Cards Cut

In a past article I relayed the plight of the widow who stated:

“I didn’t realize what an A-B Revocable Living Trust meant and that it had to be divided between the survivor and the deceased spouse and that I am limited as to what I can use from his share.”

She told me that she only learned of this after her husband passed away. This is too late for many (there is a way to collapse an A-B Revocable Living Trust, which we’ll talk about in another article).

First, what is an A-B Revocable Living Trust? I spend a great deal of time going over this in my free Multi-Media Course, available at http://www.livingtrustsecrets.com. Basically it is the splitting of a husband and wife’s estate into two shares, his share and her share. The reason is to capture, or use, the estate tax unified credit amount that each spouse receives on death.

Let’s explain. Since we know Uncle Sam likes to receive his inheritance too, whenever there is a death, we always need to ask “is there a tax?”

When we talk about taxes on death, we are talking about the federal estate tax (your state may also have a tax, sometimes called an estate tax or an inheritance tax. The difference is who is liable for payment of the tax… the estate or the inheritor? But let’s not get side-tracked on the state tax. Let’s stick with talking about the federal estate tax).

So let’s say you have a “simple will.” In a simple will, you will usually say “when I die, leave everything to my spouse.” Very Simple.

Now, is there a federal estate tax? First, realize that the passing of property on death is a privilege and not a right. Therefore, it is taxable event. Even though it is a taxable event, however, the tax code tells us that everything that is left to our spouse is tax-free under what is called the “marital deduction.” So, in our simple will example, there would be no estate tax since everything you leave to your spouse is tax free.

Uncle Sam is patient. He is willing to wait until the second spouse to die passes away. Now, he gets to collect his tax on the total of both shares: the husband’s share and the wife’s share.

What happened with the “simple will” is that you have wasted the federal estate tax unified credit amount (currently $1.5 million) that can be left tax free to anyone.

So, what the A-B Revocable Living Trust is designed to do is to capture and preserve the federal estate tax unified credit amount available when the first spouse dies. It does this by creating what is often called the “credit shelter” trust.

The “credit shelter” trust (the “B” trust in an “A-B” Trust) is an irrevocable trust that springs into being out of your Revocable Living Trust when the first spouse dies. This trust is designed to be managed by the surviving spouse for the benefit of the surviving spouse, without giving the survivor any “taxable incidents of ownership.”

What this accomplishes is that upon the death of the second spouse to die, the assets that had been placed into the “credit shelter” trust are not considered to be owned by the second spouse to die. Therefore, they are not included in or taxed as part of the second spouse to die’s estate.

This can often save hundreds of thousands of dollars, since the federal estate tax rate kicks in at 37% and goes up from there.

Good luck and until next time,

Phil Craig

P.S. Feel free to forward this on to any friends.

Phil Craig is a licensed attorney and entreprenuer.
He started practicing law at age 25 in 1979.
He does not take on any more clients, but is
advisor to some of the biggest names in the internet
world. He shares his knowledge gained over the
last 25 years at his Living Trust Secrets newsletter site:
click here=========>http://www.LivingTrustSecrets.com

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So, you have a new addition in your family! Congratulations! But
amidst all the baby boom and greetings do not forget that you
have a huge responsibility ahead of you. Besides, bringing up
your children the onus of planning for their financial future
also lies with you.

With the cost of education soaring each year in the UK, it
becomes even more imperative for parents to save up for their
children. So, what should you do? Here are a few strategies that
will help you give your children a good future:

Begin Early: Most parents do not start saving for their
children’s education until they are ready for college. This is a
big blunder! Instead, be an early bird and start saving up as
soon as possible. These days several investment opportunities
are available like savings account, child trust fund and many
more.

Look for financial aid resources: If you get your act together,
you can actually manage your child’s entire education by paying
for the minimum requirements. Explore and find out about various
financial aid opportunities available for your child.

Just a little every day: Plan your expenditure in a manner that
you are able to put aside a little of your savings every day for
your child. Set an amount and then stick to the target and you
will be surprised at how much you have managed to save.

To help your child start his/her young life on a strong
foundation, you can use any of the following investment
strategies:

Open a children’s savings account: The children’s savings
accounts are set up with banks and building societies for
children. Various banks set varying maximum and minimum age
limits for the account holders which may be as high as 21 and as
low as a month. These accounts generally carry a high rate of
interest and sometimes even bring along incentives like
newsletters or birthday cards.

Child Trust Fund: Another viable investment option is the Child
Trust Fund. In case of a Child Trust Fund, the government makes
an initial contribution of £250 and in case of low-income
families this amount rises to £500. The CTF is not made
available to the child until he is 18 and by that time, the CTF
is expected to accrue enough money to give your children a head
start either in the form of a deposit for a home or educational
fees.

Stock market funds: Stock market represents a highly profitable
but a more risky investment proposition. Although, in the short
term they may seem risky, yet the stock market funds have known
to leave other investments far behind when it comes to long-term
investments. You can invest in the stock market through a unit
or an investment trust.

Now that you have all the information you need, put it to good
use and give your child the head start he/she deserves.

Come & discuss online all topics related to Investment & finance
at: http://forum.seek.uk.com

Building up a nest egg for your retirement can be a rather
important factor in choosing your investments and long-term
financial plans… after all, you definitely want to be able to
enjoy your retirement years without having to worry about where
money is going to come from.

With a variety of retirement plan options available from most
employers and private investment firms, it can sometimes be
difficult to decide which plan you want… and which one you can
afford.

By taking the time to carefully consider your finances and doing
a little bit of research, however, it can actually be a much
easier process than you might think.

Deciding How Much You Can Afford

Of course, one of the biggest considerations in regards to a
retirement plan is whether or not you’ll be able to afford it.
While it would be nice to be able to invest a large amount into
your future, most people have bills and other expenses that keep
their finances on a pretty tight leash. Be sure to take into
account how much money will be left over after you’ve deducted
the amount for your plan and see if it’s enough to pay all of
your bills and expenses with enough left over to cover
incidentals.

You should base any retirement plan on the percentage of your
income you have left over after everything has been paid, so as
to make sure that you don’t short yourself on some of your more
important expenses by picking a high-end retirement plan.

Planning Around Retirement Planning

Being sensible with your retirement plan doesn’t mean that you
have to settle for the lowest-value plan available. Just as you
should take your other expenses into account when determining
how much you can afford to put into a retirement plan, you can
also factor your retirement plan into some of your other
expenses.

You may choose to alter some of your other expenses or downgrade
some non-essential services in exchange for a better retirement
plan… after all, you can always change things back later if
you get more money or if you simply don’t like the way that
things are working out.

Investigating Retirement Options

Obviously, there are other retirement options than simply the
plans that are offered through your employer. Take the time to
research other plans that are offered by independent companies
or investment firms and see if they might be a better choice for
you than a company-sponsored plan.

You might also find that a third-party plan is easier for you to
fit into your finances, since you usually can determine how much
and when you put into it.

Retirement Planning through Investment

You may decide that you don’t want to get a retirement plan at
all, but that doesn’t mean that you can’t set up a nest egg to
cash in later. Either by use of long-term deposits such as
certificates of deposit or by investing in long-term stocks, you
can put in money now for what is hopefully a much larger yield
down the road.

Just take care when choosing stocks or bonds, and do your
research on long-term deposits to make sure that you get the
best interest rate that you can… this way, you’ll have enough
to fall back on when you reach retirement age without having to
invest in a retirement plan while you’re working.

You may freely reprint this article provided the following
author’s biography (including the live URL link) remains intact:

Ratings for the Oscars were down a whopping 10 percent compared to 2005. Well, at least the Internal Revenue Service was watching.

Goodie Bags - Not So Goodie

Actors that get nominated for an Oscar are might happy indeed. Praise rains down upon them for a good performance and better parts are often in the offering. Win an Oscar and the world is their oyster. More important than all of this, of course, is the Oscar goodie bag.

Get an Oscar goodie bag and you know you’ve made it in Hollywood. The bag is a collection of obscenely expensive things. The 2006 goodie bag was valued at over $100,00 and included items such as vacation packages to posh resorts with a butler included, the latest mobile phone gadgets, more vacation packages, private rooms at top restaurants and so on. Heck, who needs to actually win the Oscar?

In a hilarious and cheeky move, the IRS decided to have a little fun with the nominees. Just days before the show, the service issued a press release. It wished all the nominees the best of luck at the show. IRS Commission Mark Everson than reminded the nominees that the goodie bags were taxable and he wanted them to Walk the Line. I kid you naught.

In this instance, the IRS has really gone to far. Why must the agency be such a burden to the hard working professionals in Hollywood? Just one look at Joaquin Phoenix and you could see the effect. Or it could be constipation, but who can really say.

This move by the IRS is particularly overbearing when you consider the non-winners. Winners could care less about the taxes since an Oscar is a guarantee of more roles and more money.

The losers, on the other hand, must suffer twofold. First, they have to do their best acting performance by pretending to be happy the lost. Second, they have to suffer their loss of instant fame. I mean, remember that actor. Name was Johnny Depp or something? He lost and who has heard of him since?

Richard A. Chapo is with www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit www.businesstaxrecovery.com/articles to read more business tax articles.