Planning Potpourri

By Martin M. Shenkman, CPA, MBA, JD

■ Roth Conversion Errata. Nov 09 Practical Planner typo. The text incorrectly reads: "be reported 1/2 in 2000 and 1/2 in 2012" should have been “½ in 2011 and ½ in 2012”.


■ Password Encryption. Organizing and protecting passwords, and assuring they are identifiable in the event of disability or death is becoming a more important disability and estate planning step. Consider “KeePass,” homepage http://keepass.info. Thanks to Lynn H Lander.


■ Name a Guardian. If you’re disabled your power of attorney and health proxy will protect you. But what if a court has t appoint a guardian? Who should it select? Make your wishes known now in a guardian designation. For example CT law, § 45a-645, permits you to name your own conservator for future incapacity. You have to be age 18 and of sound mind. You can designate the persons whom you desire to be appointed as conservator of your person, your estate, or both, if you are later found to be incapable of managing your affairs or incapable of caring for yourself. The designation shall be executed, witnessed and revoked in the same formality as required for a will.


■ Tenants in Common (TIC) Accounts. Instead of setting up separate husband/wife brokerage accounts to divide asset to fund a bypass trust you can simplify by having one account titled as TIC. While this can meet the estate tax objectives one Social Security number is on the account. So if that spouse’s Social Security number is caught up in an identity theft mess you may not have access to the entire account while the issue is resolved. TICs might be simpler, but not necessarily better.


■ Estate Tax. ◙ Since it ain’t going away, take action. ◙  Structure irrevocable trusts as grantor trusts. With estate tax likely to be permanent and income tax rates also like to rise this is a great play since the grantor, say mom, can pay tax on trust income growing outside her estate. ◙  Reconsider permanent insurance. Whole life policies have out performed some portfolios over the last decade, the income tax benefits will be more valuable as income tax rates rise, and if owned by an insurance trust its a great estate planning play since repeal of the estate tax is almost assuredly off the table. ◙  Use split dollar arrangements to fund the payment of insurance premiums if you need to use annual gifts to help out heirs hurt by the recession.  ◙  Family Limited Partnerships (FLPs) can still be great. Even if discounts are repealed they provide for control and asset protection. Lawsuits won’t disappear. FLPs will be increasingly used to shift income to lower tax bracket family members if income tax rates rise.