Planning Potpourri

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Insurance:

Before lapsing an insurance policy carefully evaluate your potential future
needs for the policy (you may no longer face an estate tax but may face
liquidity or other needs), consider the impact of possible income taxes and
surrender charges (if any) in your analysis, will health issues impact your
ability to obtain insurance if you need it in the future?

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Reminders:

For those suffering from cognitive issues try the creative use of the website www.rminder.com. Set reminders and your cell
phone will get a call to remind you of what you need to do at the appointed
time. If you have vision impairment and use special computer equipment the
rminder converts your text to voice. Sync with recurring entries in your
Outlook calendar to make it even easier and more automatic.

■
Roth
IRA Contributions versus Mortgage Repayment:

Hey Roth contributions can be
a tax (and maybe asset protection – see lead article) home run (Rich even I know
what that is). But before you convert, do the math. If you have a home mortgage
which is a better financial option? Paying down your home mortgage or contributing
to a Roth IRA? From an asset protection perspective if your state doesn’t
protect tenants by the entirety home ownership between spouses from creditors,
but does protect Roth IRAs, the asset protection answer may be simple. For some
investors pencil pushing is necessary. Variables include marginal tax rates,
how much interest expense would be deductible above the standard deduction,
when and how tax rates may change, after tax returns estimated for each option
and the risk associated with each.

■ Michael Jackson’s Estate May Own the
Taxman but Not Owe the Tax Man!
The untimely death of famed pop singer
Michael Jackson raises some interesting estate tax issues. For estate tax
purposes, assets generally must be valued at their fair market value at the
time of the decedent’s death. Treas. Reg. Sec. 20.2031-1(b). Assets are valued
at their “fair market value”. This
is defined as the price at which the property would change hands between a
hypothetical willing buyer and hypothetical willing seller, assuming neither is
forced into the transaction and that both parties are reasonably informed about
the facts relevant to the sale. The price is normally determined based on the
market in which the item is most commonly sold to the public. Treas. Reg. Sec.
20.2031-1(b) and 25.2512-1. For anyone that owns a television or has been on
the internet, the fascination with all things Michael Jackson has exploded. It
seems pretty incontrovertible that the value of licensing anything with his
image or log, or songs, has exploded in value. Yet the value for tax purposes
is determined at the date of death when the discussion was of a possible
comeback final tour. Might just be that the entire post-death increase in value
escapes the tax man. There will likely be some pretty technical valuation
analysis done to prove the difference in value of his assets pre- and
post-death. Could the estate show that the value of his licensing rights,
songs, etc. was quite a bit lower at death. Perhaps the difficulty or limited
guarantees for his planned European tour might be used to support low values.
If the publicity surrounding his death can be demonstrated to have increased
these values, might the estate successfully argued that these were due to
post-death events and not appropriately reflected in his date of death asset
values? If this were to succeed, especially in light of some of the supposedly
high debts Michael Jackson supposedly had, his estate may escape the Taxman,
while leaving a tremendous financial legacy to his heirs.