Cincinnati Estate Tax Rules Relating to Debt Discharged in Connection With Your Personal Residence

The Mortgage Forgiveness Debt Relief Act of 2007 and subsequent amendments allow taxpayers to exclude up to $2 million of income from the discharge of indebtedness as a result of debt discharge on their principal residence. This applies to debt forgiven in calendar years 2007 through 2012. This applies to foreclosures as well as short sales, so it is not required that the taxpayers stay in the home until the foreclosure.
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 How to Manage Money More Effectively

 

I. The problem – Money is the #1 problem in relationships today

A.

Since 2005 our country has been in a negative savings mode nationally.

 

Debts have increased and household budgets are getting stretched to the limit.

B.

Higher gas and medical costs are now forcing the average person to cut their personal living expenses deeper and deeper.

C.

The average person at all income levels $15,000/50,000/100,000 is spending more than they make in take home pay and the solutions are not easy.

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American households are struggling to make ends meet with higher gas prices and the trickledown effect on the cost of our day to day household expenditures. Now more than ever, households are living paycheck to paycheck. An ominous sign of the times are “middle income” families beginning to seek help from the food pantries.

One solution is putting together and managing your personal budget.

1. Review current spending habits.
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Pay itemized deductions before December 31, 2010 to save 2010 taxes:

• 2010 income taxes
• 2010 real estate taxes
• January, 2011 mortgage payment
• Charitable donations – donate appreciated stock to your charities and deduct the fair market value of the stock and no tax is due on the appreciation of the stock

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Employers Hiring Tax Incentives
Qualified new hire:

• Must sign affidavit on new IRS Form W-11 under penalties of perjury that he qualifies as a new hire…has not worked a total of 40 hours over 60 days prior to hire date.
• Begins work for a qualified employer which is not a governmental entity (exclusive of a public higher education institute).
• Not employed to replace another employee of employer unless such employee separated for cause or voluntarily quits work.
• Is not a related party.

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This letter highlights certain issues relating to the operation of your limited liability company (LLC) that are important in realizing the limited personal liability and tax benefits of doing business in the form of an LLC.

1. BENEFITS OF LLC FORM
As we discussed when you formed your LLC, doing business in the form of an LLC provides limited liability for all owners (“members”) and permits the LLC flexibility in its taxation strategy. These are significant benefits as compared with other forms of structuring a business entity. However, to gain that limited liability protection or experience the advantages of some taxation strategies, the LLC must be treated as a separate entity from its members and be operated in accordance with its operating agreement and/or the governing statutes.
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The aftershocks of the Terri Schiavo case encourage us to consider what, if any, life-sustaining treatment we would want in similar circumstances. But how do you make your wishes known? And to what extent is your own will-to-live subordinate to the state’s mandate-to-live?

Since 1990, the Supreme Court has maintained that a competent person always has the constitutional right to accept or refuse medical treatment, Cruzan v. Director, Missouri Department of Health 497 U.S. 261. Inherent in due process is your right to accept or to attempt to prolong the natural dying process. On the other hand, the state’s duty is to protect human life and dignity’ and to exercise particular oversight especially when one cannot communicate competently. Striking a proper balance between the state’s interest in protecting life and the individual’s right to self-determination is no easy task for the legal system or the human conscience.
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With Terri Schiavo at the center of a national ethical debate, people are assessing what, if any, kind of life-sustaining support they would want in similar circumstances. Since 1990, the Supreme Court has maintained that a competent person always has the constitutional right to accept or refuse medical treatment. However, when you are unable to speak for yourself, who do you want to speak for you? And what kind of limitations do you want to place on their authority? Here are five important things you need to keep in mind about advance health care directives:
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The new Ohio Trust Code (OTC), which directly affects your revocable trust, became effective January 1, 2007. It was enacted to make Ohio’s trust provisions similar to the Uniform Trust Code adopted by many other states. The new rules potentially compromise the privacy of your trust since beneficiaries now have rights to access information and receive notifications about the trust. Keeping your trust information private may or may not be a high priority for you. However, it’s important to understand how the OTC affects your original trust provisions.

How does the new Ohio Trust Code affect your trust?

Once your trust becomes irrevocable upon your death, the OTC imposes greater obligations on the trustee to keep beneficiaries reasonably informed about the administration of the trust and about material facts necessary to protect their interests. Please find enclosed an article published in September/October’s Ohio Lawyer, the Ohio Bar Association’s member magazine, which explains the OTC’s new requirements. All but two of these new requirements can be waived in the trust instrument:

1. You cannot waive the trustee’s duty to notify current beneficiaries age twenty-five (25) and over of the existence of the trust, the identity of the trustee, and the right to request trustee’s reports.
2. You cannot waive the trustee’s duty to respond to the request of a current beneficiary age twenty-five (25) and over for trustee’s reports and other information reasonably related to the administration of the trust.

However, these rules can be modified by designating a “beneficiary surrogate” in your trust instrument to receive any notices/reports required to be provided to current beneficiaries. This beneficiary surrogate has a fiduciary duty to act in the best interest of all beneficiaries.

Should you waive the new duties imposed by the new OTC?

The new OTC simultaneously expands the rights of beneficiaries and the duties of the trustee. If keeping trust information private from your beneficiaries is not a high priority for you, then your trust does not need modification and the OTC’s notice requirements will take effect once your trust becomes irrevocable. Please keep in mind that such stringent reporting duties increase a trustee’s responsibilities, which in turn may lead to higher trustee fees. Therefore, if you want to keep trust information private and not increase your trustee’s duties, then our office can create a short amendment to your trust which will waive the requirements as permitted by law. Since your trust was executed after the law was passed on June 28, 2006, we will amend your trust at no charge. Please contact our office if you would like us to prepare the trust amendment.

The new OTC is complex and confusing, so I encourage you to contact us by email, or call our offices at (513) 731-6601 if you have questions about how the law applies to you and your trust.