INSIGHTS gstrustco.com

May 2020 - In This Issue: TOO YOUNG FOR A RETIREMENT PAYMENT CARES ACT FRAUD POTENTIAL HOW NOT TO "WASTE" A CRISIS COVID-19 INFORMATION

This month I am featuring Kurt Talke, a Senior Vice President and Trust Officer who joined Garden State Trust Company in September, 2014. Once part of the GSTC Team, Kurt worked tirelessly the next 10 months towards building a client base and opening our Lebanon, New Jersey office. We received approval to open the office from the NJ Department of Banking and Insurance in July, 2015 and have been building on and expanding our presence in the area thanks to Kurt's efforts. Kurt plays a vital role in our North/Northwest New Jersey marketplace leveraging his knowledge and reputation of more than 30 years helping clients reach their personal and financial goals. He began his career in 1990 with United Trust located in Bridgewater, NJ where he was a vice president and trust officer. In 1997, Kurt joined the Peapack-Gladstone Bank's Trust Division located in Bedminster, NJ where he was instrumental in helping the division grow its assets under administration consistently each and every year.   Kurt always had a yearning to be an entrepreneur. By joining Garden State Trust Company and establishing a brand-new region for us, Kurt has become a central figure in the growth and success of our company.    We are proud of Kurt's accomplishments over the past 6 years in developing this region. His longtime Peapack-Gladstone colleague and mentor, John Bonk, joined Kurt shortly after the office opened in 2015. And most recently, Michelle Black has joined his team as an administrative assistant. Together they continue to build on Garden State Trust Company's reputation for superior customer service and trust.  During this difficult COVID-19 time, Kurt and John have been in constant contact with their clients, concerned for their well-being and answering their questions. Having a daughter graduating the University of South Carolina in May, Kurt understands the difficult time families all across the nation are grappling with during this crisis. He brings that compassion and understanding to his regular interactions with clients. When New Jersey reopens, Kurt would welcome the opportunity for you to meet him and his team and to see his newly renovated office.  In this month's Informational Articles see what happened to Dale Laue who was "Too young for a retirement payment". Finally, with Memorial Day just around the corner, all of us at Garden State Trust Company would like to remember and honor the men and women who have made the ultimate sacrifice to protect our country. Thank you to all who have served and are serving in our Armed Forces. This year we add frontline workers, healthcare workers and first responders as they too continue to make sacrifices to protect and care for all of us during the Covid-19 Pandemic. Stay well, Sincerely,

Ira J. Brower, Founder

TOO YOUNG FOR A RETIREMENT PAYMENT Dale Laue worked as an aviation engineer, working for Rockwell International and Northrup Grumman. He lost his job 2002 when he was 46 years old, and was generally unemployed after that. However, he did have pension credits. After Rockwell was acquired by Boeing Co., Boeing offered Dale a lump sum distribution of his retirement benefit, which came to $25,170. Dale accepted the offer, and did not roll it into an IRA to protect the tax benefit. Dale and his wife reported the entire payment as ordinary income, and paid federal income tax on it. Unfortunately, on the date Dale received the payment he was 59 years old, but he was not 59 1/2 (who pays attention to their half-year anniversaries?). The IRS noticed this fact, and imposed a 10% tax penalty for the premature distribution. The Tax Court recently upheld the tax penalty of $2,517 on the couple. Had Dale rolled the money into an IRA and waited until he was 59 1/2 to withdraw it, the penalty would have been avoided. Someone in Dale's situation this year who is adversely affected by the coronavirus pandemic may also escape the tax penalty. (May 2020) © 2020 M.A. Co. All rights reserved.

CARES ACT FRAUD POTENTIAL The Treasury Inspector General for Tax Administration (TIGTA) is concerned that scammers may try to take advantage of confusion surrounding the unprecedented benefits of the CARES Act for so many taxpayers. There are many ways to be fooled. TIGTA reminds taxpayers that: The IRS will not call, text, or e-mail taxpayers to ask for more information as a prerequisite to getting an Economic Impact Payment. To check on the status of an Economic Impact Payment, taxpayers should visit IRS.gov and click on "Get My Payment." But only use the website IRS.gov. Taxpayers should not click on any links in e-mails that purport to take them to the IRS website. The best practice is to manually type "www.IRS.gov" into your web browser. Anyone who calls claiming to be from the IRS and offering to process an Economic Impact Payment is impersonating an IRS agent and should be reported to the IRS website at TIGTA.gov. Finally, taxpayers should not share an online banking username or password with anyone. The IRS does not need the online banking username and password in order to send out Economic Impact Payments. (May 2020) © 2020 M.A. Co. All rights reserved.

HOW NOT TO "WASTE" A CRISIS Every cloud allegedly has a silver lining. Estate planners have discovered a potential silver lining in the current economic crisis. Estate planning strategies now may be implemented at a much reduced tax cost, because asset values have fallen. At today's lower asset values, much more may be transferred via gift before breaching the taxable threshold of $11.58 million per person. It's not just publicly traded stocks that are down in price. Nonmarketable securities, the value of family businesses, and real estate are down similar percentages, according to estate planner Alan Gassman, as reported in Tax Notes. For those who have been contemplating major gifts within the family, this may prove an opportune moment to pull the trigger. Roth IRA conversions. One response to this year's loss of the stretch IRA for long-term wealth management has been the recommendation to convert retirement assets to Roth IRAs. The immediate tax cost of such a conversion can be hard to swallow. Today's lower asset values mean lower taxes for conversions now. Should prices recover after the pandemic recedes, all that gain will be tax free. Several estate planning strategies rely upon the "Section 7520" interest rate in determining taxable values of transfers. As the Federal Reserve has lowered interest rates to help the economy, the 7520 rate has fallen, standing at 1.2% for April 2020 (it was 2.2% in February). Lower interest rates improve the math for some strategies, especially when coupled with reduced asset values. GRATs. In a grantor-retained annuity trust, the trust creator is paid a fixed dollar amount for a term of years. If the grantor survives the term, assets pass to the remainder beneficiaries and won't be included in the grantor's taxable estate. The GRAT is a useful tool for transferring asset appreciation in excess of the 7520 rate without further transfer taxation. Asset freezes. A grantor may sell an asset to an intentionally defective grantor trust in exchange for a note. If the note equals the value of the asset, there will be no gift tax, it will be a sale for full consideration. The interest rate on the note should match IRS guidelines--for April 2020, the mid-term interest rate is 1.9%. The note will be included in the grantor's estate, but asset appreciation in the trust assets will pass without further transfer tax, freezing the taxable value. The grantor will owe tax on the trust income, which may further deplete the taxable estate. On paper, these strategies appear to confer substantial tax benefits. However, estate planners have been reporting that many clients have not looked at the opportunity with enthusiasm. There is just too much uncertainty about how the pandemic and its economic fallout will play out. Still, if you've been thinking about taking a major estate planning step, this could be an ideal time to move ahead with the plan. (May 2020) © 2020 M.A. Co. All rights reserved.

COVID-19 INFORMATION SCAMS Avoiding Common COVID-19 Scams The New Jersey COVID-19 Fraud Task Force, a joint federal-state effort to investigate and prosecute unlawful and misleading activities related to COVID-19, has provided the following recommendations to avoid common COVID-19 related scams. Read More GENERAL The New Jersey COVID-19 Information Hub The official COVID-19 Information Hub for the State of New Jersey. Find the latest news, guidance, resources, and support here. Read More FINANCIAL Coronavirus Tax Relief and Economic Impact Payments The IRS is offering tax help for taxpayers, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus (COVID-19). Read More 

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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2017. All rights reserved.