If you will indulge me, this month I want to write about me. 2023 marks two milestones of which I am enormously proud. The first milestone is that this year will mark my 55th anniversary in the trust industry. As you will read, it has been a long journey to get to where I am today.
 
My career in the trust industry began in 1968 in New York City when I started working for Manufacturers Hanover Trust Company (now JP Morgan Chase). After a few years and still wanting to work in New York City, I moved to Bankers Trust (now Deutsche Bank) until 1974. At that point, not wanting to raise my family in an apartment in Forest Hills, NY, I relocated to Toms River, NJ where I was offered a position with a new trust department at First State Bank, which was later purchased by New Jersey National Bank, and became trust regional manager for Ocean County.  

In 1981 I moved on to establish a trust department for Berkeley Federal Savings under the then newly enacted Monetary Deregulation Act. Berkeley was granted the First Trust Charter by the Federal Home Loan Bank Board for the New York, New Jersey and Puerto Rico District as a Division of a Savings and Loan Association.

I always had a yearning to be an entrepreneur so after successfully establishing and running that trust department for many years, I went on to co-found an independent limited purpose non-depository trust company called Manchester Trust Bank in 1990. Manchester Trust became the wealth management division for Santander Bank (formerly Sovereign Bank).

Leaving Santander in 2007, when most sane people at age 62 would be planning for retirement, I spent 2007 planning to open another New Jersey limited purpose bank, Garden State Trust Company. We opened our doors 15 years ago in 2008. Today, we have seventeen team members covering our headquarters in Wall, NJ and regional offices in Lebanon, Marlton, and Linwood. This is the second and absolute proudest milestone for me in 2023!!! 

All of this leads me to what will become another big milestone in my career. As President and CEO, I have decided that it is time for me to give up the role of President, so I am thrilled to announce that as of January 1st my son, Adam, has been appointed President of Garden State Trust Company. I will remain CEO. As a parent I am so proud and happy to have both my son and daughter working with me. 

I am also excited to announce that Siobhan Connolly has been appointed Senior Vice President & Trust Officer, Director of Administration and Sean Rice appointed to Senior Vice President & Trust Officer, Regional Manager South Jersey and Philadelphia. 

Last, but not least, my path over the past 33 years would not have taken me to where I am today without Barbara Kannheiser, CFO. Barbara has been by my side since we worked together at Manchester Trust. We are so different but oh so complementary and together we have built one great partnership and a great company. 

With the team we have built, Barbara and I both know that when we do retire, Garden State Trust Company will be in knowledgeable hands continuing to care for and thoughtfully guide our clients.  

Thanks for allowing me this personal message.
FAMOUS WILL FOR THE MONTH DIANA, PRINCESS OF WALES
CLICK THE NAME TO READ
CLICK THE NAME TO READ
Princess Diana (born Diana Frances Spencer) died in a tragic automobile accident in France at the age of thirty-seven on August 31, 1997. Her Will leaves her estate to her two children, with specific bequests to her former butler. ©LIVING TRUST NETWORK
In the Informational Article, Deathbed Gift Checks read about the consequences of not cashing a Deathbed Gift Check promptly. The Tax Court holds that under state law (here, Pennsylvania) a gift of a check is not complete until it is no longer possible to issue a stop payment order. In the article titled Who Gets Audited, you can read about a new report from the Transactional Records Access Clearinghouse (TRAC) that makes some provocative observations about IRS auditing in recent years.

In one of our Of Interest Articles the Federal Trade Commission came out with a new educational website about scams called Money Matters. Take a look and share it with those that might be at higher risk of getting scammed. Last month I mentioned that we have a brochure on this subject, Watch Your Wallet, on our website.

Wishing you and yours a very Healthy, Happy and Prosperous 2023!

Sincerely,
Ira J. Brower, Founder
Deathbed Gift Checks
William DeMuth executed a power of attorney appointing his son Donald as agent in 2007. From that year through 2014 Donald gave annual gifts to his brothers and other family members relying upon the annual gift tax exclusion to avoid federal gift taxes. In the summer of 2015, as William's health began to fail, Donald wrote an additional 11 checks for an aggregate of $464,000 from his father's brokerage account. (Some checks were for more than one person, so all came within the annual gift tax exclusion.). Four of the donees deposited their gift checks before William died in September, but only one check had been paid by the drawee bank by the date of death.

The estate tax return for William did not include the value of the gift checks, which the IRS spotted upon audit. The Service argued that the ten checks that had not cleared before death were estate includible. However, in its opening brief the IRS conceded that four checks had been "credited by drawee banks." 

The Tax Court holds that under state law (here, Pennsylvania) a gift of a check is not complete until it is no longer possible to issue a stop payment order. The Court noted that both the IRS and the taxpayer seemed to confuse the idea of a "depository bank" which accepts the check deposit and the "drawee bank" which pays the funds. Under these facts, only the check that cleared should be excluded from the taxable estate.

However, that early concession made by the IRS, even though it was erroneous, may not now be withdrawn. All four of those checks avoid the estate tax, while the other seven will be taxed.

The lesson for others is that when making gifts before death, deposit the checks promptly and allow plenty of time for the checks to clear.

(January 2023)
© 2023 M.A. Co. All rights reserved.
RMDs in 2023
Some retirees received an unexpected present from Congress just before Christmas. The age at which Required Minimum Distributions (RMDs) from qualified retirement plans must begin was lifted from 72 to 73, effective in 2023. In 2033 the age requirement jumps again, to 75. Of course, those who will turn 73 in 2023 already turned 72 in 2022, and so have already had their first RMD in most cases. 

Still, the change is welcome for those who do not need to draw from their tax-deferred retirement accounts for routine living expenses. They will get another year of growth. They should have a large pot of money to withdraw over a fewer number of years, which means still bigger RMDs. The only downside is that the increase might push them into a higher tax bracket.

To offset that potential problem, retirees should look into the "charitable IRA rollover." Up to $100,000 may be directly transferred from an IRA to a qualified charity. Such a transfer will not be added to taxable income, but it will count as an RMD. Some taxpayers have been simply directing their RMDs to their favorite charities each year, which simplified their finances. Note: This option is limited to those who are age 70 1/2 and up (that age requirement was not changed when the RMD start age was lifted). A husband and wife may each make transfers of up to $100,000, but only if each has an IRA. 

(January 2023)
© 2023 M.A. Co. All rights reserved.
Who Gets Audited?
A new report from the Transactional Records Access Clearinghouse (TRAC) makes some provocative observations about IRS auditing in recent years. The odds of a millionaire being audited in person by an IRS agent in fiscal year 2022 was just 1.1%, according to the report.

The IRS says that the audit rate was 2.8% for millionaires, but that depends upon what is meant by the term "audit." The Service includes "correspondence audits" in its figures, letters that ask a taxpayer for more information. Such letters are easily and efficiently generated, but TRAC discounts those inquiries as not providing meaningful oversight of tax returns.

That the rate of auditing has dropped is not in dispute. In 2012 there were 40,965 audits of taxpayers with $1 million or more of income, and those were all by revenue agents. In 2022 the revenue agents audited 7,210 millionaire tax returns, and roughly an equal number of correspondence audits. This despite the fact that there are more millionaire tax filers than ever these days. What the report fails to discuss is what the audits turned up. Most millionaires use professional tax preparers who are unlikely to risk their livelihoods with fraudulent returns, who are diligent in being accurate in their work. How much additional tax revenue was obtained per audit? How much time was needed for the audit, compared to added taxes and penalties? Does this turn out to be a good use for scarce resources, at a time when the IRS is being tasked with other responsibilities?

At the other end of the income spectrum, the report observes a relative high audit rate of those who claim the earned income tax credit, running at 12.7%. Nearly all of these (97%) are correspondent audits asking for information to verify the claim of the tax credit. According to the report, such audits have a fairly good chance of increasing tax revenue, because the taxpayer loses the credit entirely if the request for information goes unanswered. Unfortunately, the earned income tax credit can be complicated to compute and document, and the lower income taxpayers may not have access to the necessary resources. The IRS is not much help, because so few callers have been able to get through in recent years.

Audit rate issues may become prominent in the news this year, because the IRS received a major funding boost in the Inflation Reduction Act. An amendment to ban using the increased funding for increasing audits of taxpayers with less than $400,000 of income was defeated, so audit rates for everyone are expected to rise.
(January 2023)
© 2023 M.A. Co. All rights reserved.
Articles of Interest
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How to spot, avoid, and report related frauds and scams that can affect your financial well-being. Read More


An eclectic mix of designs that favors diversity, sandy soil and a return to the Golden Age where enjoyment is the ultimate reward. 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. ©2023. All rights reserved.