IN THIS ISSUE

THE DIGITAL ESTATE

CHECKLIST GROWS

MUSIC TO IRS’ EARS

CRYPTO CON

ARTICLES OF INTEREST

"How you invest during retirement is as critical as how you invest in preparing for retirement. Things are never as simple and automatic as they once may have been -- you worked hard, saved, and then sat back and collected your benefits. You can't rely on someone else coming up with the cash you'll need once you stop working." -- Daniel R. Solin

This quote from author Daniel R. Solin is a great way to highlight our Blog this month which deals with handling your finances during retirement. If you have not had a chance to read it, I want to take this opportunity to share parts with you this month. 

Save. Save more. Save even more. Eventually, those words will change.

It's time to retire, and start spending instead of saving, but some retirees still feel uncomfortable with the transition from accumulation to distribution of financial resources. Some are not confident that they've saved enough. In fact, in some studies failing to save enough is the number one retiree regret, and the number one worry is running out of money.

For many, these concerns are well-founded because retirement costs (especially healthcare) can be volatile and difficult to assess ahead of time. When a family starts to live on their investments, they want income today, but they also want to be assured of adequate income tomorrow. They don't become less eager to obtain a good return on their money but need to start worrying almost as much about the preservation of their portfolio.

Those fears can often be allayed by realizing what we really have control over.

• When it comes to retirement, we can choose how much to save, and how to invest those savings.
• We can choose the retirement start date.
• We can choose whether to keep working in retirement, and there may be some discretion in our spending.
• We can't control the economic environment that will exist at retirement.

Those who are planning to retire in the near term know all too well how financial market reversals can sabotage even the best of plans. The recent volatility is enough to make anyone's head spin.

Here are four steps to begin your retirement income planning:

Step 1 Review all income sources. Inventory all the predictable income streams that you expect to receive--Social Security, traditional pension, lifetime annuities, rent from real estate, and portfolio income. Compile a list of all financial and real assets, including stocks, bonds, mutual funds, certificates of deposit, IRAs, 401(k) accounts and real property.

Step 2 Project your expenses. Estimate your monthly and annual expenses in retirement. Divide the expenses into the essentials--food, clothing, housing, transportation, insurance, and taxes--and the discretionary--travel, entertainment, gifts. Remember that retirement expenses likely aren't going to be uniform either. For most people, travel expenses will be much higher in early retirement as places are crossed off the bucket list, and conversely healthcare expenses grow as we age.

Step 3 Compare income to essential expenses. This will reveal whether there will be an income gap that will have to be filled by touching principal. Identify assets for essential and discretionary expenses. If you have a gap for meeting essential expenses, you may want to segregate the assets that will be liquidated as needed to fill the hole. Some parts of the portfolio may have tax advantages that you want to exploit for as long as possible. Once the essentials are funded fully, remaining assets may be tapped for the discretionary expenses.

Step 4 Monitor the plan annually. Each year you should review your plan with your financial professional, making adjustments as needed, as your retirement circumstances change.

If you're considering retiring soon or even just having a work-optional lifestyle but are concerned about whether you have enough assets to do so, consider a consultation with one of our professionals. 

We help our clients take sensible steps to deal with the underlying conflict between the desire for decent returns and the need to conserve capital and keep up with inflation. We also understand the underlying tax planning that can help create tax efficiencies in a portfolio. The goal isn't to avoid paying taxes, but rather to have more after paying them.

We will be pleased to help you on the road to financial independence.

ASK GARDEN STATE TRUST COMPANY

What is the difference between the Estate Tax and The Inheritance Tax in New Jersey?

Thank you,

A New Jersey Resident

Dear New Jersey Resident,

Thank you for your question. The Estate Tax and the Inheritance Tax are two different taxes related to the transfer of assets upon someone's death in New Jersey. Let me explain.

Estate Tax: This tax is based on the total value of the deceased person's estate. It is the responsibility of the estate to pay, and the tax is calculated before the assets are distributed to the heirs. New Jersey has repealed its Estate Tax, meaning there is no state-level estate tax no matter the size of your estate. At the Federal level there is an Estate Tax if your estate is over $12.92 million ($25.84 million for a married couple) in 2023.

Inheritance Tax: This tax is based on the relationship between the deceased and the heir who receives the inheritance. Different classes of beneficiaries have different tax rates. For example, Class A beneficiaries that include the decedent's spouse, civil union partner, children, grandchildren, great-grandchildren, stepchildren, mother, father, or grandparents are exempt from the New Jersey Inheritance Tax. A bequest to a charity is generally exempt from the Inheritance Tax. However, assets left to other relatives or individuals are subject to this tax. The heir is responsible for paying the tax, not the estate unless your Last Will states differently.

We are available to review potential inheritance and estate taxes affecting you.

Sincerely,

Siobhan Connolly

Senior Vice President & Trust Officer

Director of Administration

(732) 255-5000

sconnolly@gstrustco.com

2101 Highway 34 South, Suite A

Wall, NJ 07719

HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?

For general informational purposes only. This information does not constitute legal advice.

Updating your Will every few years is a great idea, and there are many additional things you can do to make it easier for your executor and create a smoother transition of assets. One of those things is to address digital assets. Read The Digital Estate Checklist Grows in one of our Informational articles this month. 

Speaking of digital assets, in the Informational Article, Crypto Con, read about a Minnesota man who lost $9.2 million in a romance scam involving cryptocurrency. For some great tips about keeping you safe from scammers, go to the Resources page on our website and read Watch Your Wallet. https://gstrustco.com/assets/Garden-State-WYW.pdf

Hoping you enjoy the rest of Summer. Stay safe!

Sincerely,

Updating your Will every few years is a great idea, and there are many additional things you can do to make it easier for your executor and create a smoother transition of assets. One of those things is to address digital assets. 

Our digital footprint keeps growing, and access to it is becoming more complicated. Digital assets can be personal, such as email and text messages, photos and videos. They can involve interactions on social media platforms and the identity created on those platforms. They might be financial accounts online, including bank accounts or virtual currencies such as bitcoin or NFTs. More and more things are going digital, and there isn't a unified way to address them after death. 

There are many reasons to try to protect and transition these assets in an estate. From the simplest one of reducing the chance of identity theft after death and making the job of the executor easier, to complex histories and stories that could become lost or inaccessible. It is estimated that billions of dollars' worth of crypto-currency have become completely inaccessible due to forgotten passwords.

Many companies have added two-factor authentication and biometric sensors in order to increase security. Although this is great for everyday life, it can be a problem for executors without the fingerprint needed to log in. Some companies have taken steps to deal with executors directly. For example, when it comes to an Apple ID there are two ways to go about getting access:

If you don't plan ahead, you can request access with a court order.

On Apple's website they state that:

"Where applicable, the court order needs to specify:



• The name and Apple ID of the deceased person.
• The name of the next of kin who is requesting access to the decedent's account.
• That the decedent was the user of all accounts associated with the Apple ID.
• That the requestor is the decedent's legal personal representative, agent, or heir, whose authorization constitutes "lawful consent."

That Apple is ordered by the court to assist in the provision of access to the decedent's information from the deceased person's accounts. The court order should be addressed to the relevant Apple entity."

If you do plan ahead, a legacy contact might be already baked into the cake

Apple has added the feature that someone can add a legacy contact and create an access key for them. Then they don't need a court order, and only the death certificate as additional information. You would only need to go to the "Digital Legacy - Request Access page."

What about others such as Venmo or PayPal or Facebook? Will they be the same?

Every company has their own specified guidelines for the executor. Some, such as Venmo or PayPal have possession of valuable assets that will be considered part of the estate, taxed, and passed along. Typically one needs the death certificate showing the account holder is deceased, and proof of the identity and authority of the estate executor. 

One of the recommendations by both retirement and estate planners has been to delegate early, and create access with trusted family members to help manage these accounts. One could create a durable power of attorney to do so, but also create a password list so that those people still have access both in the case of incapacity and death. Passwords can change though, and we don't always change them on all devices. Often, we might change a password because we forgot with one device, and then find out we can't log in on other devices. The hard copy "password list" is something that might not get updated when resetting a password, so it can quickly go out of date.

In addition, companies may change how access is granted. More features may be added to create a legacy contact options such as Apple has done (this is a relatively new option, only a couple years old), or access options might change with a new terms of service agreement. Thus, the best course of action is not just to make a password list, but revisit your digital assets and how you'd like them to be handled annually or at least every few years with a qualified estate planner.

(August 2023)

© 2023 M.A. Co. All rights reserved.

Omar Firestone was the executor of the estate of Ghaida Firestone. On January 17, 2012, he was notified that the estate tax return had been selected for audit. A recomputed estate tax of over $1.8 million was communicated to Omar by the IRS on April 16, 2013. 

Omar owned a valuable cello, crafted in 1816. On May 17, 2013, a month after getting the bad news about the additional estate tax due, Omar created "The Firestone Irrevocable Cello Trust." He was the sole trustee. Ostensibly, ownership passed from him personally to him as trustee. 

The estate stipulated to the additional estate tax liabilities in 2014, but Omar never paid them. By 2021, the tax debt had grown to over $2.5 million. 

The IRS brought an action to foreclose on certain real property and to seize the cello to begin paying down the tax debt. Omar claimed he owned only a life estate in the cello now; it was no longer his property. Oddly, the trust did not name any beneficiary other than Omar, although he produced an unsworn email from a rare instrument seller claiming to have the remainder interest. 

The District Court was unpersuaded. Taking the trust at face value, Omar had both equitable and legal interests in the cello, and so is properly regarded as the real owner. The IRS may take it. In a footnote, the Court observed that it need not reach the issues of whether the Trust is merely Mr. Firestone's nominee or alter ego, was created for unlawful purposes, or was self-settled in order to avoid creditors.

The case illustrates the risks of choosing an individual to settle an estate--risks to both the estate and the individual being asked to perform what may be an unfamiliar duty. The better course, for many affluent families, is to opt for professional estate settlement from an experience corporate fiduciary, such as a trust department or trust company.

(August 2023)

© 2023 M.A. Co. All rights reserved.

Details are sketchy, but it seems that a man in Eden Prairie, Minnesota, has lost some $9.2 million in an online romance scam.

It started with a connection on LinkedIn. It appears that the victim, who has not been publicly identified, made an investment of $100,000 in cryptocurrency through "Coinrule-web3" at the direction of a female LinkedIn correspondent. After what appeared to be an initial success, another 21 transfers were made, in amounts up to $2.1 million. The female correspondent at one point wrote that she "wanted him to leave his wife for her," but the rest of their communications have not been released.

When the victim decided to cash out his winnings, he was told that he had to pay a $2.8 million fee to do so. He called his wife in a panic, asking her to withdraw all their assets so that he could pay the "fee" to get their money. That's when she went to the police, reporting that her husband had been liquidating their investment accounts for the previous six months. A warrant was obtained to review the husband's financial records, and the scam was uncovered. None of the funds were ever invested for the husband, the scamster obtained all the cryptocurrency for herself.

No information is available on the course of the investigation, or on the likelihood of arresting the perpetrator or recovering any of the couple's life savings.

According to the FBI's Internet Crimes Complaint Center, some $3.31 billion was lost to investment frauds in 2022. In a majority of cases, some $2.57 billion, cryptocurrency is a factor in executing the fraud. 

If you believe you have been the target of a cryptocurrency investment fraud scheme, report it as quickly as possible to the FBI's Internet Crime Complaint Center (IC3.gov).

(August 2023)

© 2023 M.A. Co. All rights reserved.

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