Articles – Jeff Rogyom

What Is a Testamentary Trust and What Are Its Benefits?

A testamentary trust is any trust formed based upon terms contained in the settlor’s last will and testament. A testamentary trust is neither formed nor funded until death and does not exist for legal and tax purposes prior to that time.

An estate planning attorney determines the types of trusts to be used based upon the particular needs and goals of the family. Often an attorney may have several trust options capable of achieving their client’s goals. An attorney sometimes recognizes that a trust may only be needed if certain circumstances occur. As such, rather than form the trust immediately, the person forming the trust can include the terms of the trust in the last will and testament and delay the funding of the trust until the time of their death.

Intentionally Defective Grantor Trusts

If you have assets you anticipate will increase in value, you can “freeze” the value of those assets for estate tax purposes with an Intentionally Defective Grantor Trust, an “IDGT”. Most wonder why they would want an “intentionally defective” anything, but it references the fact your estate attorney will purposefully insert language making the transfer of assets to the trust an incomplete gift for income tax purposes but a complete gift for estate tax purposes. Therefore, immediately following the transfer to the IDGT, the IRS considers the trust’s assets to be owned by your heirs for estate tax purposes but still considered owned by you for income tax purposes. These differing classifications can be very beneficial for those with estate tax concerns, rather than a need for a step-up in basis at death.

What is a Trust? The Basics of Forming a Maryland Trust

It’s common to hear attorneys and others refer to trusts, but you may not know exactly what they are or why they are needed. A trust is similar to an entity, such as a corporation or an LLC, in that a trust has a separate identity from either the person that formed it or the people it is intended to benefit. The trust may own property in its own name and may even have a separate tax ID for its dealings with the IRS.

Registering a Trade Name in Maryland

Depending upon your business and your company’s marketing strategies, you may at some time consider operating under a new or second name. In such cases, you should consider using a registered trade name for your business. Since businesses evolve and sometimes move into multiple, distinct lines of business, a trade name can sometimes allow you to market a new line of business without changing the name of the entity or forming a second entity.

Probate in Maryland – Small Estates Versus Regular Estates

Probate is the process by which a deceased person’s financial affairs are concluded and their assets are transferred to their legatees (if through a will) or heirs (if without a will). Because many people pass away with minimal probate assets, the State of Maryland provides a less burdensome process by which assets can be transferred for such estates.

When the value of a decedent’s property subject to Maryland probate is less than $50,000 (or less than $100,000 when a surviving spouse will be the sole legatee or heir), the estate under is allowed to be considered a “small estate” and use a simplified set of probate rules.

How Long Should You Keep Tax Records?

A popular client question has always been, “How long should I keep my tax returns?” My answer is something many neither expect nor want to hear. Many tax professionals, and even the IRS, suggest discarding tax documents after a certain period of time: 3 years, 6 years, etc. after filed. My answer is usually, “Never.”

Those saying a certain number of years usually base it upon a particular IRS statute of limitations deadline. IRS can audit a return after it’s been filed for 3 years under normal circumstances, for 6 years if there is a “substantial understatement”, and forever if there’s fraud. Therefore, since you’re confident you’re not committing fraud, you should be safe at least after six (6) years, right? No.

Income and Salary to an S-Corp Owner

Owners of s-corporations are quickly introduced to some fairly complex tax issues. An s-corporation has “flow-through taxation”. This means the s-corporation itself generally pays no income taxes for its income, but its stockholders do. The s-corporation files its own tax return. That tax return generates a K1 that’s given to its shareholders and its shareholders report and pay the taxes on the shareholders’ personal tax returns. But the shareholders may also be required to pay themselves a salary if they are also employees or otherwise perform services for the corporation. Continue reading “Income and Salary to an S-Corp Owner”

Forming An Irrevocable Life Insurance Trust (ILIT)

An Irrevocable Life Insurance Trust, or ILIT, should be of interest to any person buying life insurance. The ILIT is not just for people with estate tax issues. The ILIT can allow you to control how and when insurance proceeds are distributed to beneficiaries. Rather than going straight to the beneficiary, the insurance company pays the proceeds into a trust that then pays the amounts to the beneficiary as quickly or as slowly as you decide. Such a trust can be particularly beneficial when the potential beneficiary is younger, may have potential marital issues, or has difficultly managing money. Continue reading “Forming An Irrevocable Life Insurance Trust (ILIT)”

Commercial Leases – Drafting and Review

Locating a property or a tenant for leasing can be a very time-consuming process, so it’s understandable that parties often rush to get the lease signed; however, having a good lease agreement that’s been drafted and reviewed by an attorney can be essential. If issues or disputes arise between the landlord and tenant, it will be too late to address problems with the lease agreement.

Almost everyone has had the opportunity to review a lease during their life, but commercial leases are far more complex. Further, consumer protection laws that save renters from bad landlords often only apply to residential leases, not commercial. With commercial leases, the laws generally assume you are a sophisticated business person and were not “taken advantage of” if your landlord or tenant gives you an unfair lease agreement. Continue reading “Commercial Leases – Drafting and Review”

Not Having a Will in Maryland

Many wonder what happens if you die without a Will. Each state, including Maryland, has its own laws that determine what happens to the person’s estate. The differences between each state’s laws do cause confusion, and your assumptions about Maryland’s laws may be incorrect and can cause incredibly negative problems.

When someone dies without a Will, the rules governing the estate are called “intestate laws”. When intestate laws apply, the deceased person may be referred to as having “died intestate” and having left an “intestate estate”. Your state’s intestate laws serve essentially as your Will if your family cannot provide an actual Will. Maryland’s intestate laws are often not what most people expect. Continue reading “Not Having a Will in Maryland”