A survey conducted in January, 2017 by Princeton Survey Research Associates International concluded that only 42 percent of U.S. adults currently have estate planning documents such as a will or living trust. Surprisingly, for those with children under the age of 18, the figure is even lower, with just 36 percent having an end-of-life plan in place. You would think that this disturbingly low percentage only affects people with modest wealth. It does not!

As we have read, the queen of soul, Aretha Franklin, recently passed away from advanced pancreatic cancer at the age of 76. Aretha was a prodigy from the very beginning. She learned to play the piano by ear as a child, and by age 12 was already performing and earning money for the family in various churches. Her first album, "Songs of Faith," was released when she was only fourteen.

From spiritual music, to blues, to R&B, to rock and roll, Aretha connected with her audience. She was recognized for it. She was the first female performer to be inducted into the rock and roll hall of fame in 1987. She was awarded the presidential Medal of Freedom, and was ranked in 2008 to be the greatest singer of all time by the Rolling Stone magazine. She won 18 Grammy awards, and has sold more than 75 million records worldwide. Remarkable achievements from an extraordinary woman.

But, how did Aretha Franklin handle the finances from such success? What will happen to her estate now? Since she was diagnosed with an illness in 2010, did she make arrangements?

Here's an interesting story from Billboard that answers some of those questions:

Some of the highlights:

  • Aretha Franklin demanded to be paid in cash, to make sure everything stayed honest.
  • She never made Forbes highest-paid celebrities list, but they estimated that her annual income was in the low seven figures.
  • She was very strict in creating an environment to work in.
  • One estate planning firm suggests her legacy could be worth as much a $1 billion when the recordings, the publishing, the goodwill, the name and likeness are added into the picture (Other sources have suggested ~$80 million).

Even though Aretha likely knew the end was near, reports indicate that she died without utilizing a will or trust services for the disposition of her estate. Perhaps she felt that the laws of intestate succession were sufficient, and she didn't need to keep the family financial affairs private. Perhaps she felt she would keep on going, so there was no need. We cannot know.

How is that for a surprising fact?
On a personal note, September 22nd will mark the 10th Anniversary for our Company. After being "retired" from my previous position in 2007, I spent the following months formulating a plan for a new independent trust company, Garden State Trust Company. Little could I imagine that 10 years later we would have 4 offices, 12 team members and over $200 million of assets under administration. None of this would have been possible without the outstanding, caring and professional team we have assembled. And, most of all we are thankful for those clients that entrusted us with the care of their financial well being today and tomorrow. And, of course for those that have recommended us to their clients for the services we provide. On to the next decade. Thank you!

Ira J. Brower, Founder
Many states offer some tax relief for their elderly citizens. There may be some generosity behind the offer, or it may be part of an attempt to compete with lower-tax states for retiree residents. That competition may heat up now that the state and local tax deduction is limited to $10,000. The tax relief takes different forms around the country:

  • tax credits that phase out at higher income levels;
  • homestead exemptions to lower property taxes;
  • freezes on assessed valuations; or
  • property taxes deferred until death, payable when the home is sold.

Deferred property taxes may include interest charges, as in a recent Massachusetts case.

Frances Arntz filed for property tax deferral on her home in 1989, when she was 76 years old. Her son suspects that she mistook "deferral" for "forgiveness," and did not understand that the tax eventually would have to be paid, because she had the financial resources to pay the tax. Frances never told anyone what she had done.

Frances moved out of the home in 2008, so the deferrals ended. Her son began to rent the home, and he took charge of paying the property tax every year. The tax bills included a notation at the bottom: "Prior tax bills outstanding." Unfortunately, the son overlooked that warning.

When Frances died in 2018, her children expected to inherit the house free and clear, as the mortgage had been paid long ago. Instead, they received a property tax bill from the town for $170,000. Some $50,000 was for the deferred taxes; the rest was interest that had been charged at 8%. About $70,000 of the interest was incurred after 2008, from the time that Frances moved out until she died.

The heirs are understandably upset that the town didn't warn them about the tax time bomb. But the town did follow the letter of the law, and in fact, had that notice on the bottom of every tax bill. The notice just didn’t spell out how big the bomb was, or the interest that was running.

Financial discussions between elderly parents and their adult children can be difficult, even emotional. But they are very important to have.

(September 2018)
© 2018 M.A. Co. All rights reserved.
Lotteries have become enormously popular in the United States. There is a widespread perception that many lottery winners burn through their newfound wealth rather quickly, and don’t end up better off in the long run.

Swedish researchers have examined this question more rigorously, in a manner akin to a randomized test of a drug's efficacy. They surveyed winners of major prizes in the Swedish lottery as well as minor winners and lottery players who did not win, a total of 3,362 players. The surveys were taken from five to 22 years after the event. The findings are interesting.

  • Lottery winners were significantly more satisfied with their lives, and that extra satisfaction lasted for decades.
  • Those who won hundreds of thousands were measurably more satisfied than those who won tens of thousands.
  • The winners did not rapidly spend their winnings, and they did not quit their jobs. They did tend to retire earlier.
  • Oddly, the researchers found that winning the lottery did not affect happiness. It is thought that questions about happiness go to mood or feelings, while questions on life satisfaction trigger more broadly based introspection.
  • Winning the lottery had no discernable affect on physical or mental health of the winners or their children.

So, although money can’t buy happiness, it can—at least in Sweden—buy satisfaction. The entire research report may be found at this link .

(September 2018)
© 2018 M.A. Co. All rights reserved.
You've just finished filing a tax return. With a sense of relief, you set aside a copy of your return and your supporting documents. But what do you do with them then?

Of course, the first step is to keep your tax records in a safe, convenient place. You may need to refer to them for any number of reasons--for example, for future filings or when you are seeking credit. Then, too, you'll need easy access if you face an audit from the IRS.

The following suggestions will help you compile the best and most complete records.

What to keep

First, there are the basic records that you will want to have on hand. Records of your income: Form(s) W-2, Form(s) 1099 and bank statements. Expense records should include sales slips, invoices, receipts, cancelled checks or other proofs of payment.

Among the investment records that you'll want to keep are the following: brokerage statements, mutual fund statements, Form(s) 1099 and Form(s) 2439 (Notice to Shareholder of Undistributed Capital Gains). Keep year-end account summaries and deposit receipts for any IRA or Keogh contributions.

Your records should enable you to determine your basis in an investment and whether you have a gain or loss. Records should show the purchase price, sales price and commissions paid. They also may show any reinvested dividends, stock splits and dividends, load charges and original-issue discounts. If you have real estate investments, you'll need to keep copies of all the regular and extraordinary expenses associated with the properties.

How long to keep it

According to the Tax Code, you are required to keep copies of your tax return and all support as long as they may be needed for the administration of any provision in the law. Typically, that means for as long as the IRS has the right to assess additional tax on your return, or you have the right to amend your return to claim a credit or refund ("the period of limitations").

There are several periods of limitations. One is a three-year period that applies generally. Another is a six-year period that applies when you don't report income that you should and that income is more than 25% of the gross income shown on your return. If the return is fraudulent, or you fail to file a required return, there is no limit as to when the IRS can require you to provide it with information.

Recordkeeping for homeowners

Determining your basis (cost) in your home will be extremely important in order to figure the gain or loss when you sell your home (or to calculate depreciation if you use part of your home for business purposes).

Therefore, your records should enable you to determine your basis as well as any adjustments to your basis. Your records should show the original purchase price of your home and settlement or closing costs. They also may show any casualty losses incurred, insurance reimbursements for casualty losses and postponed gain from the sale of a previously owned home.

Be sure to keep a file of bills on what improvements you've made to your home each year. Generally, the costs of improvements--changes that add value to your home, prolong its life or adapt it to new uses--may be added to the basis in your home. Repairs and general fix-up costs may not.

© 2018 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2018, are not reflected in this article.
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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.