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What is the Federal Unemployment Tax Act (FUTA)?

The Federal Unemployment Tax Act was passed in 1939, and it set up trust funds for the purpose of providing unemployment insurance. Businesses, not individuals, are taxed to provide funds for the program. There are 53 state funds (including D.C., Puerto Rico, and the Virgin Islands), 4 federal accounts, and 2 associated with railroad retirement. The Federal Unemployment Tax helps states fund their own unemployment programs. Continue reading...

Do I Need Professional Help to Prepare a Trust?

In most cases, you should consult a tax professional and/or an estate planning attorney for help in setting up a trust. If you’re setting up a trust in the first place, it is likely because you have estate planning needs – which also means you have a level of assets that requires estate planning. Preparing a trust on your own runs the risk of setting it up incorrectly, which can lend itself to legal risks such as challenges from heirs and/or creditors. Continue reading...

What is the Unemployment Rate?

There are a few ways to measure unemployment, but it is normally interpreted as a percentage of the working-age population that does not have a job. The statistics that are used to determine unemployment rate typically use the number of unemployed people who are actively searching for a job. The Bureau of Labor Statistics conducts a monthly poll called the Current Population Survey which goes out to about 50,000 households, and this is a significant source of unemployment data. Continue reading...

How Much Money Does the Government Have Invested in Social Security?

As of 2016, there is about $2.8 trillion in the Social Security Trust Funds, if you include what is owed to it by the Treasury for the bonds purchased with the surplus funds every year. The funds in the Trust are partitioned from the rest of the government budget, but the surplus year to year is invested in Treasury Bonds which effectively gives the government temporary use of the funds in exchange for a market-value interest rate. Continue reading...

How Much Does it Cost to Prepare a Trust?

The cost of setting up a trust varies depending on the type of trust and its complexity, but generally speaking a trust will cost between a few hundred to a few thousand dollars. Basic trusts can typically be setup using online tools and guides from trusted sources, whereas complex trusts often require the help of an estate planning attorney and a tax attorney. There is also the matter of paying the trustees an annual fee for oversight of the trust, and there may be annual expenses associated with keeping the trust up to date with changes to the law and/or your estate plan. Continue reading...

What are the Projections for Social Security Benefits?

It looks like the Social Security Trust Funds may be depleted by 2037. The system can most likely continue while paying reduced benefits that come directly from the current social security taxes to the workforce. Estimates are that the Social Security Administration could pay about 70% of its obligations at that point. There is enough money to pay Social Security benefits at the current rate until about 2037. Continue reading...

What is Form 706 GS (D): Generation Skipping Transfer Tax Return for Distributions?

IRS Link to Form — Found Here Form 706 is the Estate Tax return, and it has a section concerning Generation-Skipping Transfers. 706 GS (D), specifically, is the form which 706: GS (D-1) is the corresponding form if the transfer is associated with a trust, which is filed by the trustee. The Generation-Skipping Tax attempts to prevent an estate from transferring too many assets directly to grandchildren instead of children for the purpose of shielding heirs from estate taxes. The form for reporting Generation Skipping Transfers is 706 GS (D), where 706 is the Estate Tax Return filing. Continue reading...

What is the Difference Between a Will and a Trust?

A primary difference between a will and a trust is that a will goes into effect once you die, but a trust goes into effect when you create it. Beyond that, a will is a more basic estate planning document/tool that determines how your assets should be divided upon your death. On the other hand, a trust goes further in controlling how the assets are distributed. It may stipulate when, how, and to whom the assets will be distributed, and those distributions may not happen immediately but rather over a long stretch of time. Continue reading...

Do I Need a Trust?

Whether or not you need a trust depends on several factors, some of which include: your level of assets, the complexity of your estate planning goals, the control you wish to exercise over your assets after your death, your need for creditor protection, amongst others. Trusts have many features that make them an attractive option for wealthy people – it allows them to avoid taxes in some cases, avoid probate court for heirs, and the ability transfer control of your assets to someone you trust (your selected trustee). It also affords the ability to have the assets span multiple generations, if managed properly. Continue reading...

For How Long Will I Receive My Social Security Benefits?

After the payments begin, you'll receive Social Security benefits for the rest of your life. People worry that the Social Security system will run out of money, but as long as there are some workers paying into the system, it will be able to pay at least a reduced benefit to retirees. The system can be tweaked easily enough for full benefits to continue to all those to whom it is owed, barring some reductions for taxation on benefits and possible reductions based on income from other sources. After the payments begin, you’ll receive Social Security benefits for the rest of your life. It works like a pension. Continue reading...

What is a Living Trust?

A living trust describes a trust designed to transfer assets to beneficiaries upon the death of the owner/grantor, which is established during the life of the grantor. They can take several forms, but most common ones are categorized as either revocable or irrevocable. Living trusts have a similar effect to a Last Will and Testament, both being legal documents that stipulate how the decedent would like property to be divided amongst beneficiaries upon the death of the owner or grantor of the trust. Continue reading...

What is an Irrevocable Trust?

An Irrevocable Trust is one in which the grantor (the person who creates and funds the trust) cannot modify the trust once created. An irrevocable trust can only be modified or terminated if the beneficiary of the trust authorizes such changes. An Irrevocable Trust allows you to name a Trustee (the person that will handle your assets and will oversee their distribution to your heirs in the event of your incapacitation or death) and define the terms and conditions of the Trust while you’re alive. You can name yourself as the Trustee so you can manage your assets while you’re capable of doing so, and name a secondary Trustee to take over when you’re not. Continue reading...

What is a Living Will? (in-depth)

A living will is sometimes called an advance directive or a medical directive, and it specifies a person’s wishes regarding life-prolonging medical procedures and other end-of-life issues. If a person is in a coma, for instance, it is intended to provide instructions for their care, including whether or not to use oxygen or “feeding tubes” to keep them alive. This might require a Do Not Resuscitate (DNR) waiver of some kind, which tells medical staff not to intervene if the person is dying. The living will is different than the “will” that most people are familiar with, which is a Last Will and Testament, stipulating the person’s wishes for their estate after he or she has died. Continue reading...

What is an A-B Trust?

An A-B Trust is a plan which actually creates two trusts at the death of the first spouse, and is a strategy intended to avoid as much estate tax risk as possible. Each spouse has an estate tax exclusion amount of $5.45 Million, and laws have made unused exclusion amounts fully portable to the surviving spouse, but for our purposes here, most of the exemption will be used up. So a Bypass Trust will be created which uses some amount of the exclusion, and will take that money out of the estate of the surviving spouse. The spouse can still get some income from this trust and have some discretion and control of the principal amount, but cannot use the principal for themselves. Continue reading...

What is Federal Debt?

Federal debt is the money owed by the government. The primary source of this debt is Treasury Bonds (Notes), which constitute debt obligations. About 25% of the current national debt is owed internally between different government agencies, mostly to the Social Security Trust Funds. The Federal Debt is also, and perhaps more commonly, referred to as the National Debt. Currently the debt is approximately $19 Trillion. Continue reading...

What is a Revocable Trust?

A Revocable Trust is also known as a Living Trust, and it is an estate planning vehicle that allows you to determine how your assets are dispersed to heirs or other entities. While you are alive, you can modify the trust without restriction. When setting up a Revocable Trust, you generally name a Trustee (the person that will care for the assets in the trust and oversee distribution) and define the terms and conditions of the Trust. It is also possible to name yourself the Trustee in a Revocable Trust while you’re alive, but you should also name a contingent Trustee in the event of your death. Continue reading...

What is an Income Trust?

Income trusts are a type of company that has been structured to pass through all earnings to shareholders. A trust is a legal entity, that seeks to use assets in the best interest of beneficiaries. Some pooled investments are categorized as trusts, and they pass all income (and the tax implications) on to investors. Examples include a real estate investment trust (REIT), a royalty trust, a utility trust, or a business investment trust (also known as a master limited partnership, or MLP). Mutual funds can also fall into this category, but they are not necessarily designed just for income. Continue reading...

Who is a Bond Trustee?

A bond trustee is an institution which has the fiduciary responsibility of administering and enforcing the terms of the bond indenture. A bond indenture is the contract between the bond issuer and the bondholder. A trustee has the resources to manage the distribution of the funds to the bondholders, to keep up with and distribute the required bookkeeping and statement information to the interested parties as well as regulators like the SEC. If there is a violation of the contract, the trustee must report it and act in the best interest of the wronged party. Continue reading...

When Will Social Security Go Bankrupt?

Most estimates project that the Social Security Trust Funds will be depleted by 2037. The system could still function at 70% of their full obligations by transferring cash flow directly from social security taxes to the retired beneficiaries, which most people don’t realize when they spread the news that the system is tanking. Adjustments to the system and interest rates could change how this plays out and keep it operating closer to full capacity. Continue reading...

What is Probate?

Probate is the legal process that takes place after a person’s death, during which legal documents (such as wills and trusts) are reviewed and enforced. A person’s will generally must be validated by the court, after which the person’s assets are distributed to the heirs accordingly. If there is no will, then the probate court will decide how to distribute the assets, which may not be consistent with the deceased’s actual wishes. Continue reading...