Your beloved spouse has passed away.  The last thing you need is extra paperwork.  But…sometimes completing an extra form can mean the difference in literally millions – $5.25 million to be exact – able to be passed  free of federal estate taxes upon your death to your loved ones.

Completing a US Form 706 (US Gross Estate Tax Return) allows a decedent who is married and does not fully use his $5,250,000 exemption, to pass his unused exemption (“Decease Spousal Unused Exclusion or DSUE”) to his spouse. This is known as portability.

What does this mean in practical terms?

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After Hurricane Sandy hit, the NJ Division of Taxation was flooded (no pun intended) with inquiries regarding the taxability of repairs. As a result, a helpful “Sales and Use Tax – Frequently Asked Questions” page has been added to its website. This article has the answers, including whether charges for demolition services or tree removal are subject to NJ Sales Tax. To view the article, click here: NJ Division of Taxation FAQ

Urbach & Avraham, CPAs, is proud to offer an executor checklist to help alleviate the nightmare of financial affairs of a deceased relative. This comprehensive list, which is regularly updated to reflect the latest changes in estate tax regulation, will help you:

• Ensure compliance with tax requirements
• Take advantage of tax saving opportunities
• Preserve the assets of the estate
• Clarify the tax ramifications of distributions
• To view the checklist, click here: Executor To-Do List

Do you have a life insurance policy without a specified beneficiary (other than your estate)?  Are you leaving your estate (residuary estate) to individuals other than a spouse or child?

Many people assume life insurance proceeds, regardless of who the beneficiary is, are exempt from NJ Inheritance tax.  Therefore, even if they are leaving their estate to a beneficiary who is not a spouse or child, they see no need to designate a beneficiary for the life insurance policy.  However, life insurance left to an estate where the ultimate beneficiary is not a spouse or child is not exempt from NJ Inheritance tax.  As NJ Inheritance taxes can be as high as 16%,  it is prudent to take the simple step of naming a beneficiary to avoid the NJ Inheritance Tax. 

Unfortunately life insurance policies owned by individuals are includable for NJ Estate tax purposes, regardless of who is named as the beneficiary, if the assets of the estate are at least $675,000 (not an uncommon scenario for an insured decedent).  However, unless you cherish Chris Christie more than your loved ones, you can at least avoid paying NJ Inheritance taxes by simply naming an individual as beneficiary on your life insurance policy.     

Let’s illustrate:                                                              

Example #1: Uncle Harry dies and names his nephew in his will as sole heir of his entire estate. His only asset is a $500,000 life insurance policy. Since his estate is less than $675,000 there is no US or NJ Estate tax. If he named his nephew as beneficiary of his life insurance policy, there is no NJ Inheritance tax as well. However, if there is no named beneficiary (the estate is the beneficiary), the $500,000 is subject to a 15% inheritance tax, or $75,000.

Example #2: Same as above, except the policy is $1,000,000. NJ law states that the estate calculates the estate tax and the inheritance tax and pays the greater of the two, not both. The NJ Estate tax on $1,000,000 is $33,000. If Uncle Harry named his nephew as beneficiary, the inheritance tax is zero and the estate pays $33,200. If Uncle Harry did not name his nephew as beneficiary, the inheritance tax is 15-16% of $1,000,000 or $153,000. The Estate pays $153,000. The cost of not naming a beneficiary is $119,800 ($153,000 less $33,200).

Jeffrey D. Urbach was recently appointed to the Board of Directors of the International Association of Consultants, Valuators, and Analysts, IACVA ( www.iacva.org ). IACVA will be hosting a welcome booth as part of the annual NACVA Conference in Washington in June.  IACVA is offering an all-day training for its members from China. Jeff will be speaking on the topic of preparing valuation reports for Court use to a special delegation from China of over 30 financial experts, most of whom, like Jeff, hold advanced credentials such as the CVA.

Jeff, a Certified Valuation Analyst, specializes in several areas including business valuation, gifting/retirement planning, and healthcare practices (financial management, benchmarking, and valuation of practice).

What is the Flint assessment?

The NJ DOL borrowed money from the federal government to pay Unemployment Insurance Benefits. NJ law requires the government to pass on the interest costs of the loan to NJ employers.

Is this something new?

It’s comparatively new. This is the third year of the assessment.

How much is it?

The assessment is 0.73% of employer unemployment contributions made for 2012. The minimum assessment is $5. You should have received a bill in the mail recently. However, if you thought it was junk mail or moved and did not inform the state of your new address you might not have received it. It’s due June 23, after which it will accrue a 15% interest penalty, and you won’t know about it until NJ sends you a delinquency notice. Ouch!

How do I pay it?

Payment options include:

• Check or money order payable to: NJDOLWD
• EFT
• E-check
• Credit Card

To make a payment online, click here: NJ Division of Revenue On-Line Filing Service

It’s not uncommon for one’s spouse to work in the family business, whether as office manager or in some other capacity. Let’s assume that Dr. Sally Surgeon owns a medical practice. Her husband, Josh, is in charge of all IT operations and billing. Is it worthwhile for both spouses to receive a salary? At first glance, it may seem pointless. After all, their money ends up in the same bank account anyway. If Dr. Sally has already reached the maximum Social Security and SUI thresholds, why pay Josh a salary and incur additional steep payroll taxes? While that is true, there are several advantages to employing the spouse that are worth considering:

Social Security Disability Benefits– were Josh to become permanently disabled, he would not receive Social Security benefits for his disability unless he satisfied two different earnings tests.  He must meet a “recent work” test based on his age at time of disability. For example at age 31 or more, an individual has to work five years out of the ten years prior to claiming disability. He must also satisfy a “duration of work” test based on his age at disability. For example, at age 50, he needs to have worked 7 years in total prior to his disability. Continue Reading »

Join us on Tuesday, June 4, 2013, for a fascinating and informative presentation by Bonnie Kantor, a Constant Contact Authorized Local Expert. She will be presenting a guided demonstration on the tools and features of Constant Contact’s email marketing system. This event is part of an ongoing series of seminars by Urbach & Avraham, CPAs, to help businesses increase their revenue through marketing and finance management.  The event is free, but space is limited. To register, call Pamela Avraham at 732-777-1158 or e-mail pma@ua-cpas.com. To view the flyer with details  click here: Constant Contact Flyer

When it comes to the modification or termination of alimony as a result of cohabitation, financial assistance received from the new cohabiter is not the only factor taken into consideration. The New Jersey Appellate Court recently upheld its ruling that indirect economic benefits may be considered as well.

In Reese v. Weis, Defendant Rebecca Weis was receiving $100k annually in alimony from her ex-husband Ronald Reese since their divorce in 1996. In 1998 she began cohabiting with William Stein and his two children. Ronald filed a motion in 2008 to terminate his obligation to pay alimony citing the defendant’s cohabitation. The trial judge determined that defendant’s 10-year cohabitation afforded her significant benefit such as that alimony was no longer warranted. Defendant cross-appealed the ruling, claiming that her monthly contribution to a joint account she held with Stein, in an amount equal to what she received as support from Plaintiff, coupled with proof of annual expenses exceeding the provided support proved she paid her way without Stein’s economic assistance. She also argued that the luxuries and gifts that accompanied her new lifestyle with William should not be considered an economic benefit to terminate her alimony.

The Court however upheld its ruling, rejecting her claim that her enhanced lifestyle should not be a part of the alimony equation. The panel stated to the contrary, that economic benefits, such as when the cohabitant pays for housing costs, as well as more subtle economic benefits, may legitimately be taken into consideration.   

Maintaining a medical practice is becoming increasingly challenging from a financial standpoint. There are so many details to keep track of, and they are constantly evolving. Urbach and Avraham is proud to offer a free comprehensive physician’s financial checklist to help with this task. Our checklist, which is geared to the sole-practitioner as well as to larger medical practices, will help you:

• Reduce your taxes
• Secure your assets
• Take advantage of various tax credit opportunities
• Prepare your budget
• Address compliance issues including DOL and sales tax issues
• Grow and transition your medical practice

To view our physician’s checklist, click here:   Physician’s Financial Checklist