When will Social Security Stimulus Checks Arrive?

Many Social Security beneficiaries wonder what the status of their stimulus check is.
Many Social Security beneficiaries wonder about the status of their stimulus check.

There have been a few hiccups in the distribution of stimulus checks, and some people may have to wait months before their check is delivered. Most of us are able to monitor the status of our check by using the IRS’s Get My Payment tool. However, for many Social Security beneficiaries, they’ll see a message that says “Payment Status Not Available.” That’s because most Social Security recipients don’t file tax returns.

Motley Fool’s ’s recent article entitled “Social Security Beneficiaries: Here’s When You’ll Get Your Stimulus Check” advises that if you are unable to track your payment, here’s when you can expect to receive your stimulus money if you’re collecting Social Security benefits.

Those first to see their stimulus checks will be the ones who have their direct deposit information on file with the IRS. The agency will deposit the stimulus check straight to their bank account.

However, if you receive your benefits in the mail via paper check, or if you’re not certain if your bank account information is on file, you can provide your information through the Get My Payment tool. This will help you get your check faster.

While using direct deposit will ensure you get your check the quickest, you can get your check in the mail instead if your bank account info isn’t on file. The IRS started sending stimulus checks the week of April 20, and it expects to mail out about five million checks per week. At that rate, it could take 20 weeks for all checks to be delivered.

Whether you receive your check in days or months will depend on your income. The IRS is sending checks in a particular order, and those with the lowest-income individuals will get their checks first. If your income is nearer to the $99,000 per year income limit (or $198,000 per year for married couples), you might not receive your check until late August or early September.

If your income is somewhere in the middle, it’s estimated that you’ll get your check sometime this summer.

If you’re receiving Supplemental Security Income (SSI), you’ll see your stimulus payment in early May, according to the IRS. Whether you receive that money via direct deposit or paper check will be based on whether the IRS has your bank account information on file.

The COVID-19 pandemic has caused a real financial hardship for millions of Americans, and waiting for your stimulus check can be stressful, especially if money is tight and you need the extra money. However, it’s a little easier when you can at least calculate when your cash is expected to be delivered.

For more information on Social Security benefits see https://galligan-law.com/social-security-benefits-what-happens-when-a-spouse-dies/

Reference: Motley Fool (April 27, 2020) “Social Security Beneficiaries: Here’s When You’ll Get Your Stimulus Check”

 

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What Exactly Is the Estate Tax?

Most people ignore the estate tax due to its high exemptions, but as some candidates may lower the exemption, it is good to familiarize yourself with it.

In the U.S., we treat the estate tax and gift tax as a single tax system with unified limits and tax rates—but it is not very well understood by many people.  Plus, the estate tax exemption is currently as high as it’s ever been, so many people ignore it assuming it doesn’t and never will apply to them.

However, the estate and gift tax has always been a political football, so it is a good idea to familiarize yourself with it in an election year.  The Motley Fool’s recent article entitled “What Is the Estate Tax in the United States?” gives us an overview of the U.S. estate and gift tax, including what assets are included, tax rates and exemptions in 2020.  As an overriding point, this blog covers federal estate and gift tax.  Some states have their own estate, gift and/or inheritance tax (tax on all transfers to beneficiaries at a lower rate) which may work differently then the federal tax.

The U.S. estate tax only impacts the wealthiest households. Let’s look at why that’s the case. Americans can exempt a certain amount of assets from their taxable estate—the lifetime exemption. This amount is modified every year to keep pace with inflation and according to policy modifications. This year, the lifetime exemption is $11.58 million per person. Therefore, if you’re married, you and your spouse can collectively exclude twice this amount from taxation ($23.16 million). To say it another way, if you’re single and die in 2020 with assets worth a total of $13 million, just $1.42 million of your estate would be taxable.

However, most Americans don’t have more than $11.58 million worth of assets when they pass away. This is why the tax only impacts the wealthiest households in the country. It is estimated that less than 0.1% of all estates are taxable. Therefore, 99.9% of us don’t owe any federal estate taxes whatsoever at death. You should also be aware that the lifetime exemption includes taxable gifts as well. If you give $1 million to your children, for example, that counts toward your lifetime exemption. As a result, the amount of assets that could be excluded from estate taxes would be then decreased by this amount at your death.

You don’t have to pay any estate or gift tax until after your death, or until you’ve used up your entire lifetime exemption. However, if you give any major gifts throughout the year, you might have to file a gift tax return with the IRS to monitor your giving. There’s also an annual gift exclusion that lets you give up to $15,000 in gifts each year without touching your lifetime exemption. There are two key points to remember:

  • The exclusion amount is per recipient. Therefore, you can give $15,000 to as many people as you want every year, and they don’t even need to be a relative; and
  • The exclusion is per donor. This means that you and your spouse (if applicable) can give $15,000 apiece to as many people as you want. If you give $30,000 to your child to help her buy their first home and you’re married, you can consider half of the gift from each spouse.

The annual gift exclusion might be an effective way for you to reduce or even eliminate estate tax liability. The tax rate is effectively 40% on all taxable estate assets.

It is also worth noting that a lot of clients want to give away assets during their life time through annual gift exclusions because they are worried about the estate tax.  However, with such a high exemption, it is often better to keep assets in your estate.  This is because generally appreciable assets in your estate receive a “step-up” in basis at your death.  This point is outside the scope of this blog, but see here for why keeping assets in your estate is probably a good thing.  https://galligan-law.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/

Finally, the following kinds of assets aren’t considered part of your taxable estate:

  • Anything left to a surviving spouse, called “the unlimited marital deduction”;
  • Any amount of money or property you leave to a charity;
  • Gifts you’ve given that are less than the annual exclusion for the year in which they were given; and
  • Some types of trust assets.

Some candidates seeks to greatly lower the estate and gift tax exemption, which may lead to many more taxable estates.  If you are concerned about this tax, or are after the election, please contact our office to discuss how the estate and gift tax impacts you.

Reference: The Motley Fool (Jan. 25, 2020) “What Is the Estate Tax in the United States?”

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Business Succession Planning in your Estate Plan

Business succession planning is critical in your estate plan to ensure your business succeeds when you’re gone and to preserve value for your beneficiaries.

When people think about estate planning, many just think about their personal property and their children’s future. If you have a successful business, you may want to think about how it will continue after you retire or pass away.  Business succession planning is critical because the value and success of the business will be greatly effected when you pass away.  Planning now will help prevent interruptions to the business and preserve the value for your beneficiaries, and for your employees.

Forbes’ recent article entitled “Why Business Owners Should Think About Estate Planning Sooner Than Later” says that many business owners believe that business succession planning, estate planning and getting their affairs in order happens when they’re older. While that’s true for the most part, it’s only because that’s the stage of life when many people begin pondering their mortality and worrying about what will happen next or what will happen when they’re gone. The day-to-day concerns and running of a business is also more than enough to worry about, let alone adding one’s mortality to the worry list at the earlier stages in your life.  Having been a business owner myself, I understand that the demands of the day seem so important, it’s hard to think about next week, let alone when you’re gone.

Business continuity is the biggest concern for entrepreneurs and one of the key components to address in business succession planning. This can be a touchy subject, both personally and professionally, so it’s better to have this addressed while you’re in charge.  One option is to create a living trust and will to put in place parameters that a trustee can carry out. With these names and decisions in place, you’ll avoid a lot of stress and conflict for those you leave behind.  You may do this as a trust solely for the business, such as a management trust, or as part of your regular estate planning.

They may be upset with you, but it’s better than the other or future owners and key employees being mad at each other.  This will give them a higher probability of working things out amicably at your death. The smart move is to create a business succession plan that names successor trustees to be in charge of operating the business, if you become incapacitated or die.

Business succession planning may include several other aspects.  For example, many owners complete buy sell agreements or similar documents that require a deceased owners estate to sell their interest to the other owners, or address what happens if an owner divorces, or becomes disabled.  Some even address buy outs for retiring owners.  It is also a good idea to consider employment agreements that entice key employees to stay with the company if you should retire or pass away.  These documents can be complex as they touch many issues, but are worth discussing with your estate planning or business attorney as part of your business succession plan.

A power of attorney document will nominate a fiduciary agent to act on your behalf, if you become incapacitated, but you should also ask your estate planning attorney about creating a trust to provide for the seamless transition of your business at your death to your successor trustees. The transfer of the company to your trust will avoid the hassle of probate and will ensure that your business assets are passed on to your chosen beneficiaries. Timely planning will also preserve your business assets, as advanced tax planning strategies might be implemented to establish specific trusts to minimize the estate tax.  See here for more details.  https://galligan-law.com/how-do-trusts-work-in-your-estate-plan/

Business succession planning and estate planning may not be on tomorrow’s to do list for young entrepreneurs and business owners. Nonetheless, it’s vital to plan for all that life may bring, and is critical to prevent disruptions to the business you created.

Reference: Forbes (Dec. 30, 2019) “Why Business Owners Should Think About Estate Planning Sooner Than Later”

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