Investment and Finance

An estate plan is a premeditated, systematic process of planning for the accumulation, conservation, and distribution of an estate using the most efficient and effective methods for accomplishing the goals of the owner. Tax considerations are usually a significant part of the effort. At the death of the owner, the estate plan insures the distribution of the estate with minimum administration costs and taxes, according to the wishes of the owner. Minimizing the cost of distributing an estate can only be accomplished by anticipating expenses and planning ways to avoid them before death occurs. Speak to your local CPA about the strategies to accomplish your plan.

A state court must authorize transfer of probate assets. Non-probate assets transfer automatically to the new owners at death.
Characteristics and examples of Probate assets are assets are owned individually by the decedent.
Decedent's share of assets is owned as tenants in common. Life insurance, annuities and retirement assets without any beneficiary designations.
Life insurance, annuities and retirement assets if the estate is the named beneficiary or if the estate receives the asset because the named beneficiaries are deceased.
Characteristics and examples of Non-probate assets are assets are owned jointly with the right of survivorship. Life insurance, annuities and retirement assets with valid beneficiary designations other than the estate. Securities or security accounts to be "transferred on death".
Bank accounts and other assets with "pay on death" or trust designations. Assets in trust if the instrument includes a plan for distribution after death.

Joint tenancy is a form of co-ownership. Joint tenancy is when property is owned equally by two or more persons who have rights of survivorship. This means that when one joint tenant dies, the property passes automatically to the surviving tenants.

"Tenancy in common" is a form of co-ownership. "Tenants in common" do not have rights of survivorship. At death, an owner's share passes to his or her estate and requires probate. "Tenancy in common" may own unequal shares in proportion to their contributions.

Tenancy by the entirety is a form of co-ownership. Tenancy by the entirety exists only between spouses and is generally used for real property. It includes the right of survivorship and neither spouse can dispose of the asset without the other's permission. Tenancy by the entirety is not recognized in all states.

On traditional IRAs, the gains realized over the years in the form of capital gains, dividends, interest are deferred and not taxable until you take IRA distributions. When you do take the IRA distribution, the amount is considered ordinary income and taxed as such and not taxed as capital gains.

The tax laws' "wash sale" provisions prohibit you from recognizing any loss from the sale of buying and selling substantially the same stock within 30 days of selling a stock.
If you incur a gain within the 30 day period, the "wash sale" provisions do not apply and gain is reportable on IRS Schedule D.

If you owned shares of stock that were converted to another company's shares of stock at a later date, and you then subsequently sell the new company's stock, then the holding period starts the day after you bought the original shares of stock in the initial company.

A Day Trader can classify his or her activity as a business reported on IRS Schedule C. This business is not limited to a annual capital loss limitation of $3,000. There is no limitation to the losses that may be incurred by Day Trader's business. Expenses for such things as computer equipment, supplies, margin interest, or software that might have been limited to 2% AGI limitations on IRS Schedule A can now be taken in full on IRS Schedule C. Also, a Day Trader may use the market-to-market accounting method for his or her portfolio. This will allow recognition of gains or losses before the gain is realized on the sale of the security.