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Tax Cuts and Jobs Act: Key Provisions Affecting Estate Planning

We are committed to keeping you updated on The Tax Cuts and Jobs Act of 2017 (TCJA) -a sweeping revision of the tax code that alters federal law affecting individuals, businesses and estates.  Taking a look at estate tax law, the TCJA doesn’t repeal the federal gift and estate tax. It does, however, temporarily double the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption.

From December 31, 2017, and before January 1, 2026, the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption amounts double from an inflation-adjusted $5 million to $10 million. For 2018, the exemption amounts are expected to be $11.2 million ($22.4 million for married couples). Absent further congressional action, the exemptions will revert to their 2017 levels (adjusted for inflation) beginning January 1, 2026. The marginal tax rate for all three taxes remains at 40%.

Estate planning remains a necessity

Just because fewer families will have to worry about estate tax liability doesn’t mean the end of estate planning as we know it. Nontax issues that your plan should still take into account include asset protection, guardianship of minor children, family business succession and planning for loved ones with special needs, to name just a few.

In addition, it’s not clear how states will respond to the federal tax law changes. If you live in a state that imposes significant state estate taxes, many traditional estate-tax-reduction strategies will continue to be relevant.

Future estate tax law remains uncertain

It’s also important to keep in mind that the exemptions are scheduled to revert to their previous levels in 2026 — and there’s no guarantee that lawmakers in the future won’t reduce the exemption amounts even further. Contact us with questions on how the TCJA might affect your estate plan. We’ll be pleased to review your plan and recommend any necessary revisions in light of the TCJA.

First Quarter Tax Deadlines for 2018

Don’t miss these important tax deadlines for 2018:

January 16 — Individual taxpayers’ final 2016 estimated tax payment is due.

January 31 — File 2017 Forms W-2 (“Wage and Tax Statement”) with the Social
Security Administration and provide copies to your employees.

-File 2017 Forms 1099-MISC (“Miscellaneous Income”) reporting nonemployee compensation payments in box 7 with the IRS and provide copies to recipients.

-Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security, and income taxes withheld in the fourth quarter of 2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 12 to file the return. Employers who have an estimated annual employment tax liability of $1,000 of less may be eligible to file Form 944 (Employer’s Annual Federal Tax Return).

-File Form 940 (“Employer’s Annual Federal Unemployment [FUTA] Tax Return”)
for 2017. If your undeposited tax is $500 or less, you can either pay it with your
return or deposit it. If it is more than $500, you must deposit it. However, if you
deposited the tax for the year in full and on time, you have until February 12 to file
the return.

-File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural
Employees”) to report Social Security, Medicare, and withheld income taxes for
2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed
return. If you deposited the tax for the year in full and on time, you have until
February 12 to file the return.

-File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2017 to report
income tax withheld on all nonpayroll items, including backup withholding and
withholding on pensions, annuities, IRAs, etc. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 12 to file the return.

February 28 — File 2017 Forms 1099-MISC with the IRS.

March 15 — 2017 tax returns must be filed or extended for calendar-year partnerships and S corporations. If the return is not extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.

Tax deadlines can be a lot to process and missing even just one of them can result in penalties. Let Holbrook & Manter monitor the deadlines for your business and your personal taxes all year long. Contact us today to learn more about our tax services.

Estate Planning Strategies: Planning for Incapacity

Most estate plans focus on what happens after you die. But without arrangements for what will happen in the event you become mentally incapacitated, your plan is incomplete. If an accident, illness or other circumstances render you unable to make financial or health care decisions — and you don’t have documents in place to specify how these decisions will be made, and by whom — a court-appointed guardian will have to act on your behalf.

Choosing the right tools

There are several tools you can use to ensure that a person you choose handles your affairs in the event you cannot:

Revocable trust. Sometimes called a “living trust,” it’s designed to hold all or most of your assets. As trustee, you retain control over the assets, but in the event you become incapacitated, your designee takes over.

Durable power of attorney. This authorizes a designee to manage your property and finances, subject to limitations you establish.

Living will. It expresses your preferences regarding life-sustaining medical treatment in the event you’re unable to communicate your wishes.

Health care power of attorney. Sometimes referred to as a “durable medical power of attorney” or “health care proxy,” this authorizes your designee to make medical decisions for you in the event you can’t make or communicate them yourself.

HIPAA authorization. Even with a valid health care power of attorney, some medical providers may refuse to release medical information — even to a spouse or child — citing privacy restrictions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). So it’s a good idea to sign a HIPAA authorization allowing providers to release medical information to your designee.

For these tools to be effective, you must plan ahead. If you wait until they’re needed, a court may find that you lack the requisite capacity to execute them. Also, be sure to check the law in your state. In some states, certain planning tools aren’t permitted, or go by different names. Holbrook & Manter can help you address incapacity in your estate plan. Contact us today.

The Tax Cuts and Jobs Act has Passed

By: Justin Linscott, CPA, CFP®, CITP, CGMA- Principal

We have been doing our best to keep you updated on the activities taking place in Washington D.C. surrounding tax reform. The House & Senate have now voted on and passed the tax reform bill. The passage of the Tax Cuts and Jobs Act, H.R. 1 could change your tax strategies and burden. H&M is prepared to help you maneuver through this new tax climate. Changes are now truly on the horizon- from deductions that will disappear to the amount of federal tax you will pay. The highlights from the bill that could affect you are many, but to highlight a few:

*Disappearing or reduced deductions, larger standard deduction

*Substantially increases the alternative minimum tax (AMT) exemption amount

*Other year-end strategies

Our commitment to proactive tax planning remains a top priority, especially given these recent events. We have a document that explains this tax reform in greater detail while also offering advice on financial moves to make now in light of the passage of this bill. Please reach out to me (JLinscott@HolbrookManter.com) or any H&M team member for a copy of this document.



H&M Team Holds Holiday Toy Drive for Nationwide Children’s Hospital

For the past several weeks, H&M team members have been collecting toys to donate to Nationwide Children’s Hospital in Columbus.

In the spirit of the holidays, toys for children of all ages were brought to our various office locations.  It was fun to watch the pile of donations grow. From Legos to fidget spinners…. art supplies to puzzles…. dolls to board games…. it is the hope of our team that these gifts will bring joy to the kids that must spend the holiday season in the hospital.

The friendly staff at Nationwide Children’s Hospital greeted our H&M elves who did the toy delivery. They were excited to take a look at the items we brought for the patients and were so gracious and appreciative. However, the pleasure was all ours.

The H&M Family wishes you and your family a very happy holiday season, and a blessed and happy new year.





Address your Pet in your Estate Plan Using a Pet Trust

If you’re an animal lover, a pet is a member of the family — sometimes even more so than flesh-and-blood. So you want to ensure that your beloved pet is cared for after you’re gone. One way to do so is to make provisions for your pet through a trust.

This legally sanctioned arrangement allows you to set aside funds for the animal’s care. After the pet dies, any remaining funds are distributed among your heirs as directed by the trust’s terms.

Pet trust in action

The basic guidelines are comparable to trusts for people. You, as the grantor, create the trust to take effect either during your lifetime or at death. Typically, a trustee will hold property for the benefit of your pet. Payments to a designated caregiver are made on a regular basis.

Depending on the state in which the trust is established, it terminates upon the death of the pet or after 21 years, whichever occurs first. Some states allow a pet trust to continue past the 21-year term if the animal remains alive. This can be beneficial for pets that have longer life expectancies than cats and dogs, such as parrots and turtles.

Include specific instructions

Because you know your pet better than anyone else, you may provide specific instructions for his or her care and maintenance (for example, a specific veterinarian or brand of food). The trust can also mandate periodic visits to the vet and other obligations should you become unable to care for the pet yourself. If you have questions on how to address your pet in your estate plan, please contact Holbrook & Manter.

The Basics of Directors and Officers Insurance

By: Shannon Robinson, CPA- Senior Accountant

Have you ever wanted to serve on a non-profit board but you did not for fear that you would make a mistake? Organizations often purchase Directors and Officers (D&O) Insurance to assist them in attracting competent professionals to serve on their boards without fear of personal financial loss. Even though the insurance is for the sole benefit of the directors and officers, the organization usually pays for it.     

Directors and Officers Insurance generally provides coverage for any actual or alleged act or omission, error, misstatement, neglect, or breach of duty.  D&O Insurance provides reimbursement for losses in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.  Note that intentional legal acts or fraud are typically not covered under directors and officers policies.

D&O Insurance Policies can be structured to meet the interest of each organization based on their risk appetite and coverage needs. Polices usually cost less than most organizations think they do. Premiums can range from as low as $1,000 or less for a small non-profit organization to $15,000 for a small public company, and up to $100,000 or more for a large company.

If you are thinking about serving on a board ask the organization if they have directors and officers coverage as this may set your mind at ease and make your decision easier.  Please contact us with any questions you may have.

Are you Ready for Revenue Recognition

As the effective date of the Financial Accounting Standards Board’s new revenue recognition standard approaches, there’s increasing pressure on companies and/or their audit committees to assess their companies’ implementation efforts. For the very large publicly traded companies, the new standard will apply to annual reporting periods beginning after December 15, 2017 (including interim periods) whereas it is effective for calendar year private companies on January 1, 2019.  However, understanding the new standard and evaluating its impact is a very complex undertaking in order to understand the over 1,000 pages outlining this new standard.

The Center for Audit Quality (CAQ) has published Preparing for the New Revenue Recognition Standard: A Tool for Audit Committees to help committees fulfill their oversight responsibilities. The publication is organized into the following four sections:


1.) A new revenue recognition model

Accounting Standards Update No. (ASU) 2014-09, Revenue from Contracts with

Customers, established a new core principle for revenue recognition “to depict the

transfer of promised goods or services to customers in an amount that reflects the

consideration to which the entity expects to be entitled in exchange for those goods or

services.” It created a model for recognizing revenue:


-Identify the contract (s) with the customer.

- Identify the contract’s separate performance obligations.

- Determine the transaction price, using extra scrutiny if a contract calls for variable consideration, such as bonuses, incentives, rebates or penalties.

- Allocate the transaction price to the contract’s performance obligations, if there are multiple performance obligations.

- Recognize revenue when (or ad) the entity satisfies a performance obligation (that is, when the customer obtains control of the good or service).


The need to identify separate performance obligations — distinct promises to transfer

goods or services — is critical. To make the transition to the new standard, companies

may elect full retrospective application — which requires prior-period financial

statements to be recast — or modified retrospective application — which doesn’t require

recasting, but does require the cumulative effect of initially applying the standard to be

recorded as of the initial application date.


2. Impact assessment

This section assists audit committees in evaluating management’s assessment of how the

new standard will affect the company. For some companies, the amount and timing of

revenue recognized under the new standard won’t differ significantly from their results

under current U.S. Generally Accepted Accounting Principles. But audit committees will

still need to make the analysis under the new standard’s requirements to reach that

conclusion. In addition, all companies will be affected by the new standard’s disclosure

requirements, regardless of its impact on revenue. The new rules expand disclosure

requirements and require qualitative and quantitative disclosures intended to provide

information about a company’s contracts with customers. The disclosures must include

information about revenue and cash flow stemming from such contracts.

The audit committee should look at how the standard’s impact was assessed and who was

involved in the assessment. In addition, determine what company-specific factors were

considered and when management will provide pro-forma financial statements that

illustrate the expected impact. Finally, review how the company’s external auditor views

the assessment.

When making the assessment, it’s important to seek input from a wide range of

departments, including accounting, tax, financial reporting, financial planning and

analysis, investor relations, treasury, sales, legal, information technology and human

resources. The CAQ also urges audit committees to ask management about the standard’s

potential impact on specific aspects of the company’s business. (See “How will the new

standard affect your company’s revenue?”)


3. The implementation plan

This section helps audit committees understand and assess management’s implementation

plan. It provides detailed questions audit committees should ask on such subjects as

project milestones, progress reports, external auditor and third-party vendor views,

adequacy of resources, qualifications of the accounting team, accounting policy and

significant accounting judgments, systems and controls, and company culture.


 4. Other implementation considerations

The final section covers other considerations, including deciding on a transition

approach, handling dual recordkeeping requirements for retrospective application,

determining whether to consider early adoption and complying with new disclosure



The publication also includes a list of articles, technical guides and other resources for

navigating the implementation process.

By now, public companies should have made substantial progress toward implementing

the new revenue recognition standard. The CAQ’s publication can help audit committees

evaluate the status of their companies’ implementation efforts and, if necessary,

accelerate the process. Please reach out to H&M with any questions or concerns you may have.

Bah Humbug! The Ghost of Taxable Income for Christmas Presents May Come to Haunt You and Your Employees This Holiday Season

By: Mark Rhea, J.D.- Senior Assistant Accountant

During the Holiday Season, many employers want to show appreciation for their employees and the hard work they have done all year by giving presents. Some people might not think twice about doing something nice for their employees, but Treasury rules and regulations can turn that generosity into a potential headache for both employers and employees.

For example, let’s assume that the owner of Scrooge Enterprises, Ebenezer, decides that he wants to spread holiday cheer by giving each one of his employees a copy of his favorite movie “A Christmas Carol.” He has two options to accomplish this. The first is that he purchases copies of “A Christmas Carol” DVDs at $20 per DVD and gives those copies to his employees. The second is that he purchases $20 gift cards to the same store where he would have bought the DVDs.

If Ebenezer decides that he wants to go to the store and purchase the DVDs himself and give those gifts to his employees, the IRS would not treat those gifts as income to his employees and the IRS would permit Ebenezer to fully deduct the cost of those DVDs as the $20 spent per DVD would likely be considered a “de minimis fringe benefit” holiday gift with a “low fair market value.” See Treasury Reg § 1.132-6(e)(1). However, if Ebenezer decides to purchase gift cards in the amount of $20 to the same store that he would have bought the DVDs and gives those gift cards to his employees so they can go to the store and purchase “A Christmas Carol” on their own, the IRS would consider that gift card a cash equivalent and therefore must be reported as income and subject to employment taxes. Cash or cash equivalents, no matter how small, are never considered a “de minimis fringe benefit” excludable as income. See Treasury Reg § 1.132-6(c).

Ebenezer should take comfort in the fact that he can still treat his employees to a holiday cocktail party or meal at his favorite establishment as “occasional” cocktail parties and group meals are still considered “de minimis fringe benefits.” See See Treasury Reg § 1.132-6(e)(1). However, if Ebenezer decides to buy his employees gift cards to his favorite establishment instead of taking his employees there himself, the IRS again would find that those gift cards would be cash equivalents and treated as income subject to employment taxes.

There are many regulations and rules governing the giving of gifts to employees not just during the holidays, but year-round and for special situations such as employee awards and retirements. Holbrook & Manter is prepared to help you answer any questions regarding your generosity with your employees. Happy Holidays!

Selecting a Guardian for your Minor Children

If you have minor children, arguably the most important estate planning decision you have to make is choosing a guardian for them should the unthinkable occur. It’s critical to put much thought into this decision to ensure your children would be cared for as you wish in such a situation.

Evaluating potential candidates

Here are a few issues to consider when evaluating potential guardians:

  • Do they want to serve as guardians?
  • Does your estate plan provide sufficient resources so that caring for your children won’t cause an economic hardship?
  • Do they share your values and parenting philosophy?
  • If they’re married, is the marriage stable?
  • If they have children, do your children get along with them?
  • How old are they in relation to the children? A grandparent or other older person may not be the best choice to care for an infant or toddler, for example.
  • Are their homes large enough to make room for your children?

Keep in mind that a court’s obligation is to do what’s in the best interest of your children. The court isn’t bound by your guardian appointment but will generally honor your choice unless there’s a compelling reason not to. It’s a good idea to prepare a letter explaining the reasons you believe your appointees are best equipped to care for your children.

Naming others

It’s also important to choose a backup guardian. Why? If your first choice dies or is unable or unwilling to serve for some other reason, a court will appoint a guardian, and you likely wish to provide some guidance on that as well.

Your estate plan should list anyone you wish to prevent from raising your children. Contact us for more information regarding estate planning for parents with minor children. Contact Holbrook & Manter today for more information about the role your accountant should play in your estate planning.