You should always work with a lawyer when setting up a trust. A poorly created trust can be confusing, expensive, and/or ineffective. The trouble with do-it-yourself planning is that even if your situation seems simple, you are not aware of and won’t think of the many unusual things that can go wrong, especially with wills and trusts. These mistakes can end up costing you or your heirs a lot more than you saved in legal fees.
If you have a unique situation, need a special needs trust for a disabled beneficiary, or are overwhelmed by a complex or large estate, hiring a trusts and estates lawyer will help you answer any questions and ensure that a legal and effective trust is created.
As both an attorney and a CPA, I am a “one-stop shop” for legal, accounting, tax and financial planning services. I can help people more effectively manage their wealth and establish an estate plan that is coordinated with and fits neatly among all the pieces of their personal lives – household budget, cash flow, investments, education planning, taxes, and retirement planning.
“Why Retain An Attorney To Establish A Trust?” is discussed in more detail in my book “Nothing But The Truth About Estate Planning, Probate And Living Trusts”. Download your copy here: Nothing But The Truth About Estate Planning, Probate And Living Trusts by Larry Israeloff CPA & tax attorney.
From a simple standpoint, many people initially think of an estate plan as having a will. On the more complicated end, some think of an estate plan as an elaborate arrangement only rich people need to plan
who gets what out of their millions of dollars. Most people think estate plans only apply to the ultra-wealthy.
But no matter how large or how modest, everyone has an estate. Your estate is comprised of everything you own— your car, home, bank accounts, investments, life insurance, furniture, personal possessions. And just like the wealthy, you probably want to control, with the least expense, how those things are given to the people or organizations you care most about. That is estate planning—making a written plan in advance with instructions stating whom you want to receive the things you own after you die.
Estate planning is not just for “the wealthy.” Good estate planning often means more to families with modest assets, because they can afford to lose the least.
The above is an excerpt from my book “Nothing But The Truth About Estate Planning, Probate, And Living Trusts.
Everyone has been talking about it, but it still seems some are unaware of the stipulations of the Affordable Care Act. The ACA mandates that all Americans have qualifying health insurance coverage or pay a penalty to the IRS. The penalty in 2014 was 1% of your household income or $95 per person. But in 2015, the penalty increases to 2% of your total household income or $325 per person.
There are also a few 2015 changes regarding flexible spending accounts for healthcare costs that relate to rollover savings. If you carried over the allowed $500 into 2015, you are ineligible to save in a general purpose FSA this year. Unfortunately, it’s too late to spend what was left in your 2014 account to qualify, but now is a great time to discuss your health savings situation with your employer and/or your tax advisor.
As of the first of this year, you can only make one rollover from an IRA to another IRA within a 12 month period. A rollover counts as withdrawing funds from one IRA, holding them for fewer than 60 days, and then depositing them into another IRA.
There are also changes to 401(k) limits this year. The limit on employee contributions increases to $18,000, so you are eligible to deposit $500 more than last year into retirement savings. In order to do this, you must let your employer know you want to increase your contribution. If you haven’t already, make the change now to take advantage of the most savings available.
Other increases are also available this year, including:
• Employees over the age of 50 are now allowed an additional $500 ($6,000 total in addition to the standard amount) for 401(k) “catch up” contributions
• Increases also apply to 403(b) and 457 retirement accounts
• Employees can now contribute $2,550 to their flexible spending accounts to put toward healthcare costs
There are a few additional changes to be aware of that relate to the amount of money you earn in 2015.
First, the AMT exemption has increased to $53,600 for individuals and $83,400 for joint filers, which is a 1.5% increase from last year.
Income tax thresholds have been adjusted for inflation, too. The highest tax rate (39.6%) applies to single filers earning at least $413,200 annually and joint filers earning $464,850. This is an increase of about 1.6%.
Finally, 2015’s standard deduction increases to $6,300 for single filers and $12,600 for joint filers. The standard deduction for heads of household rises to $9,250. Keep in mind that itemized deductions such as medical costs, taxes, interest expense and charity donations provide a tax benefit only if in total they surpass the amount of the standard deduction.
Personal Tax and Financial Planning 2014 – 2015: What You Can Do Now to Save Money Now
If you are like most people, you experience an end-of-year rush that leaves you feeling exhausted and frustrated. Tax and financial planning is no different – the change in the calendar and the coming tax season after the New Year loom, and you want to do all you can now to save money. Luckily, there are a few important moves you can squeeze in now to make things a little easier when 2015 tax season arrives.
Remember, as you make decisions, any planning and strategy you employ must apply to both 2014 and 2015. A multi-year outlook ensures anything you do to save taxes this year won’t cost you more in the coming year. Also, be aware of the Alternative Minimum Tax. What works now could increase tax problems in the future. People who have many dependents, deduct state and local tax, exercise incentive stock options, or enjoy large capital gains should expect to pay this alternative tax.
Income and Deductions
Postpone income until 2015 and accelerate deductions into 2014 to lower your 2014 tax bill. This strategy may enable you to claim larger deductions, credits, and other tax breaks for 2014 that are phased out over varying levels of adjusted gross income. These include child tax credits, higher education tax credits, and deductions for student loan interest. Postponing income is also desirable for those taxpayers who anticipate being in a lower tax bracket next year due to changed financial circumstances. Note, however, that in some cases, it may pay to actually accelerate income into 2014. For example, this may be the case where a person’s marginal tax rate is much lower this year than it will be next year or where lower income in 2015 will result in a higher tax credit for an individual who plans to purchase health insurance on a health exchange.
The holidays are a time for giving and charitable contributions are no exception. Many people feel generous this time of year, and tax-wise it can pay off. Keep in mind donations charged on a credit card are deductible in the year charged, not when you make your payment. This means you can squeeze in a few donations before the end of this year and not need to make the payment until your bill arrives in January. You can give generously without leaving yourself short on funds for the holiday season.
Make Changes to Your IRA Funds
Converting traditional IRA funds to a Roth IRA can save you money over the long-term if your tax rate this year is lower than it will be in the future. Wiggle room in your current bracket also allows you to absorb a small Roth IRA conversation without forcing you into a higher tax bracket this year.
Also, don’t forget to make a tax deductible contribution to your traditional IRA or 401(k) retirement account if you are eligible.
Update Estate Planning
Recent changes concerning federal and state estate tax could mean it’s time to take a look at your current estate plan, if any, or finally implement an estate plan for the first time. In addition to changes in the law, changes in your personal life might be cause for a review of your estate plan that could lead to saving you money and improving your family’s situation in the future.
Making gifts sheltered by the annual gift tax exclusion before December 31st can save gift and estate taxes. You can give $14,000 in 2014 to each of an unlimited number of individuals but you can’t carry over unused exclusions from one year to the next. The gifts also may save family income taxes where income-earning property is given to family members in lower income tax brackets who are not subject to the kiddie tax.
Taking action now can reduce your tax liability this year and next. Unfortunately, many people get caught up in the hustle and bustle of the holiday season and miss out on this last minute opportunity to save money. Waiting reduces your options and could be a big financial mistake. To make the most of your circumstances and take advantage of end of year savings, contact a financial planning and tax expert for more information. Feel free to call us to discuss your situation.
First blog post coming soon.
“‘Cause I’m the Taxman,
Yeah, I’m the Taxman.”