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Important IRS Update: Significant Interest Penalty Increase for Tax Underpayments

The Internal Revenue Service (IRS) has recently announced a critical change that could significantly impact taxpayers who underpay their taxes. This update is particularly relevant as we approach the next tax filing season. Previously, the IRS charged a 3% interest penalty on estimated tax underpayments. However, this rate has now been increased to a substantial

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Will Inflation Hurt Stock Returns? Not Necessarily

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1993, one-year returns on

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Maximize Your Charitable Impact with These Four Strategies

As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies: Need Guidance? Reach Out to Us! These strategies are just a starting point. There

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Yes, Your 18-Year-Old Needs Estate Planning

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Category: Planning for Minors

As a parent, it can be hard enough to look ahead to the future and consider that your child could be moving out of the house to go to college, join the military or take on a new job. But part of the estate planning process does consider when your child reaches the age of 18, since he or she will be officially a legal adult at that point in time. teen-estate-planning

This means that 18 is also the recommended age for the creation of an estate plan with basic documents like advanced directives and a power of attorney. Since your child will be named as a legal adult at age 18, as a parent you are no longer equipped to make decisions on behalf of your child unless your child has granted you that ability.

Using tools like a health care proxy which can enable you to make medical decisions on behalf of your loved one or a power of attorney to assist with financial and legal decisions in the event that your teenager becomes incapacitated, are both important.

Unfortunately, everyone is at risk of accidents, diseases and sudden illnesses that could rob even a teenager of mental and physical health. If your teenage son or daughter does not have a healthcare proxy or a power of attorney, you could be at risk of having to go through the additional frustration and expense of a guardianship proceeding to enable a judge to appoint a legal guardian to make decisions on behalf of your teenager.

These guardianship proceedings are also frequently invasive to privacy and can be one additional hurdle that you don’t wish to go through after dealing with the process of your teenage son or daughter suffering through an accident or serious illness. For this reason, you need to contemplate the prospect of estate planning that can be done with the help of an experienced and knowledgeable lawyer.

Back To School Tips: Important Documents for Parents of New College Students

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Category: Estate Planning Estate Planning for Children Planning for Minors Power of Attorney

There’s no doubt that your mind is already pretty preoccupied with many different lists of supplies, last-minute shopping, and packing with your new college student. But it’s critical that you think about whether getting your adult child’s signature on two key estate planning documents is a good step. These two documents are a health care proxy and durable power of attorney.

So why, in the midst of everything else, should you be concerned with estate planning? In the majority of states, parent will not have the authority to determine health care decisions for children once those children have turned 18. This is true even if the parents are paying tuition or claiming those individuals as dependents on their tax returns. If the child were involved in an accident, for example, or became disabled, a parent might have to get court approval in order to act on behalf of his or her child.

Having both of the above-mentioned documents in place before your child goes off to college can give you a sense of peace and confidence that you will be able to act on behalf of your child in a worst-case scenario. Consider adding these crucial documents to your safebox at home today. In the event of an emergency, you can focus on caring for your child. Contact us today at 732-521-9455 or info@lawesq.net.

Back To School Tips: Important Documents for Parents of New College Students

 

 

 

 

 

 

 

 

 

Photo Credit: campaigner.com

Our version of TMZ: Estate Planning Blunders & The Famous People Who Committed Them

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Category: Distribution of Assets Estate Planning Estate Taxes Planning for Minors

Famous people are like us in many ways. They are born, they pay taxes, they make estate planning blunders, and they die. A recent article discussed several of the more common estate planning mistakes and the famous people who committed them.

English: US Congressional picture of Sonny Bono
English: US Congressional picture of Sonny Bono (Photo credit: Wikipedia)

Failing to Plan

Perhaps the worst estate planning blunder is failing to create an estate plan. When entertainer and Congressmen “Sonny” Bono died unexpectedly in a 1998 skiing accident, he left no estate plan. Therefore, his wife had to petition the court to administer his estate and continue his business ventures.

Failing to Seek a Professional

If anyone should be able to draft his own will without incident, it would be a former Chief Justice of the United States Supreme Court. However, even United States Supreme Court Justice Warren E. Burger couldn’t get it right. Burger drafted his own will, which contained simple errors, failed to address important things, and cost his family $450,000 in taxes.

Failure to Update

Importantly, a person’s estate plan should grow and change with him or her. Sometimes an out-of-date estate plan is worse than having no estate plan at all. When Actor Heath Ledger died at a young age, he had a will prepared. However, the will was drafted before the birth of his daughter, Matilda, and therefore left nothing to her.

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529 Plans Benefit Grandparents and Grandchildren

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Category: Estate Planning Estate Planning for Children Planning for Minors

As a recent article explains, a majority of wealthier investors prefer to transfer money to their grandchildren through 529 college savings plans. In part, 529 college savings plans are popular because they allow the grandparents to reduce the value of their taxable estate, while also maintaining control of the funds removed from the estate.

A person can open a 529 College Savings Plan for each of his or her grandchildren. The grandparents can then transfer up to the current annual gift tax exemption amount to each account, tax-free. Not only will the 529 account grow tax-free, but any withdrawals made by the grandchildren will be tax-free, as well.

English: A grandfather teaching his little gra...
(Photo credit: Wikipedia)

Importantly, the donors to the account are the ones who determine how the assets will be distributed. For example, if a grandparent unexpectedly has a stay in an emergency room and requires the money, he or she can take the assets back. If this happens, however, any investment gains would be taxed to the grandparents when the assets are withdrawn. This penalty tax, however, is only ten percent. Many donors attempt to “frontload” the 529 account so that they can make a lump sum gift of $65,000, tax free.

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Thanks Gramps! Planning Gifts to Grandchildren

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Category: Beneficiaries Estate Planning Estate Planning for Children Planning for Minors

Often, grandparents who have extra money wish to assist their grandchildren financially. A recent article discusses three ways through which grandparents can give to their grandchildren.

Grandparents with a child
Grandparents with a child (Photo credit: Nestlé)

Write a Check

Many grandparents simply write checks to their grandchildren without thinking twice about it. Under current tax rules, a person can give as much as $14,000 per recipient per year, without tax consequences. If you would like to give an individual grandchild more than $14,000, consider using another vehicle to avoid tax consequences. Finally, remember that this type of gift is often calculated into a giver’s estate for the calculation of whether a person is eligible for means-tested government programs such as Medicaid.

Invest in a College Savings Plan

If you want to assist your children with paying for a college education, consider a 529 account rather than simply writing a check. With a 529, you can be certain that the money is spent exactly how you would like it to be spent. Additionally, 529 accounts offer important tax benefits that will not have any impact on your grandchild’s ability to apply for means-tested financial aid.

Use a Gift Trust

Finally, you can transfer money to your grandchild through a gift trust. A gift trust is an account that you set up where you or a named individual serves as the trustee. The trustee can direct the timing and use of any distributions made from the trust.

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