7 Last-Minute Moves To Save On Your Taxes For 2021
The American Rescue Plan’s expanded child tax credit was made fully refundable in 2021, and it was increased up to $3,600 per child through age five and up to $3,000 per child aged 6 to 17. Dependents who are 18 can qualify for $500 each. Dependents aged 19 to 24 may also be eligible, but they must be enrolled in college full-time.
Eligible families automatically received half of the payments in advance monthly between July and December 2021 unless they opted out. When eligible parents file their taxes in 2022, they’ll get the remainder of the benefit they didn’t receive through advance monthly payments. If you did not receive the advance payments because you opted out or didn’t receive them for some other reason, you could claim the full credit when you file in April.
When a Gift May Not Be a Gift
The federal tax code has particular rules about how much you are allowed to transfer to others each year – and throughout your lifetime – in the form of a gift. Any gifts above that amount may be subject to gift tax, paid by the giver. However, not every gift is subject to the gift tax. Annual exclusion amounts, a lifetime exemption amount, and other exclusions, such as education or medical exclusions, relieve a giver of paying federal gift taxes.
Because the lifetime exemption amount is very generous at this time, many people will not owe taxes on their gifts. However, high net worth individuals should be mindful of how gifting can affect the estate tax that may be due upon their death.
Probate: What It Is & How To Avoid It – Part 2
Unless you’ve created an estate plan that works to keep your family out of court when you die (or become incapacitated), many of your assets must go through probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate – and keeping your family out of court – is often a central goal of estate planning.
To spare your loved one’s the time, cost, and stress inherent to probate, last week in part one of this series, we explained how the probate process works and what it would entail for your loved ones. In part two, we’ll discuss the significant drawbacks of probate for your family and outline how you can help them avoid probate with wise planning.
Not very long ago, all legal documents were printed on paper and signed with a pen. But in today’s world, where we sign commercial contracts, form and run businesses, and buy everything from groceries to cars online, it seems almost prehistoric for state laws to require that someone appear in person in front of witnesses to sign a will printed on paper.
Under established law, a will is generally invalid unless it is in writing, signed by the willmaker, and witnessed by two other people. There is a good reason for these rules: courts need to determine whether a will is authentic after the person who made the will has died. By requiring that a willmaker follow these rules, a court can ensure that the willmaker had mental capacity when they signed the will, that they signed it voluntarily (and not under duress or threat), and that the will reflects the willmaker’s wishes.
Probate: What It Is & How To Avoid It – Part 1
Unless you’ve created a proper estate plan when you die, many of your assets must first pass through the court process known as probate before those assets can be distributed to your heirs. Like most court proceedings, probate can be time-consuming, costly, and open to the public, and because of this, avoiding probate – and keeping your family out of court – is a central goal of most estate plans.
It’s important to point out that even if you have a will in place, your loved ones will still be required to go through probate upon your death. Therefore, if you want to keep your family out of court and out of conflict when you die, you cannot rely solely on a will, and you’ll need to put in place other estate planning vehicles, which we will cover in further detail later.
How to Protect Yourself from Claims of Self-Dealing When Serving as a Trustee
A trustee usually has quite a bit of discretion in managing a trust’s accounts, money, and property (known as assets). At the same time, as a fiduciary, a trustee also owes the trust’s beneficiaries a duty of loyalty, which prohibits the trustee from self-dealing. In the simplest terms, self-dealing happens when a trustee uses the trust’s assets for their benefit instead of for the beneficiaries’ benefit.
Despite this simple definition, self-dealing can be much harder to identify in practice and is often done in ignorance, particularly when complicating factors such as the trustee being a trust beneficiary.
Estate Planning Considerations for Couples with an Age Gap
With couples of similar ages, planning for the future is naturally a joint effort. However, if you are married to someone significantly older or younger than you, the future can look different and mean different things to each of you. To protect yourself, your spouse, and other loved ones, you need comprehensive financial and estate plans. For these plans to work as intended, you must have an open and honest conversation with your spouse about the following financial and estate planning topics.
Because you may rely on a job to provide you and your spouse with health insurance and income, and a job can take up a large amount of your time, it is essential to discuss these questions about the future of your employment.
Using Beneficiary/Transfer-on-Death Deeds
A TOD deed (also known as a beneficiary deed) does what it sounds like it does – it transfers your real property to your selected beneficiaries upon your death, similar to a payable-on-death designation for a bank account or a transfer-on-death registration for an investment account. You continue to own and control the real property during your lifetime, so you can sell it, lease it, refinance it, give it away, or do anything else with it you choose.
You also continue to pay the mortgage and taxes and maintain the property. If you still own the property at your death, the TOD deed works to automatically transfer the property to your named beneficiaries without having to go through probate. And if you change your mind during your lifetime about whom you have named as beneficiaries in the TOD deed, you can amend or revoke it at any time.