How Will Tax Changes Affect Your Financial Situation?
Everyone’s financial situation is different, so it can be a little difficult to determine exactly how your financial situation will be affected by the tax changes in place for 2021. However, what is important is knowing what these changes are, as there’s a good chance you might end up with more money in your pocket at the end of the day.Changes range from deadline adjustments to increases in income tax brackets and deductions. A lot has changed, and it’s important to be aware of changes to not only maximize your savings, but also reduce mistakes. No one likes to have the IRS contact them about fixing paperwork. As always, you can contact a tax attorney if you need assistance.
Big Changes to Note
COVID has caused some pretty big changes, including this main one: the tax deadline has moved. The IRS extended the federal tax return deadline to May 17, 2021. Another big change revolves around the standard deduction, which increased to $12,400 for singles and $24,800 for couples filing jointly. Income tax brackets have also gotten an increase, thanks to inflation.
Below are some other changes of which to be aware.
Standard Deduction Changes
When you’re doing your taxes, you have the option to take itemized or standard deductions. These deductions lower your taxable income. The former is more of a pain that the latter, but, if itemized deductions save you more money, then the hassle is worth it.
Note that the standard deduction has changed. If you’re single, it has changed from $12,200 to $12,400. Married filing jointly has changed from $24,400 to $24,800. Married filing separately has changed from $12,200 to $12,400, and head of household has changed from $18,350 to $18,650. Other deductions, including charitable, medical, business, EITC, and child tax credit, have seen changes as well.
Changes to Other Deductions
The CARES (Coronavirus Aid, Relief & Economic Security) Act is responsible for many of the changes below.
Charitable
With the CARES Act, you can deduct up to 100% of your AGI (Adjusted Gross Income), in qualified charitable donations if you itemize deductions. If you take the standard, you can write off up to $300 of donations made in cash.
Medical
Medical bills are nothing new, but the pandemic made them even more prominent, as costly COVID-19 hospital visits put many Americans into the red. You can deduct medical expenses over 7.5% of your AGI, if you’re itemizing your deductions. So, if you make $150,000 per year, you can deduct out-of-pocket medical costs above $11,250.
Business
Self-employed workers know that they can claim a lot of deductions on their tax returns, such as home offices and travel expenses. However, if you were working remotely, you are not able to claim this home office tax deduction. It is only reserved for those who are self-employed.
EITC
The Earned Income Tax Credit helps out people earning up to $56,844 during the tax year. 20% of taxpayers don’t file for the EITC, which is crazy, as it can save you a lot of money. Make sure to file for the EITC if you earn up to that $56,844 mark.
Child Tax Credit
Families can claim a tax credit of a maximum of $2,000 per qualified child. The income limits for claiming the credit are $200,000 for singles and $400,000 for married parents. The credit is refundable, which means families can get up to $1,400 for each kid as a refund. The American Rescue Plan will change this number in 2021, increasing the child credit to $3,000-$3,600 depending on how old the kid is.
COVID: What’s Taxable?
Plans like the CARES Act provided a lot of aid for Americans struggling to pay bills. However, which of this aid is taxable, and which is not?
Stimulus Checks
If you received any of the three stimulus checks sent out, you’ll be happy to know that that money is not taxable income. It’s treated the same way as a refundable tax credit. Consider it an advance on your refund.
PPP Loans
Paycheck Protection Program loans are designed to be forgiven, as long as you used them on business expenses. Money from the PPP loans that you used to pay off your expenses can be deducted from AGI. But, make sure you fill out your Small Business Administration loan forgiveness application. Otherwise, you won’t be off the hook to repay the PPP loan.
Unemployment
The first $10,200 of unemployment benefits are tax-free, as long as your household income is under $150,000. This means that you might owe less than you originally thought on your taxes. If you have unemployment benefits of over $10,200, you have to report any excess as taxable income. For example, if you got $11,000 in unemployment benefits, you must declare that $800.
This list isn’t exhaustive, but it does hit on some of the biggest changes for the upcoming tax season. Our recommendation is that you contact a tax attorney or other tax professional to make sure you’re doing your taxes correctly and maximizing your savings.
Stay informed and read more useful facts on our website.
Taking Charge During Stress Awareness Month
April is Stress Awareness Month (ironic, considering that both April Fool’s Day and Tax Day fall during April). Stress can have an enormously negative effect on your body, causing problems ranging from high blood pressure to depression. Financial problems are one of the main causes of stress.
In 2019, before COVID-19, 70% of Americans said that they were in financial trouble. It stands to reason that that number has only increased since the pandemic hit, causing financial hardship for millions of Americans and their families. Financial stress ranges from debt repayment, high costs of living, and lack of emergency savings to overall poor financial health. In this article, we’ll discuss possible ways to reduce financial stress.
What Happens When You Die?
When you die, your assets will be distributed, whether to your creditors or to family and loved ones. If you don’t want your estate to go through the hassle of probate court, considering setting up trusts as a way to avoid that process. Whichever financial vehicle you choose, you should make sure that it is comprehensive, providing both a way to distribute your assets to your loved ones and satisfy debts with creditors.
If you die intestate, which means you have no estate plan, your estate will go to probate court, and a judge will pay off creditors and give your family what is left at the end of the repayment process. Probate likely will add a lot of stress to your family, as the entire ordeal is quite unpleasant. To avoid that potential source of stress, contact an attorney to set up a comprehensive estate plan.
Protecting Your Business from Creditors
No one is immune to a lawsuit, no matter how careful someone thinks they are America is a litigious society, and millions of lawsuits are filed every year. Asset protection for business owners is something that every single business owner, from a huge corporation to a small mom-and-pop shop, needs.
Consider changing the structure of your business to a corporation to protect yourself from personal liability. Assets receivable financing, trusts, and insurance are other ways to safeguard your company against creditors. Insurance is especially vital if you are a doctor, lawyer, or other professional. Check with an attorney to make sure you’re doing as much as you can to protect yourself within your state’s particular laws.
Fixing Tax Issues
A huge source of stress for Americans is running afoul of the IRS. IRS penalties range from fines to imprisonment, and it’s fair to say that the U.S. has a healthy fear of the Internal Revenue Service. However, all is not lost if you owe back taxes or make a mistake.
If you owe back taxes, still make sure that you file your tax return by the deadline. Immediately contact the IRS to discuss payment options. The IRS will respond far better to someone who is reaching out proactively than to someone trying to hide from them. Whatever your issue, call 800-829-1040 to speak with a representative. You will likely find that the IRS is far more flexible than their fearsome reputation. The worst thing you can do is try to ignore or avoid the situation.
Dealing with Ill Family Members
A sick or elderly family member puts a huge strain on family members, especially if that family member is unwilling or unable to take charge of their financing. If you’re in that position, try to convince them to at least set up a power of attorney. This power of attorney will oversee financial and/or healthcare decisions if the elderly or ill person is too incapacitated to handle these decisions themselves.
Another important financial document for a sick or elderly family member is a healthcare directive, which will communicate end-of-life wishes to the doctors and nurses in charge of their care. Even if the patient cannot voice their wishes themselves, the healthcare directive will act in their stead.
This list is by no means exhaustive. We all lead different lives, and our sources of financial stress vary from person to person. Hopefully, this article at least covers some of your financial health stressors. As always, you can contact an attorney to learn more about protecting your financial well-being.
Visit our website to find out more, stay informed and reduce stress when you know how to take charge of your financial future.
What You Need to Know About Corporation Formation
Corporate law is a complicated field, and there is a lot to know about this sector of law. If you’re considering forming a corporation, you will definitely need to hire an attorney. It’s not advisable to try to go through the process yourself, as there are so many technicalities. You want to do it correctly the first time to avoid excess hassle and cost.
In this guide, we’ll discuss the benefits (and drawbacks) of forming a corporation. We’ll go through the basic steps of forming a corporation, providing an overview of what the process will look like. It might seem confusing, but corporate formation could have excellent advantages for your business.
Benefits to Forming a Corporation
The main reason that people form corporations is to limit their liability. If you own a sole proprietorship or a partnership, you (and your partner[s]) are on the hook for the business’ debts and liabilities. In many cases, creditors will go after your personal assets when collecting on business debts.
Personal asset attacks are almost always not an option for creditors if you have a corporation. Advantages include personal liability protection, easier access to capital, and business security and continuity.
Drawbacks to Forming a Corporation
As with anything, there are drawbacks, even in the face of the aforementioned benefits. Disadvantages to corporate formation include how time consuming the process is. There are also rigid formalities and protocols to follow, and corporations are subject to what’s known as “double taxation.”
“Double taxation” occurs when the corporation’s profits are taxed, and then the profits are taxed to the shareholders after being distributed as dividends. There is no tax deduction when distributing dividends to shareholders, nor can shareholder deduct any of the corporation’s losses from their taxable income.
The IRS Definition
The Internal Revenue Service describes corporate formation as a process by which prospective shareholders exchange property or money (or both) in exchange for capital stock in a corporation. The corporation takes the same deductions as a sole proprietorship when calculating its taxable income, but it can also take special deductions.
Corporate Formation: A Step-by-Step
Though by no means exhaustive, and every single step has sub-steps of which to be aware, this step-by-step corporate formation guide is an overview of the process, giving you some idea of what to expect. In general, you will have to follow the steps below.
First, you should hire a transactional lawyer. This lawyer will walk you through the process of forming a company. Laws vary by state, and they are always changing, so hiring an experienced attorney will get your formation process off to a great start.
Second, you must appoint a registered against. This individual can be a person or a company—called a registered corporate agent—and he, she, or it will accept the service of process on behalf of the corporation. If your corporation is party to a lawsuit, the agent will get the mail. The agent should file the articles of incorporation. After these articles are filed, you can move on to the next step.
Third, you must create the corporation’s bylaws and appoint the corporation’s directors. The bylaws are rules and regulations your corporation must follow. These laws lay out the responsibility of shareholders, officers, and directors, and ensure there is no confusion or blanks left missing. In some cases, banks might want to see your bylaws before giving you a loan or letting you open a corporate account.
Fourth, it’s time to issue stock. Shareholders are entitled to stock when they contribute cash, property, and/or services to the business. They have an ownership interest. Shares are classified as securities, which usually fall under state and federal law pertaining to them.
Fifth, you should file anything else that’s necessary with your secretary of state. An attorney will help you clean up loose ends and get in documents before the deadline. Annual reports are an example of required documents you must submit in Florida.
Sixth and finally, you should apply for an EIN (employer identification number), which is sort of like a Social Security number for your corporation. You’ll use your EIN when you file corporate taxes and apply for bank accounts. Filing usually takes a month, though you can apply online and get an EIN almost immediately. You should file any other necessary IRS forms at this point, too.
Once again, you should hire an attorney to complete this process. An attorney will also be able to advise you on whether the process is right for your business, considering your industry, financial situation, tax liabilities, and other pertinent information.
Visit WFP’s website to find out more about corporate formation.
Staying Lucky This St. Patrick’s Day
Have you ever wondered where the phrase “Luck of the Irish” comes from? Historians have revealed that the phrase isn’t as old as some may think—it’s not as old as St. Patrick’s Day itself, a holiday first recorded in 1601. “Luck of the Irish” dates back to the 1850s, when gold and silver mining was in its heyday. Some of the most successful, famous miners were Irish or Irish-American. The Irish ability to find gold led to the use of “Luck of the Irish.”
In law, we believe there’s no such thing as luck, only strong preparation and careful planning. Take your luck into your own hands through careful asset protection.
What is Bad Luck?
Obviously, there is no legal definition of “bad luck,” and we doubt attempting to come up with one would hold weight in court. However, there are certainly some negative events that might lead you to feel blighted. We’ll cover ways to prepare for these unlucky times, including death, sickness, and accidents and lawsuits, below.
Death
There’s no way to prevent death, but you might have thought about what will happen to your assets after you die. There might be important things that you own that you want to keep in the family (and out of probate court).
Last Will and Testament
A last will and testament will not get you out of probate court—it still has to pass through the court process—but it is often peoples’ starting point when they think about how to structure their affairs after they die. A last will and testament is a final document arranging your asset division.
In Florida, for a last will and testament to be valid, it must meet several requirements. These include:
(1) The will must be in writing.
(2) The person making the will (known as the testator) must sign it.
(3) The testator’s signature must be at the bottom of the will.
(4) The testator must sign the will while in the presence of two witnesses.
(5) The two witnesses must sign the will in the presence of each other and the testator.
As with anything in law, there are a million sub-rules for each of those five categories, which is why it is important for you to hire an attorney. The attorney will make sure the will is compliant with the law, avoiding any problems in court when it comes time to validate the will.
Trust
A trust is a three-party relationship. You, the donor, transfer assets and/or property into a trust. The trust is controlled by the trustee until you give the trustee permission to hand over the assets to a third party, the beneficiary. The beneficiary is the final person you intend to receive the assets. A trust is a way to avoid probate court.
Sickness
If it’s not death that’s considered the unluckiest of ailments, sickness is certainly a strong contender. And, if you’ve been alive in the past year, you know that sickness is everywhere. More than ever, it’s important to have safeguards set up in the case of illness. Examples of these safeguards include a healthcare directive and power of attorney.
Healthcare Directive
A healthcare directive is a set of instructions for the doctors and nurses taking care of you if you are sick. You might have specific wishes for your care, and you will want to communicate these wishes, no matter how sick you are. A directive lays out these instructions in advance, protecting you even if you’re too incapacitated to tell the doctors and nurses what you want.
Power(s) of Attorney
A power of attorney is a trusted person that you place in charge of your financial and/or healthcare affairs in the event that you’re too sick to take care of yourself. This person will act as your agent, making decisions about your finances and healthcare until you recover.
Accidents and Lawsuits
Lawsuits can be the Grim Reaper for your personal assets. Personal asset protection is a way to place assets out of reach of creditors.
Personal Asset Protection
One common example of personal asset protection is the creation of an irrevocable trust. You place your assets into this trust, and they will be shielded from creditors and controlled by a trustee. You will not be able to remove the assets from the trust, but they will be safe from lawsuits and kept for your family.
Umbrella Policies
Another common way to protect your personal assets is to purchase an umbrella policy. This “just in case” insurance policy provides more coverage than your regular auto or home policy in the event of personal injury (for example, if you are in a car accident or someone is injured on your property). Umbrella policies cost extra, but they will give you peace of mind, which is priceless.
As you can see, the way to have the “Luck of the Irish” is to simply be prepared. Bad things happen, and the best offense is a good defense. Contact an attorney for more information on boosting your own “luck” through careful estate planning.
Visit our website to get even more details on how to take cover.
All About Personal Asset Protection
When it comes to you and your family, anything financial is personal. “Personal Asset Protection” might be a term with which you’re not familiar, but it’s incredibly important. You’ve worked hard for your assets—your home, business, personal items, vehicle, and more—and the idea that these prized possessions could become fodder for a lawsuit is appalling.
In this article, we’ll give you an overview of Personal Asset Protection. As always, you’ll want to talk to a lawyer for more information if this sounds like something that interests you.
Why Do I Need This?
You might be wondering why you need Personal Asset Protection. You might feel like you’re not at risk for a lawsuit. Unfortunately, that’s not exactly true, as America is a very litigious society, and over forty million lawsuits are filed a year. Even simple things like fender benders or someone falling on your property can lead to a court case. And, if you’re slapped with a bill, you will want to make sure that your personal assets cannot be taken by creditors.
Though Personal Asset Protection has sometimes had a shady past (think of billionaires hiding their fortunes in offshore tax havens), there are legitimate, legal ways to keep your assets safe. Listed below are some of these means of protection.
Asset Protection Trusts
Several states allow Asset Protection Trusts, and they don’t require you to be a member of the state to buy one. These APTs are irrevocable, which means that, when you transfer assets into the trust, this transfer is permanent. The trust owns the assets and the trustee manages them. You won’t be able to take them out when the storm blows over, but the APT will protect your assets. APTs offer some of the strongest protection against lawsuits and creditors, as well as any other judgment against your estate.
Accounts Receivable Financing
Business owners might find that accounts receivable financing (ARF) comes in handy in warding off lawsuit damage. ARF helps avoid cash flow issues (such as those caused by a lawsuit). This financing is a type of arrangement in which a business receives financial capital related to its accounts receivable. Usually, this looks like a company receiving a loan on its outstanding invoices, but these ARF agreements can be structured as asset sales as well. ARF is a powerful tool for not only asset protection, but also growth.
Note that ARFs do have their downsides. They can be more expensive than traditional lenders’ funding, especially if your business’s credit rating is less than ideal. You might even end up losing money if your ARF is structured as an asset sale.
Family Limited Partnerships
Family limited partnerships (FLPs) are used for moving wealth between generations. Assets that you transfer into the FLP are transferred in exchange for shares in the FLP. The partnership owns the assets, so they are protected from lawsuits. But, you control the assets through the FLP. There won’t be a market for the partnership shares you receive, which means that their value will be less than that of the asset you exchanged for the shares.
Stripped-Out Equity
A possible way you can protect your assets is by stripping their equity. Pull the equity from unprotectable assets and put them into assets that your state will protect. Real estate serves as a good example for this. Let’s say you own an apartment building, and you’re concerned about a lawsuit. If you take out a loan against the apartment building’s equity, you could put those funds into a protected asset like an annuity.
Possible Other Means of Protection
Below are a few other suggestions for Personal Asset Protection, including:
- Retirement Plans. You might be able to put more money into your retirement plan (assuming it’s employer-sponsored). That could provide protection from creditors.
- Spousal Transfer. You also can transfer important assets to your spouse’s name, but, obviously, this will go south if the two of your divorce.
- Insurance. Purchasing an umbrella insurance policy will grant you protection from personal injury claims above the usual coverage that your auto/home policies offer.
- Don’t Mix Assets. Avoid mixing personal and business assets. If your company is sued, separate assets could help avoid risk of personal loss and vice versa.
There is a lot to cover when it comes to Personal Asset Protection. Contact a lawyer for more details on how to keep your hard-earned assets safe in the event of a lawsuit.
Visit our website to learn more about Personal Asset Protection.
Upcoming Tax Changes: A Brief Overview
Well, we’re almost at April 15th again. “Tax Day” has been an unavoidable
“holiday” on the American calendar since 1861, when the Revenue Act of
1861 instituted federal income tax to help fund the Civil War. Though that Act was struck down, it got the ball rolling for what would become Tax Day. Though the date has changed over time, the purpose hasn’t.
If you’ve filed your taxes already, good for you. If you haven’t, consider this your wake-up call to get going. As you can see, tax law has been changing since the Civil War. Though some years don’t bring new changes, others do, and 2020-2021 is absolutely a “new change” year, mainly thanks to the Coronavirus pandemic.
Changes to Deductions
Standard
There have been a lot of changes to the standard deductions. For 2020, single, married filing jointly, married filing separately, and head of householder filers are all going to see their standard deductions increase. Single filers can take a $12,400 deduction, MFJ a $24,800 deduction, MFS a $12,400 deduction, and HOH an $18,650 deduction. These are all increases of $200-$400 dollars.
Charitable
Thanks to the CARES Act, which was legislation instituted to help mitigate the effects of the coronavirus, you can deduct up to 100% of your AGI in charitable donations if you itemize deductions. If you take the standard deduction, you can write off $300 cash in charitable giving.
Medical
You can deduct medical expenses that are above 7.5% of your AGI if you are taking the itemized deduction.
Business
Self-employed individuals can take a bunch of deductions, including one for home office and travel expenses. But, note: if you were working remotely, like millions of workers, you won’t be able to claim a home office deduction because you don’t count as self-employed.
EITC
This Earned Income Tax Credit applies to workers who earned up to $56,844 during 2020. Depending on your filing status, income, and if you have kids, you’ll be able to save a few hundred or a few thousand dollars. Only 20% of taxpayers actually claim this credit, which is crazy, because it really can save you money.
Child
Families can claim up to $2,000 in tax credits per qualifying kid. This refundable credit means you can get up to $1,400 per kid as a tax credit. Depending on your situation, there might be other, small-print deductions you can (legally) squeeze in as well.
Stimulus Checks, PPP, and Unemployment Benefits
Stimulus Checks
Did you get a stimulus check? Congrats! That is not taxable income. It is considered the same as a tax credit, for IRS purposes.
PPP
Payment Protection Program loans helped small businesses stay afloat. With the PPP, as long as these loans were used for business expenses, they were forgiven. Expenses paid with PPP loans can, in fact, be deducted from your income, but you have to apply for loan forgiveness to the SBA. If you don’t apply, you won’t be off the hook.
Unemployment
The good news ends here, as you will need to pay income taxes on your unemployment benefits. If you chose to not have taxes withheld from the benefits, you’ll have to pay quarterly estimated tax. Or, you’ll have to pay it all on Tax Day.
529 Plans and ESAs
Education was up in the air the past year, and money you took out of an education savings account of 529 plan might have been refunded by your college. If you got a refund, you have to put the money back in the account or use it to pay educational expenses. Otherwise, you’ll have to pay income tax on it and a penalty for withdrawal.
However, there are some new ways to use the ESA/529 for educational expenses. You can use your 529 to pay off fees, books, supplies, and even student loan debt.
Changes to Retirement Plans
What the CARES Act Did
The CARES Act permitted people to tak
e up to $100K out of their IRAs and 401(k)s until the end of 2020, with no early withdrawal penalty. Though this is a bad idea—penalty or no penalty—a lot of people did it. Though there was no penalty, you still have to pay income tax on whatever you withdrew.
Traditional IRA Holders
Traditional IRA holders know that they have to take money out of their account when they reach a certain age, and these withdrawals are known as RMDs. The SECURE Act pushed back that “certain age” from 70 ½ to 72. The CARES Act went further and permitted seniors to skip RMDs with no penalty.
The SECURE Act’s Effects
Another thing the SECURE Act did for Traditional IRA holders was allow them to continue putting money in their account past 70 ½ years old. Note that you still have to pay taxes on the money when you withdraw it.
April 15, 2021. That is the date that you have to have your information in. If you make a mistake, don’t panic, as the IRS will try to work with you to correct the error. However, don’t be afraid to hire a tax professional or tax lawyer to help you get your taxes done properly the first time.
Visit our website and learn about all of our services and how we can help you secure your assets.
Valentine’s Day: Love Can Be Blinding
Valentine’s Day is a day of romance, chocolate, and roses. Named after Saint
Valentine, Valentine’s Day has been around since the year 496 A.D, but it wasn’t until the 1300s and 1400s that the holiday became associated with courtly love. In the 1700s, the trend of greeting cards, flowers, and confectionery as gifts began. Though it’s not a public holiday in America, Valentine’s Day is still one of the most-celebrated, grossing more than $20 billion in spending a year.
Though love is beautiful, it is also blinding. And don’t feel bad about it either, because you can’t help it. Medical Daily reported on research studies that took brain scans of people “in love,” and researchers found that, though being in love activated some regions of the brain that had been dormant, there was another effect. When researchers showed test subjects pictures of their significant other and recorded their brain activity on an MRI, the MRI showed that the frontal cortex shut down upon seeing their beloved. The frontal cortex is the part of the brain that is essential for judgment.
Concerning news aside, you can take steps, right now, to ensure that you’re not blinded by love. We’ll talk about these legal tools, which will pick up the slack when your frontal cortex takes a vacation.
To Whom Does This Article Apply?
This article will serve as a guide for people who are in the process of getting a divorce (or thinking about a divorce). Your frontal cortex took a vacation, but it has hopefully woken up again, and, now, you need to know how to protect your assets from your ex-beloved.
Hire a Lawyer
Step one, get a lawyer. Every state’s laws differ on what is and isn’t marital property, and every state’s laws differ on the deadlines and processes required to get a divorce. You want to know what you’re walking into, and you can’t do that if you don’t know the law, which is complex, confusing, and ever-changing. Get a lawyer, and don’t try to go it alone.
Identify What’s Yours
Something the lawyer can help you with is identifying what is and isn’t yours. Before you proceed with anything, you must know how much money you have and where it is. What’s in your name? Your property can include assets, mortgages, bank accounts, and more. A judge will care a lot more about a detailed financial record than he or she will about a picture of your spouse having dinner with someone else.
Get Everything in Writing
Courts might not be as shocked and awed at proof of your spouse cheating, but, again, what they really want to see is proof of assets. Be careful to have everything in writing, especially financial statements, documents relating to your home and business, and pretty much anything that could come up in the asset division.
Don’t rely solely on electronic copies, either. Senior V.P. of Investments at Raymond James, Shelly Church, warns that it’s not unheard of for a vindictive spouse to change passwords on joint accounts, locking you out. Fire up the printer and get moving.
Secure Liquid Assets
According to Church, the aforementioned financial guru, it’s also not unheard of for a spouse to take out all the money from your account and leave you penniless. If the two of you have a joint account, set up an account in your name and move your portion of the assets to it. Do not wipe out the account.
In addition to being a not nice thing to do, wiping out the account will make you look really bad in the eyes of the court. It will backfire on you down the road. Just move enough assets to cover your bills and living expenses until lawyers and the court get involved.
Possibly a Financial Adviser
If you can afford it, it will help to have a financial adviser in your corner, especially if you’re not good with money. Jacqueline Newman, a NYC divorce lawyer at one of the top firms in the city, said that “non-financially-savvy” spouses need to go to a financial adviser who will “understand” and “connect” with you. That way, you’re not getting taken advantage of because of your lack of knowledge.
What You Want vs. What You Need
At the end of the day, lawyers try to reach the best settlement they can for their client. You’ll hear a lot of, “Can you live with this?” and “Can you deal with this?” from your lawyer. Settlements will not be perfect, but if you have what you need, you should accept that you won’t get everything you want. Your lawyer will get as close as he or she can, but there will have to be compromises on your end, no matter how much you hate your ex-spouse.
This guide isn’t the be-all, end-all. Divorce is a tough time, but you’re going to feel even worse if you don’t get your financial situation squared away. The emotional process will take time, but the clock is ticking when it comes to defending your finances and future.
Care for your assets? Get more details from our website.
Super Bowl: Keep the Shocks in the Arena
Who doesn’t love the Super Bowl? Millions and millions of viewers watch
the Super Bowl every year, and it has been a national pastime in America since 1967. While the ups and downs of the famous game draw us in, you probably want to keep your real life shock-free.
One of the most unpleasant surprises in life is being faced with a lawsuit. Hopefully, you have never been sued, but those who have know that it is an extremely stressful event. In this article, we’ll talk about ways you can “lawsuit-proof” your estate plan.
Note that none of these tips is 100% foolproof. Like with what we might see at the Super Bowl, someone could get past your defense. But, as they say, the best offense is a good defense.
Wait…You’re Saying Someone Might Sue Me?
People fight. That’s the hard truth. It’s not unheard of for heirs to fight over an estate plan. And, in the legal world, a “fight” almost always means a “lawsuit.” Whether driven by grief or a misguided belief that they’re being swindled, heirs slap each other with lawsuits all the time.
This could have disastrous consequences. Your estate could be tied up in court battles for years, and litigators’ fees aren’t cheap. Not to mention, depending on the court where you live, your “dirty laundry” could be made public record. All this is added on to the toll that family drama takes on your loved ones.
To lower the risk of lawsuits, there are some simple precautions you can take. This might not lower the risk of someone being unhappy, of course, but it could stop that unhappiness from turning into a lawsuit.
Trusts Instead of Wills
This first tip is more a case of problem prevention than problem-solving. A trust doesn’t need to go through probate court after you die, but a last will and testament does.
The probate process can give rise to all types of thorny issues regarding the executor’s duties, asset division, splitting the expenses, and more. Basically, probate gives an already fragile family dynamic a stick of dynamite. Trusts bypass this process, which is unpleasant even for the most cordial of families.
Estate Planning Letter(s) of Instruction
An heir might contest on the grounds that your estate plan isn’t “what [you] would have wanted.” There’s an easy way to avoid such a contest, and it is to create a detailed “estate planning letter of instruction.” This letter will give your executors all the information they need to administer your estate.
Topics covered in the letter can include passwords to accounts, subscriptions you need canceled, keys to safe deposit boxes, people to contact in the event of your death, and how your personal effects should be divided.
If you feel it’s necessary, you can even explain why you want your family to end life support if you’re in a coma. Some letters of intent even go so far as to explain unevenness or “favoritism” in the will. A letter of intent will clear up confusion that could lead to a lawsuit.
Provide for Disinheritance
Essentially, disinheritance is when you leave a family member—who would have expected to get something in a will—absolutely nothing. There are some limits. First, in Florida, you cannot disinherit a minor child. Florida doesn’t want kids left homeless and penniless, and family disputes with minors aren’t usually serious enough to warrant as drastic a step as disinheritance.
Secondly, you can’t automatically disinherit your spouse. Your spouse must agree to get nothing from your estate, either in a Pre- or Postnuptial agreement. This probably won’t surprise you, but spouses usually don’t agree to that.
Any legal disinheritance should be provided for in your estate plan, but be careful giving a “why” for the disinheritance. A court could find the reason you give is contrary to public policy and re-inherit the person.
Check Ownership of Assets
This is a simple one. You can’t give away something you don’t own. Make sure to check and re-check that you own the assets you’re giving away in your will or trust. Checking ownership will avoid a lot of legal tangles.
Establish Mental Competency
In Florida, you must have “testamentary capacity” to create a will (among other requirements). Heirs will sometimes challenge testamentary capacity, claiming that the writer didn’t know what he or she was doing at the time.
If this sounds like something your family might do, consider agreeing to an examination by a geriatric psychiatrist. That way, there will be no doubt of your competency.
Don’t “DIY” It
We might sound biased, but attempting to create a legal document without the help of an attorney is a bad idea. Don’t do it yourself, as there are a lot of minor technical aspects of the law that are easy to miss. Any little error could provide basis to challenge the will, depending on the situation. Contact an attorney to make sure it’s done properly the first time.
Talk to Your Family
A lot of knock-down, drag-em’-out lawsuits happen because the family is shocked at the results of the will. The shock and disappointment, compounded with feelings of grief, is a powerful combination. It’s best to make sure your family is not surprised by the terms of your will or trust. Talk to them beforehand so that they know what to expect. They don’t have to like it, but they should at least be prepared.
While this list is by no means exhaustive, they provide a few ways to soften the blow, especially if your estate plan contains news that your family might find unwelcome. Note that there is no “No Contest” clause in Florida (§732.517), and such a clause is unenforceable. Talk to an attorney to learn more.
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What Should You Trust? Revocable vs. Irrevocable Trusts
You’ve likely heard the word “trust” before, at least in some legal sense. A trust is a tri-party fiduciary relationship. A grantor transfers legal title to an asset to a trustee. The trustee then holds the asset for the benefit of the beneficiary until the grantor allows the trustee to transfer title to the beneficiary. During the time in which the trustee holds the property, they must manage the property or asset for the benefit of either grantor or beneficiary (or both).
Trusts have existed since the year 400 B.C. From what archaeologists have been able to find, early records of Roman law contain examples of “testamentary trusts,” a term discussed later in this article. By the 1500s, British common law would adopt those examples and add “inter vivos trusts.”
Centuries later, we have a body of law that contains dozens of types of trusts, all with their own legal requirements. In this article, we’ll be talking about two specific characteristics of trusts: irrevocable and revocable.
Terms to Know
There are three terms to know, in addition to the definition of a trust that is discussed above. These terms are: (1) grantor, (2) trustee, and (3) beneficiary.
A grantor is also called a “creator,” “settlor,” or “donor.” This is the person or entity (such as a company, charity, museum, etc.) who is conveying the property in the first place. It is the person or entity that creates the trust.
A trustee is the person or entity designated in the trust to hold equitable and legal title to the property conveyed by the grantor in the trust.
A beneficiary is the person or entity that has the beneficial interest in the trust. This is the person for whom, at the end of the day, the trust was created.
Irrevocable Trusts
The Definition
In an irrevocable trust, the terms of the trust (conditions, specifications, etc.) cannot be modified, terminated, or amended unless the named beneficiary gives permission to make changes. The grantor has effectively transferred their ownership, which legally removes their right to make modifications or cancellations.
Types of Irrevocable Trusts
There are really two main types of trusts that can be irrevocable. These include testamentary and living trusts. A testamentary trust arises when the grantor dies. It is specified in the grantor’s will, so it must go through probate. A trustee is appointed to manage the testamentary trust, which contains assets of the deceased. This trust reduces estate taxes.
A living trust can be revocable or irrevocable. An irrevocable living trust is created during the grantor’s lifetime. A trustee is responsible for managing the grantor’s assets for the eventual beneficiary’s benefit.
Reasons for This Trust
Estate and tax purposes are the two main reasons that an irrevocable trust is set up. When this trust is made, the asset is removed from the grantor’s taxable estate. The grantor no longer owns it, so they do not have to pay taxes on it. The grantor is relieved of the tax burden, but they are also often relieved of any income the asset generates.
Who is this Trust For?
“Trust funds” have always been thought of as tools for the super-rich, but that isn’t the case. People who work in professions that might make them subject to lawsuits—lawyers, doctors, accountants, contractors, etc.—can use these trusts to shield their assets from lawsuits. A creditor can’t take what you don’t legally own. However, the loss of control and rigid terms are two disadvantages that often discourage people from forming them. These characteristics are not found in revocable trusts.
Revocable Trusts
The Definition
As you may have guessed from the name, a revocable trust can be changed or amended, and terms can be eliminated without the permission of the named beneficiary or beneficiaries. These changes can be made by the grantor during his or her lifetime. A revocable trust offers a degree of flexibility that an irrevocable trust does not. Grantors maintain control. They can even get rid of the trust during their lifetime, if they want.
Types of Revocable Trusts
A revocable living trust is the main type of trust to know when it comes to revocable trusts. This trust is created by the grantor during his or her lifetime, and it is during that period that he or she can make changes. There are dozens of other types of trusts that can be revocable as well, but the concept of a living trust is the main one to know.
Reasons for this Trust
A main reason people enter into a revocable trust is for privacy. A revocable living trust ensures that your estate, when you die, doesn’t enter probate court. Your estate’s possessions and assets are not dragged through the court system and publicized. A revocable living trust bypasses probate court
Additionally, revocable trusts adhere to a grantor’s wishes. They offer flexibility, and a grantor can change the terms of the trust if needed. They are not bound to their original decision-making.
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Why Partnerships Can Be Beneficial for Your Business
There’s no denying that 2020 was been tough on businesses. Nearly everyone’s business sustained some form of loss, and the governmental assistance, though helpful for many, could only do so much. Looking forward to the future, there is a light at the end of the tunnel. This means that it’s time to talk about things that don’t involve mitigating or preparing for disaster.
Namely, this article will discuss partnerships. This structure might be beneficial for your business, and, if you think a partnership is something that interests you, you should contact an attorney about filing any necessary paperwork.
What is a Partnership?
A business partnership shares the business between multiple owners (two or more). The partnership is a formal arrangement by the parties to share the business’ profits and manage and operate the business together. In a partnership business, partners might share in the losses and profits together. Or, they might have limited liability.
What are the Main Types of Partnerships?
General
General partnerships are the most informal arrangement that you can have in Florida. A general partnership means that each partner is personally liable for not only the debts of the business, but also the actions of their fellow partners. In Florida, it is not difficult to start a general partnership. Choose a business name, trade name, draft a partnership agreement and sign it, and then apply for the appropriate licenses, permits, zoning clearances, and EID.
Limited
A limited partnership is similar to a general partnership, though it does have a few distinctive features. For example, a limited partnership must have at least one general partner. This partner must be personally liable for the business’ debts and claims, and the GP must manage the business. Other partners can be “limited” partners, who contribute capital and investments to the business but are not involved in management. If the limited partner is not involved in management, they aren’t liable for debts or claims.
Limited Liability
A limited liability partnership is often preferred by medical, legal, or accounting practices. These LLPs are distinctive because, though they have the same basic structure and tax advantages as other partnerships, they have liability protection. An LLP partner’s personal assets are protected if there are claims against one of their partners. An LLP partner is not personally responsible for their business partners’ actions. Though assets held in the partnership can be liable for claims or debts, the LLP offers more personal protection to its partners.
Advantages of a Partnership
A good partner can bring things that you might lack, including specialized expertise and cash. A partner also allows you to share the capital expenditures and expenses necessary for your business, lessening the financial burden on you. Additionally, a partner can provide access to new business opportunities and inroads with investors or communities to which you alone might not have been connected.
There are tax advantages to certain types of partnerships. According to the IRS partnership page, a general partnership might not have to pay income tax, as it “passes through” its profits and losses to the partners themselves. Partners might be able to deduct certain business losses from their tax returns. Note: it is important to contact an attorney for more information on what, if any, tax benefits you can get through a partnership.
Disadvantages of a Partnership
As with anything, there are drawbacks, even in the face of benefits. A partnership does somewhat involve a loss of autonomy, as you now have to consult with another person about at least some decisions (especially true in a general partnership, where everyone’s involved in management).
Also, a partnership entails sharing losses. Though LPs and LLPs prevent personal losses, there is still always at least some extent of loss incurred together. In the future, you could also have issues if you want to sell your business and your partner(s) refuse.
Lastly, there is always the chance of conflict. Though states have some laws about this (in the event of fraud or “insanity,” usually), these regulations are only put into use in extreme situations. Bickering and disagreement could be enough to sink a business, but it likely won’t be actionable in court. Choose your partner wisely.
As you can see, a lot goes into a partnership, and this article serves as only a brief overview. If you’re feeling a little overwhelmed or confused by this information, that’s perfectly normal. Law isn’t easy, but, luckily, lawyers exist. If you want to learn more about partnerships, consider booking a consultation with an attorney to talk about your options and visit our website.