2018 Year-End Tips for Financial Planning

If you haven’t looked at year-end financial breaks, I have news for you–the time is NOW!
Here’s a quick list of important tax-cutting or planning actions to take before Dec. 31, 2018! 
–Update your will to find tax breaks or fix tax consequences before year-end
–If you’re a veteran, talk to a lawyer before giving away money or property–especially if you need assisted living care
–Donate gifts of cash or stocks to your favorite charities now
–Assess business changes to cut taxes now or push taxable decisions to 2019

Read more below for explanations on actions needed before Dec. 31, 2018.

Why update your will before Dec. 31?
Reveal tax breaks or deal with tax problems before year-end deadline

New baby or grandbabies? You now have another potential tax deduction. But, remember– anyone under the age of 18 cannot inherit property in Texas. We recommend you place any inheritance for minors in a testamentary trust in your will. This helps you avoid guardianship issues and allows you to specify the age of inheritance (age 25, age 30, or older).

Happily married again? Congratulations! Divorce? It happens. Your tax status can change with with either of these life events. As far as your will–make sure the new spouse is the beneficiary on all your documents. Or, name someone else as beneficiary if you’re now free of a spouse. Too often we see estate plans where an ex-spouse is still a primary beneficiary. Staying friends is one thing . . .but inheritance?

Move to Texas recently or move away? Different states mean different tax and probate rules. State income tax factors into your tax return. You may need to file separate returns for different states. Your will should reflect your new place of residence to avoid costly probate. For example, California probate is difficult and expensive. Texas probate is straightforward and cost-effective by comparison. While Texas allows valid wills from other states to be presented in a probate case, we always recommend new Texas wills for clarity and to cover any issues which may have arisen in the last few years.

Inherit property or purchase a home in another state? This change almost always affects your tax situation and likely has probate consequences for your will. No one ever said, “I want to probate a will in two states.” If you have valid Texas estate planning, these documents cover any and all property you own in Texas. If you own property outside of Texas, especially real estate, we recommend placing this property in a simple revocable trust. This avoids multi-state probates and allows you to transfer the property seamlessly without further court involvement.

Buy or sell a big item? Maybe you finally bought that boat you’ve always wanted. Don’t forget to invite us on your next trip! Just kidding–kinda. If this is for personal use, it probably won’t qualify as a tax deduction. But, maybe the boat can be used in part to entertain clients? Let’s talk. This asset definitely should be added to your will along with designating what happens to it if you’re not around.

Is your will’s executor still a good choice? This decision may affect your taxes and far more–your entire family’s inheritance or anyone else designated to benefit from your will.

Let me give a good example. Let’s say you are an elderly gentleman and you have a nice new friend named Anna Nicole Pith. This friend is quite a bit younger than you and is kind enough to offer to serve as your executor. Now let’s say this friend starts borrowing money from you and maybe even steals a car or boat from you. We recommend finding a new executor. If you don’t trust the people named in your documents, find new people. Don’t have ideas? Ask us to brainstorm for you.

Why should I care about the VA’s rule changes for long-term care?

You should care because your decision to give away money or property before Dec. 31 could mean you or your spouse won’t qualify for long-term nursing home care or assisted living benefits. This year VA long-term care benefits changed to require a three-year look-back period for aid and attendance to veterans or their spouses who are in nursing homes or assisted living facilities. The rule change also affects those who need help at home with everyday tasks like dressing or bathing. This means that moving assets during the three years prior to applying for these benefits could affect your eligibility. 

In addition, a new net worth maximum of $123,600 has been established.

The new rules are similar to Medicaid in their requirements and similar types of financial planning using trusts and other property transfer tools are still available.

You may benefit from meeting with an attorney to discuss the ways to transfer your property or money and still qualify for VA long-term care or assisted living benefits.

Here are the basics:

  • Applicants are required to disclose all financial transactions within the three years prior to submission of the application.
  • Applicants who transfer assets to put themselves below the net worth limit within three years of applying for benefits will now be subject to a penalty period. During this penalty period, the applicant will not be eligible for VA benefits. This can last as long as five years.
  • There are limited exceptions to the penalty period for fraudulent transfers and for transfers to a trust for a disabled child.
  • Gifts count towards this penalty period. 
  • Taking your name off of bank accounts also counts as a gift or unqualified transfer of assets for VA and Medicaid purposes. 

Basically, if you think you have a new trick for getting rid of assets, the VA and Medicaid case workers have seen it before. To learn more, check out our detailed article on this subject or call 817-638-9016 to schedule an appointment

Do I have to give a charitable gift before Dec. 31?
Yes, you do–if you want a tax deduction. Here’s the IRS break down:

How charitable giving tax deductions work
You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2018. This is true even if you don’t pay the credit card bill until 2019. Also, a check will count for 2018 as long as you mail it in 2018.

Wait! There’s more! Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift.

Gifts of stock require more detailed planning. Let us know if you want to give away stock as you need to understand the most beneficial way to handle this transaction—for your own tax consequences and to best benefit the charity. If you need help in planning stock or property sales for maximum tax benefits, call us at 817-638-9016 for an appointment with an estate planning attorney. 

Why Do Business Changes Matter?
Assess Before Dec. 31 & Avoid Unexpected Tax Outcomes

Ask yourself the questions below to do a quick assessment of your business changes over the past 12 months. If “YES!” is the answer to any of them, you may need to talk with us or your CPA about tax consequences. And, you may need to update your will:
• Buy or sell a business?
• Get a new partner or dissolve a partnership?
• Buy or sell business assets including property, buildings, equipment, cars, etc.?
• Declare bankruptcy?
• Make tons of money with your new business idea?
• Added new staff—possibly some relatives?

Make sure your estate plan matches the current state of your business. We want your wills, trusts, power of attorneys, and more to match your business plan in a seamless transition plan.

Need help? Call our office at 817-638-9016 to schedule an appointment.  

Wishing you peaceful and relaxing holidays,

Travis Weaver, Attorney

Posted in Legal Tips Today - Travis Weaver.