You might recall that the Tax Cuts and Jobs Act made it much harder for Americans to get tax breaks on their charitable giving by raising the standard deduction so that fewer people have the opportunity to itemize. Of course, you want to do some good for the community with your charity dollars! But receiving the tax break is nice too.

For National Philanthropy Day, we wanted to give you some ideas for making the most of your charitable gifting this year.

Choosing a charity

More significant dollars make a bigger impact. In other words, if you select just five charities and give them $1,000 each, you’ll make more of an effect than if you sent $100 to 50 charities.

That may mean that you take more time to figure out where you truly want your charitable funds to go and to ensure that the organization is one that you are willing to support. Although many of our clients have a wide variety of philanthropic interests, we encourage you to choose your top two or three and plan to make a difference through them.

Many of the charity rating websites can provide you with a list of the top charities according to the issues that are most important to you.

For tax deduction purposes, your dollars need to go to an organization recognized as a charity. A 501c3 entity can show you their IRS letter granting them charitable tax exemption. You can also find them on the IRS’s lookup tool.

Research the charity to make sure it’s worthwhile

Verify your choices with online sites that provide ratings and information about them. Make sure that your money is going to an entity that values the same things you do.

You can ask the organizations some questions directly as well. What is their mission, and how have they made progress toward it and their goals? Do they have transparency about financials and IRS forms that are readily available on the website?

Watch for costs, primarily operating or administrative. Although not the number one consideration for choosing a charity, costs can help guide your decision. Some charities require a lot more internal support than others, and the organization must staff up to carry out the mission. 

Although the vast majority of charities that you’ll come across are healthy and dedicated to their vision, some scam artists operate in this space. 

If you get an email from an organization you’ve never heard of before, be skeptical. Most of the time, a true charity only emails you when you provided your address to them. And if they’re asking you to send money to a foreign bank or institution – forget it!

Legitimate charities usually don’t send attachments with their emails. They may have pictures that link back to the site, but clicking on an attachment can unleash a virus or other cyber issue into your computer. Delete them. If you’re concerned, you can always look up the phone number on their website and double-check.

You’ll probably see a lot of information come through your social media feeds, too. Remember those scam artists and others, including Russian intelligence, plant bots, and fake profiles. Do your homework first if you see something through social media you want to investigate.

If someone claims to be a victim through email or social media, that’s also likely a scam. You can always search for the charity’s website, look it up on an online rating site, and determine if it’s legitimate.

Don’t forget QCDs

The TCJA also increased the age required to take minimum distributions (sometimes called RMDs or MDRs) from your Traditional or pre-tax retirement accounts. If you’re 72, you need to begin these withdrawals.

However, you can deposit up to $100,000 of the funds at the (legitimate) charity of your choice. This option is known as the Qualified Charitable Distribution or QCD. The distribution must go directly to the charity without making a pit stop at your bank account along the way to avoid disqualification.

As you know, typically, you have to pay taxes on your RMDs. That’s the whole point of having mandated withdrawal requirements. But if you do a QCD directly to the charity instead, you won’t pay taxes on the withdrawal.

Bundle potential deductions

The standard deduction for married couples for the 2020 tax year is $24,800 ($12,400 for singles and married filing separately.) Since the TCJA limited the deductions you can take on items such as mortgage interest and state and local taxes, many taxpayers no longer itemize. Which means they can’t take the itemized deduction for charitable gifts.

However, if you have some unusual deductions this year that could push you over the standard deduction, you might want to accelerate them into 2020 and do some charitable giving while you’re at it. 

For example, the floor to deduct medical costs is 7.5% of your adjusted gross income. If you happen to reach it this year because you’ve had some medical issues, you might exceed the standard deduction. 

Another avenue to consider is bundling your charitable donations into one tax year to help you exceed the deduction threshold, rather than giving smaller amounts annually. If you decide to use a donor-advised fund, you could bundle several years’ worth of giving into one tax year and then portion out the money to your charities over time.

This strategy provides an excellent opportunity to make some substantial gifts and receive your tax break.

Contribution limits

Ordinarily, you would only be able to deduct up to 60% of your adjusted gross income for a cash donation to a qualified organization. However, those limits have been suspended for 2020. The ceiling is still in place for non-cash donations, such as stocks.

Thinking about how best to make your charitable gifts this year? We can help. Just give us a call at 619.255.9554 or email us to set up an appointment.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

It’s common for the surviving spouse to feel a bit lost upon the death of their partner. You may not have immediate access to all the household assets or know what information you need to put together for the estate.

This time can be very confusing, so it’s essential to feel that you can enlist your financial team. Your financial advisor, CPA, and attorney should work together to help you manage the transition.

Here are the steps you should take to make the process easier for you as you navigate your new phase of life. You can delegate some of these to a trusted relative or friend to give yourself more time to grieve.

1. Death Certificate: Request multiple copies

For many of these steps, you’ll need a death certificate. Make sure you request multiple copies. Some companies may require an actual certificate and not a copy, so ask what they want when contacting them.

These are not necessarily in the exact order you’ll end up taking them, but the more urgent suggestions are listed first.  

3. Talk to your estate planning attorney

Every state has different probate requirements, so your lawyer can guide you through the process. “Proving” the will is often the first step taken by the probate court. They’ll also be able to help you with reading the will and settling the estate.

It may take some time for the estate to finally be distributed, depending on how the attorney has set up the estate planning documents. At some point, you may want to revisit your own will, but that doesn’t need to be taken care of right away unless you have an urgent reason for doing so.

If you don’t already have an estate planning attorney, consider asking your financial advisor for a recommendation.

4. Talk to your financial advisor

It would be best if you alerted your advisor about the death as soon as possible. They’ll be able to get the paperwork ready to make the necessary changes. You can discuss with them if they have any recommendations for you regarding your budget, financial plan, or investments. 

They most likely have experience in dealing with widows and widowers, so they can help guide you through some of your decisions.

5. Call the Social Security Administration

You will need to call or visit your local office in person. You may qualify for survivor’s benefits, whether or not your spouse had already begun collecting Social Security retirement payments.

Most likely, you’ll need your spouse’s Social Security number for this, so have it handy when you call or visit.

6. Call the Veterans Administration if your spouse served in the US armed forces

Similarly, you may be able to claim benefits from the VA, depending on the length of service. There may be some funding that you were not previously aware of, so it’s always a good idea to check with them when you have a military spouse.

7. Collect documents

You’ll find it’s much easier to gather all the necessary items before you begin contacting people. In addition to the will and Social Security information, you’ll want birth, marriage, divorce (if applicable), and death certificates. In addition, find tax returns, banking, credit card, investment account, retirement account, pension plan, and loan statements (including mortgage) as applicable.

It will also help have your house deed, car titles, insurance statements, and bills in one spot.

8. Let employers know

There may be benefits that you can receive as the spouse of a deceased employee. Often you can start your search with the Human Resources department. They’ll be able to advise you if there’s a different number you should call. 

There are several employers you should call, not just the current or most recent company.

Your spouse’s current/most recent employer if retired

Find out what benefits may be available to beneficiaries, as well as the details of the retirement plan or pension. If your family is covered through your spouse’s health insurance, contact them as well to make sure you can continue coverage.

Your employer

Frequently, a spouse’s death is considered a “life event” that may allow you to claim some benefits. Check with your HR to determine whether you are eligible for any additional aid.

Your spouse’s previous employers

You may have access to a pension, retirement account, insurance payout, or other benefit you or your spouse may not have been aware of.

For your property and casualty insurance, you’ll need to remove your spouse’s name to put everything in your name. Check policies for auto, homeowners, umbrella, etc.

11. Change titles and beneficiaries on jointly-held property

You’ll need to change everything into your name only, whether it’s the house, banking accounts, credit card accounts, or investment accounts. Your financial advisor can prepare and expedite the paperwork for the accounts that they manage for you.

For accounts in your name, such as pensions and retirement accounts, you may want to change beneficiaries if your spouse is the sole beneficiary with no contingent beneficiaries listed. If you already have contingent beneficiaries designated, this is not an immediate need.

12. Send a letter to the three credit bureaus

You’ll want to get the credit reports for your spouse so that you’re aware of all the credit liabilities. You should advise the bureaus to add the notification that your spouse is deceased so no one can attempt to take credit out in their name. This helps protect you from fraud.

13. Let your tax advisor know

They’ll need to file taxes for your spouse for the year in which s/he died and have the taxes paid. Depending on your situation, this can get tricky, so let them advise you. Because the taxes aren’t due right away, this isn’t an immediate need, but it still should be done in a timely fashion, so they’re not late in filing.

14. Call the financial aid office if you have a student in college

Your child may be eligible for more financial aid or other assistance, so let them know.

15. Cancel your spouse’s subscriptions and memberships

Any gym or club memberships in your spouse’s name should be canceled, so you don’t continue to pay those bills. If you have a joint membership, at some point, you’ll want to investigate what other options are available to you.

16. If your spouse had business interests, let their business attorney know

The lawyer can take charge of any processes that your spouse put in place for this contingency.

Do you need help dealing with the financial issues surrounding the death of your spouse? Please give us a call at 619.255.9554 or email us to set up an appointment.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

It’s no secret that many Americans put off creating a will — even those who need it most. But one milestone event often triggers a shift in mindset: the arrival of a child or grandchild. Usually, it hits people right before they get on a plane for the first time following the child’s birth: “If the plane crashes, what happens to our children, and how do we make sure they’re taken care of after we’re gone?”

If you have not put your estate plan into place, the answer to that question is that state law dictates who gets your assets, and a court decides who will act as guardian of your minor children. Picture in-laws fighting over custody of your children, assets being misappropriated and mismanaged, and a spendthrift child 18 years in the future, riding off into the sunset in a shiny, new Lamborghini.

A thoughtful and well-constructed estate plan can make all of these worries obsolete. If you put an estate plan in place years ago, it may be time to revisit the documents and revise where needed. If your estate plan was created before the significant tax law changes of 2018, it should be reviewed by an attorney. Here are four essential questions you should be able to answer about your estate plan.

Are estate-planning documents in place and up to date?

For most people, “basic” estate-planning documents include the following:

Will, Revocable Living Trust, Financial Power of Attorney, Health care directives and a living will.

Will

This primary estate-planning document dictates how a your property will be distributed at death. A will also names the individual in charge of managing the property’s distribution — the executor — and includes a nomination of a guardian for any minor children.

Revocable living trust

In many cases, it’s important to have a revocable living trust in addition to a will. For example, in states where probate is unusually expensive or burdensome, a properly funded living trust avoids the expense and delay of a probate proceeding. The living trust becomes the primary estate-planning document, dictating how an individual or couple’s property is distributed upon death and who manages the process (in this case, a trustee).

Financial power of attorney

In a financial power of attorney, an individual names an agent to act on her behalf with respect to her financial matters. The powers granted under a financial power of attorney range from very narrow (i.e., granting the agent power to act on behalf of the individual with respect to a specific transaction) to very broad (i.e., giving the agent the authority to take virtually any action with respect to the individual’s financial matters).

Health care directive and living will

In this document, which has many different names and comes in many different forms, the individual appoints an agent to make health care decisions if she is unable to do so and makes known her end-of-life wishes.

Gaurdian

Charged with raising the children if you are unable to do so, caring for the children daily.

Trustee/executor

In charge of overseeing the gathering of your assets, the payment of taxes and any other final expenses, and then the distribution of the assets to the clients’ beneficiaries. If your estate-planning documents provide for continuing trusts for the children, the trustee will handle the ongoing management and investment of the assets.They will also oversee the distribution of the assets to the children and their guardians.

Some common questions you may have about the two roles are:

Should the trustee/executor and guardian be the same person?

It depends on the client’s situation. The roles require two very different skill sets, but if you have a go-to person you trust to serve in both roles, it may make sense to name the same person. The checks and balances and diversity of perspectives afforded by two different individuals serving in the roles can be beneficial. If you decide to name two different individuals, they’ll need to work together.

Should the trustee/executor and guardian be a family member?

Again, this depends on your situation and relationships. Some things you should keep in mind are the age of the individual you’re considering, as well as where the individual lives (i.e., does the individual live in the same city where the clients are raising their children, or across the country), the individual’s own family composition (i.e., is the individual married, does the individual have his or her own children) and the individual’s personal financial situation.

Is the guardian appointed in the will guaranteed to be the children’s guardian?

No, it is merely a suggestion. The supervising court must officially appoint the guardian but is usually deferential to the parents’ wishes, unless there are extenuating circumstances.

In any case, whether trustee, executor or guardian, it is important to get permission from the person being appointed prior to naming them in the plan.

What if my children can’t handle money?

If the children are minors, an outright disposition of your assets is not appropriate. This means that after your death, continuing trusts will likely be put in place for the children’s benefit, and you need to decide what these trusts will look like. Although estate-planning attorneys will likely have helpful recommendations on how to structure the ongoing trusts for children, some factors you must consider include:

• The standard of distribution (How does the trustee determine if a distribution is appropriate?)
• The term of the trusts (Are there mandatory distributions at certain ages, or do the trusts continue for the children’s lifetimes?)
• The identity of the trustee

Do you have sufficient life insurance?

If the children are minors, an outright disposition of your assets is not appropriate. This means that after your death, continuing trusts will likely be put in place for the children’s benefit, and you need to decide what these trusts will look like. Although estate-planning attorneys will likely have helpful recommendations on how to structure the ongoing trusts for children, some factors you must consider include:

Because of the high cost of raising children today, new parents need to consider purchasing life insurance. There are two basic types:

• Term insurance – provides coverage for a term of years and pays out a death benefit if the insured dies during the term.

• Permanent insurance – includes an investment component and is usually structured to pay a death benefit no matter when the insured dies.

One of the primary benefits of insurance is that beneficiaries receive the proceeds free of income tax. Further, if you have substantial net worth and purchase an insurance policy with a significant death benefit, it may make sense to hold the policy in an irrevocable life insurance trust. If structured properly, an irrevocable life insurance trust ensures that any insurance proceeds received by the trust are sheltered from the estate tax.

If you are young and healthy, term insurance is a relatively cheap and effective way to provide an income-tax-free pool of money to provide for surviving children in the case of your premature death.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Saving for your child’s future education costs can be one of the most important decisions for parents. The price of tuition alone is staggering, with new increases each year. Imagine being a new parent and what education costs will be in eighteen years when your child would potentially be in their first semester of higher education. The good news is that there are different options you can implement with strategic financial planning

How retirement planning with a financial advisor can help

Over the past twenty years, tuition costs have doubled, taking into account fees, room, and board. Average costs for educational institutions for 2020 are as follows:

• Private School (nonprofit): $49,879
• Public 4-year institution: $21,950
• Out of State: $38,330

Saving for education can be just as important as saving for retirement. There are many options to help you save for your child’s education and prepare for rising costs. There are qualified tax-advantaged plans geared toward each financial situation, and not all options will be appropriate. A good financial planner can help you sort through the choices and select the strategy that is right for your family.

The 529 prepaid tuition plan

One of the many qualified state tuition plans is the 529 savings plan. There are two kinds of 529 plans, a prepaid tuition plan, and an education savings plan. Both plans would be considered an asset of the parent, which means you have full control of your child’s education savings.

The most significant advantage of prepaid tuition plans is the ability to permanently “lock” tuition at current rates by purchasing college credits. To do this, you must buy the college credits from a state school. So if you are in California, your child could only attend a California State University (CSU) and not a University of California (UC). The funds in the account will appreciate based on the inflation of tuition costs.

If the account holder wishes to close the account, he/she receives only the principal amount they originally paid. The prepaid tuition plan only covers future tuition costs and does not include other associated education costs.

Some disadvantages include:

• Credits appreciate by the rate of inflation. One potential downside to prepaid tuition is anticipating the students’ needs in college.
• The student could receive a scholarship to the university negating the prepaid tuition, which would then be returned interest-free to the account holder.
• The university may also not have the student’s field of study. The prepaid tuition can only be applied on a per university basis, forcing your child to choose a different major.

The 529 education savings plan

The most common 529 savings plan is the education savings plan. The earnings of this plan grow tax-free so long as you apply the funds for qualifying education expenses (e.g. tuition, books, supplies, room, and board). For the earnings to be tax-free, the student must also be enrolled at least half-time. If these requirements are not met, there is a 10% penalty on the earnings.

Anyone can contribute to the plan, regardless of income. Individuals can contribute up to $75,000 a year, and couples who elect gift splitting can contribute up to $150,000. There are no tax consequences associated with these contributions. The plan also allows for annual distributions up to $10,000 to pay for enrollment in elementary or secondary schooling.

In 2019, the SECURE Act allowed for a lifetime aggregate distribution of up to $10,000 to pay for student loans. The SECURE Act also allows for annual qualified distributions for apprenticeships registered and certified with Secretary Labor National Apprenticeship Act also up to $10,000.

Education Planning with Platt Wealth Management

It can feel intimidating, almost impossible, to plan for all of the moving parts within a comprehensive financial plan. Don’t worry — we can help! 

If you are searching for a certified financial planner that you can trust to help plan the next stage in your life, please give us a call. At Platt Wealth Management, our financial advisors put your needs first and provide completely transparent services to best prepare you for all financial milestones. 

Are you ready to take control of your retirement plans? Give us a call at (619) 255-9554 to set up a complimentary review or email us here. 

In our last article on estate planning, we explained why estate planning is essential and discussed the basics of wills and powers of attorney. You probably know you want to avoid probate, but you might not know precisely why.. 

Probate

This process proves a decedent’s in court as legal and determines whether the decedent’s intentions have been carried out. Wills can be contested during this process since the probate court is public. The estate of someone who dies intestate (without a will) goes through probate to determine how to handle the assets.

It can take months to years to settle probate, depending on the estate’s size and other issues.

Once someone dies, all their assets (that aren’t jointly owned) are considered part of their estate. Financial assets that have named beneficiaries, such as retirement accounts and life insurance policies, and accounts with a transfer-on-death/payable-on-death designation are exempted from probate, as are trusts.

In California, if set up correctly, houses can be transferred on death, as can vehicles. Bear in mind that the law on transferring houses sunsets 1/1/21.

The will is legally verified by the judge, showing that the decedent signed the will in the presence of two witnesses. Then an executor or court-appointed administrator sets out to execute the terms of the will.

Executors get the death certificates to show the decedent is in fact, deceased. They find all the assets and have them appraised and notify creditors. (Note the beneficiaries don’t owe any money as long as they weren’t joint signers on any debt.)

The executor also needs to pay taxes, including income and estate tax, from the estate and make any payments like homeowners’ insurance and utility bills. They notify the beneficiaries named in the will.

After paying all the liabilities and taxes, the remainder or residue is distributed to the beneficiaries. The executor or administrator gets compensated for performing all these duties.
If you have a spouse, on first death, there’s no probate. Your spouse can claim the assets. But the will of the second to die must be probated. Almost all states have a “small estate” exemption, and if the total estate is less than the limit, the will doesn’t need to be probated. In California, the limit is $166,250.

Public

Court records, except in some instances, are available to the public. Anything that’s in the will can be discovered by anyone willing to do the research. The will can be contested in court. If you’re a private person or there are some skeletons in the closet that your family wouldn’t want to be made public, you want to avoid probate as much as you can.
Assets that don’t pass through probate, such as trust and retirement accounts, don’t have these issues.

Length of time

The entire process can easily take years. Some courts are severely backlogged, or there may be provisions in the will that could be difficult to execute. For example, the testator (decedent) might have left small bequests to people whose addresses the executor doesn’t have. However, they must still notify the beneficiaries and distribute the assets.
In California probate takes a minimum of 7-8 months (when there’s no pandemic on) and can go for up to two years.

Cost

As noted earlier, this varies by state. Some states have a less lengthy probate process that costs less than others. However, if you live in California, the executor’s fee starts at $4,000 for a $100,000 estate. It reaches $23,000 for $1mm estate up to $163,000 for a $20mm estate.

It’s important to note that for these purposes, the debts don’t reduce the value of the property. For example, if the house is worth $1,500,000 and it has a $1,250,000 mortgage, it’s still valued at $1.5 million.

Also, filing fees range from $60 to several hundred dollars for probate petitions and fees for copies of the death certificate. Notice of the probate hearing must be published in a newspaper, and that can cost $200.

However, there is one instance where it might be preferable to allow the assets to go through probate. That’s if there are a lot of lawsuits or liabilities against the property. 

After the creditor has been notified, there’s a small window – typically six months – where creditors must notify the estate that they’ll file a claim against it. If they don’t make the notification within the window, their claim expires.

Trusts

For probate to be reduced to the minimum possible, people often use trusts to hold their property. Upon death, the assets go by the language of the trust and sit outside the probate estate.

However, it’s not enough to have a trust; the assets must be placed into it. For example, if you want to put your house in a trust (almost always a good idea in California), then the house’s title must name the trust as owner. It’s not enough to write it into the trust.

Most people use a “living” trust to hold their assets. You can put real estate, bank accounts, vehicles, artwork, and other assets into a living trust. It doesn’t make sense to put retirement accounts or transfer-on-death assets into a trust, because they already operate outside probate.

You will be the trustee of the living trust, naming a successor trustee who takes over when you’re gone. Your successor trustee can also act on your behalf if you become incapacitated. They distribute the property as spelled out in the trust once you’re gone, without involving the courts.

These living trusts are usually also revocable so that you can make changes to them during your lifetime. (An irrevocable trust is set in stone.)

Trusts require you to deal with some paperwork while you’re setting them up, and the attorney’s fees to handle it. Yes, there are DIY trust documents out there, but you want to make sure that your trust is air-tight, so it’s worth having a professional do the work for you.

There’s not much ongoing record keeping required, except when you transfer property in or out of the trust. You do need to keep written records of those transfers.

As always, there’s no free lunch. You will pay to have the trust created and assets re-titled. It’s sometimes more challenging to refinance a property that’s held in a trust. If you can’t get over the hurdle by finding another lender who understands trust property, you could always transfer it back to yourself as owner for the refinance. Then transfer it back in afterward.
Creditors can sue the trust because there’s no creditor cutoff window like there is in probate.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.