58% of people haven’t started to create a will. Or have even thought about the importance of estate planning to protect themselves and their loved ones upon their passing. We take time to plan out every other thing in our lives.
Everything except estate planning, which is why you’re here. If you’re still unsure of the importance of estate planning, you’ve come to the right place.
Below you’ll find some valuable estate planning tips to help you get your affairs in order ahead of time.
Here are the reasons why future planning matters!
Protects People Listed As Beneficiaries
There are several types of accounts you sign up for while you’re living. One of the standard practices organizations have people commit to is declaring a beneficiary in case of their death.
Someone that’s a beneficiary will be the person that the assets get passed on to when you pass per your signed declaration.
One of the first critical reasons that having an estate plan is crucial is to protect those that you’ve listed as your beneficiaries. This will ensure that everyone you want to pass things like monetary assets or homes you leave behind are given on to the right people.
One thing that can bring out the worst in people is having a family member pass and then having to decide who gets what. We aren’t saying that an estate plan won’t cause ill feelings between those who are beneficiaries and those who aren’t.
However, it will outline and clarify who gets what.
If you don’t have a plan that lists your beneficiaries, the court system will likely be the one that decides what happens to all of your assets. Which, again, can cause friction between your loved ones.
This is because the courts have no knowledge of your wants because it’s not in writing for them to review and enforce.
Offers Protection From IRS Bills
While many people don’t mind inheriting from their family members, one thing that crosses their mind is the amount they will have to pay in taxes if they choose to take on these inherited assets.
When you list people as your beneficiary, one goal you have is to reduce the tax bill they will have as much as you possibly can.
For example, if you use an IDT or irrevocable trust, you can transfer the assets you have to your beneficiary and they can’t be taxed. However, the person that is listed as the “grantor” of these assets will have to file and complete a 1040 form and return it to the IRS.
As long as the assets being transferred are provided at the correct value, there will be nothing to report. This means the trust will essentially pay any taxes it incurs itself without additional payment from the beneficiary.
Estate Planning Takes Steps Beyond a Typical Will
It’s not uncommon for people to assume that a will is the same thing as estate planning. The common theme amongst the two documents is that they both specify how you wish your assets to be handled when you’ve died.
However, estate planning outlines much more than you typically find in your will. For example, the estate planning guide will detail any medical directives you’ve specified.
This is in case you cannot make decisions on your own.
Of course, the medical beneficiary would only happen if you’re incapacitated or have other medical complications. Another detailed piece of information that can be found in an estate planning document is trust.
This aids in the facilitation of property being passed along.
As mentioned previously, this benefits you and the person inheriting the property for various tax purposes.
Takes Care of Your Children
When you consider estate planning or a will, the last thing you think about including information on is your children. It’s essential that you take time to outline who will take care of your living dependents in the event you pass and they are still minors.
Again, like the assets you’ll be passing along, you don’t want to leave the decision in custody for your children up to the legal system. The last thing that will need to happen is your children ending up in the middle of a battle between family members over who they will end up living with.
When you don’t have an estate plan, the court will appoint someone as their legal guardian, but this won’t stop other family members or close friends from petitioning to become their guardians. If there are no other family members alive to take custody of your children and no friends willing to, your children will become wards of the state.
This means they will be turned over to the foster care system until they age out of the system and can begin living their adult lives on their own. Also, it’s best to designate a secondary guardian in the event that the first one isn’t able to take your children or something happens to them, making them an unsuitable guardian.
Estate Planning: Start Today!
When it comes to estate planning, it’s crucial that you stop waiting and take the time to reach out to an estate planning attorney. They’ve got the experience needed to explain the process and guide you through it from beginning to end.
Contact Rhodes Law Firm and let us help you get your assets in order. There’s nothing better than continuing to enjoy your life knowing that you’ve done what it takes to protect your loved ones long after you’re gone.
Everyone’s estate planning process looks different. A young couple just starting out and a senior with significant assets will need to approach their estate decisions much differently. While there is no one-size-fits-all approach, this article suggests a few top strategies for those making estate plans.
- Revocable trusts – a revocable trust bypasses probate, allowing your property to transfer immediately. This saves your loved ones and beneficiaries much time and stress. It also keeps your estate and your wishes confidential, as opposed to going through probate and having everything made public.
- Family limited partnerships – When you set up a partnership that allocates assets among the partners, you can provide a benefit right then which reduces estate taxes by lowering the book value.
- Gifting trusts – by utilizing an irrevocable generation-skipping trust, you are able to make non-taxable gifts during your lifetime up to $16,000 per person per year. By doing this, it is removed from your estate and allows you to retain control over your assets.
All in all, it’s important to consider these options now. Trusts, estate taxes and the GST are constantly shifting and changing under federal and state laws. It’s crucial to work with qualified legal professionals to create and implement your estate plan. Our attorneys at Rhodes Law Firm are eager to help you create the best plan for your needs. Contact us today!
In today’s digital age, most people have numerous online accounts and subscriptions. From social media and streaming services to bank accounts and apps, it can be overwhelming. So what happens when we pass away? It’s important to consider what your family members may need to know in order to access or delete accounts as needed. This Kiplinger article addresses the steps you can take now to prevent any unnecessary confusion or frustration for your family members after your passing.
- Keep a list of all your logins for online accounts. From your Facebook and Amazon accounts to your frequent flier login, it’s important there is a record of all your accounts and your heirs are able to access them.
- What do you wish to be done with your accounts after your passing? Whether you want it closed, saved, or otherwise, it is very helpful to notate these wishes in your list of accounts.
- Make sure someone whom you trust is named as online executor of your digital will. Put all of these wishes into writing to make it official. An attorney can help you with the proper language.
If you need assistance with your digital will, Rhodes Law Firm is happy to help. Give us a call today!
When you pass away, your family could have to visit a probate court to claim the inheritance you left behind. If you own property like a house, car, bank account, investment account or any other possessions you wish to pass on after your death, your inheritors could be in store for a long probate court process.
Although having a will is a good form of planning, a will does not avoid probate. Instead, a will simply lets you inform the probate court of your wishes. Your family will still have to endure the probate court process to make your final wishes legal. In simpler terms, probate is the legal process for distributing your property upon your death.
What is probate?
Explaining the probate process sounds simple, but probate itself is anything but a walk in the park. While probate isn’t always complex, it is important to understand the process, particularly if you want your heirs to avoid probate after your passing.
Your estate executor, or the attorney representing your estate, typically initiates probate. During this process, a probate court validates your will and then authorizes your executor to distribute your estate to your beneficiaries as you instructed, as well as pay any taxes your estate may owe.
If you do not have a will, a further administrative proceeding must be held to determine how your estate will be divided. In this case, the court will name an administrator for your estate, who then follows the probate judge’s instructions on how to distribute your property.
Why should you avoid probate?
Although the probate court process is often straightforward, many people want to avoid it. Below is a list of some common complaints and hindrances regarding probate.
- Probate can be slow. In some cases, it can take years for a probate court to finalize an estate, especially if it’s complicated or involves a contested will. Whether you have a large or small estate, the probate court process will be slow and could drag on for months.
- Probate can be expensive. Costs vary from state to state, but probate generally entails executor fees, attorney costs and other administrative expenses, such as appraiser’s fees. In some cases, these charges can accumulate quickly. The expenses are exacerbated if the process drags on for a while.
- Probate is part of the public record. Since probate is a state legal proceeding, what goes on in probate court does not stay there. All the material in the probate process goes into the public record.
How can you avoid probate?
Maybe you’ve made it through to this portion of the blog and now you’re ready to find out how you can avoid probate. The first recommendation is to call a trusted attorney at Rhodes Law Firm to discuss your estate, options and wishes upon your passing. Below are three simple ways to avoid the probate process.
- Name beneficiaries on all of your accounts that allow you.
Many of your financial accounts allow you to designate a beneficiary who will be payable upon death. This means all the proceeds from your accounts will be given to them rather than going through probate after you pass.
Certain accounts are referred to as a “payable on death” accounts while non-retirement investments are known as “transfer on death” accounts and include:
- Bank accounts
- Brokerage accounts
- Life insurance policies
- 401k plans
- IRA accounts
You only need to complete a couple forms with the name of your beneficiary, and after your death they will have access to the accounts while avoiding probate court.
- Set up a trust to leave property and assets upon death to your beneficiaries.
An easy way to avoid probate when you have substantial assets is to create a trust. A trust outlines what will be done in terms of asset distribution without the courts being involved. While a will distributes your assets and property after your death, a trust allows you to place your assets and property “in trust” while you’re alive so they will not require distribution after your death.
You will personally appoint a trustee to manage your trust and they will make decisions for your beneficiaries. Besides avoiding probate, a trust makes a smart estate planning tool because:
- A trust is private.
Probate records are public court records, which means that anyone can look up how your assets and properties were distributed in a will following your death. None of this information will be publicly available when you create a trust because your beneficiaries will not need to go through the court system.
- Trusts can be less expensive.
Your estate will need to pay for the court fees associated with probate, which can cost anywhere from 2% to 10% of your total estate. The percentages tend to be higher for smaller estates, because many costs are fixed. You do have to hire a lawyer to set up a trust, which can run into the thousands of dollars. Then you must be sure to retitle your accounts into the name of the trust, or you will have paid the trust drafting fees for nothing, and you will still incur probate costs. To totally avoid probate, all assets need to be titled into the trust or to “transfer on death” accounts.
Probate is a process that may require a year or more. If you own homes in multiple states, your family must comply with each state’s specific probate laws, additional court dates and fee structures if you only create a will. Your beneficiaries may need to wait a substantial time to receive what you leave them, which could put them in financial strain.
Since a trust avoids probate, distributions take only a few weeks instead of several months or years. Setting up a trust is the best way to leave property upon death if you are leaving a large inheritance, but you’ll need the help of an estate planning attorney along with an experienced financial planner to get it right. You need to make sure there are assets available to pay any outstanding liabilities before the trust assets are disbursed.
- Hold your property jointly.
Owning a property with your spouse, significant other, or a beneficiary allows it to automatically pass to them without going through probate after your death. You do not have to be married to take advantage of this, but you do need to clearly designate the jointly held property with the right of survivorship.
Interested in estate planning with a trusted and experienced attorney? The law office of Rhodes Law Firm is here to help you plan for the future, and help you avoid the probate process. Make things simple for your beneficiaries upon your passing and allow Rhodes Law Firm to help you plan and avoid the probate process.
A trust is a legal way to set aside your hard earned assets for a specific and desired purpose. A living trust is a type of trust that can be initiated while you are still alive, offering flexibility and control over your estates in the event of incapacitation or death.
How a living trust is different from a will.
You might be asking yourself, “is there really a difference between a living trust and a will?”
Living trusts are set up before you pass on and can be used in case you are incapacitated. A will only goes into effect upon death. Utilizing a living trust can help you avoid probate court and your assets will be granted to your beneficiary immediately.
One reason for consulting with an attorney regarding a living trust is to remove the unnecessary and painful legal proceedings following a loved one’s death. With a will, you can’t avoid probate court and the assets become public record. With a living trust, you exclude probate court and all your assets remain private to your beneficiary.
What exactly is a living trust?
A living trust is a legal estate planning tool that breaks down how your assets are to be used or distributed in any event of incapacitation or death. A living trust specifies legal relationship between three basic groups.
- The grantor, who funds the trust
- The trustee, who manages the trust
- The beneficiary, who receives the proceeds & assets
Living trusts are powerful legal documents regarding your estate and how you would like it dispersed among your beneficiaries upon death or incapacitation. Living trusts protect assets such as real estate investments, bank accounts, investments and property.
Upon your passing, your wishes will be carried out and passed to the beneficiaries all while avoiding the negative aspects of probate court.
Living trusts are important, and below are important reasons to have a living trust.
- Avoid Probate
- Privacy Protection
- Save Money & Protect Property
- Greater Control of Assets
A living trust gives you control of your hard earned assets while you’re still alive, but you pass on the control to a trustee to pay the beneficiary under specified conditions. These conditions allow for greater control over your assets even when you’re gone.
So, why is it a good idea to arrange how your assets will be handled upon death? It helps take away decisions for your beneficiary or spouse during a tough and emotional time. With a living trust, you can place many different assets into a bank account, allowing loved ones to be cared for immediately.
Probate is the court-led process that usually handles an estate after death. In general, the probate process involves a court examining the provisions of a will and the assets included (or excluded) within.
There is usually a waiting period from one to three months in which the beneficiaries could have limited or no access to any of the funds in the estate while in probate. A living trust is an effective method of avoiding probate court. One of the main reasons it is best to avoid probate is because of the fees and other costs which can be calculated as a percentage of the total estate. Avoiding probate means that money won’t be deducted from your estate, and your beneficiaries will receive everything you intended for them to inherit.
A will and all assets not covered by a will are subject to probate and thus become open record. The probate process is public record, which means anyone can look up what assets were in the estate and what beneficiaries received what assets. Setting up a living trust is a method of avoiding probate and can also be used to protect the privacy of your estate and thus your beneficiaries.
Another key benefit of living trusts is that they can be enacted when the grantor is incapacitated. The trustee will take control of your assets during this unfortunate situation and then manage your estate according to your predefined stipulations, including ensuring the trust is run for your benefit as the trustor. This is different from a power of attorney or health care power of attorney in that it details how your assets are to be managed while you are incapacitated, as well as what to do in the case of your death. Living trusts can also be set up for married couples that will set aside funds or assets to provide for the surviving spouse.
Trusts offer greater flexibility in determining how assets are to be distributed in various situations. A living trust can also detail how assets are to be managed in case you are incapacitated. There are a variety of trusts, such as living trusts, which can be revocable or irrevocable. A revocable living trust can be changed while an irrevocable one may not. It may be a good idea to consult an estate-planning attorney for complex situations to ensure your assets are managed in the best possible way. Living trusts will provide greater flexibility to manage your assets in the way you want, including how they are passed on to heirs.
Save Money & Protect Property
Estate taxes and protecting assets from lawsuits or creditors is a concern when estate planning.
Certain trusts may even be arranged to be managed overseas to avoid jurisdiction of some courts. Also, trusts can provide benefits in cases of joint tenancy. Since a trust allows for the assets to be split up as desired, it can be parceled out in amounts or in ways that limit the impact of costs while maximizing associated tax benefits. It is important to consult a legal professional before funding any trust to ensure your assets are managed legally.
Greater Control of Assets
A living trust allows you to decide how your estate will be managed in various situations. This can give much greater control over how real estate and other property will reach beneficiaries compared to a will or other legal documents. A trust can be arranged to payout assets immediately, over time, or when the beneficiaries reach certain conditions. This is especially useful when setting up a trust for children who are not old enough to manage their money.
A living trust can also be used to set aside money for a person who might not be mature enough to handle a large sum at that time, such as grown-up children with mental issues or drug problems. Trusts can also be set up to manage assets for situations where relationships may be complex. Finally, some living trusts can set aside assets in a way that is not counted for end-of-life care and Medicare proceedings.
At Rhodes Law Firm, we’re focused on providing our clients the best possible service regarding personal estate planning, as well as business planning and asset protection. One of our clients, Jeff Annis of Advanced Services Pest Control, talks about the important of having business plans in place and his experience with our firm. If you are looking for help with your business plan or estate plan, contact us today.
Selling a small business isn’t like selling lemonade, or even selling a car. It’s a major undertaking with several moving parts, requiring experienced negotiators, capable lawyers, and a successful strategy from day one.
Which means that if you want a sale to succeed, you need to go in with a plan.
If you plan on selling your business, here are seven steps you should take to make the whole process easier.
1. Get Your House in Order
Before you do anything else, you should start by getting your affairs in order.
You might not think that you need to. After all, the business is profitable, and while there are areas where functions could be clearer, everything more or less goes without a hitch.
Keep in mind, though, that you’ve been with your business since the start. Things that make sense to you could easily spook a potential buyer.
When you first consider selling your company, make sure to get these things in order:
- Financial records
- Financial reports
- Employment contracts
- The legal structure of your business
- Any family ownership arrangements
- Intellectual property arrangements
If you’re unclear on any part of the puzzle, your attorney can help you figure out where you should focus and how to protect your assets in preparation for a sale.
2. Prepare the Right Documents
The next thing you can do to smooth out a deal (and help your lawyer’s peace of mind) is making sure that you have the right legal documents prepared.
This includes things like:
- Financial statements (profit and loss, cash flow projections, etc.)
- A complete list of stockholders and shareholders
- A breakdown of the percentage of shares owned and stock issued
- A list of names and titles of everyone authorized to sign papers for your business
- Copies of all employment contracts
- Copies of all your business’s insurance policies
- Copies of your incorporation papers or equivalent paperwork
- Copies of your federal and state tax returns going back three years
- Copies of any pending lawsuits
- A schedule of company assets
- A complete list of your company’s creditors
Keep in mind that this list is by no means exhaustive. If you’re not sure what documents you need, ask your attorney.
3. Separate Lines of Business
Multiple lines of business help your business stay profitable.
Unfortunately, they also make it harder to value, which can drive away potential buyers.
You look at your business and see an integrated whole. A buyer may only understand one aspect of the business, so they see it as fragmented or view certain assets as liabilities.
You can help keep a buyer interested by separating your business assets into clear divisions. This will help buyers get a clearer picture of the benefit of acquiring your business, which may lead them to offer more.
4. Know the Value of Your Business
With that in mind, it’s vital that you know the value of your business before you try to sell it.
Specifically, you should understand the value of your business from a buyer’s perspective.
The best way to do this is through a business valuation. This will keep you from fixating on a specific sale price from start to finish, and thus keep you from leaving buyers’ money on the table.
Get in touch with an appraiser and ask them to draw up a detailed explanation of the business’s worth. This will add credibility to your asking price.
5. Reason for and Timing of the Sale
Buyers will want to know, so you should figure out the reason and timing for the sale of your business before you sit down with a buyer.
Owners sell businesses for any number of reasons, though these are among the most common:
- Becoming overworked
- Partnership disputes
- Illness or death
All of these are reasons that a buyer will generally accept at face value. On the other hand, if you’re trying to sell your business because it’s no longer profitable, you’re going to have a much harder time bringing in buyers.
Part of these considerations is the timing of the sale. Ideally, you should start to prepare for the sale a year or two ahead of time so that you can make your business appear more attractive in the meantime and get everything in order before you initiate a sale.
6. Put Together the Right Team
If you’re looking to get out of your business, the last thing you probably want to do is pay an outside team to come in and help prepare for the sale, since it will only cost you money.
This is a critical mistake.
Recognize up front that you, as a business owner, are probably the worst person to negotiate your own account. You want an impartial third party that will look at the facts without emotional attachment.
With that in mind, don’t hesitate to assemble the right team to help with the process. If needed, bring on specialists who know how to deal with large buy/sell transactions.
7. Create an Exhaustive Letter of Intent
Finally, you should make sure you create a comprehensive letter of intent before you start a sale.
Everything you care about should be included in the letter. If everything is covered, it gives you much greater leverage in negotiations. For example, if a buyer’s team attempts to erode the deal, you can refer them to the letter–the buyer will have to justify signing a letter if they didn’t expect to honor the terms.
Thinking of Selling Your Business?
If you’re thinking of selling your business, the last thing you should do is make it up as you go along.
Instead, get an attorney on your side who knows their way around these types of deals. That’s where we come in. We’re experienced business lawyers who will help you chart the best course of action for your business.
If you’re making dinner or helping your kids do math homework, the last thing you want to think about is mortality.
Unfortunately, you’re not alone – 64% of Americans don’t have a will, and 27% said there was no urgent need for them to get one.
But will and estate planning are vital to ensuring that your assets and estate are handled properly after your death. To help you make sense of it, here are nine estate planning mistakes to avoid.
1. Not Having a Plan
On the top of the list? Not having any estate plan at all.
As you can guess, this is a pretty common problem. Most people don’t think they have enough assets to make a will or estate planning worth the trouble.
This is a huge mistake. If you don’t have a will or any form of estate planning, the courts will decide how to transfer your assets to a living beneficiary, a process called probate.
This can be a long process, especially if there are any complications in your estate (hint: there usually are). It’s also an expensive process, with court fees, personal representative fees, attorney fees, accounting fees, appraisal and valuation fees, bond fees, and more.
2. A DIY Estate Plan or Will
But before you get ahead of yourself, a DIY estate plan or will isn’t any better than having no will at all.
Sure, there are plenty of websites that will give you DIY forms, and some of those forms may be correct. But unless you know how to fill them out and file them correctly, or even what forms you need, they won’t be sufficient as a will, power of attorney, or other vital documents.
Which means your assets wind up back in probate, and you’re in just as much of a mess as you would have been with no plan at all.
3. Not Understanding How Assets Pass On
Pop quiz: all of your assets pass through your will, right?
Because most people hold most of their wealth in life insurance policies or retirement funds, most assets cannot pass through a will.
Real estate, on the other hand, can pass through wills, which is good news because the house is the most valuable thing most people own outside of a retirement fund.
If you don’t know anything about how your assets pass on, guess what? Your assets will land back in probate court after your death.
4. Not Handling or Reviewing Paperwork
On a related note, failure to properly handle or review the relevant estate planning paperwork is another huge issue that most people encounter.
Let’s say you named your sister as the beneficiary of your life insurance and retirement while you were single. That’s all fine and good.
Now let’s say that you got married. You changed your will and assumed everything would be fine.
Here’s the problem: if you didn’t change beneficiary designations on your life insurance and retirement, your sister will receive most of your estate, not your spouse.
5. Not Planning for Disability
In much the same way that people don’t like to think about their mortality, they also don’t like to think about the possibility of future disability.
That’s a big problem for estate planning.
If you don’t have anything like a living trust set up in the event that you are unable to make decisions for yourself, major decisions like managing your finances, raising your children, or healthcare decisions on your behalf are left out of your control.
6. Not Funding Your Trust
And speaking of trusts, not funding your trust is another estate planning sin that many people are guilty of.
It’s a good first step to have a trust. But a trust is like a suitcase. If you don’t put anything in it, you’re passing an empty suitcase to your beneficiaries and leaving the rest up to chance.
In other words, trusts are only as good as what you do with them. If you do nothing, well, they aren’t going to do you very much good.
7. Planning Your Estate Around Specific Assets
There’s been a lot of talk about assets going on here, which means you may be tempted to try estate planning based on certain specific assets.
Unless there is an unusually compelling reason for a specific asset to go to a specific person, resist the temptation.
For example, let’s say you have three children, and you want them to share your assets equally. One receives half your home, another is added as the beneficiary of your life insurance, and the third is added as a signer on your bank account.
That’s all fine assuming that nothing changes between now and when you die. But if you, say, sold the house or let the life insurance lapse, whatever child was supposed to receive those assets will get nothing.
8. Beneficiary Designations and Joint Accounts
On that note, let’s talk about beneficiary designations and joint accounts.
Beneficiary designations are useful, especially when it comes to life insurance and retirement funds.
The problem is that some beneficiary designations can override your will. Remember, your will doesn’t control retirement accounts or jointly owned accounts, which means that you may be leaving a sticky situation behind for your beneficiaries to sort out.
9. Keeping Secrets from Your Estate Planner
Finally, the greatest mistake in estate planning: even if you do everything else right, keeping secrets from your estate planner can throw off your best-laid plans.
Keeping secrets from your estate planner, or only providing them with vague or incomplete details regarding your finances and family, is like lying to your lawyer. You can do it for the sake of your dignity, but you’re the one who will be hurt in the long run.
The whole point of an estate planner is to provide you with an appropriate strategy to protect your family after your death. It’s difficult for them to do that if they don’t have an accurate picture of your situation.
Making Sense of Will and Estate Planning
With all of this in mind, one of the best things you can do in terms of your will and estate planning is to have a professional on your side.
Rhodes Law Firm PC offers estate planning in Augusta and Aiken, whatever your needs may be.
Have you recently acquired a substantial amount of wealth? Are you considering donating some of the money to different charities?
Whether you’re looking to donate a large amount of money or simply make a small donation, planning your charitable contributions is important.
If you don’t plan properly, you could end up donating money to an illegitimate charity or another scam, or make a donation that doesn’t end up being tax deductible when the end of the year rolls around.
These two mistakes are all-too-common, which makes planning your charitable gifts even more important.
Below are 10 helpful tips for donating money to charity, so you don’t make any mistakes with your money.
1. Pick a Charity That’s Important to You
Before you can donate your money to a charitable organization, you have to find one.
Think about what’s important to you. What causes really fire you up? If you could change anything in the world, what would it be?
Whether you’re passionate about ending domestic violence, sex trafficking, or world hunger, there’s a charity that will happily accept your monetary donations. After you have made a decision on where you want to focus your donation, it’s time to decide if you’re going to keep your donation local, regional, national, or international.
The great thing here is that it’s completely your call. It is your money, after all. No one can tell you where you have to donate.
2. Verify the Legitimacy of the Charity or Charities You’ve Chosen
When you’re donating money to charity, this is a crucial step.
If you don’t verify that the charity is, in fact, legitimate before you donate, you could end up donating money to an organization that uses more of your money to line their pockets than it does to feed the children. Or worse, you could donate it to a corrupt organization or person whose sole reason for collecting donations is to profit off of them.
Neither of those situations would be your preferred outcome.
If you want to avoid donating to a scam, you can use the following two websites to verify the credentials of your chosen charity:
Both of these organizations vet nonprofits so you don’t have to.
This is a simple step, but when it comes to charitable planning, it’s not one to take lightly. Don’t skip it, or you may end up throwing your money away.
3. Keep an Eye on Their Administrative Expenses
Before donating your money, it’s a good idea to confirm that it’s going to be spent wisely.
Of course, charitable organizations will have administrative expenses just like any other organization, but it’s important to ensure that the money used for these expenses does not outnumber the amount of money that they are using to fund programs. If you pull their reporting and find that their contributions to expenses are far beyond those to their programs, there’s a problem.
Save your money and find a different charity to donate it to. Preferably one that values their programs more.
4. Make Your Money Work
If you donate to the same several charities, your money will go farther than if you donate smaller amounts to many different charities. Why? Many charities have fees they will deduct from your donation, meaning less of your money is going directly to the cause you’re looking to support.
5. Donate Directly to the Charity Itself
In other words, don’t donate money over the phone to a solicitor you don’t know. There’s always a risk that they might not be legitimate and could be taking the money they receive and profiting off of it.
6. Itemize Your Donations
To claim a deduction on your taxes, you need to itemize it. When it comes time to file them, you can use Schedule A on the form 1040 to itemize each of your deductions. Be sure to include your donation on lines 16-19.
7. Donate to Qualified Organizations
If you’re hoping to deduct your donations from your taxes, you’ll need to donate your money to qualified organizations which are determined by the IRS.
If you want to confirm the status of a charity, call the IRS.
8. If You Want to Deduct Your Donations, Donate to Organizations, Not Individuals
No matter how much the individual needs or deserves your contribution, you won’t be able to deduct donations to individuals on your taxes. Keep this in mind if you want to be able to deduct your donations, and donate only to the qualified organizations mentioned in the previous tip.
9. Get a Receipt
Are you looking to make a charitable donation in cash? If you are, and you want to claim it as a deduction on your taxes, you’re going to need to have a receipt to back it up.
Be sure that it includes the date, the amount of the donation, and the name of the charitable organization that received the money. To claim a deduction, you’ll need to donate $250 minimum and then have the qualified organization provide you with a form of acknowledgment.
No matter what amount you donate, don’t forget to ask for a receipt!
10. Deduct Expenses Related to Volunteering
If you’re considering donating to charity, you may also be considering volunteering.
While your time is not tax-deductible, any expenses you incur as a result of volunteering are. See tip #9 and always get a receipt.
Some Closing Words on Donating Money to Charity
Donating money to charity is a great way to relieve yourself of extra funds while also doing something that will benefit a good cause.
To donate the smart way and ensure that your charitable gifts are, in fact, tax-deductible, just take these tips into account before making your next donation.
If you’d like some assistance with your charitable planning efforts, don’t hesitate to contact Rhodes Law Firm today.
Our team will work with you to ensure that we answer each of your questions and can provide you with the help you need.
So you’ve worked all your life to create a legacy. Did you know that all your hard work can disappear?
This can happen if you’re sued or upon death, even when you’ve created a trust to shield your assets. Yes, that’s right. Even when you plan ahead your assets could be seized.
Trusts can be great tools for creditor protection, but only if you do it the right way. If you are here it means that you want to protect your assets, but want to make sure you’re doing it right.
Now the question is, are trusts protected from creditors?
Creditor Protection: Where to Start?
Before we get into if trusts are protected from creditors, we’ve to start with the basics. What is a trust? How do they work?
A trust is an arrangement where the settlor or trust maker transfers the ownership of their assets, to be managed by a trustee, for the benefit of a person or group of people, also known as beneficiaries. The 2 most common types of trusts are revocable living trust and irrevocable trust.
A revocable living trust is a trust that’s created while you’re alive. The purpose of this legal document is to provide the instructions on how your assets will be handled when you pass away. It’s different to a will because it can prevent the court from controlling your assets, and avoid probate upon death.
Also in a revocable trust, the settlor keeps the control of the assets. While an irrevocable trust, the trust maker loses the ownership of the assets. Another thing that makes it different is that it can’t be amended or revoked.
How Do Trusts Work?
Many people get wills to establish how their assets will be handled when they pass away. But, a lawyer might recommend a trust instead. They might suggest a revocable trust or an irrevocable trust.
You might be asking yourself, how do these work? A revocable trust can be established tying it up with your will. Many lawyers advise their clients to do this because it saves their family members court proceedings.
This process is known as probate. If there’s a will, it will have to go through the court probate process to confirm the distribution of the assets. This process can take from 6 months to a year and can cost your survivors from 3 to 5 percent of the assets.
Also, this type of trust helps in case you’re incapacitated, because if this happens your trustee will handle your assets in accordance with your trust provisions. This means that the court won’t assign an administrator, and your wishes will be followed.
In a revocable trust, you keep the ownership, and control over your assets. This is different in an irrevocable trust because the court won’t consider you the owner of the assets. It’s like this because you will lose all control and ownership of the property included in the trust.
Are Trusts Protected from Creditors?
You might be asking yourself, will a trust protect my assets? The answer is yes, but not all trusts are created equal. Not all types of trusts can protect your assets from creditors.
The only type of trust that can protect your property is an irrevocable trust. Once you put your assets in this trust, you aren’t the owner or control these assets anymore. Therefore, you can’t modify how they’re distributed.
Since you aren’t the owner of the assets, when there’s a judgment from a creditor against you, they won’t be able to seize the property that’s included in the trust.
Why Should You Establish a Trust?
There are many reasons why you should create a trust, but the most important is to protect your assets. If you want to do this is because you want to be prepared for when or if the worse happens.
In the event that lawsuits against you or even death occur, a trust can protect your assets from creditors and people who want to take advantage of the situation.
If your assets are in a trust, the courts and creditors can’t seize those assets. Yet, they could go against the assets that aren’t in the trust. This only applies to irrevocable trusts.
It only applies to this type of trust, because it creates a separate legal entity with control and ownership over those assets. The court and creditors could still seize your property, but only the assets that aren’t in the trust.
Many people think that having a will guarantees that their wishes will be followed when distributing their assets. Yet, even if there’s a will there are complications that can happen.
Besides the fact that a trust will help avoid the long probate process. These can prevent debts not being paid off, certain heirs receiving more than you intended them to receive, money designated for charities of being distributed elsewhere, among other possible issues.
Cost-Effective Creditor Protection
Another option you may consider to be prepared in the event of death is a testamentary trust. This trust is programmed to be created upon death and will include your life insurance policy proceeds, or all the assets of your estate.
Some people prefer this type of trust because it will protect your assets after death, without all the costs involved in the maintenance of a trust. But, it will also allow the distribution of your assets without them going through the probate process, or causing any financial hardship on your loved ones.
Wrapping It Up
You shouldn’t have to continuously worry about your assets being seized, or end up in the wrong hands. If you’re in the process of writing your will or are looking for ways to protect your assets now you know that trusts are protected from creditors.
Remember that you’ll get creditor protection only if you leave your property in an irrevocable trust, or a testamentary trust if your purpose is protection upon death. Make sure to consider these types of trusts when you decide to secure your family’s financial future.
Are you planning on getting a trust to protect your assets? We can help!
Contact us for more information about our services.