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Tax Cuts and Jobs Act Expands Appeal of 529 Plans in Estate Planning

It’s common for grandparents to want to help ensure their grandchildren will get a high quality education. And, along the same lines, they also want the peace of mind that their wealth will be preserved for their children and grandchildren after they’re gone. If you’re facing these challenges, one option that can help you conquer both is a 529 plan. And it’s become even more attractive under the Tax Cuts and Jobs Act (TCJA).

529 plan in action

In a nutshell, a 529 plan is one of the most flexible tools available for funding college expenses and it can provide significant estate planning benefits. 529 plans are sponsored by states, state agencies and certain educational institutions. You can choose a prepaid tuition plan to secure current tuition rates or a tax-advantaged savings plan to fund college expenses. The savings plan version allows you to make cash contributions to a tax-advantaged investment account and to withdraw both contributions and earnings free of federal — and, in most cases, state — income taxes for “qualified education expenses.”

Qualified expenses include tuition, fees, books, supplies, equipment, and a limited amount of room and board. And beginning this year, the TCJA has expanded the definition of qualified expenses to include not just postsecondary school expenses but also primary and secondary school expenses. This change is permanent.

529 plan and your estate plan

529 plans offer several estate planning benefits. First, even though you can change beneficiaries or get your money back, 529 plan contributions are considered “completed gifts” for federal gift and generation-skipping transfer (GST) tax purposes. As such, they’re eligible for the annual exclusion, which allows you to make gifts of up to $15,000 per year ($30,000 for married couples) to any number of recipients, without triggering gift or GST taxes and without using any of your lifetime exemption amounts.

For estate tax purposes, all of your contributions, together with all future earnings, are removed from your taxable estate even though you retain control over the funds. Most estate tax saving strategies require you to relinquish control over your assets — for example, by placing them in an irrevocable trust. But a 529 plan shields assets from estate taxes even though you retain the right (subject to certain limitations) to control the timing of distributions, change beneficiaries, move assets from one plan to another or get your money back (subject to taxes and penalties).

529 plans accept only cash contributions, so you can’t use stock or other assets to fund an account. Also, their administrative fees may be higher than those of other investment vehicles. Contact Holbrook & Manter to help you plan for the distribution of your wealth using various estate planning strategies, such as a 529 plan.

Important Audit Changes on the Horizon

By: William Bauder, CPA, CGMA, CITP- Manager of Assurance & Advisory Services

Our firm has been keeping you updated on the most recent events surrounding tax reform, but, taxes aren’t the only things changing these days.  The accounting standards are also changing, and more frequently and more drastically than in recent history.  From 2014 to 2017 there were 70 separate Accounting Standards Updates (ASU’s) implemented.  In three year period preceding, 2011-2013, there were only 33 ASU’s implemented. There are more coming too.  In 2017 the FASB put out 14 standards for comment. During 2015 and 2016 only a combined 10 standards were put out for comment.  Currently, the FASB has 29 separate projects in some phase of exploration.  The changes are going to keep coming.  Make sure you are staying up to date and working closely with your accounting professionals. 

Below are some of the larger standards on the horizon:

New Revenue Recognition Standards:

  • ASU 2014-09 (ASU 2015-14 delays implementation by 1 year)
  • This goes into effect for fiscal years beginning after 12/15/18 for all non-public entities.
  • It is important to note, this standard will affect all industries; all those who follow GAAP accounting standards will be affected by this.

New Not-For-Profit Standards:

  • ASU 2016-14 brings about the largest change to NFP accounting in 25 years.
  • This standard goes into effect for fiscal years beginning after 12/15/17.
  • These new standards change the three classes of net assets to two. Increased disclosure on liquidity. A statement of functional expenses must be presented. New standards may also present a direct method cash flow without also doing an indirect cash flow.

New Lease Standards:

  • ASU 2016-02 goes into effect for fiscal years beginning after 12/15/19 for non-public companies.
  • As an extreme generalization: any lease the entity has will now be treated as a capital lease- meaning there should be an asset and liability on the books.

Income Taxes Disclosure:

  • ASU 2015-17 goes into effect for fiscal years beginning after 12/15/17 for non-public companies.
  • In the case of this change, a breakout of deferred tax assets/liabilities between current and long term will no longer be required.

Standards to look for this year:

  • Keep an eye on ASU 2015-11 – this one relates to inventory. This one goes into effect for fiscal years beginning after 12/15/16 and means that inventory should be valued at the lower cost or net realizable value (no longer at lower of cost or market).

Again, these were just a few of the standards that have changed, are scheduled to change, or the FASB is looking into changing in the coming years.  If you have questions about these or any other accounting matters, feel free to give our firm a call or send me an email.  Thanks and good luck navigating these changes!

Ohio Tax Amnesty: Could you be Eligible?

Ohio is offering tax amnesty on penalty and interest for both business and individual tax returns from January 1, 2018-February 15, 2018. This could be good news for those that are delinquent on tax returns or tax payments.

According to the Ohio Department of Taxation, all penalties and half the interest will be waived on qualified delinquent taxes for both individuals and businesses.

We invite you to visit www.ohiotaxamnesty.gov if you are behind on your tax payments. This website is a powerful resource that will not only explain tax amnesty to you, but will also allow you to see if you are eligible. Be sure to visit the FAQs page to have all of your questions answered about this savings opportunity.

Please contact Holbrook & Manter today for assistance with this matter. Now is the time to wipe the slate clean and become current on your taxes. We can help you and set you on the right tax path moving forward.

Again, that website is: www.ohiotaxamnesty.gov

 

 

 

Tax Cuts and Jobs Act: Key Provisions Affecting Estate Planning

We are committed to keeping you updated on The Tax Cuts and Jobs Act of 2017 (TCJA) -a sweeping revision of the tax code that alters federal law affecting individuals, businesses and estates.  Taking a look at estate tax law, the TCJA doesn’t repeal the federal gift and estate tax. It does, however, temporarily double the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption.

From December 31, 2017, and before January 1, 2026, the combined gift and estate tax exemption and the generation-skipping transfer (GST) tax exemption amounts double from an inflation-adjusted $5 million to $10 million. For 2018, the exemption amounts are expected to be $11.2 million ($22.4 million for married couples). Absent further congressional action, the exemptions will revert to their 2017 levels (adjusted for inflation) beginning January 1, 2026. The marginal tax rate for all three taxes remains at 40%.

Estate planning remains a necessity

Just because fewer families will have to worry about estate tax liability doesn’t mean the end of estate planning as we know it. Nontax issues that your plan should still take into account include asset protection, guardianship of minor children, family business succession and planning for loved ones with special needs, to name just a few.

In addition, it’s not clear how states will respond to the federal tax law changes. If you live in a state that imposes significant state estate taxes, many traditional estate-tax-reduction strategies will continue to be relevant.

Future estate tax law remains uncertain

It’s also important to keep in mind that the exemptions are scheduled to revert to their previous levels in 2026 — and there’s no guarantee that lawmakers in the future won’t reduce the exemption amounts even further. Contact us with questions on how the TCJA might affect your estate plan. We’ll be pleased to review your plan and recommend any necessary revisions in light of the TCJA.

First Quarter Tax Deadlines for 2018

Don’t miss these important tax deadlines for 2018:

January 16 — Individual taxpayers’ final 2016 estimated tax payment is due.

January 31 — File 2017 Forms W-2 (“Wage and Tax Statement”) with the Social
Security Administration and provide copies to your employees.

-File 2017 Forms 1099-MISC (“Miscellaneous Income”) reporting nonemployee compensation payments in box 7 with the IRS and provide copies to recipients.

-Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security, and income taxes withheld in the fourth quarter of 2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 12 to file the return. Employers who have an estimated annual employment tax liability of $1,000 of less may be eligible to file Form 944 (Employer’s Annual Federal Tax Return).

-File Form 940 (“Employer’s Annual Federal Unemployment [FUTA] Tax Return”)
for 2017. If your undeposited tax is $500 or less, you can either pay it with your
return or deposit it. If it is more than $500, you must deposit it. However, if you
deposited the tax for the year in full and on time, you have until February 12 to file
the return.

-File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural
Employees”) to report Social Security, Medicare, and withheld income taxes for
2017. If your tax liability is less than $2,500, you can pay it in full with a timely filed
return. If you deposited the tax for the year in full and on time, you have until
February 12 to file the return.

-File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2017 to report
income tax withheld on all nonpayroll items, including backup withholding and
withholding on pensions, annuities, IRAs, etc. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 12 to file the return.

February 28 — File 2017 Forms 1099-MISC with the IRS.

March 15 — 2017 tax returns must be filed or extended for calendar-year partnerships and S corporations. If the return is not extended, this is also the last day to make 2017 contributions to pension and profit-sharing plans.

Tax deadlines can be a lot to process and missing even just one of them can result in penalties. Let Holbrook & Manter monitor the deadlines for your business and your personal taxes all year long. Contact us today to learn more about our tax services.

Estate Planning Strategies: Planning for Incapacity

Most estate plans focus on what happens after you die. But without arrangements for what will happen in the event you become mentally incapacitated, your plan is incomplete. If an accident, illness or other circumstances render you unable to make financial or health care decisions — and you don’t have documents in place to specify how these decisions will be made, and by whom — a court-appointed guardian will have to act on your behalf.

Choosing the right tools

There are several tools you can use to ensure that a person you choose handles your affairs in the event you cannot:

Revocable trust. Sometimes called a “living trust,” it’s designed to hold all or most of your assets. As trustee, you retain control over the assets, but in the event you become incapacitated, your designee takes over.

Durable power of attorney. This authorizes a designee to manage your property and finances, subject to limitations you establish.

Living will. It expresses your preferences regarding life-sustaining medical treatment in the event you’re unable to communicate your wishes.

Health care power of attorney. Sometimes referred to as a “durable medical power of attorney” or “health care proxy,” this authorizes your designee to make medical decisions for you in the event you can’t make or communicate them yourself.

HIPAA authorization. Even with a valid health care power of attorney, some medical providers may refuse to release medical information — even to a spouse or child — citing privacy restrictions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA). So it’s a good idea to sign a HIPAA authorization allowing providers to release medical information to your designee.

For these tools to be effective, you must plan ahead. If you wait until they’re needed, a court may find that you lack the requisite capacity to execute them. Also, be sure to check the law in your state. In some states, certain planning tools aren’t permitted, or go by different names. Holbrook & Manter can help you address incapacity in your estate plan. Contact us today.

The Tax Cuts and Jobs Act has Passed

By: Justin Linscott, CPA, CFP®, CITP, CGMA- Principal

We have been doing our best to keep you updated on the activities taking place in Washington D.C. surrounding tax reform. The House & Senate have now voted on and passed the tax reform bill. The passage of the Tax Cuts and Jobs Act, H.R. 1 could change your tax strategies and burden. H&M is prepared to help you maneuver through this new tax climate. Changes are now truly on the horizon- from deductions that will disappear to the amount of federal tax you will pay. The highlights from the bill that could affect you are many, but to highlight a few:

*Disappearing or reduced deductions, larger standard deduction

*Substantially increases the alternative minimum tax (AMT) exemption amount

*Other year-end strategies

Our commitment to proactive tax planning remains a top priority, especially given these recent events. We have a document that explains this tax reform in greater detail while also offering advice on financial moves to make now in light of the passage of this bill. Please reach out to me (JLinscott@HolbrookManter.com) or any H&M team member for a copy of this document.

 

 

H&M Team Holds Holiday Toy Drive for Nationwide Children’s Hospital

For the past several weeks, H&M team members have been collecting toys to donate to Nationwide Children’s Hospital in Columbus.

In the spirit of the holidays, toys for children of all ages were brought to our various office locations.  It was fun to watch the pile of donations grow. From Legos to fidget spinners…. art supplies to puzzles…. dolls to board games…. it is the hope of our team that these gifts will bring joy to the kids that must spend the holiday season in the hospital.

The friendly staff at Nationwide Children’s Hospital greeted our H&M elves who did the toy delivery. They were excited to take a look at the items we brought for the patients and were so gracious and appreciative. However, the pleasure was all ours.

The H&M Family wishes you and your family a very happy holiday season, and a blessed and happy new year.

 

 

 

 

Address your Pet in your Estate Plan Using a Pet Trust

If you’re an animal lover, a pet is a member of the family — sometimes even more so than flesh-and-blood. So you want to ensure that your beloved pet is cared for after you’re gone. One way to do so is to make provisions for your pet through a trust.

This legally sanctioned arrangement allows you to set aside funds for the animal’s care. After the pet dies, any remaining funds are distributed among your heirs as directed by the trust’s terms.

Pet trust in action

The basic guidelines are comparable to trusts for people. You, as the grantor, create the trust to take effect either during your lifetime or at death. Typically, a trustee will hold property for the benefit of your pet. Payments to a designated caregiver are made on a regular basis.

Depending on the state in which the trust is established, it terminates upon the death of the pet or after 21 years, whichever occurs first. Some states allow a pet trust to continue past the 21-year term if the animal remains alive. This can be beneficial for pets that have longer life expectancies than cats and dogs, such as parrots and turtles.

Include specific instructions

Because you know your pet better than anyone else, you may provide specific instructions for his or her care and maintenance (for example, a specific veterinarian or brand of food). The trust can also mandate periodic visits to the vet and other obligations should you become unable to care for the pet yourself. If you have questions on how to address your pet in your estate plan, please contact Holbrook & Manter.

The Basics of Directors and Officers Insurance

By: Shannon Robinson, CPA- Senior Accountant

Have you ever wanted to serve on a non-profit board but you did not for fear that you would make a mistake? Organizations often purchase Directors and Officers (D&O) Insurance to assist them in attracting competent professionals to serve on their boards without fear of personal financial loss. Even though the insurance is for the sole benefit of the directors and officers, the organization usually pays for it.     

Directors and Officers Insurance generally provides coverage for any actual or alleged act or omission, error, misstatement, neglect, or breach of duty.  D&O Insurance provides reimbursement for losses in the event an insured suffers such a loss as a result of a legal action brought for alleged wrongful acts in their capacity as directors and officers.  Note that intentional legal acts or fraud are typically not covered under directors and officers policies.

D&O Insurance Policies can be structured to meet the interest of each organization based on their risk appetite and coverage needs. Polices usually cost less than most organizations think they do. Premiums can range from as low as $1,000 or less for a small non-profit organization to $15,000 for a small public company, and up to $100,000 or more for a large company.

If you are thinking about serving on a board ask the organization if they have directors and officers coverage as this may set your mind at ease and make your decision easier.  Please contact us with any questions you may have.