Be Aware of Dirty Tax Scams

With tax season come tax scams. Lets face it. Scam artists are after your tax refunds and they are trying to get to your money before you do.

Here are the top tax scams we have heard of over the last couple years.

Phone scams – Criminals are targeting specific groups of people, for example, retirees. The criminals call with threats of police arrests or license revocation in order to strong-arm many elderly people into “paying their taxes.”   The IRS does not call about taxes owed without first sending you a bill in the mail. Be wary of phone calls demanding payment for taxes.

Phishing – Fake emails can be sent and phony websites can be established to make it seem legitimate. But the intent is to steal your information. That can lead to identity theft and stealing your tax refund.

Return Preparer Fraud – Each tax season criminals set up shop as tax preparers with the intention of stealing your information and getting to your refund money before you do. If dozens of people go these dishonest tax prepares, hundreds of thousands of dollars can be collected before any of the victims realize their refund was taken. These criminals can also entice people by promising an inflated tax refund, but then they ask you to sign a blank return or they may charge a fee based on the percentage of a refund.  Tip: Always ask to see the IRS’s Preparer Tax Identification Number (PTIN).

Offshore Tax Avoidance – Hiding assets offshore can lead to significant tax penalties and even criminal prosecution.

Fake Charities – There are groups of criminals who like to masquerade as charities in order to get donations from unsuspecting tax payers.

Hiding Income with Fake Documents – Avoid tax prepares who even suggest falsifying documents to reduce tax bills or to inflate a refund.

We want to make everyone aware of these scams. We hope they don’t happen to you. Feel free to share these with friends and family. You could help someone.

Tax Season Could Be Difficult With the Shutdown

This article was written before the government reopened.  The reopening is only temporary, for the next three weeks, so these problems may arise in the future.

The tax overhaul of 2017 will affect every tax return filed for 2018, and tax season starts Jan. 28.  At this moment the IRS will have approx. 46,000 of its more than 80,000 employees at work.  This years start date is consistent with last years filing season, so not much has changed in that capacity.  The agency has said it will re-open call sites that had been closed during the shutdown.  But even those wont be fully staffed and wait times could be extremely long.

This tax overhaul affected tax brackets, expanded the child tax credit and eliminated or limited several niche breaks.

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A Look at Two Celebrity Estate Plans from 2018

Last year we lost a lot of big names.  In this newsletter we plan to address two of those big names and the vast difference between their estate plans.

First Aretha Franklin, who everyone knows as the Queen of Soul.  She had a catalog of hits many loved and remember fondly.  Ms. Franklin lived in Detroit and passed away in her home.  Unlike California, the state of Michigan has a very different Probate process.  Ms. Franklin was a huge star but passed away with no estate planning documents.  She leaves behind a partner, whom she never married, and 4 sons.  Her sons have filed documents in a Michigan probate court and listed themselves as interested parties in her estate.  This also means her finances will be made public should others come forward with claims against her estate -whether it be creditors who want to be paid or extend family who come forward hoping to get a portion of her wealth.

 

Probate court has several requirements.  First, someone will need to be appointed the personal representative.  It could be one of her sons or maybe an attorney.  Once a personal representative has been chosen by the court they will need to pay her finals bills.  They will be tasked with coming up with with a list of all her assets and in the end, they will be responsible for distributing these assets, most likely to her sons in this case.  Probate court in California can take years to settle.  Michigan may be significantly faster.  But with an estate as large as Ms. Franklin’s it may not be so quick.  They will need to account for her music catalog and the royalties she receives.  There may be battles with family members who believe they are entitled to a piece of her wealth.

It is unfortunate she did not have any estate planning documents in place.  Even though her attorney has told the press he was on her for “a number of years” to prepare a Trust.

We encourage all our clients to get the proper estate planning documents, do not hesitate.  It could save your family a lot of money and time after your demise.  And while they are grieving is not a good time to deal with these problems.

Our second big name star was Anthony Bourdain.  Anthony Bourdain was known as a hot-head chef who began his TV career by taking viewers on a tour around the world to “Parts Unknown.”  He would do a Layover in cities and countries far and wide – he traveled to India, Singapore, France and even Japan.  His many shows aired on CNN for several seasons.  He was greatly admired by many.  Unfortunately, Bourdain took his own life while filming one of his shows overseas.  Bourdain’s primary residence was in New York, and he actually had all his estate planning documents in order.  Bourdain had a trust that left his ex-wife in charge and made his only daughter, who was 11 at the time, the sole beneficiary.  She stands to inherit several million dollars and some real estate.

 

The entire process will be kept private, as it should with Trusts.  His daughter will receive money for her healthy, education, welfare, and support.  The daughter’s mother will be in charge of handing out the money.  The trust will also determine at what age the daughter will get it outright.  There could be educational incentives, where if the child completes a 4-year college and receives a degree she can receive more sooner.  He may have provisions in there that provide for the child to travel.  Luckily for Bourdain all these terms/provisions are kept private and his young daughter will be able to grow up and not worry.

Need help with your estate plan?  Have questions about the documents you have in place?  Give our office a call. The new year is good time to review your estate plan.  818.887.9401.

7 Strategies for Developing Good Financial Habits

As a CPA, I have learned more about people and their personal finances than might be healthy. Over the years I have put together an informal list of what I call “Good Financial Habits” that I would like to share with you.

 

  1. Pay Yourself First.

Each payday you should transfer a certain percentage of your paycheck to your savings account. You earned the money; you should keep some of it

 

  1. Save your tax refund and any work bonuses.

Although it is tempting to spend your tax refund or a bonus, you should save it in a high-yield savings account so it can accumulate interest and grow.

 

  1. Cut back on your home expenses.

There are several ways to cut home spending; a less expensive cable tv package or mobile phone plan, reduce your grocery bill, monitor heating and a/c costs by using blankets or fans instead, bring lunch instead of buying it. If you aren’t sure where to make cuts, create a list of your discretionary spending, including meals out, gourmet coffee, new clothes etc. Small changes can add up to big savings.

 

  1. Set a savings goal.

It is helpful to have a number in mind that can be broken down into smaller, more manageable increments. You may want to save enough to cover six months of expenses or you may be saving to buy a new car. Either way, having a number in mind makes it more attainable. You can also sign up to receive emails from your bank with account balances. Which will help you keep track of your spending and saving.

 

  1. Turn saving into a game.

If you want some competitive motivation to save money, create a game with your spouse or significant other to see who can save the most each paycheck or month

 

  1. Put extra cash or change into a jar.

Instead of letting change accumulate in your purse or your pockets, put it into a jar. It may seem insignificant at first, but you will be surprised by how much you can save. You can call it a “rainy day” fund.

 

  1. Make saving a habit.

It may take some time to get into the habit, but setting reminders for yourself to save money can go a long way. Once you make it a habit it will pay off for years to come.

 

 

 

 

Tips on Eating Healthy During the Holidays

The holidays mean holiday parties with increased alcohol consumption and seemingly endless opportunities to eat too much.   Holidays are suppose to be fun times of family togetherness, so here are some ways to control the calories in the midst of all the feasting.

If you are hosting a holiday party and are watching your weight, make sure to prepare a few healthy dishes for yourself and for your health-conscious guests. Dishes with lots of fruits and raw or steamed veggies are a good idea.

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Keep Your Home Safe While on Vacation

As we get closer to the holiday season we like to change direction in our newsletter. Talking about estate planning for eight months straight can get a bit tedious.   We like to give tips for party planning or keeping pets safe during holiday parties.  Hopefully its useful for you.

 

In this newsletter we are going to provide some tips for when you leave home on vacation.   These tips should help keep your home safe while you are gone.
    1. Stop newspaper delivery and ask the post office to hold all mail.
    2. Do not let your answering machine tell the world you are on vacation and how long you are gone. An answering machine message that says “we are on vacation in Aspen till the 28th” is a bad idea. It will tell any stranger who calls that you are gone and how long you are gone. Thieves love that sort of knowledge.

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Stress Management Before the Holidays

Now that Halloween is over and the holiday season is here. Family will be visiting, preparing decadent holiday meals will begin and stressful holiday shopping will come along.  You may not be able to avoid the stress that comes with the holiday season, but we have some tips that might help ease your stress.

Stress Management

We all know stress is a part of life. You cannot avoid it, ut you can try to avoid the situations that cause the stress.  You can learn how to control the stress and your response to it.

The first step is to know your own coping strategies. What are productive ways that you cope with a stressful situation? Lets highlight those coping strategies and make the best of them. A ‘Stress Journal’ may help. You can record stressful events, your initial response to the event and stress, and how you coped with the situation. Once you know what is causing your stress, try making changes in your life that will help you avoid stressful situations. Here are a few ideas that may help.

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Five Situations Where You Need an Emergency Fund

Saving for the future is always a good plan. But what happens when an emergency occurs and you are not prepared. It is common for people to forget to put money into an emergency fund until circumstances make having one essential. Here are some common situations where having an emergency fund may prevent financial stress and prevent you from going into debt.

 

  1. You or your spouse loses a job

A job loss can happen to anyone at anytime. Having a safety net that covers your expenses for three to six month is crucial. This will allow you to keep current on your bills while you cut back expenses and search for new employment.

  1. Emergency medical or dental bills

Even with health insurance, emergencies and unexpected expenses and high deductibles still occur and can put you in a financial rut if you don’t have enough

  1. Unexpected home or vehicle repairs

You may have homeowners or renters insurance, and vehicle warranties may cover many repairs, however they do not cover everything. Repairs are inevitable, regardless of the age of your home or vehicle. For unexpected repairs it is helpful to have a stash of cash to pay for them

  1. Tax-time surprises

Most people only think about taxes in April, when they are due. They eagerly plan what they will do with their refund. But sometimes you are surprised with a tax bill that is much higher than what you had anticipated. Having an emergency fund can help cover the financial shock.

  1. Last minute travel

This sort of travel usually entails an ailing loved one, a funeral or other family related emergency. You need to get somewhere fast on short notice. Having money saved will alleviate the need for using credit cards to pay for the trip.

 

 

Funding Your Trust

In order for a Revocable Trust to work correctly it must be funded, that is, your assets must be put in the name of your trust.   The Trust can only govern what it owns.   By funding your Trust, the Trust governs those assets. We tell our clients the importance of funding their Trust all the time.   Since there are different types of assets, there are different ways to fund them into your trust. Bank accounts, for example, are funded differently than life insurance. The rights to royalties or money owed to you are funded in a different manner. Here are three ways to fund assets into your trust.

Change of Title/Ownership

Changing title or ownership applies to assets such as bank accounts and real property. These assets are funded into your Trust by changing the owner of the asset from your individual name to the name of the Trust.

Here is an example:

Current name on ABC Bank Checking Account: John A. Smith

New Title on ABC Bank Checking Account: John A. Smith as Trustee of the John A. Smith Revocable Trust dated April 1, 2010.

Important Fact: The date of your Trust is part of the name.

Assignment of Ownership Rights

These are things such as monies owed to you.   If you loan money to someone and have not been paid back yet, you can assign the debt to your Trust. The same goes for royalties, copyrights and patents. Even oil and mineral rights are assigned to Trusts.

These are done through “Assignments of Interest” and require specific language. Contact your Estate Planning attorney if you need one, and they can draft one depending on your asset. Different assets require different language.

Change of Beneficiary

Many people have assets that are beneficiary driven. Meaning that you can’t change the title, but you can change the beneficiary. These are assets such as IRAs, 401Ks and Life insurance policies.

If you would like to fund these assets into your trust so the money is divided equally, or is used in the manner in which you chose, it is best to name your Trust as the beneficiary.

It may be best to contact your attorney or Financial advisor to help you change the beneficiary on these accounts/assets. For many of these you can contact the financial institution that has these assets and ask them for a Change of Beneficiary form and update your beneficiary that way.

 

At Hornstein Law we know the value and importance of funding your Trust and we are always available to discuss funding. Give our office a call, at 818.887.9401, with any questions. We cannot stress the importance of this enough.

 

 

 

College Students Need A Power Of Attorney

It is that time of year, school is back in session.  Many parents and many of our clients are sending their kids to college.  At this point, something all parents should do is encourage their kids to get a power of attorney, its important.

We understand that this is not something on kid’s minds right now.  But as parents, having a power of attorney in place usually prevents you from having to go to court to get permission to act as your child’s proxy.  Which is both expensive and time consuming. A power of attorney that’s validly executed in the state in which an individual has full-time residency is usually honored across the U.S.  But if a child attends school out of state, we recommend having your attorney contact an attorney where the school is located to confirm this.

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