As we head into summer, many parents will see their children graduate high school and prepare to leave home to attend college or pursue other life goals. This can be an exciting and emotional time, and with so much going on, estate planning probably isn’t at the front of your (or their) mind right now.    

However, estate planning should actually be a top priority for both you and your kids.

Here’s why: Once your kids turn 18, they become legal adults, and many areas of their life that were once under your control will become entirely their responsibility, whether you take action or not. To this end, if your kids don’t have the proper legal documents in place, you could face a costly and traumatic ordeal should something happen to them.  

If your child were to get into a serious car accident and require hospitalization, for example, you would no longer have the automatic authority to make decisions about his or her medical treatment or the ability to manage their financial affairs. Without legal documentation, you wouldn’t even be able to access your child’s medical records or bank accounts without a court order.

To deal with this vulnerability and ensure your family never gets stuck in an expensive and unnecessary court process, before your kids leave home, have a conversation about estate planning and make sure they sign the following three documents. 

1. Medical Power of Attorney

The first document your child needs is a medical power of attorney. A medical power of attorney is an advance healthcare directive that allows your child to grant you (or someone else) the immediate legal authority to make healthcare decisions on their behalf if they become incapacitated and are unable to make these decisions themselves.

For example, a medical power of attorney would allow you to make decisions about your child’s medical treatment if he or she is incapacitated in a car accident or falls into a coma due to a debilitating illness like COVID-19. 

Without a medical power of attorney in place, if your child suffers a severe accident or illness that requires hospitalization and you need to access their medical records to make decisions about their treatment, you’d have to petition the court to become their legal guardian. While a parent is typically the court’s first choice for a guardian, the guardianship process can be slow and expensive—and in medical emergencies, time is of the essence.

Not to mention, due to HIPAA laws, once your child becomes 18, no one—not even their parents—can legally access his or her medical records without prior written permission. However, a properly drafted medical power of attorney will include a signed HIPAA authorization, so you can immediately access your child’s medical records to make informed decisions about his or her treatment.

2. Living Will

While a medical power of attorney allows you to make healthcare decisions on your child’s behalf during their incapacity, a living will is an advance directive that provides specific guidance about these decisions, particularly at the end of life.

For example, a living will allows your child to advise if and when they want life support removed should they ever require it. In addition to documenting how your child wants their medical care managed, a living will can also include instructions about who should visit them in the hospital and even what kind of food they would want provided. For example, if your child is a vegan, vegetarian, or takes specific supplements, these things should be considered and documented in their living will.

Additionally, given the pandemic, speak with your child about the unique medical decisions related to COVID-19, particularly intubation, ventilators, and experimental medications. At the same time, your child’s living will should also outline their quality of life decisions to ensure their emergency medical treatment doesn’t end up doing more harm than good.

Although you’ll find a variety of medical power of attorney, living will, and other advance directive documents online, your child has unique needs and wishes that can’t be anticipated by these fill-in-the-blank documents. Given this, we recommend you and your child work with us, your Personal Family Lawyer® to create—or at the very least, review—their advance directives.

3. Durable Financial Power of Attorney

Should your child become incapacitated, you may also need the ability to access and manage their finances and legal affairs, and this requires your child to grant you durable financial power of attorney.

Durable financial power of attorney gives you the authority to manage their financial and legal matters, such as paying their tuition, applying for student loans, paying their rent, negotiating (or re-negotiating) a lease, managing their bank accounts, and collecting government benefits if necessary. Without this document, you’ll have to petition the court for this authority.

Start Adulthood On The Right Track
Before your kids leave the nest, discuss the value of estate planning and make sure they have the proper legal documents in place. By doing so, you are helping your family avoid a costly and emotional court process, while also demonstrating the importance of good financial and legal stewardship, which sets your kids on the right track from the very start.

As your Personal Family Lawyer®, we will not only help you draft these documents, we can also facilitate a family meeting to discuss the importance of estate planning with your kids. From there, we hope this will begin a life-long relationship with your children, as they start on their journey into adulthood and beyond. Contact us today to schedule your appointment.

This article is a service of Sahmra Stevenson Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.

As a business owner, it’s inevitable that you will face minor conflicts and disputes at some point. Whether it’s a client who refuses to pay a bill, an independent contractor who fails to fulfill the terms of their agreement, or a vendor who stiffs you on an order, dealing with such issues is a simple fact of doing business.

However, given the time and expense involved, filing a lawsuit in civil court to resolve such minor disputes typically isn’t worthwhile, especially if you are only trying to recover a few thousand dollars. And taking the matter to a collections agency usually isn’t a viable option either, since average fees run between 25% to 50% of the total amount recovered. 

If you can’t resolve the dispute privately, taking the case to small claims court may be your best option. Small claims courts are specifically designed to resolve relatively low-collar cases quickly and inexpensively, without the need to observe the complex formalities of traditional court proceedings, and without incurring costly legal fees.

If you are considering taking a case to small claims court, here are a few answers to some basic questions about the process.

What types of cases are resolved in small claims court? 

Small claims courts are real courts, and a judgment issued by a small claims court is just as binding and enforceable as one made in a traditional civil court. Small claims court can be a quick and inexpensive way for your business to collect on unpaid debts and resolve contractual disputes with clients, vendors, and other companies. However, you can only take your case to a small claims court if the money you’re seeking to collect is below a certain amount, which is known as the court’s jurisdictional limit. 

These limits are different for each state, with some as low as $2,000 and others as high as $25,000, so be sure to review our state’s jurisdictional limit before filing your claim. Additionally, be aware that no state allows for small claims court cases involving divorce, guardianship, name changes, bankruptcy, or to seek an injunction against another individual. These cases all require you to file a lawsuit in state civil court.

Where should I file my small claims lawsuit?

If the other party does business or lives in our state, the law typically requires you to file your lawsuit in the small claims court district closest to that person’s residence or business headquarters. In some cases, you also may be able to file in the district where a legal agreement was signed or the dispute in question occurred. Check with the local small claims clerk for more detailed information.

Note that if the other party you are looking to sue has no business or other contact within our state, you’ll likely have to file your case in the state where the individual lives or does business. That said, unless the other party lives in a nearby state, out-of-state small claims lawsuits can be cost prohibitive due to travel expenses, so be sure to factor in the cost of traveling before you file your claim.

How does the small claims court process work?

First, let’s get clear on some terminology. The person who initiates the claim is the plaintiff, and the person who is being sued is the defendant. The process begins when the plaintiff files a statement of claim with the county or district where the case will be held. You can typically get all of the necessary paperwork for filing your claim from our local clerk of court website. You’ll also need to pay court fees, but they’re typically small, ranging from $20 to $200. There are also now apps that will help you file your small claims court case.

Once filed, the court may schedule an initial pretrial conference and/or order the parties to mediation. If the case can’t be resolved via mediation, the court will set a trial date, which will typically be a month or so from the time the claim was filed.

Small claims procedures vary by state and district, but in general, the hearings are fairly informal and don’t involve complicated legal procedures or strict rules of evidence. That said, you still need to prepare and present your case before the judge. Be sure to bring all of the documentation needed to help prove your case, such as contracts, invoices, photos of damages, copies of emails, and/or sales receipts. Some states also allow you to call witnesses.

One of the biggest advantages of small claims court is the time it takes for your case to be decided. Unlike traditional civil court, where cases can drag out for months or even years, a small claims judge will typically issue judgment on the spot, once both sides have presented their arguments and evidence.

Do I need an attorney?

Small claims court is designed to be easy to navigate, without the need for an attorney. Indeed, avoiding costly attorney’s fees is one of the primary benefits of these courts. For this reason, some states even prohibit lawyers from being present.

Of course, if you are going to file a case in small claims court and you are a Family Business Lawyer client, you should definitely call and discuss your strategy with us first, and we can advise you about how to proceed, and/or assist with collecting a judgment.

How do I collect a judgment?

Unfortunately, the court won’t collect your money for you. If you win your case and are awarded a judgment, unless the defendant agrees to pay you or you both agree to a payment plan, you may have to go back to court to get a lien on the defendant’s property or have the court order a wage garnishment.

As your Family Business Lawyer™, we can offer you support and guidance on the best ways to collect on your judgment to ensure you get all the money you are owed.

Can I appeal my case if I lose?

In many states, the plaintiff cannot appeal if he or she loses. If the defendant loses, he or she can generally file an appeal, and if it’s accepted, a new trial will be held in a higher court. Upon appeal, the small claims court trial is completely negated, as if it never happened. 

We’re Here If You Need Us

As your Family Business Lawyer™, we can help you decide whether or not to take your particular dispute to small claims court, as well as help you prepare your case. And while you likely won’t need us during the trial, we’re here to support you in whatever way you might require, providing you with the best chance to win your case and collect on your judgment. Contact us today to learn more.

This article is a service of Sahmra A Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. 

Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind. 

To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms. 

In fact, without a thorough understanding of how the legal process works upon your death or incapacity, along with knowing how it applies specifically to your family dynamics and the nature of your assets, you’ll likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks. 

Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, last week in part one, we highlighted the first five of 10 of the most common estate-planning mistakes, and here we wrap up the list with the remaining five mistakes.

6. Not Updating Beneficiary Designations

In addition to reviewing and updating your core estate planning documents like your will, trust, and power of attorney, it’s crucial that you also update the documentation for your other assets, especially those with beneficiary designations. Some of your most valuable assets, like 401(k)s, IRAs, and life insurance policies, do not transfer via a will or trust. 

Instead, these assets have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. Oftentimes, people forget to change their beneficiary designations to match their estate planning goals, which can lead to disaster. For example, if you get remarried and forget to update your 401(k), your ex-spouse from 20 years ago could end up inheriting your retirement savings.

Additionally, some people assume that because they’ve named a specific heir as the beneficiary of their IRA in their will or trust that there’s no need to list the same person again as beneficiary in their IRA paperwork. Because of this, they leave the IRA beneficiary form blank or list “my estate” as the beneficiary. But this is a major mistake—and one that can lead to serious complications and expense for your loved ones.

It makes no difference who is listed as the beneficiary in your will or trust; you must list the person you want to inherit the asset in the beneficiary designation, or your heirs will have to go to court to claim the asset. 

And you should never name a minor child as a beneficiary of your life insurance or retirement accounts, even as the secondary beneficiary. If a child inherits assets, the assets become subject to control of the court until they reach the age of 18, and then, the assets are distributed outright without any protection or direction.

If you want a minor to inherit assets, you can create a special trust to hold the asset until the child comes of age, and name someone you trust to serve as a successor trustee to manage the assets until that time. As your Personal Family Lawyer®, we can support you to choose the appropriate trust for this purpose to ensure your child gets the maximum benefit from their inheritance.

7. Improper Execution
You could have the best estate planning documents in the world, but if you fail to sign them, or sign them improperly, they will fail. This might seem trivial, but we see it all the time. A loved one dies, their family brings their estate planning documents to us, and we can’t help them because the documents were either not signed or were signed improperly.

To be considered legally valid, certain estate planning documents like wills must be executed (i.e. signed, witnessed, and/or notarized) following very strict legal procedures. For example, many states require that you and every witness to your will must sign it in the presence of one another. If your DIY service doesn’t mention that condition (or you don’t read the fine print) and you fail to follow this procedure, the document can end up worthless.

8. Choosing The Wrong Executors Or Trustees
In addition to laws regarding execution, state laws are also very specific about who can serve in certain roles like executor, trustee, or financial power of attorney. In some states, for instance, the executor of your will must either be a family member or an in-law, and if not, the person you choose must live in the state. If your chosen executor doesn’t meet those requirements, he or she cannot serve.

Moreover, some states require the person you name as your executor to get a bond, which is like an insurance policy before he or she can serve. Such bonds can be difficult to get for someone who has a less-than-stellar credit score. If your executor cannot get a bond, it would be up to the court to appoint your executor, which could end up being someone you would never want managing your assets or a third-party professional, who could drain your estate with costly fees.

As your Personal Family Lawyer®, we will guide you to choose the most appropriate and qualified executors and/or trustees to manage your estate and assets.

9. Unintended Conflict Between Family Members
Family dynamics are—to put it lightly—quite complex. This is particularly true for blended families, where spouses have children from previous relationships. If you try to go it alone using a DIY document service, you won’t be able to consider all of the potential areas where conflict might arise among your family members and plan ahead to avoid such disputes. After all, even the best set of documents will be unable to anticipate and navigate these complex emotional matters—but we can.

Every day we see families end up in lifelong conflict due to poor estate planning. Yet, we also see families brought closer together as a result of handling these matters the right way. When done right, the estate planning process is actually a major opportunity to build new connections within your family, and our lawyers are specifically trained to help you with that. 

In fact, preventing family conflict with proactive estate planning is our special sauce and one of the many reasons to work with us, as your Personal Family Lawyer®, rather than relying on DIY planning documents, which will not identify nor prevent unforeseen family disputes. 

10. Failing To Properly Name Guardians For Minor Children
If you are a mom or dad with children under the age of 18 at home, your number-one estate planning priority should be selecting and legally documenting both long and short-term guardians for your kids. Guardians are the people legally named to care for your children in the event something happens to you.

If you haven’t named guardians for your kids yet, use the link  below to find out how you can take care of this critical task right now. And if you’ve named guardians for your minor children in your will—even with the help of another lawyer—your kids could still be at risk of being taken into the care of strangers. 

For instance, if you’ve named guardians for your kids in your will, what would happen if you became incapacitated and were no longer able to care for them? Did you know that your will only becomes operative in the event of your death, and it would do nothing to protect your children in the event of your incapacity?

Or perhaps the guardians you named in your will live far from your home, so it would take them several days to get there. If you haven’t made legally-binding arrangements for the immediate care of your children, it’s highly likely that they will be placed with the authorities until those guardians arrive. 

And does anyone even know where you will is located and how to access it? How can they prove they are your children’s legal guardians if they can’t even find your estate plan?

These are just a few of the potential complications that can arise when naming legal guardians for your kids, whether in your will or as a stand-alone measure. And if just one of these contingencies were to occur, your children would more than likely be placed into the care of strangers. Sadly, we see this happen even to those parents who’ve worked with lawyers to name legal guardians for their children, and that’s because most lawyers simply don’t know what’s necessary for planning and ensuring the well-being and care of minor children.

However, as your Personal Family Lawyer® firm, we have been trained by the author of the best-selling book, Wear Clean Underwear!: A Fast, Fun, Friendly, and Essential Guide to Legal Planning for Busy Parents, on legal planning for the unique needs of families with minor children. As a result of this training, we offer a comprehensive system known as the Kids Protection Plan®, which is included with every estate plan we prepare for families with young children.

The Kids Protection Plan® was created by a nationally recognized attorney, who is a mom herself, to make 100% certain that her kids would always remain in the loving care of people she knows and trusts and never be raised by anyone she didn’t want. And now, you can put this same plan in place for your kids. 

While you should meet with us to put the full Kids Protection Plan® in place as soon as possible, protecting your children is such a critical and urgent issue, we’ve created a totally free website, where you can visit to get your plan started right now.

⇒ If you’ve yet to take any action at all, visit this easy-to-use and 100% FREE website, where you can take the first steps to create legal documents naming long-term guardians for your children. By doing this, you can ensure that should anything happen to you prior to creating your full estate plan, your kids would be cared for by the people you would want in exactly the way you would want.

After you’ve completed that step, schedule a Family Wealth Planning Session™ with us, your Personal Family Lawyer®, so we can put the full Kids Protection Plan® in place. From there, we can determine if there are any other estate planning measures that your family might need to ensure the well-being and care of your children no matter what happens.

⇒ If you have already named long-term guardians in your will or as a stand-alone measure, either on your own or with a lawyer, we can review your existing legal documents to see whether you have made any of the most common mistakes that could leave your kids at risk. From there, we will revise your plan and put the proper protections in place to ensure your children are fully protected.

Life & Legacy Planning: Do Right By Those You Love Most
The DIY approach might be a good idea if you’re looking to build a new deck for your backyard, but when it comes to estate planning, it’s actually one of the worst choices you can make. Are you really willing to put your family’s well-being and wealth at risk just to save a few bucks?

If you’ve yet to do any planning, contact us, your Personal Family Lawyer® to schedule a Family Wealth Planning Session, which is the first step in our Life & Legacy Planning Process. During this initial meeting, we’ll take you through an analysis of your assets, what’s most important to you, and what will happen to your loved ones when you die or if you become incapacitated.

If, as a result of this process, we determine that you really do have a very simple situation and you want to create your own estate planning documents yourself online, we will support you to do that. However, if as a result of the process, you decide you would like us to create a plan for you, we’ll support you to find the optimal level of planning for a price that’s right for you.

And if you’ve already created an estate plan—whether it’s a DIY job or one created with another lawyer’s help—contact us to schedule an Estate Plan Review & Check-Up. With our support, we will ensure your plan is not only properly drafted and updated, but that it has all of the protections in place to prevent your children from ever being placed in the care of strangers or anyone you’d never want raising them.

In either case, working with us will empower you to feel 100% confident that you have the right combination of estate planning solutions to fit with your unique asset profile, family dynamics, and budget. As your Personal Family Lawyer® firm, we see estate planning as far more than simply planning for your death and passing on your “estate” and assets to your loved ones—it’s about planning for a life you love and a legacy worth leaving by the choices you make today—and this is why we call our services Life & Legacy Planning. Contact us today to get your plan started.

This article is a service of Sahmra A Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge. 

10 Common Estate Planning Mistakes Your Family Can’t Afford to Make—Part 1

Because estate planning involves actively thinking about and planning for frightening topics like death, old age, and crippling disability, many people put it off or simply ignore it all together until it’s too late. Sadly, this unwillingness to face reality often creates serious hardship, expense, and trauma for those loved ones you leave behind. 

To complicate matters, the recent proliferation of online estate planning document services, such as LegalZoom®, Rocket Lawyer®, and Trustandwill.com, may have misled you into thinking that estate planning is a do-it-yourself (DIY) affair, which involves nothing more than filling out the right legal forms. However, proper estate planning entails far more than filling out legal forms. 

In fact, without a thorough understanding of how the legal process works upon your death or incapacity and applies specifically to your family dynamics and the nature of your assets, you’ll likely make serious mistakes when creating a DIY will or trust. And the worst part is that these mistakes won’t be discovered until you are gone—and the very people you were trying to protect will be the ones stuck cleaning up the mess you created just to save a few bucks. 

Estate planning is definitely not a one-size-fits-all endeavor. Even if you think your particular situation is simple, that turns out to almost never be the case. To demonstrate just how complicated estate planning can be, here are 10 of the most common estate planning mistakes, starting with the worst blunder of all: failing to create an estate plan.

1. Leaving No Estate Plan At All
If you die without an estate plan, the court will decide who inherits your assets, and this can lead to all sorts of problems. Who is entitled to your property is determined by our state’s intestate succession laws, which hinge largely upon whether you are married and if you have children. Spouses and children are given top priority, followed by your other closest living family members.

If you are single with no children, your assets typically go to your parents and siblings, and then more distant relatives if you have no living parents or siblings. If no living relatives can be located, your assets go to the state. It’s important to note that state intestacy laws only apply to blood relatives, so unmarried partners and close friends would get nothing. If you want someone outside of your family to inherit your assets, having a plan is an absolute must.

If you’re married with children and die with no plan, it might seem like things would go fairly smoothly, but that’s not always the case. If you’re married, but have children from a previous relationship, for example, the court could give everything to your spouse and leave your children with nothing. In another instance, you might be estranged from your kids or not trust them with money, but without a plan, state law controls who gets your assets, not you.

Moreover, dying without a plan could also cause your surviving loved ones to get into an ugly court battle over who has the most right to your property. Or if you become incapacitated, your loved ones could even get into conflict around your medical care. You may think this would never happen to your loved ones, but we see families torn apart by it all the time, even when there’s not significant financial wealth involved.

As your Personal Family Lawyer®, we will help you create a plan that handles your assets and your medical care in the exact manner you wish, taking into account all of your family dynamics, so your death or incapacity won’t be any more painful or expensive for your family than it needs to be.

2. Thinking A Will Alone Is Enough
Lots of people, particularly older folks, believe that a will is the only estate planning tool they need. While a will is a fundamental part of nearly every adult’s estate plan, which can ensure that your assets go where you want them to go in the event of your death, using a will by itself comes with some serious limitations, including the following:

• Wills require your family to go through the court process known as probate, which can not only be lengthy and expensive, it’s also completely open to the public and frequently creates ugly conflicts among your loved ones.
• Wills don’t offer you any protection if become incapacitated by illness or injury and are unable to make your own medical, financial, and legal decisions.
• Wills don’t cover jointly owned assets or those with beneficiary designations, such as life insurance policies and 401(k) plans.
• Wills don’t provide any protection or guidance for when and how your heirs take control of their inheritance.
• Naming guardians for your minor children in your will can leave them vulnerable to being placed in the care of strangers.

Given these facts, if your estate plan consists of a will alone, you are missing out on many valuable safeguards for your assets, while also guaranteeing your family will have to go to court if you become incapacitated or when you die. Fortunately, all of the above issues can be effectively managed using a trust. That said, as you’ll see below, trusts are by no means a panacea—these documents come with their own unique drawbacks, especially if you try to prepare one on your own.

3. Creating A Trust & Not Properly Funding It
Many people now know that a trust can keep your family out of court, and you may think you can just go online to set up your own trust, or have a lawyer do it with you as a one-size-fits all solution. And while that might be true, particularly if you have very simple assets and few family members, even in that case, you are likely to overlook one of the most important parts of creating a trust: “funding” it.

An unfunded trust is a trust that exists, but that doesn’t hold any of your assets because you didn’t retitle them properly, or because you acquired new assets after creating your trust. This is all too common, and if this is true for you, it will leave your family with a big mess, even though you have officially created your trust. 

Funding your trust properly is extremely important, because if any assets are not properly funded, the trust won’t work, and your family will have to go to court in order to take ownership of that property. And when you acquire new assets after your trust is created, you must make sure those assets are properly funded into your trust as well.

While many lawyers will create a trust for you, few will ensure your assets are properly inventoried and funded into your trust, and even fewer will ensure the inventory of your assets is kept up-to-date as your life and assets change over time. This might sound crazy, but it’s actually common practice among many estate planning firms—but not ours.

As your Personal Family Lawyer® law firm, we will not only make sure all of your assets are properly titled when you initially create your trust, but we will also ensure that any new assets you acquire over the course of your life are inventoried and properly funded to your trust. This keeps your assets from being lost, and prevents your family from being inadvertently forced into court because your plan was never fully completed.

In light of these facts, if your estate plan includes a trust, it’s critical to work with us, your local Personal Family Lawyer® to ensure it works exactly as you intended.

4. Not Leaving An Up-To-Date Inventory Of Assets

As mentioned above, even if you’ve properly funded your assets into your trust, your estate plan will be worthless if your heirs don’t know what you have or where to find it. In fact, there’s more than $58 billion dollars worth of lost assets in the U.S. Department of Unclaimed Property right now. And that’s all because someone died or became incapacitated without letting anyone know how to locate their assets. 

This is especially critical for digital assets like cryptocurrency, social media, email, and data stored in the cloud, because if you haven’t properly addressed these assets in your estate plan, there’s a good chance they will be lost forever if something happens to you. For all of these reasons, creating and maintaining a comprehensive inventory of all of your assets is a standard part of every estate plan we create. With our support, you can rest assured that your family will know exactly what assets you own and how to locate them should anything happen to you. 

But that’s not all. As your Personal Family Lawyer®, we will not only help you create a comprehensive asset inventory, we have systems in place to make sure that inventory stays consistently updated throughout your lifetime. This is such an important and urgent issue, we’ve even created a unique (and totally FREE) tool called a Personal Resource Map to help you get the inventory process started right now, by yourself, without the need for a lawyer.

To learn more, visit the Personal Resource Map website to watch a webinar by Ali Katz, founder of Personal Family Lawyer®, and then get your asset inventory started for free. That way, no matter what, if something happens to you, your family will know what you have, where it is, and how to find it.

Then, schedule a meeting with us, your Personal Family Lawyer® to incorporate your inventory with your other estate planning strategies.  

5. Failing To Regularly Review & Update Your Estate Plan
In addition to keeping an updated asset inventory, it’s vital that you regularly review and update all of your planning documents. Far too often people prepare a will or trust , then put it into a drawer or on a shelf, and forget about it.

Yet, an estate plan is not a one-and-done deal. As time passes, your life circumstances change, the laws change, and your assets change, you must update your plan to reflect these changes—that is, if you want your plan to actually work for your loved ones and keep them out of court and conflict.

We recommend reviewing your plan annually to make sure its terms are up to date. And be sure to immediately update your plan following major life events like divorce, births, deaths, and inheritances. We actually have built-in processes to make sure this happens—be sure to ask us about them.

Beyond sheer necessity, an annual life review can be a beautiful ritual that puts you at ease, and helps you to set the course of your life and keeps your life on course, knowing that you’ve got your affairs in order, all handled, and completely updated each year.

Next week, in part two, we’ll wrap up our list of the 10 most common estate-planning mistakes. Until then, if you are ready to get your estate planning handled and taken care of the right way with ease and affordability, start by contacting us, your local Personal Family Lawyer® for a Family Wealth Planning Session. Your Family Wealth Planning Session is custom-designed to your assets, your family, your wishes, and to educate you on the best way to reach your objectives for the people you love most.

This article is a service of Sahmra A Stevenson Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge.

When you think about loved ones who’ve passed away, you probably don’t think very much—or even at all—about the “things” they’ve left you. And when they do leave something behind, what you likely cherish most about the object are the memories and feelings the item evokes, not the thing itself.

For the founder and CEO of New Law Business Model, Ali Katz, the most treasured memento her late father left her wasn’t even something he intended to be special—it was just a random voicemail on her cellphone. And the message wasn’t meant to be anything sentimental.

His message simply said, “Lex, it’s your dad. Call me back.”

Following his death, Ali loved listening to that message to hear her father’s voice. Of all the assets he left behind, that tiny voicemail was what she cherished most.

Until one day, she went to listen to the message and discovered it had been erased—and her father’s voice was lost to her forever. She still recalls that day as one of her worst ever. Yet like most painful events, it taught her an important lesson.

Losing that voicemail ultimately inspired Ali to build a special new feature into her family-centered model of estate planning, known as the Family Wealth Legacy Interview.

Family Wealth Legacy Interviews: Sharing Your Family’s Unique Story

As your Personal Family Lawyer®, we recognize that estate planning isn’t just about protecting and passing on your financial wealth and other tangible assets when you die. When done right, estate planning supports you to pass down the most precious assets of all—your life stories, lessons, insights, and values—and done so intentionally. That’s why we call it Life & Legacy Planning, not just estate planning.

To collect and preserve what truly matters most, we include a unique service in every estate plan we create for our clients. When you plan with us, we will personally guide you to create a customized recording for the people you love—far more in-depth than Ali’s dad’s two-second message—in which you share your most insightful lessons, memories, and experiences. From there, we will provide you with the recording digitally to ensure it will survive long after you—and your money—are gone. 

And don’t worry, if this sounds overwhelming or difficult in any way, it’s not. Our clients consistently tell us they are surprised about how easy it was, and how quickly they were able to create a truly meaningful gift for the people they love. But most importantly, what they also tell us is that it brings more intention and awareness to how they want to pass on their values, insights, stories, and experiences to the people they love on a day-to-day basis going forward.

Best of all, the Family Wealth Legacy Process is offered at no additional cost to you, since it is part of each plan we create for our clients. And the process of documenting this recording is as easy and convenient as possible: We use a series of helpful questions and prompts, which makes the process both easy and enjoyable. From start to finish, the entire process takes less than an hour. 

My favorite part about this process is that most of our clients tell us that going through it helps them rekindle life moments and memories they would otherwise not share with their loved ones. Indeed, this unique process can enrich your family with something far more valuable than any tangible asset you might leave, and instead leave behind a lasting legacy of love. 

Life & Legacy Planning

In the end, your family’s most precious wealth is not money, but the memories you make, the values you instill, and the lessons you hand down. And left to chance, these assets are likely to be lost forever just like Ali’s voicemail from her father.

That said, recording your Family Wealth Legacy Interview is just a start. To protect and preserve your family’s tangible wealth and other assets, you should create a comprehensive estate plan. Yet, we’ve discovered that “estate planning” is really a misnomer. When done right, it’s really about planning for a life you love and a legacy worth leaving by the choices you make today—which is why we call it Life & Legacy Planning.

Your Life & Legacy Plan goes far beyond simply creating documents and then never seeing us again. We will develop a relationship with you and your family that lasts not only for your lifetime, but for the lifetime of your children and their children if that’s your wish. And this all starts with our Family Wealth Planning Session. If you’d like to learn more about this process or schedule your appointment, contact us, your local Personal Family Lawyer® today.

This article is a service of Sahmra A Stevenson, Esq., Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge. 

Whether it’s to qualify for Medicaid, avoid probate, or reduce your tax burden, transferring ownership of your home to your adult child during your lifetime may seem like a smart move. But in nearly all cases, it’s actually a huge mistake, which can lead to dire consequences for everyone involved.

With this in mind, before you sign over the title to your family’s beloved homestead, consider the following potential risks.  

1. Your Eligibility For Medicaid Could Be Jeopardized

With the cost of long-term care skyrocketing, you may be worried about your (or your senior parents’) ability to pay for lengthy stays in an assisted-living facility or a nursing home. Such care can be extremely expensive, with the potential to overwhelm even those families with substantial wealth.

Since neither traditional health insurance nor Medicare will pay for long-term care, you may  look to Medicaid to help cover the costs of long-term care. To become eligible for Medicaid, however, you must first exhaust nearly every penny of your savings.

In light of this requirement, you may have heard that if you transfer your house to your adult children, you can avoid selling the home if you need to qualify for Medicaid. You may think transferring ownership of the house will help your eligibility for benefits, and this strategy may seem easier and less expensive than passing on your home (and other assets) through estate planning.

However, this tactic is a big mistake on several levels. It can not only delay—or even disqualify—your Medicaid eligibility, it can also lead to other serious problems. Here’s why: In February 2006, Congress passed the Deficit Reduction Act, which included a number of provisions aimed at reducing Medicaid abuse.

One of these provisions was a five-year “look-back” period for eligibility. This means that before you can qualify for Medicaid, your finances will be reviewed for any “uncompensated transfers” of your assets within the five years preceding your application. If such transfers are discovered, it can result in a penalty period that will delay your eligibility. Any transfers made beyond that five-year window will not be penalized.

The length of the penalty period is calculated by dividing the amount of the uncompensated transfer by the average cost of one month of private nursing home care in the state you live in. These days, the average cost of nursing home care is roughly $10,000 a month. Given these figures, this means that for every $10,000 worth of uncompensated transfers made within the five-year window, your Medicaid benefits will be delayed for one month. So if you transferred the title to a home worth $500,000 within the look-back period, your Medicaid benefits would be delayed for 50 months. 

In light of this, if you transfer your house to your children and then need long-term care within five years, it could significantly delay your qualification for Medicaid benefits—and possibly even prevent you from ever qualifying. Rather than taking such a risk, consult with us, your Personal Family Lawyer® to discuss safer and more efficient options to help cover the rising cost of long-term care, such as purchasing long-term care insurance.

2. Your Child Could Be Stuck With A Massive Tax Bill

Another drawback to transferring ownership of your home in this way is the potential tax liability for your child. If you’re elderly, you’ve probably owned your house for a long time, and its value has dramatically increased, leading you to believe that by transferring your home to your child, he or she can make a windfall by selling it. And by transferring the property before you die, you may think that you can save your child both time and money by avoiding the need for probate.

Probate is the court process used to distribute your assets according to the wishes outlined in your will or according to our state’s intestate succession laws if you don’t have a will. Depending on the complexity of your estate, probate can be a long and expensive process for your loved ones; however, that expense is likely to be relatively minor compared to the tax bill your heirs could face.

That’s because if you transfer your home to your child during your lifetime, he or she will have to pay capital gains tax on the difference between your home’s value when you purchased it and the home’s selling price at the time it’s sold by your child. Depending on your home’s value, that tax bill can be astronomical.

In contrast, by transferring your home at the time of your death via your estate plan, your child will receive what’s known as a “step-up in basis.” This tax savings is one of the only benefits of death, and it allows your child to pay capital gains taxes when he or she sells your home, based only on the difference between the value of the home at the time of inheritance and its sales price, rather than paying taxes based on the home’s value at the time you bought it.

For example, say you originally purchased your home for $80,000, and when you die, the home had appreciated in value to $250,000. Your daughter inherits the home upon your death, and then she sells it five years later for $300,000. With the step-up in basis in effect, she would only owe capital gains taxes on the $50,000 of difference between the home’s value when it was inherited and when it was sold.

However, if you transferred ownership of the home to her while you were still living, your daughter would lose the step-up in basis, and would face a capital gains tax bill of $220,000.

Capital gains tax is only one kind of tax that could be impacted by a transfer of your home during your lifetime. You may also destroy valuable property tax basis, which could cause a re-assessment of your home for property tax purposes, depending on the county or state your home is located in. 

There are much better ways to avoid probate using estate planning, such as by putting your home into a revocable living trust, in which case your home would immediately pass to your loved ones upon your death, without the need for any court intervention. As your Personal Family Lawyer®, we can help you choose the most advantageous estate planning strategies to minimize your beneficiaries’ tax liability and ensure they get the most out of their inheritance, all while allowing them to avoid court and conflict.

3. Your Home Could Be Vulnerable To Debt, Divorce, Disability, & Death

There are a number of other reasons why transferring ownership of your house to your child is a bad idea. If your child takes ownership of your home and has significant debt, for example, his or her creditors can make claims against the property to recoup what they’re owed, potentially forcing your child to sell the home to pay those debts.

Divorce is another potentially thorny issue. If your child goes through a divorce while the house is in his or her name, the home may be considered marital property. Depending on the outcome of the divorce, the settlement decree may force your child to sell the home or pay his or her ex spouse a share of the home’s value.

The disability or death of your child can also lead to trouble. If your child becomes disabled and seeks Medicaid or other government benefits, having the home in his or her name could compromise their eligibility, just like it would your own. And if your child dies before you and owns the house, the property could be considered part of your child’s estate and end up being passed on to your child’s heirs, leaving you homeless.

There’s Simply No Substitute For Proper Estate Planning

Given these potential risks, transferring ownership of your home to your adult child as a means of “poor-man’s estate planning” is almost never a good idea. Instead, you should consult with us, as your Personal Family Lawyer®, to find alternative solutions. We can help you find much better ways to qualify for Medicaid and other benefits to offset the hefty price tag of long-term care, and at the same time, we will keep your family out of court and conflict in the event of your death or incapacity.

As your Personal Family Lawyer®, we offer a variety of different estate planning packages at a variety of different price points as part of our Life & Legacy Planning Process. With our guidance and support, we will not only help you protect and pass on your home, but all of your family’s wealth and assets, while also enabling you to better afford whatever long-term healthcare services you might require. Contact us today to learn more.

This article is a service of Sahmra Stevenson, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge. 

In light of the pandemic, the rules and programs governing income taxes for businesses have changed numerous times over the last two years, which has caused confusion and headaches for more than a few business owners. And while many of the pandemic-inspired programs and tax breaks have already ended or will end soon, a few of these programs still stand to impact your taxes in 2021.

The good news is that even though many of these programs are ending, the impact on the overall taxes paid by most small businesses is not expected to be all that significant. Moreover, in some cases, business owners can still apply retroactively for certain pandemic-related benefits they might have missed out on when the tax breaks were first offered. 

With this in mind, here we’ll cover a few of the tax breaks left over from the pandemic-inspired programs that are still available to businesses in 2021. We’ll also outline some of the most valuable deductions and credits that are available to tax savvy business owners every year. 

Although the optimal time for tax planning is typically before the end of the year, there are still a number of ways you can reduce your company’s 2021 tax bill right up to this year’s filing deadline, which is April 18th for most taxpayers. While there are dozens of potential tax breaks you may qualify for, here are six last-minute moves you can make to save on your company’s 2021 tax return.

1. The Employee Retention Credit Is Still Available

First started under the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020, the Employee Retention Credit (ERC) is a fully refundable tax credit that was created to encourage businesses to keep employees on their payroll. The ERC has gone through multiple changes over the last two years, causing confusion among many business owners, which is one reason many companies didn’t apply for it.

However, the ERC can be extremely valuable, and while the program ended for most companies on Sept. 30, 2021, businesses may be able to retroactively claim the ERC. In order to qualify for the latest version of the ERC, a business must have experienced one of the following two circumstances:

1) Gross receipts declined more than 50% in any quarter of 2020 compared to the same quarter of 2019 or declined more than 20% in any quarter of 2021 compared to the same quarter of 2019; or

2) The company had to fully or partially suspend operations due to a government order related to COVID-19.

For companies who qualify, the expanded ERC comes with the following conditions:

• Can be applied retroactively to 2020.
• Can be claimed by Paycheck Protection Program (PPP) borrowers, as long as the PPP proceeds and the ERC covered different expenses.
• Can offset employment taxes equal to 50% of qualified wages (including employer paid health plan expenses) paid between March 13, 2020 and December 31, 2020 or 70% of qualified wages paid between January 1, 2021, and September 30, 2021.
• Has a maximum credit of $5,000 per employee per year for 2020 or $7,000 per employee per quarter for 2021.
• Companies with fewer than 500 employees may also be able to claim fully refundable tax credits to cover wages paid to employees who took paid sick or family leave related to COVID-19 from January 1, 2021 through September 30, 2021.
  
  
  

Although the ERC ended for most businesses on Sept 30,  2021, some new companies, known as “Recovery Startup Businesses” (RSB) can claim the ERC for the third and fourth quarters of 2021. To qualify as an RSB, a company must meet each of the following conditions:

• Started operations on or after Feb. 15, 2020;
• Maintains average annual gross receipts that do not exceed $1 million;
• Employs one or more employees (other than 50% owners); and
• Does not otherwise qualify for the ERC because the business’ operations were not fully or partially suspended due to government orders, and it did not experience a decline in gross receipts.

Businesses that want to apply for the ERC retroactively will need to amend prior years’ tax returns to adjust their payroll expenses. And even if you’ve already filed your taxes for 2021, you still have time to claim the credit. In fact, businesses have up to three years from the program’s end on Sept. 30, 2021 to determine if wages they paid after March 12, 2020 through the end of the program are eligible. 

For more information, visit the ERC FAQs on the IRS website. That said, because the ERC is so complex, you should consult with us, your local Family Business Lawyer™ or your CPA to gain clarification on the program and support you with your application to ensure your company gets the maximum benefit of the tax credit. https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act]

2. Forgiven Paycheck Protection Program (PPP) Loans Aren’t Taxable—At Least At The Federal Level

Forgiven Paycheck Protection Program (PPP) loans aren’t considered taxable income by the IRS, so they won’t affect your 2021 federal income taxes. Additionally, you can deduct eligible business expenses you paid with PPP funds on your federal tax return.

That said, not all states have adopted the federal rules on how PPP loans are taxed, so you should consult with us, your Family Business Lawyer™ or your CPA to determine our state’s law on the PPP’s taxability. 

3. Deduct 100% Of Business Meals From Restaurants

To spur growth in the hard-hit restaurant industry, a provision in the Consolidated Appropriations Act (CAA) passed in December 2020 makes the cost of business-related meals (food and beverages) served by a restaurant 100% deductible on your federal income taxes. As long it’s from a restaurant, meals served via takeout and delivery qualify too—you don’t have to actually eat on the premises.

This tax break is only for 2021 and 2022. Previously, deductions for business meals at restaurants were limited to 50%. 

4. Increased 179 Deductions For Equipment and Vehicle Purchases
If you purchased new or used business equipment in 2021, you could qualify for  a deduction of up to $1.05 million (up from $1.04 million in 2020). The deduction is available under Section 179, which allows you to write off the entire amount you pay for qualified business equipment in a single year, rather than depreciating it over multiple years.

Most business property, such as office furniture, computers, software, machinery, and office equipment, will qualify. The deduction can also be applied to SUVs, pickups, vans, and other vehicles weighing more than 6,000 pounds. Section 179 now also includes building improvements like HVAC, elevators, and security systems, Real estate, however, does not qualify.

To take the deduction, the property must be purchased and put into use during 2021, and it must be used more than 50% of the time for business purposes. The provision caps total equipment purchases for the year at $2.62 million (up from $2.59 million in 2020). Once you spend $2.62 million, the deduction is phased out on a dollar-for-dollar basis, and it totally phases out once you hit $3.67 million.

That said, if you made equipment purchases in 2021 that exceeded the $3.67 million limit, you may still use bonus depreciation on the amount above the Section 179 cap. Bonus depreciation remains at 100% through 2022. From there, bonus depreciation decreases by 20% each year until it totally phases out at the end of 2026.

If you made significant equipment purchases in 2021 or plan to make them in 2022, meet with us, your Family Business Lawyer™ , so we can work with you and your CPA to ensure you are maximizing all of your deductions for such major capital investments. 

5. Deduct The Cost Of Your Business Insurance Policies
Most every business takes out some form of business insurance to protect against a variety of threats and liabilities. Yet, many business owners don’t realize or simply forget that you can deduct 100% of the cost of most types of business insurance from your federal income taxes. The most common forms of business insurance that qualify for the 100% deduction include the following: 

• Health insurance 
• General liability insurance 
• Commercial property insurance 
• Business interruption insurance 
• Professional liability/Malpractice insurance

• Cybersecurity insurance
• Worker’s compensation insurance 
• Vehicle insurance

Note that while most forms of business insurance are tax deductible, life insurance premiums are generally not deductible. There are a few exceptions, such as when you pay for your employee’s life insurance premiums, which can be written off as a business expense, but even this comes with limitations

In this case, deductions can only be applied to premiums paid for the first $50,000 of coverage for each employee, and you are not permitted to deduct the premiums if you or the company benefit from the policy. Since it can be tricky to figure out when life insurance is deductible, meet with us, your Family Business Lawyer™ to find out whether or not your policies would qualify.

6. QBI Deduction For Pass-Through Income Still Available—And With Higher Income Limits

The Section 199A Qualified Business Income (QBI) Deduction is still available for 2021. Starting in 2018 and running through 2025, this provision allows qualifying business owners to take a straight 20% deduction on their net business income for the year. And this deduction is in addition to any ordinary business-expense deductions you might have.

To qualify, your business must be set up as a “pass-through” entity, meaning your company’s taxes pass through and are paid at your personal income tax rate. This business structure includes sole proprietorships, partnerships, limited liability companies (LLC), and S corporations—basically all businesses except C corporations and LLCs taxed as corporations.

The deduction does have some restrictions, including for specific types of service businesses like law practices and accounting firms, and it begins to phase out at higher income levels. For 2021, the deduction begins to phase out once your taxable income surpasses $164,900 if single and $329,800 if married and filing jointly. The tax break completely phases out once your income reaches $214,900 for individuals and $429,800 for joint filers.

Given these restrictions, meet with us, your Family Business Lawyer™ or your CPA to see if your company qualifies.

Maximize Your Company’s Tax Savings For 2021

In addition to the tax breaks highlighted here, there are numerous other potential tax-saving opportunities that your company might qualify for. So even if you don’t qualify for any of these, it’s likely that there are others you can benefit from.

As your Family Business Lawyer™, we will work with you and your CPA to help you choose the tax breaks best suited for your business, and ensure you get the maximum benefit from the ones you qualify for during the 2021 tax season and beyond. Contact us today to get started.

This article is a service of Sahmra A Stevenson, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. 

Although many strategies to save on your income taxes must be locked in before the end of the year, there are still numerous ways you can reduce your tax bill right up until the filing deadline, which has been pushed back to Monday April 18th due to a holiday on April 15th.

Some of these strategies are time tested and available every year, but with all of the legislative changes made during the past two years to deal with the pandemic, there are also a few opportunities that won’t be around much longer, with some only available this year. While there are dozens of potential tax breaks you may qualify for, here are 7 of the leading moves you can make to save big on your 2021 tax return.

1. Max Out Your Retirement Account Contributions

The lower your income is, the lower your taxes will be, and tax-advantaged retirement plans, such as 401(k)s, 403(b)s, and individual retirement accounts (IRAs), are a great way to reduce your taxable income and save for retirement at the same time. And you have until the April tax-filing deadline to add money to your plan for the previous tax year, so you still have time to contribute.

For those with workplace retirement plans, such as a 401(k), 403(b), and most 457 plans, you can contribute up to $20,500 in 2022, up from $19,500 in 2021. For those 50 and older, you can make an extra catch-up contribution up to $6,500 in 2022 (no change from 2021) for a total contribution of $27,000.

For those with IRAs, both traditional IRAs and Roth IRAs, you can contribute up to $6,000 in both 2021 and 2022, or $7,000 for those 50 or older. However, the ability to deduct your traditional IRA contributions from your taxes comes with certain limitations, depending on whether you or your spouse is covered by a retirement plan at work and your adjusted gross income (AGI). Roth contributions are not tax deductible, since they are made after taxes are taken out; however, withdrawals from a Roth in retirement are tax-free. https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

Note: RMDs Reinstated For 2021

Although you are typically required to take an annual required minimum distribution (RMD) from your traditional IRA, 401(k), or other tax-advantaged retirement account starting in the year you turn 72, the CARES Act waived the RMD requirement for 2020 due to the pandemic. The waiver also applied if you reached age 70 ½ in 2019, but waited to take your first RMD until 2020.

However, RMDs were reinstated in 2021, so if you are 72 or older, you were required to make a withdrawal from your retirement account before the end of 2021. Similarly, if you reached age 70 ½ in 2019 and your RMD in 2020 was waived, your 2021 RMD was also required to occur by Dec. 31, 2021. And if you reached age 72 in 2021, your 2021 RMD is required to occur by April 1, 2022. 

If you failed to distribute the RMD, you may owe a 50% penalty on the amount not distributed. That said, you may be able to avoid the penalty by requesting a waiver from the IRS. You can request a waiver if your failure to take the RMD is due to a reasonable error, and you take steps to make the required distribution. To request a waiver,  submit Form 5329 to the IRS, with a statement explaining the error and the steps you are taking to correct it.   https://www.irs.gov/pub/irs-pdf/f5329.pdf

2. Contribute To A Health Savings Account
As with tax advantaged retirement plans, if you have a high-deductible health insurance plan, you may be able to reduce your taxable income by contributing to a health savings account (HSA), which is a tax-exempt account you can use to pay medical expenses. The deadline for making a 2021 contribution to your HSA is April 15, 2022.

HSAs offer three different tax breaks: Contributions are tax-deductible, they allow for tax-free growth, and withdrawals are tax-free if they are used to pay for qualified medical expenses. 

For 2021, if you had self-only health coverage, you could have contributed up to $3,600. For 2022, the individual coverage contribution limit is $3,650. If you have family coverage, the limit was $7,200 in 2021 and is $7,300 in 2022. And if you’re 55 or older, you can add an extra $1,000 catch-up contribution to your HSA.

To be eligible, you must have a high-deductible health insurance plan with a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage. The maximum out-of-pocket expenses cannot exceed $7,000 for a self-only plan or $14,000 for a family plan.

3. Claim The New Expanded Child Credit

The American Rescue Plan’s expanded child tax credit was made fully refundable in 2021, and it was increased up to $3,600 per child through age 5, and up to $3,000 per child aged 6 to 17. Dependents who are 18 can qualify for $500 each. Dependents aged 19 to 24 may also qualify, but they must be enrolled in college full-time. 

Eligible families automatically received half the total of the payments in advance monthly payments between July and December 2021, unless they opted out. When eligible parents file their taxes in 2022, they’ll get the remainder of the benefit they didn’t receive through advance monthly payments. If you did not receive the advance payments because you opted out or didn’t receive them for some other reason, you can claim the full credit when you file in April.

Because the IRS based these payments on your 2020 tax return, a change in income or the number of qualifying dependents in 2021 could have resulted in an overpayment. If so, you’ll have to pay that back when you file in April.

Even if you made little to no income, you are still eligible for the child tax credit, though payments begin to phase out when your AGI reaches $75,000 for single filers, and $150,000 for joint filers. To find out where you stand with this credit, visit the Child Tax Credit Update Portal on the IRS website.  https://www.irs.gov/credits-deductions/child-tax-credit-update-portal

4. Take The Increased Deduction For Charitable Donations

The CARES Act allowed for up to a $300 deduction per tax return for charitable donations in 2020, even for those taxpayers who don’t itemize. For 2021, this benefit expanded to up to $300 per person.

This means if you are a married couple filing jointly, you could be eligible for up to a $600 deduction for your charitable giving last year, even if you take the standard deduction, which increased to $12,550 for single filers and $25,100 for joint filers in 2021. 

5. Claim The Increased Child & Dependent Care Credit 

If you care for a child under age 13, or a spouse, parent, or another adult dependent who is unable to care for themselves, you may be able to get up to 50% back as a tax break or refund for your care-related expenses. For 2021, the amount you can claim maxes out at $8,000 for one dependent and $16,000 for two or more. 

For 2021 only, this credit is fully refundable, meaning that you can receive money even if you don’t owe taxes. Note that this credit is different from the child tax credit mentioned above, and qualifying for the child tax credit does not affect your eligibility for this credit and vice versa. Learn more about the requirements for the Child and Dependent Care Credit on the IRS website. https://www.irs.gov/newsroom/child-and-dependent-care-credit-faqs]

6. Claim The American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) provides undergraduate college students or their parents with an annual tax credit up to $2,500 for eligible education expenses incurred during the first four years of college. The credit can be used to cover 100% of the first $2,000 spent on tuition, books, school fees, and other supplies (excluding living expenses or transportation) plus 25% of the next $2,000 for a total of $2,500.

To qualify, the student must be pursuing a degree or credential and be enrolled at least half-time for one academic period (semester, trimester, or quarter) beginning in 2021 or the first three months of 2022. The credit can be claimed for a maximum of four years, and it can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.

The full credit is available for individual filers with an AGI of $80,000 or less or $160,000 or less for joint filers. A reduced credit is available for individuals with an AGI over $80,000 but less than $90,000 or over $160,000 but less than $180,000 for joint filers. Taxpayers who earn more than that can’t claim the credit. The credit is partially refundable, so you can still receive 40% of the credit (up to $1,000) even if you had no income or owed no taxes.

7. Claim The Lifetime Learning Credit

The Lifetime Learning Credit (LLC) is another tax credit for qualifying educational expenses, but it’s slightly different from the American Opportunity Credit. The credit can be used to cover 20% of the first $10,000 spent on tuition and school fees for a maximum of $2,000. Unlike the AOTC, the LLC does not generally cover books or other supplies (unless those books or supplies were required to be purchased to take the course), and it also does not cover living expenses or transportation. 

The LLC is not just for undergraduates; it applies to undergraduate, graduate, and non-degree or vocational students, and there’s no limit on the number of years you can claim it. To qualify for the LLC, the student must be enrolled in at least one course for an academic period beginning in 2021 or the first three months of 2022. The credit can be claimed by the student or their parents provided they paid the expenses and the student is listed as a dependent on their tax return.

The full credit is available for individual filers with an AGI of less than $59,000 or less than $118,000 for joint filers. A reduced credit is available for individuals with an AGI between $59,000 and $69,000 or between $118,000 to $138,000 for joint filers. Those who earn more than $69,000 or $138,000 can’t claim the credit. 

The LLC is not refundable, so you can use the credit to pay any taxes you owe, but you won’t get any of the credit back as a refund. Additionally, you can’t claim both the American Opportunity Tax Credit and the Lifetime Learning Credit in the same year.

Maximize Your Tax Savings for 2021
These are just a few of the tax breaks available for 2021. There are plenty of other deductions and credits that your family might qualify for depending on your circumstances. Meet with us, your Personal Family Lawyer®, to make certain you don’t miss out on a single one. Contact us today to schedule your appointment.

This article is a service of Sahmra Stevenson Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $450 session at no charge. 

In the last decade, the rise of the gig economy has fueled an unprecedented increase in the number of independent contractors (ICs) in the U.S. workforce. And that growth has only accelerated in the wake of the pandemic, with more companies relying on remote work arrangements, and many workers laid off during the shutdowns and forced to go solopreneur choosing to remain independent.

In fact, the number of independent contractors in the U.S. workforce rose by 34% in 2021, according to MBO Partners’ 11th Annual State of Independence in America report. As a business owner, using independent contractors in lieu of full-time employees has a number of distinct advantages, including big savings on labor costs, taxes, and training—but using contractors is not without risks.

Employers Facing Increased Scrutiny
Along with the rise in ICs, there’s been an equally steady increase in the number of companies being targeted by state and federal agencies for misclassifying workers. And with the election of President Biden, employers are facing even more scrutiny. 

Last May, the Department of Labor (DOL) rescinded a Trump-era rule that would have made it easier for employers to designate workers as independent contractors, rather than employees under the Fair Labor Standards Act (FLSA). And as part of his $6 trillion budget proposal unveiled this summer, Biden pledged to end “the abusive practice of misclassifying employees as independent contractors.” To fund this effort, Biden proposed a 12% increase in funding for the DOL’s Wage and Hour Division, which deals with worker classification.  https://www.natlawreview.com/article/what-s-old-new-now-dol-rescinds-trump-era-worker-classification-rulemaking-eyes]

Most recently, in January the DOL and the National Labor Relations Board struck an agreement to collaborate on investigations and share information on potential violations, specifically targeting independent contractor misclassification. The deal will create a new referral process for violations of federal labor and employment laws, making it easier for the government to pursue employers who have breached laws enforced by both agencies.

The Cost Of Misclassification
If you misclassify an employee, you can face hefty fines from the DOL, IRS, and state agencies. Moreover, you can be held responsible for paying back taxes and interest on employee wages, along with FICA taxes that weren’t originally withheld.

You can also be held liable for failing to pay overtime and minimum wage under the FLSA as well as under state laws. Such claims can go back as far as three years if it’s found you knowingly made the misclassification. And if the IRS believes your misclassification was intentional, there’s also the possibility of criminal penalties.

Outside of the fines paid to state and federal agencies, if an employee is misclassified, they’re eligible to claim employee benefits he or she missed out on. These can include healthcare coverage, stock options, 401(k) matches, PTO, and even unpaid break time.

Best Practices To Avoid Misclassification
Fortunately, with the support and guidance from us, your Family Business Lawyer™, you can easily avoid these risks and stay totally compliant. While you should meet with us for an in-depth review of your employment agreements and worker classification procedures, implementing the following best practices can go a long way toward ensuring your team members are correctly classified.

1) Conduct An Internal Audit Of Your Classification Process

The first step to ensuring that your ICs are classified properly is to conduct an internal audit of your current classification policies and practices. And if you don’t have any formal policies or practices in place, now is the time to create them.

While the federal government, the states, and the courts don’t have a single common test to determine a worker’s classification, there are some overarching themes that they all consider. In general, if you have the right to control or direct how an IC’s work is done, not just what’s to be done, the worker is more likely to be an employee, not an IC. With ICs, you’re only permitted to direct and control the end result of their work, not the manner and methods of getting it done.

Since there are many complex legal issues related to this process, it’s important that you work with us, your Family Business Lawyer™ to review each worker’s on-the-job practices. Many times an IC’s employment agreement may state one thing, but their actual work performance and relationship with you may be something entirely different.

For example, an IC’s contract might state that they’re to work independently, but in reality they work under close supervision. Or their contract may state that they’re free to work with other clients, but the audit shows that the way you’ve structured the relationship makes it impractical or impossible for them to work for anyone but you.

By auditing your policies and practices in this way, you can identify and change any problem areas internally, before a regulatory agency steps in to investigate.

2) Review And Revise Your Employment Agreements

Even if you’ve worked with someone for years without any problems using a verbal agreement, it’s crucial that every contractor you hire has a properly drafted contractor agreement in place, describing exactly what services the contractor is providing and laying out the parameters of their relationship with you.

We cannot emphasize this point enough: Well-drafted agreements are the foundation of your protection from misclassification. Your IC agreements should clearly define the scope of work, the time frame involved, their communication process with you, and the terms of payment. Additionally, the agreement should clearly state that the worker is responsible for his or her own workplace, equipment, and expenses.

Finally, don’t forget to include terms in your IC agreements protecting your intellectual property. This can be done fairly easily using work-for-hire and copyright assignment clauses. To ensure your agreements offer you the maximum protection, be sure to have us review the terms of your agreements, even those prepared by another lawyer.

3) Implement And Enforce Classification
Once you’ve identified and fixed any gaps or areas needing improvement in your IC classification policies and practices, the final step is to make certain these criteria are implemented and enforced. Your policies and agreements are worthless if they’re not actually being followed.

Keep in mind, the DOL, state agencies, and courts are only concerned with what an IC is doing, not what’s in their contract or job description. If necessary, revise your company’s operating manual and procedures to ensure that the provisions of the agreements and policies are thoroughly documented, implemented, and enforced.

Enlist Our Support
Using contractors can give your company an edge in today’s thriving gig economy, but if you’re not careful, they can also be a serious liability. Consult with us, your Family Business Lawyer™ for trusted guidance on the latest worker classification laws, implementing proper classification procedures, and for support in creating airtight agreements that protect both your company and your intellectual property. Contact us today to schedule your appointment.

This article is a service of Sahmra A Stevenson Esq, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule.