Feb 25

Fiduciary Standards

With all aspects of estate planning, there are many variables that you need to address. The aspect that my clients and I spend the most talking about is how and when property is to be given to their kids or other beneficiaries. Most of the time, this is all that people think about when they think of estate planning. However, recent meetings and recent events compel me to bring up another point that is often overlooked when clients just think about where their property will go after they die: Who should be in charge of the administration?

When you are writing your estate plan, whether it is a last will and testament, a revocable trust, or you are just depending upon beneficiary designations and powers of attorney, the person you name as your fiduciary is going to be the person that has the most power ensuring your written wishes are adhered to. If you have minor children and you want to ensure that, if something were to happen to you, your minor children were cared for and they didn’t get all their inheritance at age 18, then you need to put someone you can trust in that position to follow your directions.

Likewise, if you are worried about becoming elderly and incapacitated, and must name someone as power of attorney, you should look at who will have your best interests in mind, not just your closest relative. A horror story that I am in the process of correcting involved an elderly woman who named her nephew as agent. The nephew used the POA to gift out, mostly to himself or his kin, over $250,000 from the estate (over a 16 month period)! This woman did not have millions in assets (total value of her gross estate prior to wrongs was only about $600,000), so the value removed almost equaled 1/2 of her lifetime net worth!

Now, not everyone will try to take advantage, but not everyone is honest enough to serve in a fiduciary capacity. I cannot tell you who will be best to serve for you when we write your estate plan, but prior to coming meeting with any estate planning attorney, you need to be aware of the power these fiduciaries wield and who you would trust in caring for you, your finances and your children’s inheritances.

Feb 21

Reminders about tip income

If your pay from your job includes tips, the IRS has a few important reminders about tip income:

  • Tips are taxable. Individuals must pay federal income tax on any tips they receive. The value of non-cash tips, such as tickets, passes or other items of value are also subject to income tax.
  • Include all tips on your return. You must include all tips that you receive during the year on your income tax return. This includes tips you received directly from customers, tips added to credit cards and your share of tips received under a tip-splitting agreement with other employees.
  • Report tips to your employer. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer. Your employer is required to withhold federal income, Social Security and Medicare taxes on the reported tips.
  • Keep a daily log of tips. You can use IRS Publication 1244, Employee’s Daily Record of Tips and Report to Employer, to record your tips.

For more information, you can reach me at 580-318-8829.

Feb 19

Thanks to the Oklahoma Women in Ag and Small Business

I want to send a thank you to the Oklahoma Women in Ag and Small Business and the Texas County Extension Service for inviting me to speak at the 5 State Symposium for Women in Agriculture this past Saturday. I was able to give a presentation on estate planning basics to about 50 attendees and enjoyed their company so much I stayed for the remainder of the conference.

If you have a group that you think would benefit from a seminar about wills, trusts, probate procedures, and other estate and tax planning options, then please do not hesitate to contact me. I can put together any type of program related to these topics in seminars from 30 minutes to up to four hours. I am willing to travel about anywhere in the state as well, even though I am officed in Altus, Oklahoma.

Feb 17

Six Important Facts about Dependents and Exemptions

While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.

1. Exemptions reduce taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.

2. Personal exemptions.  You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.

3. Exemptions for dependents. Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.

4. Some people do not qualify as dependents.  While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.

5. Dependents may have to file.  If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.

6. Dependents can’t claim a personal exemption. If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.

Remember that a person must meet several tests in order for you to claim them as your dependent.

Feb 15

Taxable and nontaxable income

Taxable and Nontaxable Income

Most types of income are taxable, but some are not. Income can include money, property or services that you receive. Here are some examples of income that are usually not taxable:

  • Child support payments;
  • Gifts, bequests and inheritances;
  • Welfare benefits;
  • Damage awards for physical injury or sickness;
  • Cash rebates from a dealer or manufacturer for an item you buy; and
  • Reimbursements for qualified adoption expenses.

Some income is not taxable except under certain conditions. Examples include:

  • Life insurance proceeds paid to you because of an insured person’s death are usually not taxable. However, if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
  • Income you get from a qualified scholarship is normally not taxable. Amounts you use for certain costs, such as tuition and required course books, are not taxable. However, amounts used for room and board are taxable.

All income, such as wages and tips, is taxable unless the law specifically excludes it. This includes non-cash income from bartering – the exchange of property or services. Both parties must include the fair market value of goods or services received as income on their tax return.

If you received a refund, credit or offset of state or local income taxes in 2012, you may be required to report this amount. If you did not receive a 2012 Form 1099-G, check with the government agency that made the payments to you. That agency may have made the form available only in an electronic format. You will need to get instructions from the agency to retrieve this document. Report any taxable refund you received even if you did not receive Form 1099-G.

For more information, or if you are in the Altus, Oklahoma area and would like to set up an appointment to talk about your tax and estate planning, then call me at 580-318-8829.