In the News
Part of what makes Schulze Law & Consulting, PLLC, a truly client-centric firm is our goal to educate our clients, and the public about news and information that affects them. We provide publications, client alerts, and other legal resources.
Trust Check-up: Beneficiaries and Income Taxes
The language of the deceased person's trust is very important. Does it create a trust share for each beneficiary or does it create a separate trust for each beneficiary? Usually those who draft trusts are not very discerning with respect to this distinction. Start with the language of the trust.
Option 1: More often, than not, the trust will create trust shares. That is each grandchild's share will be an account within the "big trust." If that is the case, then the trust will file one 1041 income tax return for all of the trust income. Distributions, if any, to individual beneficiaries will be a deduction from income of the "big trust" and each beneficiary will receive a k1 indicating the income that the beneficiary has to report on the beneficiary's 1040 income tax return for the year because that distribution of income to the beneficiary is taxable to the beneficiary. This will reduce the number of returns and administrative items to be tracked each year, reducing administrative costs to the trust and thus beneficiaries by eliminating accounting/CPA/trustee annual fees.
Option 2: If the trust actually establishes a separate trust for each grandchild, the benefit for the trust for their grandchild is placed in the trust for that grandchild, each separate trust obtains a 1041 and there is a separate income tax return for that trust. Distributions during the year to a grandchild are deductible by their grandchild's trust, the grandchild receives a K-1 and pays income tax on the income received.
The reason why your accountant cannot use each grandchild's Social Security number for that child's share (or separate trust) The assets are in the trust in which the trustee is the legal owner-not the child. Of course, there are some IRS code, regulations and cases. Your accountant can find them if your accountant looks for them.
: Wendy Zimmer Cox provided a helpful progfram on ICLE entitled : Postdeath Tax Planning and Preparing Fiduciary, Estate, and Gift Tax Returns
AG Nessel Issues Alert Advising Caution, Patience When Purchasing Used Cars
LANSING – Michigan Attorney General Dana Nessel, through her Consumer Protection Team, is cautioning patience and thorough review of vehicle and sales terms to Michigan residents shopping for used cars in a new consumer alert.
Purchasing a used vehicle is an experience often marked by high-pressure sales tactics, few or missing vehicle history details, ‘as-is’ terms of sale, and most often the transaction is finalized in a legally binding purchase agreement or contract.
“Purchasing a used vehicle is often an anxious, uneasy experience for buyers who only engage in this type of transaction every few years and aren’t often making purchases with such large price tags,” said Nessel. “Following several key tips on vehicle inspection and taking your time to thoroughly review any agreements you are signing can give buyers confidence in the process and the purchase.”
Among the recommendations in the alert are:
Examine the vehicle using an inspection checklist;
Find out if the vehicle was involved in an accident or incurred other damage;
Ask for maintenance records;
Check for open recalls at safercar.gov; and
Determine the value of the vehicle before you negotiate.
For more information, visit Michigan Attorney General alerts:
You can file a consumer complaint here. More information about the complaint process is available on our website.
For more information about popular consumer scams, or if you believe you’ve been a victim, residents can contact the Consumer Protection Team Monday-Friday at 877-765-8388 or complete our online complaint form.
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5 Signs You Might Be Better Prepared for Retirement Than You Think
You’ve Paid Off Your Mortgage
Housing is the biggest monthly expense for most Americans. If you’ve paid off your mortgage by the time you retire, however, you eliminate that huge expense from your monthly budget. Rather than paying thousands of dollars to your loan company — the average payment on a mortgage initiated in 2023 being $2,317, according to The MReport — you get to keep that in your pocket.
This can make a tremendous difference in the quality of your life in retirement. If you so desire, you can even tap the equity in your home to generate even more cash flow. Just be aware that taking out home equity can have consequences as well, and you should discuss them with your financial and/or tax advisors before you take that step.
You Have No Consumer Debt
Debt is the albatross around the neck of many Americans. When you accrue interest on outstanding credit card balances, your cash flow is going to a bank rather than to fund your own lifestyle. Even worse, the interest rates on credit cards are so high that it’s very easy for your debt to quickly grow out of control.
But if you’re retiring with no consumer debt, you’re ahead of the game when it comes to your finances. Rather than simply flushing that money down the toilet, you can use it for everything from paying for your daily expenses to enhancing the quality of your life.
You’re Healthy
For some seniors, healthcare can be the biggest expense they face in retirement, even if they have insurance. While you can’t eliminate all healthcare costs, if you’re a healthy individual, you may be able to avoid some of the big-ticket items that plague many seniors, from expensive surgeries and hospital stays to specialized medications and long-term care costs.
You Live in an Inexpensive City or State
If you live in the most expensive locations in America, like Hawaii, Manhattan or Los Angeles, it’s obviously going to be harder to stretch your retirement savings. But there are plenty of desirable locations across the country that have a cost of living 40% or more below these pricey areas.
According to Numbeo, you would only need about $5,500 in Cleveland to maintain the same standard of living that would cost you $9,500 in New York City. While there are certainly arguments to be made about how living in some cities is different than in others, saving $4,000 a month by simply moving from New York to Cleveland could make a huge difference in terms of how prepared for retirement you are. And this is just one example of literally hundreds.
If you prefer to live in a warmer location with unique Southern charm, you could spend a whopping 75% less in rent by living in Charleston, SC, instead of New York City.
You Don’t Have a Car Payment
The average monthly car payment reached a staggering $725 in Q1 2023, according to Experian. That’s more than some Americans pay for their mortgage. If you’ve managed to pay off your car, it means you’re keeping hundreds of dollars in your pocket — or $8,700 per year using just the average car payment. That can substantially improve your quality of life in retirement.
Savings in Black and White
Imagine you have no mortgage payment, no credit card debt, no auto loan and you move from a high-cost to a low-cost area. You could be saving over $7,000 per month, using the average monthly costs for all of these items.
While it’s true that not all Americans have a brand-new car, carry credit card debt, took out a mortgage in 2023 and live in New York City, this is just a mathematical example of how getting your financial life in order can make a huge difference in terms of being prepared for retirement. If you can eliminate these excess costs and live a happy life in a less expensive area, you can get by in retirement with a much smaller account balance.
https://finance.yahoo.com/news/5-signs-might-better-prepared-150007518.html?guccounter=1