Check to See if you are Entitled to a Red-Light Camera Refund

As many drivers in and around the City of Chicago know, red-light cameras have been installed on many of the intersections we navigate.  Unfortunately, many of us know all too well of how they work. You may have received a violation notice in the mail soon after seeing the flash of the camera as you went through an intersection.

In July of this year, the Chicago City Council approved a $38.75 million settlement of two class-action lawsuits that claimed the City failed to provide drivers adequate notice of a red-light camera violation before finding them guilty and imposing a late fee on the ticket.

Now the city has begun sending out notices on the settlement terms as well as instructions on how to submit a claim to the drivers who qualify for a refund or forgiveness of any unpaid tickets.  

Rather than wait for the notice in the mail, you can check the City of Chicago website to locate any tickets you may have received by searching by license plate, driver's license number, and other information. 

Then you may enter the ticket information on the Online Claim Submission to see if you qualify for a refund.

Individuals with eligible tickets have until December 11, 2017 to file a claim with the City of Chicago.  Claims will begin paying out the beginning of August 2018. 

Glick and Trostin, LLC is a tax and estate planning firm located in Chicago, Illinois and can be contacted at 312-346-8258. 

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Family Memberships as Tax Deductions

As the days get shorter and cooler, taking your kids outdoors might not always be an option. You may be in need of something to keep your kids active and entertained. Did you know that some or all of the costs of memberships to organizations that qualify as nonprofit 501(c)3 organizations such as the Chicago Botanic Gardens, Children's Museum, Shedd Aquarium, and Brookfield Zoo can be tax deductible.  Often times, the cost of a family membership can pay for itself in as few as two visits for a family of four.  

If you are looking for possible holiday gifts for loved ones, a membership can be a great present and provide yourself with an additional charitable deduction at the end of the year.  Further, grandparents can utilize their RMDs from IRA's with a Qualified Charitable Distribution. 

Just remember to keep your receipts for these expenses in a safe place so that you can reap the tax benefits when you file in the next calendar year.

            

If you have any questions regarding your personal taxes and other exemptions you may qualify for, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Qualified Charitable Distribution ("QCD") From your IRA RMDs

As individuals invest in their retirement funds, over the years these accounts can become one of the largest assets at the time of retirement.  At age 70 1/2, you must begin to take Required Minimum Distributions ("RMD") from these accounts based on your life expectancy.  These income distributions are taxable and can cause an individual to move into a higher tax bracket or increase their Medicare premium expenses.

A great way to offset some of this taxable income is to use a portion of your IRA RMD to donate to qualified charitable 501(c)(3) organizations ("Qualified Charities"). These donations are called Qualified Charitable Distributions ("QCD").

How To Make A QCD: To make a QCD, the funds must go directly from your IRA to a Qualified Charity.  At your request, your IRA administrator will make a distribution directly to the Qualified Charity to satisfy your RMD. At tax time you will receive a 1099-R from your IRA showing the full amount of your distribution.  Your tax preparer will then enter the amount of the RMD that went to Qualified Charities through a QCD. The QCD will reduce the taxable portion of the 1099-R.

Example:  Lisa is 72 years old, lives on a combination of $25,000/year of Social Security and another $25,000/year of interest income from her portfolio, and has a $3,400 RMD this year. In addition, Lisa donates each week to her church and takes the deduction on her Schedule A to offset the tax consequences of her RMD. She would like to assess the tax savings benefit if she simply did a Qualified Charitable Distribution directly from her IRA to the church to satisfy her RMD obligation.

By allocating Lisa's RMD to a QCD, her AGI would result in $25,000 (ordinary income) + $7,475 (the taxable portion of her Social Security) = $32,475. Since Lisa has only $6,000 of itemized deductions, she instead claims the $7,850 standard deduction (including the additional amount for being over age 65), and also receives a $4,050 personal exemption, which brings her taxable income down to $20,575. Based on the 2016 individual tax tables, this puts Lisa in the 15% tax bracket, with a total tax liability of $2,622.50.

In contrast, if Lisa were to take the $3,400 RMD directly, her income would increase by $3,400. In addition, the higher income would also increase the taxability of her Social Security from $7,475 to $10,365. The subsequent $3,400 donation to her church would produce a $3,400 tax deduction, bringing her total tax deductions to $9,400 (although she already had a $7,850 standard deduction, only the last $1,550 produces any tax savings). Thus, Lisa’s final taxable income is $38,765 – $9,400 – $4,050 = $25,315, which produces a tax liability of $3,333.50.

Benefits: The bottom line for Lisa is the saving in taxes of $711 by simply allocating the deduction straight from the RMD instead of receiving the RMD herself.  Depending on your income, you may also avoid the Medicare high-income surcharge, which increases your Part B and Part D premiums based on your AGI.

Tips for QCDs: To make a QCD, we recommend contacting the charitable organizations first to obtain the correct address and mailing information to make your gift. You will then need to obtain an application from your financial planner or IRA Administrator to make an RMD distribution by checking the QCD box (with no taxes withheld) and provide the information for the charitable organization. The application should have your name and address on it so the charity knows who to send the acknowledgment letter to and state that no goods or services were received for the donation.  Any donations over $250 require a written receipt from the charity. Come tax time, provide the 1099-R along with the QCD information to your tax preparer.

If you have any questions about Qualified Charitable Distributions and other tax planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258. 

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

When Should I Update My Estate Planning Documents?

You may be part of the 42% of the population that has created an estate plan. However, did you know that it is recommended that estate plans be updated at least every 3-5 years? Since signing your documents, circumstances in your life could have changed, making parts of your plan outdated or obsolete. No, you did not waste your time creating your initial plan--you made your wishes known in legal documents that were ready if you needed them. It is important to remember though, that documents making up an estate plan are affected by changes in the law as well as personal events (i.e. marriage(s), birth, moving, divorce, and death). Significant events can change a person's priorities and relationships with others, leading many to adjust their estate plans as well as retirement and/or life-insurance plans over the course of their life.    

The good news is that once you get past the first step of initially creating your estate planning documents (i.e. Will, Trust, Powers of Attorney, Living Will), it is relatively easy to update your documents as changes occur. The following are the common estate planning documents and a recommendation as to when you should update them:

Basic Will
·  Purpose: Directs the distribution of your assets and appoints a guardian for any minor children after your death.
·  When to update: After a change in your family status such as marriage, births, divorce, and death. As you have more children or your children get older, the guardians that you chose initially may no longer be the right options for your family. After a divorce or remarriage, your Will should be rewritten to remove or correct your spouse's information. If you previously had set up equal inheritances for a group of people (i.e. your children), you may now have reasons to leave more or less to certain people, e.g. one person's lack of financial need for the inheritance. You may also want to consider making changes if you are planning to provide for grandchildren or someone with a disability, if your assets substantially increase or decrease, or if you are no longer in possession of items or funds that you previously designated to be left to specific people.
·  How: Smaller changes can be made to a Will through the use of a Codicil or the entire Will can be rewritten with the necessary changes included. An important note—a Will and Codicils are filed at the time of your death, so any changes made to your will by the use of a Codicil will be visible to the public.

Declaration of Trust
·  Purpose:  Functions similar to a Will with some added benefits such as avoiding the court’s oversight of your estate (probate). A Trust is not made public like a Will is after your death, and assets can be distributed to your beneficiaries over time rather than all at once.
·  When to update: Similar to a Will but also update a Trust if you wish to change your Trustee or add a special needs provision.
·  How: Smaller changes can be made by amending your Trust or the entire document can be updated through a restatement of the Trust.

Powers of Attorney
·  Purpose: Names an agent to manage your financial affairs (Power of Attorney for Property) and an agent to make medical decisions for you (and your minor children) if you are unable to (Power of Attorney for Healthcare).
·  When to update: These documents should be updated every 3-5 years due to changes in personal information (addresses and phone numbers are listed in the documents), your wishes, and relationships with your agents. Additionally, the forms themselves and laws regarding the documents change from time to time. Institutions that require these documents such as banks and hospitals prefer to see more recent documents as they are considered to more accurately reflect the person’s current wishes.
·  How: These documents would be rewritten using updated formatting and information. 

Living Will
·  Purpose: Specifically directs your end-of-life instructions.
·  When to update: Generally not updated unless your wishes change or changes in the law.
·  How: The document would be rewritten with your updated wishes.

There are many factors to consider when creating your estate plan. As you age, people and possessions come into and out of your life and your personal values and preferences may change as well. It is important to remember to update your estate planning documents accordingly. If you would like to have one of our attorneys review your current estate plan or if you have any questions, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Your Pet and Estate Planning

You may be one of the millions of people who considers their pet to be a part of the family. It is this way of thinking that leads pet owners to spend a combined $60 billion annually on their pets in the United States. There should be no surprise then that people often wish to make arrangements for their pets in estate planning documents so that their pets continue to be cared for even after the death of their human. While most of us cannot leave our pets a fortune (or a mansion as the case may be) we can make sure that they are provided for to the best of our abilities. 

It is important to remember however, in the eye of the law, pets are considered property of an individual like a piece of furniture. Unfortunately, this means that if people pass away without proper estate planning, pets may be left without a home and end up in shelters. Luckily, in Illinois, and most other states, you can make arrangements for your pets in your estate plan to ensure that they are taken care of for the rest of their lives.

There are a few different options when making arrangements for your pet.

·     Will: Allows you to name a caretaker for your pets after you have passed away. You can also bequest a one-time payment of funds to the individual for the pet’s care. This is a common planning technique as it is done in the same document and with similar considerations to naming a guardian for a child.

·      Pet Trust: Recognized by Illinois law, a Pet Trust allows you to name an individual to care for your pet in the event that you become incapacitated or pass away. You will choose a trustee who will oversee the assets to be distributed for the pet’s care. This document allows you provide funds over the life of your pet and plan for your pet’s final arrangements. This may be a good option for pets that come with special considerations such as long life-span, breeds that are prone to health issues, or those that need extra care (i.e. horses). Once the pet named in the trust is no longer living, the trust will terminate and any remaining funds will be distributed as you state in the trust.

If you have any questions about preparing a pet-friendly estate plan, please feel free to contact Glick and Trostin, LLC at 312-346-8258. To read more about essential estate planning documents, please click here.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice.  Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein.  No one should rely upon the information contained herein as constituting legal advice.  The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

Do I Owe Taxes on an Inheritance or Gift?

People receive assets from their loved ones all the time in the form of an outright gift or an inheritance under a will. Many individuals question whether there is a tax on the gift or inheritance, and the simple answer is no (unless you live in Maryland or New Jersey). 

But what happens when the asset you received is sold by you? It is important to understand your cost basis in the transferred asset. How the asset is passed to you determines the cost basis you will take in the asset for tax purposes.

Cost basis is the value that is assigned to the asset when it changes hands. Knowing the cost basis is important for the purposes of calculating your gain or loss when you eventually decide to sell the asset. The gain or loss resulting from the sale of the asset has to be reported on your income tax return. The gain or loss is equal to the difference between the cost basis and selling price of the asset.

When an individual gifts an asset to you during their lifetime, it is an outright gift, and your cost basis in the asset is equal to the giver’s (the individual giving the gift) cost basis. In other words, your cost basis is the amount the giver paid for the asset* when the giver bought it or acquired it. If the asset has appreciated in value before it was gifted to you, there is no recognition of any gain when the asset changes hand. Gain will be recognized and taxable upon the sale or other disposition of the appreciated asset.

For example, if A has stock that he bought for $100 in 2010 and gives it to his daughter B in 2017 when it is worth $200, B’s cost basis in the stock for tax purposes is $100. Since she received this as a gift she takes her father’s basis in the stock. She is not taxed on the appreciation in value when the stock changes hands. Years later when she sells it and the fair market value of the stock is $250, her capital gain will be $250 - $100 = $150. B will be taxed on capital gain of $150 when she sells the stock.

Alternatively, if you receive the asset as an inheritance, you receive a cost basis in the asset equal to the fair market value of the asset on the date of the person’s death. Thus, you will receive what is called a stepped-up basis or increased cost basis in the asset.

For example, C has stock that he bought for $100 in 2010 and leaves it to his daughter D in his will. C dies in 2017 when the stock is worth $200 and D inherits the stock. D’s cost basis in the stock for tax purposes is $200, the fair market value at the date of death. This is what we call a stepped-up basis because the cost basis increased from $100 to $200. Again D is not taxed on the appreciation in value when the stock changes hands. Years later when D sells it and the fair market value of the stock is $250, her capital gain will be $250 - $200 = $50. D will only be taxed on capital gain of $50 when she sells the stock.

In sum, in the case of inheritances you need to know the value at the date-of-death and in the case of gifts you need to know the giver’s cost or what the giver paid for the asset. Thus, although you may not be taxed on the receipt of an inheritance or gift, it is important to learn about the cost-basis in the asset so that when you eventually sell it, you will know how to properly report the sale for tax purposes and pay the appropriate tax. If you have any questions about tax and estate planning, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

*The giver may also have acquired the asset by gift or inheritance which would establish the basis. Cost basis may also be adjusted by other factors, such as depreciation, improvement, etc.

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.

New Parent Series Part V - Creating an Estate Plan

As a new parent, I imagine all of the things that my son will see and do as he grows up. Rarely do I think that I may not be around during all the wonderful milestones in life. For most people, planning for the time when you are not able to care for yourself or your family is something that you would rather not think about. Perhaps this is part of the reason why only 36% of parents with children under the age of 18 have a will according to Caring.com. Making your wishes known often provides people with peace of mind and will help your family know how to proceed. 

Creating an estate plan allows you to convey your wishes through the use of legal documents. These documents will speak for you regarding medical care for you and your children if you are unable to due to disability, what will be done with your finances, and how your estate should be distributed once you pass away. Additionally and perhaps most importantly for new parents, these documents allow you to name a guardian for your children. You are able to make amendments to your estate plan when needed as your family's needs generally change over time. The following are basic documents that should be included in a (new) parent's estate plan. 

• A Basic Will. A Will makes sure that your assets are passed on according to your wishes and allows an individual with children to name Guardians. If an individual does not have a Will, the laws of the state will control the distribution of the estate and the courts will decide who will raise the children. To help avoid court proceedings known as probate, you may also consider a Declaration of Trust which is a private document that functions similarly to a will but does not need to be filed with the Court.

• A Power of Attorney (POA) for Property. This document names a person as "agent" to act on your behalf in case of disability. The document covers financial matters (e.g., banking, bill paying, etc.) and can be broadly drafted or be quite limited.

• A Health Care Power of Attorney. The health care POA designates an individual to make important health care decisions on your behalf, when you are unable, due to a temporary or permanent disability. This document can also be used to name someone to make health care decisions for your children in the event that you are unable to do so. Individuals may also consider creating a Living Will which specifically directs end-of-life instructions.

• Beneficiary Designations. You should make sure appropriate beneficiaries are listed for all of your retirement accounts such as IRAs, 401(k) and life insurance policies. These assets go directly to named beneficiaries. If you do not have named beneficiaries, the assets will generally be distributed through your estate. Be sure to check older plans that may still name parents or ex-spouses that you may wish to update. (NOTE: When naming a minor, a guardianship proceeding may be required if the minor inherits, unless there is a trust.)

It is important to discuss these matters with your loved ones. An attorney can help answer questions that you may have, advise you on the best plan for your situation, and ensure that the documents are executed (signed) correctly. Creating your first estate plan can be an emotional process, yet the peace of mind in knowing that you have a plan in place can be reassuring. If you have any questions about preparing an estate planning or would like to begin the process, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

To read the other posts in the New Parent Series, simply follow these links:

New Parent Series Part I - Dependent Issues and Tax Filing Status For You to Consider
New Parent Series Part II - Healthcare FSA's and HSA's
New Parent Series Part III - Child and Care Tax Credits
New Parent Series Part IV - Adoption Tax Credit and Benefits

Disclaimer: The materials on this website are provided for informational purposes only and do not constitute legal advice. Transmission of the information is not intended to create, and receipt does not constitute, an attorney-client relationship between any attorney and any other person, group or entity. No representations or warranties whatsoever, express or implied are given as to the accuracy or applicability of the information contained herein. No one should rely upon the information contained herein as constituting legal advice. The information may be modified or rendered incorrect by future legislative or judicial developments and may not be applicable to any individual reader's facts and circumstances.