Bright Start: A Primer on a 529 College Savings Plan

As children begin to return to school for the 2021-2022 academic school year, parents with children of all ages should know that it is never too early to begin saving for their children’s college fund. The Illinois Bright Start College Savings Plan is an excellent vehicle that offers tax breaks to encourage savings for college tuition.

The Bright Start College Savings Plan allows Illinois taxpayers to claim state tax deductions on contributions up to $10,000 for individual taxpayers and $20,000 for married couples filing their taxes jointly. An account owner can contribute $15,000 each year, provided that no other gifts are made to the same beneficiary that year.  It also allows tax-free withdrawals for higher education expenses at the federal and state level. This includes, among other things, withdrawals for tuition, fees, books, supplies and equipment, room and board, etc. There are narrow exceptions to this rule, however.

A contributing taxpayer does not have to be the parent of a beneficiary to open a 529 College Savings Plan. The program has no limitations with respect to who can open accounts. Therefore, if you are a grandparent, relative, or even a friend to a potential beneficiary, you are able to open a 529 College Savings Investment Account for that individual. There are also no income limitations to individuals opening these accounts, so you can open an account no matter what your income level may be for tax purposes.

If you have contributed to the 529 Savings Plan and your beneficiary decides not to enroll in higher education, you do have options. For one, you could change the beneficiary to an individual who intends to enroll in higher education or you can withdraw the funds from the account. Keep in mind that if you were to withdraw these funds, the amount would be subject to federal and state income taxes, plus a 10% penalty.

The Bright Start contribution is simple and easy to use. You can contribute via an automatic investing plan which allows you to have a fixed amount automatically debited from your account on a periodic basis. You can also choose to make a lump sum one time deposit of up to $75,000[1], or have a payroll deduction taken straight from your paycheck each pay period. Additionally, if you are new to Illinois but have a 529 College Savings Plan already established in a different state, Bright Start allows you to roll over the funds from the out of state program to the Bright Start 529 account and keep all of the funds, while potentially earning an Illinois state Income tax deduction by rolling over.

For more information and to open your 529 College Savings Investment account, you can visit www.brightstart.com.  They have a number of different portfolios that you can choose to enroll in. It is recommended that you complete the Risk Tolerance Questionnaire on the website prior to enrolling. This questionnaire will help determine how you would like to allocate your money and develop an investment plan going forward.

If you have any questions about the Bright Start College Savings Plan, 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.

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[1] Gift tax return (Form 709) reporting may be required.

Cook County Property Tax Bills Are Out. Check To Make Sure You Are Getting Your Exemptions

If you are a homeowner in Cook County, you should be receiving the 2nd installment of your property tax bill this week.  Like many other residents, you would likely want to see the tax amount reduced if possible.  One simple way to get a reduction is to ensure you are receiving the exemptions you are entitled to.  

The Homeowner's exemption (also known as Homestead Exemption) if you own your residence is given to property owners on their property tax bill.  Taxpayers whose single-family home, townhouse, condominium, co-op, or apartment building (up to six units) is their primary residence can save $250 to $2,000 per year, depending on local tax rates and assessment increases.

If you are over 65 years of age, you may also be entitled to the Senior Exemption or a Senior Freeze on your property taxes if your income is under the 

First, check to see if you have a homeowner's exemption by searching your property by PIN or address on the Cook County Treasurer's website.

You can also review the most recent 2nd installment of your property tax bill, it will list the exemptions at the lower portion of the bill and whether you received any exemptions for that tax period. 

Next, if you believe you are entitled to an exemption, you can obtain the exemption forms on the Cook County Assessor's website.  If you have lived in the property for a number of years and have not claimed the exemption, you can file Certificate of Error forms to request a refund for the Homeowners and/or Senior Exemptions for the years that you qualify.

Finally, if you are a new homeowner, you may not qualify for this year's homeowner exemption but put a reminder to file for the exemption next year.  This is also important for anyone soon to obtain the age of 65 so that they file to obtain the Senior Exemption.  

This exemption is not limited to Cook County or the State of Illinois.  Contact your local Property Tax Assessor or Treasurer to confirm that you are receiving all credits for being a homeowner in your state.

If you have any questions about tax and estate 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.

Find Money That You May Not Have Realized You Were Missing

Finding money in a coat pocket is always a nice surprise, but what if you found that you could search the internet to locate lost assets?  Most states have an unclaimed property website that allows you to search your name to determine whether you may have property that the state is holding for you. Illinois is currently holding $3.5 billion in abandoned assets that are unclaimed by its residents. 

It is a good practice to check every year or two with your state to see if you may have unclaimed property in the state where you currently or previously lived.  Many times when you move, checks are sent to your old address.  If the payor is not aware that you moved, the funds are eventually deposited with the state as unclaimed property.  

You may also find assets that may have been held by loved ones who have passed away. This is one of the most common reasons for unclaimed property to go to the state when someone dies and accounts are abandoned.  As estate planning attorneys, we do a search frequently for estates that we have handled to make sure we did not miss anything when administering an estate.

What is unclaimed property?

Common types of unclaimed property include: checking and savings accounts, uncashed wage and payroll checks, uncashed stock dividends, and stock certificates, insurance payments, utility deposits, customer deposits, accounts payable, credit balances, refund checks, money orders, traveler’s checks, mineral proceeds, court deposits, uncashed death benefit checks, and life insurance proceeds.

In most states, you can file a claim form to reclaim your property.  The claim form will tell you which documents you will need to provide to make a claim.  

The following are a few websites for unclaimed property if you live or have lived in these states. 

Illinois

Wisconsin

Minnesota

Iowa

Indiana

If you have any questions about tax and estate 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.

Understanding the Advance Child Tax Credit

As we pass the halfway point of 2021, the Biden Administration has begun implementing policies that intend to offset the economic consequences resulting from the COVID-19 pandemic.

Pursuant to this effort, the Biden administration unveiled The American Rescue Plan on March 11, 2021. One of the primary components of the American Rescue Plan is an increased and advanced payment of the Child Care Tax Credit (“CTC”). In recent years, a qualifying family was entitled to receive a $2,000 credit per child; and prior to 2017, qualifying families were only eligible for a $1,000 credit per child. However, under the newly ordered CTC, every qualifying family will receive a $3,000 credit for each child between the ages of 6 and 17 and a $3,600 credit for each child under the age of 6 years old. Families with combined adjusted gross incomes over $150,000 for married filers, over $112,500 for heads of household, and over $75,000 for all other taxpayers will not be qualified for the entire amount of the tax credit, but remain eligible for a reduced rate. The credit phases out completely at $440,000 for married filing joint returns, and at $240,000 for all others.

A big advantage to the newly ordered CTC is that half of the credit can be paid to qualifying parents in advance. In a typical year, qualifying families would not receive this credit until they file their taxes the following year. Conversely, in an effort to expedite the economic recovery process, qualifying families will now receive half of the tax credit in monthly installments beginning in July of 2021. These monthly installments will be paid in the amount of $250 for each child between the ages of 6 and 17 and $300 for each child under the age of 6. Qualifying families can expect a total of six payments to be made once a month from July to December of 2021.  In addition, CTC allows the parent of a child who is turning 17 during the 2021 calendar year to receive the benefit, which was not the case in previous years.

It is important to note that these payments are an ADVANCE of the credit so keep in mind that your available CTC remaining when you file your return will be less.

Each qualifying family is automatically enrolled in the plan, so there is no additional action required to receive these benefits. However, if you do not wish to enroll in this program and elect instead to receive your full tax credit when you file your return, you can do so on the IRS website under the manage payments tab. A link to this page can be found below:

https://www.irs.gov/credits-deductions/advance-child-tax-credit-payments-in-2021

If you have any questions about the newly implemented CTC or any other tax policies that may arise during this recovery period, please feel free to contact Glick and Trostin, LLC at 312-346-8258.

Tax Effects of Buying and Selling Real Estate

Our clients often consult us to determine the tax effects of their pending real estate transactions. This article is intended to discuss some of the tax issues that may arise from a real estate sale.

Many of our clients are surprised to find that the State of Illinois, the county, and the municipality in which the property is located may levy a transaction tax on the sale of real estate. Some municipalities assess this tax on the purchaser in order to allow residence in their locale; some tax the seller; and some, such as the City of Chicago, tax both the seller and purchaser.

At the federal level, the government includes the profits on the sale of your personal residence as income to be declared on your personal income tax return. However, the IRS allows the first $250,000.00 in profit to be exempt from capital gains tax for a single person and $500,000.00 as being exempt for a married couple.  These exemptions result in most residential sales being a tax-free transaction for the seller.

Profits on the sale of commercial real estate are taxed in various ways depending on how long the real estate was owned prior to the sale, whether you are deemed to be in the business of selling real estate, the amount of depreciation you took during the ownership of the asset, and whether you will be deferring any of the gain pursuant to a 1031 exchange transaction.

You should always consult your tax advisor when you are considering a real estate sale so that the transaction may be structured in the most tax-efficient manner for you. Our attorneys are experienced in advising our clients in the sale and purchase in the sale of real estate, whether it is your personal home, investment property, or if you are in the business of buying and selling real estate. 

If you are in the process of buying or selling real estate and have questions regarding the tax impact, feel free to contact Glick and Trostin, LLC at 312-346-8258 for a complimentary consultation

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.

Estate Planning for Unmarried Couples

In today’s society, marriage is not viewed as a necessity to starting a life together. Many couples opt to cohabitate and share their lives with their partners without “involving the government”. While there are pros to not getting married, like avoiding costly and messy divorces; there are also cons. Many protections offered to married couples under the law are simply not extended to cohabitating couples. This includes the right to make health care and financial decisions on behalf of your partner, certain tax breaks, and rights to inheritance.

Under the Illinois Probate Act, even if a deceased spouse leaves no Will, the surviving spouse is eligible to inherit ½ of the deceased spouse’s estate. Additionally, if the deceased spouse does leave a Will and omits their spouse, the surviving spouse still has options to inherit under the law. The Illinois Probate Act has no such protections for unmarried couples. If either partner dies or becomes incapacitated, the surviving, or non-disabled, partner has no right to make decisions on behalf of his/her partner. Decisions about your home and other assets, your medical decisions, and even your life itself, would instead default to your next of kin. This could result in your final wishes not being met and may cause tension between your partner and family members. The best way to protect your partner and ensure your final wishes are met is to have an appropriate estate plan.

The estate plan can be as simple as drafting Power of Attorney forms designating one another to make financial and health care decisions should you become incapacitated.  To protect your partner in the event of your passing, having an estate plan that includes a Will and a Trust will ensure your remains and assets are handled in the way you desire, and your assets are distributed according to your directions. Please note, any Will can be challenged or contested by your heirs-at-law. This is why you may choose to have a Trust in order to keep your matters private, and include no-contest clauses for added protection for your partner. A carefully executed estate plan could offer you and your partner as much legal security as a married couple.

*The word “partner” as used in this article does not mean a person who has a formalized a marriage or civil union under the laws of the State of Illinois, or any other state or country, with another person.

If you have any questions about preparing an estate plan, 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.

Is Having a Will, Enough of an Estate Plan?

Many people assume that having a will is the simplest and most cost-effective estate plan document to transfer an inheritance to their heirs.  In reality, this is usually not true and many times can be the longer and the more costly of the estate planning options. 

In a will, you name an executor to administer your estate after you die.  In most cases, this person is not able to act until the will is admitted to probate (formal court proceeding) and the court issues Letters of Office for the executor to act on behalf of the estate.

The following are four facts that you should be aware of before relying solely on a will for your estate plan.

1. Probate takes time.  If Illinois estates have no real estate and the assets are under $100,000, an executor can usually avoid probate with a small estate affidavit.  If there is real property or assets exceeding $100,000, the estate will be required to go through probate.  

As with most legal proceedings, the ability to obtain a court date and then have follow-ups with the judge can take time.  An estate must be open for at least six (6) months to allow creditors to make any claims against the estate.  Once everything is finalized, you may close the estate and distribute the assets to heirs.  This typically takes at least 9 months depending on the complexity of the estate.

2. Costs of Probate.  Probate is not a matter to be done on your own ("pro se").  The courts have specific procedures, filing fees to be paid, and forms that must be properly drafted to open and administer an estate. The executor will likely want to engage the services of an attorney and an accountant to assist with administering the estate efficiently.  

3. Probate Documents are Public. Once an individual dies, their will is required, by law, to be filed with the clerk of court.  At that point, the will becomes a public document along with any probate filings.  Many families do not care to have their personal wishes and assets be open for public inspection.

4. Probate Can be Avoided.  While a will is an important piece of an estate plan, there are ways to avoid the probate process altogether by utilizing revocable trusts or by designating beneficiaries directly by transfer on death designations, on certain accounts such as life insurance policies, and on retirement plans.  As you review your estate plan, keep in mind that a will maybe just the first step toward achieving the estate planning goals that you desire. 

If you have any questions about preparing an estate plan, 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.