It's that time of the year again! With the tax filing deadline around the corner, and though filing your taxes is not exactly thrilling, it needs to be done. It can be a bit overwhelming to have to dig through your files and gather all your paperwork to file taxes. But after taking this first step, the rest of the process should be easier and less stressful.
Here’s a checklist of what you will need to gather before your tax appointment:
1) Your Social Security number, your spouse’s and/or dependents’ Social Security numbers
2) Last year’s tax return
3) All W-2 and/or 1099-MISC forms including any contractor’s income
4) Self-employed bookkeeping records
5) Schedule K-1s
6) Bank saving interest and dividend statement from credit unions, stockbrokers, etc.
7) Unemployment compensation report
8) Social Security benefits report
9) Gambling winning or lottery winning statement
10) State Income tax refund from last year
11) Withdrawal statement of your 401K, IRA, Pension and Annuity, etc.
12) IRA contribution for last year
13) Education expenses for your children and yourself and student loan interest
14) Health and dental insurance / Obama Care premium payment and associated expenses
15) House mortgage interest records
16) House property tax records
17) Auto registration fees
18) Childcare expenses, care provider's name, SSN or Tax ID-FEIN, and address
19) Business expenses, business travel, rental property, stock, bond, real estate, job related moving expenses, etc.
20) Charitable donations made throughout the year
21) 1099-C forms, if you canceled any debt during the year
22) Record of alimony received
23) Energy-efficient home improvement records and receipts
Many people have asked me what the difference is between a WILL and a LIVING TRUST, and if they really need both or just one or the other. Or they state that their estate is fairly simple – just a house that I want to leave to my kids equally – and they think that a simple will is sufficient.
However, both a living trust and a will serve different purposes and will have difference outcomes, but both can also work together for a complete estate plan.
Both a will and a revocable living trust allow you to name beneficiaries and allow you to state how you want your assets distributed. But there are many differences between the two estate planning devices.
Listed below are some of the important differences between a Will and a Living Trust.
#1: A Will goes into effect only after you pass away. A Living Trust takes effect as soon as you create it and is especially important if you become incapacitated.
#2: A Will directs who will receive your property at your death. A Trust can be used to begin distributing property before death, at death or afterwards.
#3: Most importantly, with a Will, any assets you own, will go through PROBATE (provided that it is worth $150,000) and the proceedings and documents are public record. The court will oversee the administration of the Will and ensure that it is valid and the property gets distributed the way the decedent wanted. A Trust passes outside of probate, which is private, saves time and money.
#4: A Will allows you to name a guardian for your children and specify funeral arrangements, while a Trust does not.
#5: A Trust can be used to plan for disability or to provide savings on taxes.
#6: With a Will, any assets in your name will be distributed. With a Trust, only assets that have been transferred to the Trust will be distributed.
Your trusted estate planning attorney can tell you how best to use a Will and Trust in your estate plan.
An all too common scenario may look something like this:
A woman at the end stage of cancer suffered a stroke. Her brother, the only surviving relative, is overseas and can’t be reached. She did not have any health care directives to describe her healthcare wishes and designate someone who can make decisions for her. Important and difficult decisions regarding her care, such as life-sustaining treatment, were left to the doctors and nurses who don’t know her or even met her before.
In these difficult moments, a proper health care directive would have helped the doctors and any loved ones in making the medical decisions necessary to care for her.
An advanced health care directive is a document that explains the healthcare you desire in case of a serious injury or illness or incapacity. It can clarify such issues as whether you want to be resuscitated if you become terminally ill or permanently unconscious or whether you want home hospice care instead of care at the hospital. It’s not only for the end-of-life care, but the document may be most helpful if you were temporarily incapacitated and there’s a chance for recovery.
At a minimum, you can name an agent (usually your spouse is the initial agent) who will speak and provide consent for medical decisions, and/or releases with hospitals and doctors on your behalf.
Once you determine who your trusted agent is, talk to him or her about how you want your care to go. That way, it’s clear and your loved ones aren’t left arguing with one another about your care. It may be hard to get the conversation going, but once you get them started, it can be a relief and empowering.
About the Author
Christine Chung, Esq.