Tips, Tricks and Essentials of Estate Planning (PART 2)

Cathy R. Robinson, CPA
Senior Manager
robinson@hwco.com
 

In Part 1 of Tips, Tricks and Essentials of Estate Planning the four essential documents the CPAs and advisors at HW&Co. most recommend were covered. To recap the list, the essentials were having a will, having durable power of attorney, medical power of attorney, and finally, a directive to physicians or a living will.

So what else can you do to better prepare yourself for planning your estate?  There are additional highly recommended items you should look into. They are: 

A  Trust

You should create a trust while you are alive. Finding a reliable, trustworthy trustee is the second step. This person will manage the property according to legal duties and your instructions. They distribute the assets to the beneficiaries according to your instructions.  So why invest in a trust? The first reason is so that it can help you to provide for and protect a beneficiary. Secondly, the flexibility of asset distribution can help to spread benefits over time. Your instructions will govern who receives the assets of the trust and the amount they receive, while also setting standards and conditions. Finally, a trust can help to protect against your own incompetence. Should something happen with your mental state the trust will already be in place with clear concise orders to help take care of your loved ones.  

It’s important to also be aware that while trusts can be very helpful, they are not always worth the cost, expense and hassle that come with them. You should also look out for the trust “seminars” sponsored by companies claiming to prepare trusts. These people are often not licensed attorneys. Avoid the scam and seek out a professional.  

Self-Designation of Guardian

With this document, you can name the person whom you would want appointed to be in charge of your minor child(ren.) A guardian is the person who will be legally responsible for the personal affairs, health, and well-being of a minor. In some states, you can also disqualify people you do not want appointed.  

Organ Donation

If you are someone who would like to donate your organs, you should have clear documentation and instructions. This can be as easy as going to the DMV to have it placed on your driver’s license. If you do not make this decision for yourself, your family will reserve the right to make the decision for you.  

There never seems to be an ideal time to plan your estate, but it is important to have a plan. These useful documents can help to make things easier on your loved ones, while ensuring your wishes are being carried out accordingly. It is also recommended to seek professional advice as to meet your goals.    

September Intern Recruiting...Coming to a School Near You!

Kirsten Thompson, CPA
Director of HR

Katie Primeau
HR Assistant

 

HW&Co. | CPAs & Advisors will be meeting with students and recent grads from Ohio colleges during the month of September at Accounting Career Fairs!  Check the career services calendar at your university and stop by the HW&Co. booth to introduce yourself.

 

HW&Co. already looking for Accounting Interns to work through busy season January through April 15, 2016. 

September Recruiting at Ohio Colleges for Interns:

College	Date
The Ohio State University	9/08/15
Bowling Green State University	9/09/15
Ashland University	9/10/15
Case Western Reserve University	9/10/15
University of Akron	9/15/15
Cleveland State University	9/16/15
Baldwin Wallace University	9/17/15
University of Dayton	9/17/15
Kent State University	9/17/15
John Carroll University	9/21/15

Tips, Tricks and Essentials for Estate Planning (PART 1)

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

In this two part series, we have compiled a list of essential documents, as well as the highly recommended documents, for Estate Planning.  Though you may think you can wait to plan, our advisors recommend starting sooner rather than later.   

Estate planning can be complicated.  It is important you know all the essential tips, tricks, and documents to can help make planning easier on you and your relatives. What are the essential documents that you will need for planning your estate?  

1.)    A Will

Having a will is the first and most important step.  In your will you must clearly and carefully describe the beneficiaries and the property and or assets they will receive. This means identifying their exact name and relationship to you, as well as the property and or asset. Keep in mind a stranger should be able to go into your home and find the item based upon the provided description.

 

This is especially true for heirlooms. They should be specifically left in the will and described carefully. Relying on markings, an informal list, or the idea your children know what you want is a bad rule of practice. Most disputes which occur between family members are over heirlooms. Another good idea is to give the item to the person while you are still alive.

DO NOT give reasons for your actions in your will. Reasons can be used to show a lack of capacity and have the potential for testamentary libel.

The most important part of creating a will is naming a trustworthy executor. This person will carry out your will when you die, pay your debts and distribute property to your beneficiaries. They should also be appointed by a court first. The executor should be honest, have sound judgment, be financially responsible, and be close in proximity. 

2.)    Durable Power of Attorney

You must name a power of attorney to manage your property in the event you are unable to do so yourself. This means this person will have the responsibility of doing things such as paying your bills, maintaining your house, managing your investments, etc.  When selecting this person, they should have experience and skill, good trustworthy character, and are close by.

3.)    Medical Power of Attorney

This person will be the one is responsible for making all of the medical decisions for you in the event you are unable to do so yourself.  It is important to explain in this document the types of decisions they will face such as: “pulling the plug,” what treatments you do and do not desire, forced food and water administration.  When selecting this person, remember they may be making life and death decisions, so you will want to choose wisely. Spend time with this person going over your wishes and consider naming alternates.

4.)    Directive to Physicians (“Living Will”)

This statement will alert the doctor as to whether or not you desire to be kept alive artificially when you are in an irreversible or terminal condition and cannot express your own desires.  This statement differs from the medical power of attorney because it directly expresses your wishes. In your document, include your detail desires for things like artificial nutrition and hydration, as well as antibiotics.

 

 

Student Loan Forgiveness...Do You Know The Dangers?

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com

What many people ask themselves, especially millennial’s, is how they can take advantage of student loan forgiveness. Here’s what you need to know:  

Public Service Loan Forgiveness

 This program was created in 2007 and was intended to help to remove the student loan debt from those low-salaried employees of the public service industry. There are also some for profit employers who qualify your employment as a public service.  This list includes:  police officers, teachers, public defenders, and those in the public health sector.  Borrowers of federal loans may qualify for forgiveness on the remaining balance of their student loans if they have made 120 payments on their loans while working in the aforementioned list.

Income-Based Repayment

More people qualify for this type of plan. This plan allows borrowers to pay ten percent to twenty percent of their income towards their loans. These loans will then be forgiven in 20 to 25 years. But a word of caution, with this plan, you will pay more in interest over the life of the loan. 

Pay as you Earn

This plan caps out your payments to being ten percent of your income. Like the Income-Based Repayment plan, it lasts for 20 years, and any balance remaining after this time period will be forgiven. In order to qualify for this program, you need to have taken a loan after October 2007 and have borrowed a Direct Loan or a Direct Consolidated Loan.

In all three of these plans, your payment amount will never exceed the amount you would have to pay under the standard ten-year payment schedule. Unfortunately, like private loans, there are some dangers associated with these repayment plans.

• For income-based repayment plan, the amount of debt forgiven at the end of the plan becomes taxable income for the borrower. The borrower who received student loan forgiveness then faces large tax bills they typically cannot afford.

• You MUST remember to continue to qualify each year, meaning you must remember to send in the application and updated paperwork each year. Failing to do this will get you removed from the program.  

• For participating in Public Service Loan Forgiveness, you must be working full-time at a qualifying public service organization at the time you enter the program as well as at the time the remaining balance is forgiven.

This update is published periodically by HW&Co. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

The 4 Things you NEED to Know Before Taking Student Loans

Cathy A. Robinson, CPA
Senior Manager
robinson@hwco.com
 

 

There are two words that most people are familiar with: Student Loans. If you’re a parent of a child getting ready to go to college or you have a child that is already in college, sometimes student loans are simply unavoidable. Should this be the case, we have some must know tips for you!

 

1.       The first, and most important, point is this: complete the Free Application for Federal Student Aid (FAFSA). By taking advantage of federal student loans now you stand to reap some of the advantages later. These advantages could include:

·         A generally fixed interest rate.

·         You can limit the amount you repay each month later based on your income.

·         Loan forgiveness may be available for those pursuing a career in the public service industry after 10 years.

·         In some cases the federal government may also subsidize the loan –pay interest on- while the student is still attending school

 

2.       Be cautious of private student loans.

·         An advantage of borrowing a private loan is that you’re able to borrow at a higher limit.

·         The problem with borrowing private student loans, however, is that these loans generally come with a higher interest rate.

·         These loans also do not generally offer any kind of subsidies, loan cancellation or forgiveness programs.

·         Co-signers are also sometimes required if the student is applying for the loan and doesn’t have credit history. Should your child be unable to pay the loan on time or make the minimum monthly payment they would eventually look to you to take over the payments.

 

3.       Do your best to plan ahead.  What are the total projected expenses for the year?  Doing this can help you to figure out just how much to borrow or accept when it comes to student loans. If you’re awarded more than what you need, only utilize the amount that you need.  Remember, you have to pay it back in the end. By borrowing too much money now you may struggle to pay it all back later.  The debt must be paid back. This includes garnishing up to 15 percent of your wages and even garnishing Social Security benefits.

 

4.       Finally, some parents may qualify for a student loan interest deduction.  Generally, the amount you may qualify to deduct is less than $2,500 or the amount of interest you may have actually paid on the loan. This deduction is subject to decrease or phase out completely if and or when your modified adjusted gross income (MAGI) amount reaches the annual limit.  Ask your accountant if you qualify for this deduction. 

 

This update is published periodically by HW&Co;. as an information service to our clients, business associates and friends. It is general information and professional advice should be obtained before acting on any comments contained in this document.

 

FASB Provides Guidance for Employee Benefit Plans

 

Tony S. LaNasa, CPA, CFE
Managing Partner-Columbus Office
lanasa@hwco.com
 

On Friday, July 31^st, the Financial Accounting Standards Board (FASB) provided guidance designed to help in simplifying the accounting of employee benefit plans in a three-part document included in  Accounting Standard Update (ASU) No. 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plan (Topic 962, Health and Welfare Benefit Plans (Topic 965).

Part I of the update assigns contract value as the only required measure for fully benefit-responsive investment contracts.  This part will reduce the complexity of reporting for fully benefit-responsive investment contracts while still requiring disclosures helping users understand these investment contract types.

 Part II, of the update eliminates requirements for participant-directed investments and nonparticipant-directed investments to disclose:

·         The net appreciation or depreciation for investments by general type.

·         Individual investments representing five percent or more of net assets available for benefits.

Stakeholders informed FASB that disclosing similar investment information in multiple ways is costly for preparers and makes the financial statements more difficult to use.  It is important to note that FASB will still require net appreciation or depreciation in investments to be presented in the aggregate, but it will no longer require amounts to be disaggregated and disclosed by general type.

 Finally, Part III relates to an area of several potential simplifications submitted by stakeholders. It provides a practical expedient allowing the employer to measure and define benefit plan assets on a month-end date nearest to the employer’s fiscal year-end, when the fiscal period does not coincide with a month-end.

 These amendments in each part of the ASU will be effective for fiscal years beginning after December 15, 2015. Earlier application is permitted, and the amendments in Parts I and II should be applied retrospectively for all financial statements presented.  Part III should be applied prospectively.