Will Planning

Estate Planning and Tax Deduction, How are they connected?

Posted on

Preparing for your death is not an easy thing. However, every responsible person must plans how their estate and property will split and get distributed amongst the surviving family members. From planning for the funeral to set up last will and testimony, there are a lot of things one has to do. While the cost of writing a basic will is low, more detailed and complicated wills may cost up to $1,000 or more. People who hire estate attorney Virginia for will and estate planning often ask if the estate planning fees are tax-deductible or not. In this blog, we have answered some of the questions related to estate planning and tax.

Earlier, estate planning fees were exempt from taxes. But before delving deeper into estate planning cost and taxes, it’s essential to understand what estate is planning in general and why it is crucial that people draft their estate and will.

In simple terms, estate planning means arranging one’s assets and estate to be distributed to the beneficiaries designated by them. The process entails creating legal documents and directives, calculating the assets and estate, deciding the beneficiaries and property sharing percentage, and much more. One of the biggest misconceptions revolving around estate planning is that it’s only for people with high net worth. However, everyone should consider estate planning as it helps one to settle financial affairs even after passing away. Without properly created estate planning, your family may experience issues in handling the creditors and estate taxes. Moreover, new tax laws have made it difficult for people to receive a tax break on estate planning fees.

 There are various facets to creating an enforceable estate will. However, the cost is one of the most crucial elements of any estate planning. One should keep in mind the cost of an estate litigation lawyer, tax accountants, and advisors, to name a few.

Previously, the Internal Revenue Services considered some estate planning fees as an itemized deduction. Now, the changes in the tax laws and acts have changed the scenario.

IRS Rules Changed

 According to the miscellaneous deduction on Schedule A of the IRS code, specific fees and charges related to estate planning were qualified for an itemized deduction. Now, due to the change in the Tax Cuts and Jobs Act now, legal fees for estate planning are not eligible for a tax deduction. Until recently, IRS made estate tax planning fees deductible if a person incurred expenses to collect income, management, and maintenance of property producing income or tax planning.

While the Tax Cuts and Jobs Act will end by the year 2025, some estate planning tax deductions may revive before then.

If you had planned to deduct fees for tax advice, you would not be able to avail of the tax rebate. Tax deduction for pre-fee services for estate and tax preparation is not deductible anymore. Fees for services like the power of attorney, living will, or property transfer were not deductible even for the tax changes.…

LAW

What is a Chapter 7?

Posted on

Chapter 7 bankruptcy, also called liquidation, is the most common type of bankruptcy and completely eliminates your dischargeable debt forever. Individuals or businesses who are granted Chapter 7 bankruptcy discharge have proven to the Bankruptcy Court that they have no realistic way to repay their debt over the course of the next three to five years. 

 When Chapter 7 bankruptcy relief is awarded, the debtor is legally excused from having to repay any unsecured debts, and most debtors are able to keep all properties. Typically it takes about four months after the case is filed in the Bankruptcy y Court, for a Chapter 7 bankruptcy case to be discharged. Certain types of debts cannot be eliminated through Chapter 7 bankruptcy including student loans, child support, alimony, and most taxes.

 If you had a prior bankruptcy pending within the past year

The automatic stay is the provision of the bankruptcy code which stops or prevents creditor’s collection actions (including repossession, garnishment, foreclosure, etc.).  However, if you filed one previous case which was pending within the past year, the stay will end on the 30th day after the filing of the present case. 

The stay will not go into effect at all if you filed two or more previous bankruptcy cases which were pending within the past year. For the automatic stay to take effect longer where there was a single previous case, or at all where there was more than one previous case, you must file a motion with the court and demonstrate “that the filing of the latter case is in good faith as to the creditors to stay.” Within six months prior to filing a bankruptcy individual must complete and obtain a certificate of credit counselling.