The new law keeps the seven income tax brackets but reduces rates:

According to Barron’s, taxpayers earning less than £25,000 will keep 0.4% or an extra £60 in their pockets for the 2018 year. Taxpayers earning between £49,000 and £86,000 will keep an extra 1.9% or £900. Taxpayers who earn £308,000 to £733,000 will keep an extra 4.1 % or £13,500. Those who earn over £500,000 will keep 3.4% extra or £51,000.

Many taxpayers who used to itemize their deductions will no longer be itemizers. The standard deduction has been doubled. You only itemize if your itemized deductions are greater than the standard deduction.

A single filer’s standard deduction increased from £6,350 to £12,000. The deduction for married joint filers increased from £12,700 to £24,000. You only itemize if itemized deductions exceed the standard deduction. The combination of the increased standard deduction and elimination or reduction of some itemized deduction means that about 94% of people will take the standard deduction.

The new law also eliminates personal exemptions, although it increases the Child Tax Credit from £1,000 to £2,000 per child and increases the qualifying income level from £110,000 to £400,000 for married taxpayers who file jointly.

The deduction for mortgage interest is limited to the interest on the first £750,000 on the loan. Interest on home equity lines of credit can no longer be deducted.

You can deduct only up to £10,000 in state and local taxes and must choose whether to deduct state income tax or state and local sales tax.

The medical expense deduction is expanded. All taxpayers can deduct medical expenses greater than 7.5% of adjusted gross income. The threshold used to be 10% for taxpayers born after 1952.

Moving expenses are no longer deductible except for the military. The law retains deductions for charitable contributions and student loan interest.

After January 1, 2019, alimony is no longer deductible by the payer spouse and will not be reported as income by the recipient spouse. Under the old law, alimony was deductible by the payer and included as income for the recipient spouse. The old-law treatment will continue for alimony payments made under pre-2019 divorce agreements unless it is modified after January 1, 2019 and the modification specifically states that the TCJA treatment now applies.

The Obamacare tax on those without health insurance (known as the individual mandate) is repealed.

The estate tax exemption is raised to £11.2 million

529 plans can now be used for tuition at private and religious K-12 schools and for expenses of home-schooled students.

Do you have questions about a specific matter? Contact us now.

The post How Does the New Tax Law Affect You? appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

In many families, there is an uncomfortable silence when the subjects of death and money come up. According to Eileen and Jon Gallo, authors of Silver Spoon Kids: How Successful Parents Raise Responsible Children (McGraw-Hill, 2001), most adult children have no idea of their parents’ net worth, let alone the details of their estate plan. All too often, “when kids work up the courage to ask their parents for specifics, they often get slapped down.”

Some parents use their money as a means of controlling their children. They change their estate plan as a way of rewarding and punishing behavior. This article is not for those parents.

What should you tell your children about your estate plan? They don’t need to know all the details. In most instances it is unwise to provide the kids with actual copies of your current documents. The tax law will change, your circumstances may change, the children’s circumstances will change and you may make changes to the plan. Distributing copies gives a false sense of the permanence of the current disposition and raises expectations that may not be realized.

Nevertheless, you should tell your kids that you have addressed your plan, have made wills, powers of attorney and so forth. Assure them that you have considered the tax ramifications with qualified counsel and that you have made provisions for them to be effective after both parents are deceased (or whatever disposition you have in fact made.)

Talk to your kids about your furniture, jewelry, collections, heirlooms. Try to work out who gets what now. In my experience, the most bitter arguments come over the division of these items of personal property. Many times these pieces have little monetary value, but they are loaded with sentiment. Give your children the gift of resolving these issues while you are alive. Remember – everyone says their children won’t argue. Your children have argued before, and they will again. Don’t be in denial.

You don’t have to give your kids details about your finances, such as this month’s balance in your checking account and a list of holdings in your brokerage account. But you should prepare a list of your assets, their approximate values, and the contact persons for each holding. There should be a listing of professional advisors and how to reach them, and the location of stock certificates, life insurance policies, deeds, and evidences of debts. You can give the list to the kids, or you can just tell them where it can be found when the time comes. Update it from time to time.

The post Talking About Estate Planning – Part I of 2 appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.

Give your family the gift of telling them what you have planned for them.

Decide who will be your executors, agents under your power of attorney and surrogate for health care decisions under a medical directive. Let the family know who is going to hold these positions. Make sure the persons you name are willing to serve.

Most parents want their children to be self-supporting. They may help them financially from time to time, but they don’t expect to be supporting their children well into adulthood. If the family has wealth, it is only fair to the children to discuss the estate plan so that they can understand what they’re going to receive, when they will receive it, and plan their lives accordingly.

If you are planning to treat your children differently, it is very important that you discus the plan with them. There can be good reasons to leave unequal inheritances to children, but they shouldn’t find out about it after both parents are dead. They should hear the explanation from the parents in a family meeting.

If you wish that your parents would share their plans with you, here is some help: Read How to Talk to Your Senior Parents About Really Important Things (Jossey-Bass 2001), by Theresa Foy DiGeronimo. It has loads of practical suggestions on how to talk about everything from driving safety, alternative living arrangements, scams that target the elderly, and unwise romances.

Steve Leimberg, in Estate Planning Newsletter # 795 (March 3, 2005) a summarizes an article by the Gallos (Gallo Wines) and gives suggestions for how to approach estate planning with your parents. Try a discussion:

• of friends or friends’ parents who had positive experiences as the result of planning or negative experiences because of a failure to plan;
• about the child’s own experience in planning his or his estate;
• of recent or potential changes in the estate and gift tax laws; or
• about the need for health care powers of attorney (or similar types of advance directives) in the event of illness.

Some other ways to start a conversation on the topic of estate planning are to:

• discuss the child’s own wishes (and plans if any) if he or he is disabled;
• provide family members with a list of trusted advisors and their phone and e-mail addresses;
• let family members know where you’ve put a list of your assets and the location of your safe deposit boxes.

Parents often view their children’s efforts to ask such questions as attempts to take control. Often the parent generation lived through World War II and the Depression and are afraid of losing control. They also think they should not need or ask for help. Some parents may not have their financial information organized, or some may not have the financial resources they have led the children to believe they had.

If parents decide not to share information about their estates and their estate plan; the decision, of course, must be honored. However, be aware that non-disclosure and no communication create uncertainty and tension. Relationships that are already strained can deteriorate further under the emotional pressures of losing a parent and feeling insecure and in the dark about the estate.

Give your family the gift of telling them what you have planned for them.

The post Talking About Estate Planning – Part 2 of 2 appeared first on the Spencer Law Firm blog, https://www.mspencerlawfirm.com/blog/.