Just in case there isn’t enough on your to-do list this holiday season, allow me to suggest some legal documents you may want to take care of at year-end.
I wish I was kidding …
Adult children: If you’ve got young adult children coming home for the holidays, consider making sure they have a power of attorney, an advanced health care directive, and a HIPAA form in place so that you are authorized to act on their behalf in the event of an emergency.
These documents allow the person signing to nominate someone else to act on their behalf in the event of incapacity. This can be particularly important if you’ve got a child away at college.
Should an accident or illness occur, the only way to obtain medical information and handle matters for your adult child is with these signed and properly witnessed or notarized documents. Your adult child will not likely think of these things and may think they are unnecessary.
You may not want to think about this possibility at all. But, in an emergency, you’ll be glad you planned ahead.
If you’ll be downsizing soon, holiday visits when everyone is together might be a good time to talk about items you’d like to give away. Find out if your descendants really want any of the items you’ve been carefully storing for decades (often, the answer is “no”).
If you’ve finally gotten around to getting your estate plan in place, or you’re thinking about it, consider having a conversation about your plans when everyone is gathered and can ask questions or raise concerns openly.
In my experience, estate plans go most smoothly when no one is surprised by what the documents say.
Even though the tax laws have changed, and fewer people itemize deductions (and thus don’t “need” a charitable deduction), year-end charitable giving should still be considered. Charities typically raise one-fourth of their annual revenue at year-end. In other words, they’re counting on you.
There are several vehicles available for making tax-advantaged donations beyond direct giving.
A gift to a Charitable Remainder Trust can provide both a current taxable deduction and a stream of income to you or your beneficiary over a period of time with the “remainder” going to a designated charity. Charitable Lead Trusts do the reverse — an income stream pays to the charity, with the remainder paid to you or your beneficiary.
These are great tools for dealing with appreciated assets, or in years where you need a substantial deduction to offset a large influx of taxable income. See your advisor for what plan might work for you—but do it soon as the trust would have to be implemented by year-end to save you taxes on your 2023 tax return.
Beginning Jan. 1, a new federal law known as the Corporate Transparency Act, or CTA, is effective. This new law affects every LLC, S corporation, C corporation and any other entity required to be “registered” with their respective state.
The CTA was developed to expose illicit activity, money laundering and concealment of ownership, but it’s also going to affect a lot of small business entities, irrevocable trusts and individuals.
The CTA will require the filing of federal forms reporting all beneficial owners, officers, managers and other reporting persons and entities by name, address and a valid ID. Gathering this information could take significant time and effort, as will getting the new forms filed in a new (government!) system.
If you have plans to form a new business entity, you may want to do so before year-end.
If you form an entity before Dec. 31, you’ll have until the end of 2024 to file the required CTA forms.
If you form an entity after Dec. 31, you’ll have 30 days to file the forms — forms that aren’t even published yet.
With new governmental processes, it’s always better to have extra time. Plus, if you form an S corporation or limited liability company after Dec. 17 and have no business activity in 2023, you do not have to pay the $800 minimum tax for 2023, so there may be no reason to wait.
Stay tuned in this column for more information on the CTA in the weeks to come.
The year-end, or first of the year, is also a good time to check that you’ve held or have plans to hold any annual meetings, your minutes are up to date, and you’ve filed any required forms — such as the Statement of Information required by the California Secretary of State, and reports to any professional regulatory agency.
If you’re part of a nonprofit, be sure the organization has filed any required reports with the California Attorney General Registry of Charitable Trusts.
It’s a busy time of the year. When you make your shopping list, be sure to also make your “to-do” list of personal and business matters you need to tend to. Then, eat, drink, be merry, and…be on top of things.
Teresa J. Rhyne is an attorney practicing in estate planning and trust administration in Riverside and Paso Robles, CA. She is also the #1 New York Times bestselling author of “The Dog Lived (and So Will I)” and “Poppy in TheWild.” You can reach her at Teresa@trlawgroup.net
