Thursday, February 15, 2018

Philanthropic giving for average donor

By Andrew Zashin*

The Internal Revenue Service identifies some 29 different types of organizations that are exempt from federal income tax.

In the most basic of terms, these are “nonprofit” organizations, or entities that exist generally for a purpose other than making money, and it is to nonprofits that we think about directing our philanthropy.

While you may make donations to causes such as a fraternal organization or a political campaign, in terms of philanthropic giving, you are probably most familiar with 501(c)(3) organizations. These are more commonly known as “charitable” organizations, and the “501(c)(3) label refers to the specific subsection of the Internal Revenue Code under which they are organized.

These types of organizations include only those which are “organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals…”

So what does this mean for the average donor?

In deciding where to put your donation dollars, obviously it is most important to select a cause that you believe in. However, people choose to donate for many reasons beyond the simple “feel good” factor of helping a good cause. Of course, the deductibility of charitable gifts has been impacted by the recent tax reforms. But if tax deductibility is on your radar you will want to speak with your accountant or financial planner before making any large donations to be certain the donation will be deductible.

When searching for that perfect charitable cause, know that you will come across many, many options vying for your money, and it can be difficult to know where to start. Websites like Charity Navigator, Charity Watch, GuideStar and Consumer Reports evaluate an astounding number of organizations on topics such as operating and fundraising overhead, total contributions, sources of contributions, and other information that may be of interest.

The majority of donors will look to contribute to public charities. That is, most people will make donations toward an organization that regularly receives contributions from the general public and has active programs. Organizations in this category might include a synagogue/temple/shul, an animal welfare organization, an educational organization, or a benevolence organization, just to name a few.

Of course, private foundations are another option. These entities are typically nonprofits that have been established from funds from a single source or small group of sources, such as a family or corporation. They often have no active programs of their own, but support the work of other public charities through grants.

Ultimately, what is right for you will depend on your personal tastes and how you prefer to see your funds allocated. With a little research you are sure to find the right fit for you.

This article originally appeared as a column for the Cleveland Jewish News.

Thursday, January 18, 2018

Cryptocurrency investing not for the faint of heart

By Andrew Zashin*

Once limited to techie news, cryptocurrency has now hit the finance pages and even mainstream media. Bitcoin, one of the predominant players, was trading at around $1,000 in January 2017. The subsequent months saw enormous jumps, with the value per Bitcoin nearing $20,000. With those sorts of gains, it is no wonder that many have wondered how they, too, could get in the game.

“Cryptocurrency” refers to a subset of digital or virtual currency (and its moniker refers to the cryptography used to create it and transact with it). Unlike traditional money it is not backed by any government. The holder does not have a coin or a bill.

Instead, it is an entirely digital asset. It is created, or “mined,” under controlled conditions, although admittedly the identity of the governing body is sometimes a bit nebulous. It is traded on specialized exchanges created for that purpose. Like other securities, cryptocurrency can be bought and sold. Like traditional government-backed currency, it can be used to purchase goods and services, assuming, of course, the seller accepts it as valid tender.

Bitcoin is not the only player in town, but it has been covered the most widely in the mainstream news given the huge swings in value. Nowadays, it is still up significantly from this time a year ago, but most recently it dropped down below the $10,000 mark as investors dumped it amid concerns about increased scrutiny and regulation. The volatility is enough to give anyone whiplash.

The chairman of the U.S. Securities and Exchange Commission in December released a statement on cryptocurrencies and initial coin offerings, pointing to specific concerns with this market. Warren Buffet has called it “a mirage” and has said the current frenzy surrounding it will “end bad.”

One of the primary risks with this type of investment is the sheer lack of governmental oversight and regulation. Of course, most types of investment come with some risk. But cryptocurrency markets cross national borders and trading may occur on a system anywhere in the world. Invested funds are very likely to leave the United States without your knowledge.

Regulatory agencies such as the SEC may not be able to offer any adequate remedy. The rules may be different wherever the funds end up; South Korea and China, for example, appear to be working toward regulation in their respective nations. Or the body that might otherwise regulate it – the SEC, for example – might not have jurisdiction at all. The definition of the “thing” being traded is in flux, with many arguing that cryptocurrencies are not securities, and that the trading of them is not within the SEC’s jurisdiction at all.

Surely, some have become significantly wealthier for having invested in cryptocurrency. However, it is definitely riskier than your average investment. In this area, the law is continuously evolving and trying to catch up. If you are thinking of jumping on the bandwagon, it has never been more important to do your research to decide for yourself if cryptocurrency is a reasonable investment.

This article originally appeared as a column for the Cleveland Jewish News.

Wednesday, December 13, 2017

Trust important part of life care plan for special needs loved one

By Andrew Zashin*

If you have a loved one with special needs, a trust could be a very important part of his or her life care plan. Generally speaking, a trust is created when someone manages property – usually money or real estate – for another person.

We often think of trusts as estate planning tools to conserve wealth for future generations. In the case of a special needs trust, the beneficiary or the person for whom the trust is created, is someone who is disabled or mentally ill and who lacks the capacity to manage his or her own finances.

This type of trust is intended to provide ongoing financial support for the beneficiary’s specific medical and lifestyle needs. And, it provides you with assurance that your loved one will be cared for when you are no longer able to do it yourself.

The definition of special needs is rather broad. Not only can a special needs trust help with medical and health care services and products, but it can be used for daily living needs such an accessible vehicle, modified communication devices or appropriate living arrangements like an assisted living or skilled nursing facility.

This money can fund recreational activities, hobbies and activities, or vocational activities, training and education for the beneficiary. It can be used toward professional services such as claims processing, attorneys, and accountants that may be hired to act on behalf of the beneficiary. Trust funds can even be used to provide for respite care for a caregiver.

The trustee typically will be a family member such as a parent or a sibling. But, if no appropriate family member is available, a third party can be appointed by a court. The trustee is tasked with smartly managing the funds or other assets, balancing the immediate needs and wants of the beneficiary against expectations that the funds will be used frugally so as to be available to provide for the beneficiary as long as possible. After all, the trust will generally continue on until either the beneficiary dies or the funds are exhausted.

Funding of the trust will vary widely, based on the available assets and the particular needs of the beneficiary. There is no minimum requirement for a special needs trust, and it can be funded with thousands of dollars, or millions. Generally, the funds will come from family assets, lawsuit proceeds, life insurance policies on the lives of the beneficiary’s parents, inheritances, etc.

Often, a prospective beneficiary qualifies for means-tested government assistance, i.e. assistance that is based on a recipient’s lack of resources, such as Supplemental Security Income, Medicaid, subsidized housing and the like. Special needs trusts are especially useful in those cases; with proper planning, the trust can subsidize expenses for a beneficiary without jeopardizing access to other benefits.

If you are looking to create a special needs trust for a loved one, it is imperative to get the right team behind you. A special needs trust is not something to do once and never look at again. Instead, you will want to work with a competent estate-planning attorney, and possibly a financial planner, to make sure the trust will continue to accomplish your goals for your loved one well into the future.

This article originally appeared as a column for the Cleveland Jewish News.

Tuesday, November 21, 2017

Proposed tax changes may impact alimony awards

By Andrew Zashin*

If you haven’t heard about the competing tax plans proposed by Congress, you haven’t been reading the news.

Just as soon as the House of Representatives released their proposed tax plan, the phones started ringing at the offices of domestic relations lawyers throughout the country.

Currently, alimony – which is more appropriately called “spousal support” in Ohio – is considered taxable income to the recipient, and tax-deductible to the payer. In that way, income tax on the money will generally be paid by the person in the lower income tax bracket. (In contrast, income tax on money that goes toward child support is the responsibility of the payer.) Divorce lawyers have long taken advantage of this tax schema to help resolve their cases, since it gives the higher income earner some incentive to agree to a higher amount of spousal support than he or she might otherwise.

It is true that spousal support awards – which originally were intended to provide for women who were predominately homemakers or who had lower-earning positions than their spouses – have been decreasing over time as societal norms change. Even so, IRS statistics indicate some 12 million tax returns claim deductions for spousal support payments each year, and it remains an important component of many divorce negotiations.

In theory, removing the deduction could generate higher revenues because the money would be taxed at the payer’s higher tax rate. In addition, this proposal looks to address the disparity in reporting; the number of recipients claiming spousal support income totals something closer to 10 million, creating an administrative nightmare for the IRS to reconcile underreporting and recover the missing revenue.

However, experts generally believe that spousal support awards, whether through settlement or ordered by a court, are likely to get a lot less generous if this law is enacted. The Ohio spousal support statute specifically requires a court consider the tax implications when determining an appropriate award. Under the proposed schema, a higher amount of any award will get allocated to taxes, and the money simply won’t go as far. How could awards not be impacted?

Doubtless, in settlement negotiations prospective payers will be making the same assessments. Certainly, a higher monthly support amount is more doable and palatable when the payer knows that some relief will come at tax time.

The current proposal seems to suggest that the change would take place for spousal support awards that start after 2017. It remains to be seen if this provision will see the light of day as actual law. In the meantime, practitioners are collectively holding their breath, anticipating an onslaught of requests to modify existing awards if this proposal sticks.

This article originally appeared as a column for the Cleveland Jewish News.

Friday, November 17, 2017

Protecting Your Identity in the Aftermath of the Equifax Breach

By Andrew Zashin*

By now you have probably heard that Equifax’s database was breached sometime this past summer. Announced only in September, cybercriminals gained access to about 145.5 million consumers’ personal data. Some consumers in the United Kingdom and Canada were affected as well. Data stolen included full names, Social Security numbers, birth dates, addresses and even driver license numbers. More than 200,000 credit card credentials were stolen as well. Obviously, breaches are not new news, and several other data breaches have been discovered and reported since that time. Your chance of becoming victim of identity theft is higher than ever before, and it’s becoming less a question of “if” your identity or financial information is compromised and more a matter of “when” it will happen.

Every breach presents a huge concern for those affected – and a public relations nightmare for the breached entity. The Equifax breach is particularly troubling. Not only was the sheer number of credit files impacted huge, but the breadth of the information obtained is particularly scary. And, unlike an insurance company, bank or other entity with which consumers choose to do business, any consumer wanting any type of consumer credit forms a relationship with Equifax by default – and never had an option to “opt out” in the first place.

What’s the average person to do? While it’s enough to make anyone want to switch back to cash, there are some common sense steps you can take to decrease your chances of becoming a victim:

• Specific to the Equifax breach, you can visit equifaxsecurity2017.com to determine whether your data was among that stolen. Follow the prompts and instructions on that website to sign up for their complimentary credit-monitoring service.

• Monitor all bank and credit accounts regularly for charges or withdrawals you don’t recognize. If you see something, call your bank or the number on the reverse of the credit card to report it immediately. There are laws on the books to protect consumers from fraud, and it is likely that you will get your money back, but they do require quick reporting – and you may be out of pocket for the money while it gets corrected.

• Check your credit reports regularly. You are entitled by law to get a free credit report from all three major credit reporting agencies each year via annualcreditreport.com. You can even maximize your coverage by staggering your requests and, say, getting a report from Equifax now, a report from TransUnion in four months or so, and a report from Experian a few months after that. If you see an unknown account or inquiry, contact that entity immediately to report possible fraud.

• You may want to consider the possibility of a credit freeze. You can accomplish this though each of the major agencies – Equifax, Experian and TransUnion – and you will want to contact each of them individually. In effect, a freeze locks down your credit file and prevents new lines of credit from being opened with your credentials without having the PIN number that you create. When you intend to open up a new line of credit, you simply call the agencies and ask for the freeze to be lifted temporarily.

• File your taxes well in advance of the filing deadline and make sure to read and respond timely to any communications from the IRS or other tax agencies. Surprisingly, tax fraud is a fairly common scam using stolen credentials. Filing early will make it more likely for a fraudulent filing to be caught before it creates a big headache for you.

• If making purchases online, consider using a trusted payment service such as PayPal, and if you can, use a credit card rather than a debit card. Another option is to use a temporary credit card number generated specifically for that purpose – a service which many banks are now offering – if you have any concerns about whether the site has adequate security protections.

The breaches are concerning, without a doubt. But the fact is it is pretty hard to exist in our modern world – with all of its technology and convenience – without some risk of data breach. While the typical consumer can’t do anything to impact how companies like Equifax protect their data, and while it is impossible to completely lock down everything, there are some common sense steps you can take to protect your information.

This article originally appeared as a column for the Cleveland Jewish News.

Wednesday, October 18, 2017

Tax reforms may pose significant hit to charitable giving

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Every level of government, from the smallest municipality to the federal government, must tackle tax issues. Politicians, pundits and, of course, prospective tax payers will each weigh in, offering separate opinions as to how best to generate the funds the government needs to operate without breaking the back of the average citizen or losing his vote.

President Donald Trump recently released a skeleton outline of his tax plan. The plan proposes sweeping overhauls that, among other things, aims to significantly increase the standard deduction to $12,000 for a single filer and to $24,000 for a jointly-filing married couple. And, for many middle-class Americans, higher standard deductions do away with the complicated process of itemizing deductions for things like qualifying medical expenses, state and local taxes paid, and charitable contributions.

A simplified tax filing process is certainly something taxpayers could get behind. But charitable organizations have some concern as to what impact this plan may have on their bottom lines. Certainly, people donate for benevolent reasons; they do it because they genuinely want to see a cause succeed and because it feels good to do good in the world.

But charitable organizations are well aware that people also give because they derive some direct benefit from it. At certain levels of giving, name recognition may be involved. Perhaps the giver will see their name in a printed program or on an inscribed plaque or brick, or even on the entrance to a hospital wing or theater. Maybe they benefit by having a cleaner home after donating unwanted clothing or household goods.

Or, maybe they get a tax write-off. And, it is the last reason that is causing some concern; if the average taxpayer will no longer get the same tax benefit for his charitable contributions, will he still give at the same level? Nonprofit leaders certainly don’t think so, and experts are estimating that overall giving could decrease by as much as $13 billion to $26 billion per year.

Support is increasing for the concept of a universal charitable deduction, and one congressperson, U.S. Rep. Mark Walker, R-N.C., has introduced the Universal Charitable Giving Act, which proposes to offer an incentive for lower and middle income families to keep or start giving, by allowing them to deduct their charitable donations in an amount of up to one-third of the value of the standard deduction, without itemizing.

Clearly, it is far too soon to know if any of these tax changes may come to fruition or in what form. But, it is apparent that the proposed Trump reforms would mean that as many as 95 percent of taxpayers would derive no value from itemizing deductions and, therefore, no additional tax benefit for charitable giving.

The National Council of Nonprofits responded with a statement calling for Congress and charitable nonprofits to “quickly identify relevant data and come to a consensus on how best to improve the universal charitable deduction so that all American taxpayers, not just 5 percent, benefit from the tax incentive for donations designed to make a difference in local communities across the country.”

Tuesday, September 19, 2017

In estate planning for your minor children, think beyond just money

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Do you have minor children? Do you know what would happen to them if you were to pass away unexpectedly? This is never a pleasant topic to think about, but it is one of the most important estate planning decisions you can make.

Depending on your specific situation, the answer may be obvious. If a minor loses one parent, most often the surviving parent would simply assume custody. If the parents are divorced, or if they were never married, the domestic relations or juvenile courts may need to get involved depending on formal parenting plans that may already be in place. But from a legal perspective, it may be a simple matter.

On the other hand, if the surviving parent is estranged, unfit, or otherwise not around or uninvolved, the answer could become more complex. In that case, it may be necessary to seek the appointment of a “guardian.”

In general, anyone with some ties to the child could apply in the appropriate probate court to become the child’s guardian. Once appointed, that guardian would be expected to care for the child’s well-being just as a parent would, providing food, shelter, and clothing, and ensuring schooling and medical care. If the child has any assets, a guardian would be expected to manage those on behalf of the child as well.

In Ohio, as in many states, a person can be named as the guardian “of the person” or the guardian “of the estate.” A guardian of the person would be responsible for providing necessities and care and for decision-making regarding the child’s health and well-being, while a guardian of the estate would be tasked with management of the minor’s financial affairs, such as managing monies held in trust for the child. One person could feasibly fulfill both roles, or a different person might fulfill each. And, if the child has no significant assets, there may be no need for a guardian of the estate to be appointed at all.

Ideally, your wishes as to who should serve as your child’s guardian, and maybe a “backup,” or successor, guardian will be spelled out in your will. A probate court would not be required to follow a guardianship designation made in a will, but generally would, so long as that designation is in the interest of your child. It is also important to understand that just because you choose to name someone does not obligate them to accept the responsibility; they could decline to serve in that capacity.

For these reasons, it is important to consider carefully who you would trust with such responsibility and, ideally, discuss in advance if he or she would be willing to take on the job should it become necessary. If a significant inheritance or other monies could be involved, consider who you believe would handle those funds appropriately and in a manner that you would be satisfied with. And, if you have a spouse or co-parent, it is very important to discuss with him or her the identity of a successor guardian in the – however unlikely – event that neither of you would be around to care for your child. Any disputes will likely ultimately be resolved by a court, and it is far better to tackle this issue in advance via a clear and concise estate plan, rather than in a court of law after legal challenges.