April 2022 Newsletter
April 2022 Issue
Do You Qualify for the Earned Income Tax Credit
Are you a working senior that does not claim a dependent on your federal tax return? You may qualify for the Earned Income Tax Credit when you file your 2021 tax return. This tax credit was previously available to primarily assist low income families who have young children. It is now available for low income seniors who have earned income.
If your earned income is below a certain level when you file your taxes, you can apply the tax credit to the amount of federal taxes you owe. In many cases, the earned income tax credit results in a tax refund from the Internal Revenue Service. Many individuals miss out on the Earned Income Tax Credit (EITC) because they fall below the income amount required to file a tax return. Individuals who are not required to file a federal tax return due to income level, can still file a tax return to potentially get the EITC in the form of refund.
In 2021, the EITC is available to individuals 19 years old and older, without qualifying dependents who have an earned income up to $21,430. Married couples filing jointly qualify for EITC by earning up to $27,380. Years prior to 2021, the EITC was only available to individuals between the ages of 25 and 64. Those age 65 and older can now claim the credit if they have earned income.
What is earned income? Aside from wages, earned income includes contract (1099) and self-employed income. Investment income may also be counted, although the IRS only allows up to $10,000 from investments. Social Security, pensions, and annuities do NOT count towards earned income, however if you claim less than $10,000 on your interest and gains and your income falls below the allowed amount, you could still qualify for the EITC.
If you think you may qualify for the Earned Income Tax Credit, we recommend that you speak with your tax advisor to review the IRS changes carefully as they prepare your 2021 tax returns.
Estate Planning When You Are Raising Your Grandchildren
Grandparents often play an influential role in the lives of their grandchildren. If you are a grandparent who is a primary caregiver for their grandchildren, you’re experiencing the blessings and responsibilities of parenthood all over again. One of the pressing responsibilities that accompany your role as caregiver is to make sure that you have a plan for your grandchildren in the event that something happens to you. In the United States, 2.5 million households that include minor children are headed by grandparents. In unfortunate circumstances, parents may be unable (or unwilling) to care for their children, leaving a grandparent as the primary caregiver. Unexpected reasons could be a result of premature death, severe illness, drug abuse, or incarceration of the child’s parents.
Being left raising a grandchild is usually an unplanned detour during retirement. Buying health insurance and enrolling children in school can be a challenge without proper legal custody. Planning your estate while raising your grandchildren, should look similar to planning your estate while your children are minors. However, your estate may become more complicated considering your grandchildren’s parents may have a legal right to parent your grandchildren. Your estate plan as a grandparent caregiver should address several possible issues.
If you have legal custody of your grandchildren, you will need to determine who should be their caregiver if you are unable to care for them. Depending on your legal custody status, you may be able to designate a guardian for them in your Will. If you financially support your grandchildren, you will need to consider how financial support will continue upon your death. This could mean leaving them (or the caregiver) as beneficiaries on your life insurance. You will need to decide if you are leaving funds to the caregiver or establishing a Trust that will distribute funds within your preferred parameters. If you decide the inheritance will be held in trust, you must address if you would like the funds to be distributed over time, for a particular reason, or when your grandchildren reach a certain age. It is imperative that you designate a trustworthy trustee to manage and distribute your assets in accordance with your wishes.
Each custodial grandparent scenario can, and will, look very different. It is important for grandparents to seek advice from an estate planning or elder law attorney when creating their estate plan. They can advise you on ways to protect your grandchildren and money from the wrong hands, even after your death.
A Personal Note From Susana
An Ounce of Prevention is Worth a Pound of Cure
My clients know that I try to assist them with estate planning that considers their family dynamics, and I always work to develop a plan that is indisputable. Certain precautions are definitely taken at Lannik Law. These may include determining the competency of the testator and working through family issues, among others. But sometimes clients don’t follow our advice; and other times family members will never be satisfied, feel cheated, or feel left out. Then, they contest the probate of that person’s estate. If that happens, my go-to litigation person is Maureen Curran.
I am very excited to have Maureen as a guest speaker for our April 27, 2022, “Beyond the Law” webinar series. Hopefully you will be too when you learn from her that there are times when litigation is the solution to the problem; and times when it may be avoided. I met Maureen some years ago when a client (serving as Personal Representative) for an estate was confronted by a spurious claim against the estate he was managing. She handled the case so well! The client was satisfied, and her fine work cemented our professional relationship. We at Lannik Law are eager to present and learn about Maureen’s considerations when she takes on contested probate matters.
With best regards,