If you are lucky enough to own a vacation home, then you need to figure out what will happen to it after you are gone. Many parents hope to keep vacation homes in the family, but guaranteeing that can be tricky.

While meant to be fun and relaxing places to get away from everyday life, vacation houses can cause problems between siblings after their parents pass away. Some siblings may want to use the house, while others may need cash and want to sell. There may be disputes over who pays maintenance costs or when different families can use the house.

One option for passing on a vacation home is to leave it to your children in your will. The problem with this is that if the children own the house equally as joint tenants or tenants in common and one sibling wants to sell, that sibling can demand to be bought out. If the other siblings can't come up with the money to buy out the sibling, the sibling who wants out can force the sale of the house.

Before you decide to leave your vacation house to your children outright, you should have a family meeting to find out whether all the children actually want the house. If they do, you should discuss who will be responsible for maintenance and property taxes, and who has the right to use the property, among other issues. Putting a plan in writing can help prevent or resolve disputes down the road. The plan can also include a buyout option if any heirs decide they do not want to own the property. The buyout price can be less than if the property is sold to a third party and payment terms can extend over several years.

Rather than giving the property to your children outright, you can also put it in a trust or a Limited Liability Company (LLC). LLCs have become a popular estate planning tool for vacation homes. Using an LLC allows parents to transfer interest in the LLC to their children while still retaining control. Parents can use the annual gift tax exclusion to slowly gift their children additional interest in the LLC each year. The LLC agreement can designate a property manager, provide instructions on maintenance costs and property taxes, and include buyout options. Property in an LLC is also protected from creditors.

Another option is to put property into a qualified personal residence trust (QPRT). A QPRT allows the parents to live in the home for a certain number of years and at the end of the term, the children own the home. The main purpose of a QPRT is to reduce taxes on property, but QPRTs are tricky and must be set up just right or there will be no tax savings. 
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To determine the best way to protect your vacation home, contact us today.

​The new tax law makes it harder to claim a tax deduction for charitable contributions. While charitable giving should not be only about getting a tax break, if you want to reap a tax benefit from your contributions, there are a couple of options. 
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The Tax Cut and Jobs Act, enacted in December 2017, nearly doubled the standard deduction to $12,000 for individuals and $24,000 for couples. This means that if your charitable contributions along with any other itemized deductions are less than $12,000 a year, the standard deduction will lower your tax bill more than itemizing your deductions. For most people, the standard deduction will be the better option. 

If you still want to maximize the tax benefits of charitable giving and you have the financial means, one option is to double your charitable donations in one year and then skip the donation the following year. For example, instead of giving $10,000 a year to charity, you could give $20,000 every other year and itemize your deductions in that year. 

Another way to concentrate charitable giving is to establish a donor-advised fund (DAF) through a public charity. A DAF allows you to contribute several years worth of charitable donations to the fund and receive the tax benefit immediately. The money is placed in an account where it can be invested and grow tax-free. You can then make donations to charities from the account at any time, in addition to adding to the account. As with any investment, you need to do research before establishing a DAF. Make sure you understand the fees involved and whether there are any limits on the charitable contributions you can make. You should consult with your financial advisor before taking any steps. 

If you are taking required minimum distributions from an IRA, another option is to donate those distributions directly to charity through a qualified charitable donation. The distributions won't be included in your gross income, which means lower taxes overall. The donation must be made directly from the IRA to the charity and different IRAs have different rules about how to make the distributions. 

If you are paying for your own insurance, you may think you do not need to sign up for Medicare when you turn 65. However, not signing up for Medicare Part B right away can cost you down the road. 

You can first sign up for Medicare during your Initial Enrollment Period, which is the seven-month period that includes the three months before the month you become eligible (usually age 65), the month you are eligible and three months after the month you become eligible. If you do not sign up for Part B right away, you will be subject to a penalty. Your Medicare Part B premium may go up 10 percent for each 12-month period that you could have had Medicare Part B, but did not take it. In addition, you will have to wait for the general enrollment period to enroll. The general enrollment period usually runs between January 1 and March 31 of each year.

There are exceptions to the penalty if you have insurance through an employer or through your spouse's employer, but there is no exception for private insurance. The health insurance must be from an employer where you or your spouse actively works, and even then, if the employer has fewer than 20 employees, you will likely have to sign up for Part B. 

If you don't have an employer or union group health insurance plan, or that plan is secondary to Medicare, it is extremely important to sign up for Medicare Part B during your initial enrollment period. Note that COBRA coverage does not count as a health insurance plan for Medicare purposes. Neither does retiree coverage or VA benefits.
For a New York Times column about a man with private insurance who didn’t realize he needed to sign up for Part B, click here.  
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For more information about Medicare and turning 65, click here.

The Internal Revenue Service (IRS) is increasing the amount taxpayers can deduct from their 2019 income as a result of buying long-term care insurance.
Premiums for "qualified" long-term care insurance policies (see explanation below) are tax deductible to the extent that they, along with other unreimbursed medical expenses (including Medicare premiums), exceed 7.5 percent of the insured's adjusted gross income.  (The 7.5 percent threshold is for the 2017 and 2018 tax years.  It is scheduled to revert to 10 percent in 2019.)
These premiums -- what the policyholder pays the insurance company to keep the policy in force -- are deductible for the taxpayer, his or her spouse and other dependents. (If you are self-employed, the tax-deductibility rules are a little different: You can take the amount of the premium as a deduction as long as you made a net profit; your medical expenses do not have to exceed a certain percentage of your income.)
However, there is a limit on how large a premium can be deducted, depending on the age of the taxpayer at the end of the year. Following are the deductibility limits for 2019. Any premium amounts for the year above these limits are not considered to be a medical expense.

Another change announced by the IRS involves benefits from per diem or indemnity policies, which pay a predetermined amount each day.  These benefits are not included in income except amounts that exceed the beneficiary's total qualified long-term care expenses or $370 per day, whichever is greater.
For these and other inflation adjustments from the IRS, click here.  

What Is a "Qualified" Policy?
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To be "qualified," policies issued on or after January 1, 1997, must adhere to certain requirements, among them that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold.