Don’t Put That 1040 Client Copy Tax Return Away Just Yet

I suspect that most of you have completed your 2024 taxes by now. Tax time is a hassle and most people have the urge to quickly file away the paperwork once their accountant tells them the taxes have been completed.

I think it’s a good idea to take a few minutes to go through the various schedules on the 1040 to confirm all of the assets and liabilities that make up your estate. You can use that review to make sure that you have your assets protected from probate. The 1040 is your opportunity to do an annual review of all of your assets and to update your annual asset list (You do have an asset list that you update annually, don’t you??).

Equally important is your opportunity to review the 1040 of a friend or loved one who is or will be relying upon you to handle their affairs after they pass on. Reviewing that person’s 1040 will allow you to have a snapshot of all their sources of income so that you can make sure they are properly protected from probate. You may find a bank account or a brokerage account that they’ve never talked about and maybe even forgot about.

Your 1040 is only about 2 pages long, but attached to it are various schedules that give details about income and liabilities. The four schedules listed below are important for confirming sources of income. Income comes from an asset and the asset has an owner which is probably the person whose 1040 you are reviewing. Upon death, that asset needs to be co-owned with someone else, held in a trust, or designated with a beneficiary. Otherwise, you risk probate at death. Here are the four schedules to look at carefully:

• Schedule B: “Interest and Ordinary Dividends”: This schedule applies if you have over $1,500 in taxable interest or ordinary income. It’s where bank accounts, CDs and stocks, bonds and mutual funds will be found. Make sure you match up each source of income so you know what you own. If you find a bank or stock that you didn’t know about, now is the time to dig deeper.

• Schedule D: “Capital Gains and Losses”: This schedule addresses transactions related to after-tax investments like brokerage accounts and individual stocks. Go through each entry and make sure you know how the asset is owned and whether it has a beneficiary or it could be subject to probate.

• Schedule E: “Supplemental Income and Loss”: This is where income or loss related to a probate estate, trust, rental real estate or other business arrangements are listed. This is a good place to figure out if someone is a beneficiary on a decedent’s trust or estate.

• Schedule 1: “Additional Income and Adjustments to Income” has two parts: Part One: This is where all sorts of “unique” income shows up, including unemployment, alimony, business income. Gambling winnings and prizes and awards also show up here. Part Two: This has adjustments to income and, for an elderly loved one, check to see if there was any penalty on early withdrawal of savings (e.g. cashing a CD in before maturity). This could be a tipoff that the person doesn’t fully understand the ramifications of their transactions.

Before you file your 1040 away, take a minute to use this as a checklist for assets.

Fun fact: Easter is upon us. When it comes to the largest Easter Egg, the record was set in 2011 in Italy where an Easter Egg measuring 34’ 1.05” was crowned the largest ever chocolate egg at the Le Acciaierie Shopping Centre. The chocolate egg weighed 15,873lbs and had a circumference of 64’ 3.65” at its widest point.

Five Things to Know About Creditors When Someone Dies

The death of a loved one brings forth a lot of emotions. While grieving can last a long time, at some point someone has to take a look at the financial affairs of the decedent. One big concern is debt, which can come in many forms: mortgage, credit card, personal loan, back taxes due, just to name a few. Understanding the basic rules can put your mind at ease if you take on the responsibility of estate/trust administrator. Here are some things to consider:

1. The first thing to understand is that taking on the responsibility of trustee or personal representative does not in any way make you personally liable for the decedent’s debts. Some collection agencies might try to coax you into thinking you have to pay from your own pocket, but it’s just not so. As long as you don’t personally guarantee a debt and you don’t try to hide the debt or do something illegal, you are never personally responsible.
2. Many, but not all debts are negotiable. This holds true for credit card debt in particular. Once the credit card company finds out the card holder has died, they typically sell the debt (at a very reduced rate) to a collection agency. If they contact you, it is appropriate for you to try to negotiate down the balance owed. I’ve seen the final negotiated bill be as little as one-third of the original bill, but there is no standard rule. Debt negotiation is an art form, and the more experience you have, the better chance you have to get the debt down. Your leverage increases if there is no need for probate (e.g. a living trust holds all assets). That’s because the collection agency then has to open a probate case themselves if they want to collect and that is time consuming and expensive for them. A quick settlement on the phone makes much more sense to them in that situation.
3. An outstanding mortgage is much less negotiable. The mortgage company has collateral they can get at — i.e. the home. By definition, a mortgage is simply a loan that is secured by real estate. Two things to know with a mortgage: First, you can call the mortgage company, and they are typically very flexible when it comes to mortgage payments. They will usually be compassionate and accommodating, but in the end, they will need their debt paid. Second, if the house is worth less than the outstanding mortgage, they will work with you because it is costly for them to try to recoup more than they can get for the house sale.
4. If the decedent had a trust or some of the estate was probated, then you are required to file a Notice to Creditors in a county legal newspaper. That is a good thing because in Michigan a 4-month deadline starts for unknown creditors to contact you. The deadline runs from the date the Notice to Creditors was first published and once the 4-month time period is up, even a creditor with a valid bill is out of luck – You don’t have to pay. I’ve used this effectively many times for medical bills that first show up after the 4-month period expires. Note that this legal debt cut-off only applies to bills you first learned of after the 4-month deadline.
5. Tax debt is different. The IRS is powerful, and the laws play in their favor. Take the initiative to make sure there is no outstanding tax debt before fully distributing the estate. The Notice to Creditors won’t protect you here either so check with the decedent’s tax preparer to make sure things are correct.
   It’s never easy to deal with the affairs of a deceased loved one. I hope the information above makes it a little more tolerable.

Fun Fact: After driving to and from Florida recently I got to wondering about our roadway system. I found it surprising that the United States has 3.9 million miles of roadway, of which 3 million miles are rural roads. The Interstate System accounts for only 1.2% of total mileage but carries 24.1% of total travel. I think most of those interstate travelers were congregated around Atlanta and Tampa when I was driving home last week!

COVID-19 PREPAREDNESS AND RESPONSE PLAN Prepared: May 22, 2020

Jeffrey R. Saunders, P.C./Saunders Financial, LLC COVID-19 Preparedness and Response Plan

In accordance with Executive Order 2020-59, Jeffrey R. Saunders, P.C./Saunders Financial, LLC (“Company”) institutes this COVID-19 Preparedness and Response Plan (“Plan”) which is on file and available for members and clients.

Jeffrey R. Saunders is hereby designated as the person responsible for implementing, monitoring, and reporting on COVID-19 control strategies, including training members as to workplace infection control practices and the proper use of personal protective equipment (PPE).

Company is continually monitoring guidance from local, state, and federal health officials and implementing workplace and Plan modifications where appropriate.

1.   Prevention Efforts and Workplace Controls

a.   Cleanliness and Social Distancing

Members of Jeffrey R. Saunders, P.C./Saunders Financial, LLC will whenever feasible, perform their essential duties remotely.
Company provides members with, at a minimum, non-medical grade face coverings.

In addition, Company is instituting the following cleanliness measures:

• Performing routine environmental cleaning and disinfection of workspaces;
• Requesting that the landlord disinfect all common areas frequently and regularly; and
• Where available, providing hand sanitizer.

Members will minimize COVID-19 exposure by:

• Frequently washing hands with soap and water for at least 20 seconds;
• Utilizing hand sanitizer when soap and water are unavailable;
• Avoiding touching their face with unwashed hands;
• Avoiding handshakes or other physical contact;
• Avoiding all contact with sick people;
• Practicing respiratory etiquette, including covering coughs and sneezes;
• Seeking medical attention and/or following medical advice if experiencing COVID-19 symptoms; and
• Complying with self-isolation or quarantine orders.

b.   Supplemental Measures Upon Notification of COVID-19 Diagnosis and/or Symptoms

A member with a COVID-19 diagnosis or who displays symptoms consistent with COVID-19 will self-isolate for at least 14 days and until symptoms are resolved.

c.   Member’s Self-Monitoring

Members will not report to the office work site if they:

• Display COVID-19 symptoms, such as fever, cough, shortness of breath, sore throat, new loss of smell or taste, and/or gastrointestinal problems, including nausea, diarrhea, and vomiting, whether or not accompanied by a formal COVID-19 diagnosis;
• In the last 14 days, have had close contact with and/or live with any person having a confirmed COVID-19 diagnosis; and
• Who, in the last 14 days, have had close contact with and/or live with any person displaying COVID-19 symptoms, such as fever, cough, shortness of breath, sore throat, new loss of smell or taste, and/or gastrointestinal problems, including nausea, diarrhea, and vomiting.

Such members may only resume in-person work upon meeting all return-to-work requirements, defined below.

d.   Return-to-Work Requirements

Members who were themselves diagnosed with COVID-19 may only return to work upon confirmation of the cessation of symptoms and contagiousness, proof of which may be acquired via the test-based strategy or the non-test-based strategy.

The test-based strategy is preferred but relies upon the availability of testing supplies and laboratory capacity. Under this strategy, members may discontinue isolation and return to work upon achieving the following conditions:

• Resolution of fever without the use of fever-reducing medications;
• Improvement in respiratory symptoms (e.g., cough, shortness of breath); and
• Negative results of an FDA Emergency Use Authorized molecular assay for COVID-19 from two consecutive nasopharyngeal swab specimens collected at least 24 hours apart.

Under the non-test-based strategy, members may discontinue isolation and return to work upon achieving the following conditions:

• At least 3 days (72 hours) have passed since recovery defined as resolution of fever without the use of fever-reducing medications;
• Improvement in respiratory symptoms (e.g., cough, shortness of breath); and
• At least 7 days have passed since symptoms first appeared.

Members who came into close contact with, or live with, an individual with a confirmed diagnosis or symptoms may return to work after either 14 days have passed since the last close contact with the diagnosed/symptomatic individual, or the diagnosed/symptomatic individual receives a negative COVID-19 test.

2.   Conduct of Office Meetings

When working on-site at the physical office, Company abides by the recommended social distancing and other safety measures and establishes the following:

• All meetings will be limited to six persons maximum;
• Everyone is required to maintain physical distance no less than six feet apart; and,
• Everyone is required to wear a non-medical grade face covering.

3.   Plan Updates and Expiration

This Plan responds to the COVID-19 outbreak. As this pandemic progresses, Company will update this Plan and its corresponding processes.

This Plan will expire upon conclusion of its need, as determined by Company and in accordance with guidance from local, state, and federal health officials.