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Wills

It's unfortunate how many people believe that estate planning is only for wealthy people. People at all economic levels benefit from an estate plan. Upon death, an estate plan legally protects and distributes property based on your wishes and the needs of your family and/or survivors with as little tax as possible.

A will is the most practical first step in estate planning; it makes clear how you want your property to be distributed after you die.

Writing a will can be as simple as typing out how you want your assets to be transferred to loved ones or charitable organizations after your death. If you don't have a will when you die, your estate will be handled in probate, and your property could be distributed differently than what you would like.

It may help to get legal advice when writing a will, particularly when it comes to understanding all the rules of the estate disposition process in your state. Some states, for instance, have community-property laws that entitle your surviving spouse to keep half of your wealth after you die no matter what percentage you leave him or her. Fees for the execution of a will vary according to its complexity.

Rules To Remember When Writing A Will

  • In most states, you must be 18 years of age or older.
  • A will must be written in sound judgment and mental capacity to be valid.
  • The document must clearly state that it is your will.
  • An executor of your will, who ensures your estate is distributed according to your wishes, must be named.
  • It is not necessary to notarize or record your will but these can safeguard against any claims that your will is invalid. To be valid, you must sign a will in the presence of at least two witnesses.

Choose an Executor

An executor is the person who is responsible for settling the estate after death. Duties of an executor include:

  • Taking inventory of property and belongings
  • Appraising and distributing assets
  • Paying taxes
  • Settling debts owed by the deceased

Most important, the executor is legally obligated to act in the interests of the deceased, following the wishes provided by the will. Here again, it could be helpful to consult an attorney to help with the probate process or offer legal guidance. Any person over the age of 18, who hasn't been convicted of a felony, can be named executor of a will. Some people choose a lawyer, accountant or financial consultant based on their experience. Others choose a spouse, adult child, relative or friend. Since the role of executor can be demanding, it's often a good idea to ask the person being named in a will if he or she is willing to serve.

If you've been named executor in someone's will but are not able or do not want to serve, you need to file a declination, which is a legal document that declines your designation as an executor. The contingent executor named in the will then assumes responsibility. If no contingent executor is named, the court will appoint one.

Review Your Estate Plan

Once you've completed a will, it's a good idea to review it from time to time, and consider changes if:

  • The value of your assets change
  • You marry, divorce or remarry
  • You have a child
  • You move to a different state
  • The executor of your will dies or becomes incapacitated or your relationship changes
  • One of your heirs dies
  • The laws affecting your estate change

Write a Social Media Will

Social media is a part of daily life, so what happens to the online content that you created once you die? If you are active online you should consider creating a statement of how you would like your online identity to be handled, like a social media will. You should appoint someone you trust as an online executor. This person will be responsible for the closure of your email addresses, social media profiles, and blogs after you are deceased. Take these steps to help you write a social media will (download a social media will template in Excel format):

  • Review the privacy policies and the terms and conditions of each website where you have a presence.
  • State how you would like your profiles to be handled. You may want to completely cancel your profile or keep it up for friends and family to visit. Some sites allow users to create a memorial profile where other users can still see your profile but can’t post anything new.
  • Give the social media executor a document that lists all the websites where you have a profile, along with your usernames and passwords.
  • Stipulate in your will that the online executor should have a copy of your death certificate. The online executor may need this as proof in order for websites to take any actions on your behalf.
  • Check to see if the social media platforms have account management features to let you proactively manage what happens to your accounts after you die. For example, Google's Inactive Account Manager allows you to manage how you want your online content to be saved or deleted. This feature also lets you give permission for your family or close friends to access the content you saved on Google websites after you die.

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Hr block online free tax filing 6. Hr block online free tax filing   How To Figure Cost of Goods Sold Table of Contents Introduction Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42Line 35 Inventory at Beginning of Year Line 36 Purchases Less Cost of Items Withdrawn for Personal Use Line 37 Cost of Labor Line 38 Materials and Supplies Line 39 Other Costs Line 40 Add Lines 35 through 39 Line 41 Inventory at End of Year Line 42 Cost of Goods Sold Introduction If you make or buy goods to sell, you can deduct the cost of goods sold from your gross receipts on Schedule C. Hr block online free tax filing However, to determine these costs, you must value your inventory at the beginning and end of each tax year. Hr block online free tax filing This chapter applies to you if you are a manufacturer, wholesaler, or retailer or if you are engaged in any business that makes, buys, or sells goods to produce income. Hr block online free tax filing This chapter does not apply to a personal service business, such as the business of a doctor, lawyer, carpenter, or painter. Hr block online free tax filing However, if you work in a personal service business and also sell or charge for the materials and supplies normally used in your business, this chapter applies to you. Hr block online free tax filing If you must account for an inventory in your business, you must generally use an accrual method of accounting for your purchases and sales. Hr block online free tax filing For more information, see chapter 2. Hr block online free tax filing Figuring Cost of Goods Sold on Schedule C, Lines 35 Through 42 Figure your cost of goods sold by filling out lines 35 through 42 of Schedule C. Hr block online free tax filing These lines are reproduced below and are explained in the discussion that follows. Hr block online free tax filing 35 Inventory at beginning of year. Hr block online free tax filing If different from last year's closing inventory, attach explanation   36 Purchases less cost of items withdrawn for personal use   37 Cost of labor. Hr block online free tax filing Do not include any amounts paid to yourself   38 Materials and supplies   39 Other costs   40 Add lines 35 through 39   41 Inventory at end of year   42 Cost of goods sold. Hr block online free tax filing Subtract line 41 from line 40. Hr block online free tax filing  Enter the result here and on line 4   Line 35 Inventory at Beginning of Year If you are a merchant, beginning inventory is the cost of merchandise on hand at the beginning of the year that you will sell to customers. Hr block online free tax filing If you are a manufacturer or producer, it includes the total cost of raw materials, work in process, finished goods, and materials and supplies used in manufacturing the goods (see Inventories in chapter 2). Hr block online free tax filing Opening inventory usually will be identical to the closing inventory of the year before. Hr block online free tax filing You must explain any difference in a schedule attached to your return. Hr block online free tax filing Donation of inventory. Hr block online free tax filing   If you contribute inventory (property that you sell in the course of your business), the amount you can claim as a contribution deduction is the smaller of its fair market value on the day you contributed it or its basis. Hr block online free tax filing The basis of donated inventory is any cost incurred for the inventory in an earlier year that you would otherwise include in your opening inventory for the year of the contribution. Hr block online free tax filing You must remove the amount of your contribution deduction from your opening inventory. Hr block online free tax filing It is not part of the cost of goods sold. Hr block online free tax filing   If the cost of donated inventory is not included in your opening inventory, the inventory's basis is zero and you cannot claim a charitable contribution deduction. Hr block online free tax filing Treat the inventory's cost as you would ordinarily treat it under your method of accounting. Hr block online free tax filing For example, include the purchase price of inventory bought and donated in the same year in the cost of goods sold for that year. Hr block online free tax filing   A special rule may apply to certain donations of food inventory. Hr block online free tax filing See Publication 526, Charitable Contributions. Hr block online free tax filing Example 1. Hr block online free tax filing You are a calendar year taxpayer who uses an accrual method of accounting. Hr block online free tax filing In 2013, you contributed property from inventory to a church. Hr block online free tax filing It had a fair market value of $600. Hr block online free tax filing The closing inventory at the end of 2012 properly included $400 of costs due to the acquisition of the property, and in 2012, you properly deducted $50 of administrative and other expenses attributable to the property as business expenses. Hr block online free tax filing The charitable contribution allowed for 2013 is $400 ($600 − $200). Hr block online free tax filing The $200 is the amount that would be ordinary income if you had sold the contributed inventory at fair market value on the date of the gift. Hr block online free tax filing The cost of goods sold you use in determining gross income for 2013 must not include the $400. Hr block online free tax filing You remove that amount from opening inventory for 2013. Hr block online free tax filing Example 2. Hr block online free tax filing If, in Example 1, you acquired the contributed property in 2013 at a cost of $400, you would include the $400 cost of the property in figuring the cost of goods sold for 2013 and deduct the $50 of administrative and other expenses attributable to the property for that year. Hr block online free tax filing You would not be allowed any charitable contribution deduction for the contributed property. Hr block online free tax filing Line 36 Purchases Less Cost of Items Withdrawn for Personal Use If you are a merchant, use the cost of all merchandise you bought for sale. Hr block online free tax filing If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into a finished product. Hr block online free tax filing Trade discounts. Hr block online free tax filing   The differences between the stated prices of articles and the actual prices you pay for them are called trade discounts. Hr block online free tax filing You must use the prices you pay (not the stated prices) in figuring your cost of purchases. Hr block online free tax filing Do not show the discount amount separately as an item in gross income. Hr block online free tax filing   An automobile dealer must record the cost of a car in inventory reduced by any manufacturer's rebate that represents a trade discount. Hr block online free tax filing Cash discounts. Hr block online free tax filing   Cash discounts are amounts your suppliers let you deduct from your purchase invoices for prompt payments. Hr block online free tax filing There are two methods of accounting for cash discounts. Hr block online free tax filing You can either credit them to a separate discount account or deduct them from total purchases for the year. Hr block online free tax filing Whichever method you use, you must be consistent. Hr block online free tax filing If you want to change your method of figuring inventory cost, you must file Form 3115, Application for Change in Accounting Method. Hr block online free tax filing For more information, see Change in Accounting Method in chapter 2. Hr block online free tax filing   If you credit cash discounts to a separate account, you must include this credit balance in your business income at the end of the tax year. Hr block online free tax filing If you use this method, do not reduce your cost of goods sold by the cash discounts. Hr block online free tax filing Purchase returns and allowances. Hr block online free tax filing   You must deduct all returns and allowances from your total purchases during the year. Hr block online free tax filing Merchandise withdrawn from sale. Hr block online free tax filing   If you withdraw merchandise for your personal or family use, you must exclude this cost from the total amount of merchandise you bought for sale. Hr block online free tax filing Do this by crediting the purchases or sales account with the cost of merchandise you withdraw for personal use. Hr block online free tax filing You must also charge the amount to your drawing account. Hr block online free tax filing   A drawing account is a separate account you should keep to record the business income you withdraw to pay for personal and family expenses. Hr block online free tax filing As stated above, you also use it to record withdrawals of merchandise for personal or family use. Hr block online free tax filing This account is also known as a “withdrawals account” or “personal account. Hr block online free tax filing ” Line 37 Cost of Labor Labor costs are usually an element of cost of goods sold only in a manufacturing or mining business. Hr block online free tax filing Small merchandisers (wholesalers, retailers, etc. Hr block online free tax filing ) usually do not have labor costs that can properly be charged to cost of goods sold. Hr block online free tax filing In a manufacturing business, labor costs properly allocable to the cost of goods sold include both the direct and indirect labor used in fabricating the raw material into a finished, saleable product. Hr block online free tax filing Direct labor. Hr block online free tax filing   Direct labor costs are the wages you pay to those employees who spend all their time working directly on the product being manufactured. Hr block online free tax filing They also include a part of the wages you pay to employees who work directly on the product part time if you can determine that part of their wages. Hr block online free tax filing Indirect labor. Hr block online free tax filing   Indirect labor costs are the wages you pay to employees who perform a general factory function that does not have any immediate or direct connection with making the saleable product, but that is a necessary part of the manufacturing process. Hr block online free tax filing Other labor. Hr block online free tax filing   Other labor costs not properly chargeable to the cost of goods sold can be deducted as selling or administrative expenses. Hr block online free tax filing Generally, the only kinds of labor costs properly chargeable to your cost of goods sold are the direct or indirect labor costs and certain other costs treated as overhead expenses properly charged to the manufacturing process, as discussed later under Line 39 Other Costs. Hr block online free tax filing Line 38 Materials and Supplies Materials and supplies, such as hardware and chemicals, used in manufacturing goods are charged to cost of goods sold. Hr block online free tax filing Those that are not used in the manufacturing process are treated as deferred charges. Hr block online free tax filing You deduct them as a business expense when you use them. Hr block online free tax filing Business expenses are discussed in chapter 8. Hr block online free tax filing Line 39 Other Costs Examples of other costs incurred in a manufacturing or mining process that you charge to your cost of goods sold are as follows. Hr block online free tax filing Containers. Hr block online free tax filing   Containers and packages that are an integral part of the product manufactured are a part of your cost of goods sold. Hr block online free tax filing If they are not an integral part of the manufactured product, their costs are shipping or selling expenses. Hr block online free tax filing Freight-in. Hr block online free tax filing   Freight-in, express-in, and cartage-in on raw materials, supplies you use in production, and merchandise you purchase for sale are all part of cost of goods sold. Hr block online free tax filing Overhead expenses. Hr block online free tax filing   Overhead expenses include expenses such as rent, heat, light, power, insurance, depreciation, taxes, maintenance, labor, and supervision. Hr block online free tax filing The overhead expenses you have as direct and necessary expenses of the manufacturing operation are included in your cost of goods sold. Hr block online free tax filing Line 40 Add Lines 35 through 39 The total of lines 35 through 39 equals the cost of the goods available for sale during the year. Hr block online free tax filing Line 41 Inventory at End of Year Subtract the value of your closing inventory (including, as appropriate, the allocable parts of the cost of raw materials and supplies, direct labor, and overhead expenses) from line 40. Hr block online free tax filing Inventory at the end of the year is also known as closing or ending inventory. Hr block online free tax filing Your ending inventory will usually become the beginning inventory of your next tax year. Hr block online free tax filing Line 42 Cost of Goods Sold When you subtract your closing inventory (inventory at the end of the year) from the cost of goods available for sale, the remainder is your cost of goods sold during the tax year. Hr block online free tax filing Prev  Up  Next   Home   More Online Publications