From the Financial Hotline
By: Financial Hotline
Summer 2025 (Vol. 43, No. 2)
Q: What are the basics of creating and funding a trust?
A: Funding a trust means transferring ownership of your assets into the trust so they can be managed and distributed according to your wishes. You may need to work with an attorney to draft your trust document. You need to choose the type of trust you need (revocable or irrevocable) and name your trustee and beneficiaries. Creating the trust documents is only the first step. You can’t just name what you want included, you must also transfer the ownership of those assets to the trust.
Gather documents for everything you own including bank accounts, investment accounts, vehicles and real estate. For Real Estate, you will need to prepare and record a new deed naming the trust as owner. For bank and other financial accounts, contact the bank or financial institution to retitle accounts or open new ones in the trust’s name. For businesses you may need to update the annual report and reissue stock certificates. Vehicles will need to be retitled with the DMV. You can use a general assignment document to transfer items like art, jewelry, furniture, and collectibles. For life insurance, change the beneficiary to the name of the trust.
Assets, like IRAs and 401(k)s, should not be retitled into a trust due to tax consequences. Instead, designate the trust as a beneficiary. Transferring real estate may involve recording fees or affect property tax exemptions—check with your local county recorder.
Keep copies of all transfer documents with your trust paperwork and don’t forget to update your trust as you acquire new assets or your life circumstances change.
Q: I will be traveling a lot for business this year and my husband will accompany me. What can I deduct?
A: If you own a company and travel for business, it’s possible to deduct most of the expenses but there are some restrictions. If your husband is your employee, you may be able to deduct most of his or her travel expenses, if his or her presence on the trip serves a bona fide business purpose. For example, if you’re attending a trade show and your spouse is one of your company’s leading sales reps, negotiating and closing sales at the show would likely qualify as a bona fide business purpose. But it isn’t sufficient for your spouse to merely be “helpful” in incidental ways, such as by typing your meeting notes.
Similarly, a spouse’s participation in social functions, such as being a host or hostess, generally isn’t enough to establish a business purpose. That is, if his or her purpose is to develop general goodwill for customers or associates, this is usually insufficient. Further, if there’s a vacation element to the trip (for example, if your spouse spends most of the time sightseeing), it will be more challenging to establish a business purpose for his or her presence on the trip. On the other hand, a bona fide business purpose exists if your spouse’s presence is necessary to care for your serious medical condition while you’re traveling for business.
If these tests are satisfied in relation to your spouse, you can claim the typical deductions allowed for business travel away from home. These include the costs of transportation, meals, lodging and incidentals such as dry cleaning and phone calls.
If your spouse isn’t your employee, you won’t likely qualify to deduct all of his or her travel costs. But you may still be able to deduct a substantial portion of the trip’s costs. This is because the rules don’t require you to allocate 50% of your travel costs to your spouse, only any additional costs you incur for him or her.
For example, renting a car or motel room is the same price whether your spouse is along or not. But if you need an extra ticket for public transportation, a second meal or any other separate expenses incurred by your spouse won’t be deductible.
Q: Are there specific tax advantaged accounts for disabled individuals?
A: Eligible individuals with disabilities and their family members can use Achieving a Better Life Experience (ABLE) accounts to pay for qualified expenses. These are savings or investment accounts that don’t affect eligibility for government assistance programs. Contributions aren’t tax deductible, but withdrawals used for qualified expenses are tax free, like 529 education savings plans. The 2025 contribution limit is $19,000. Qualified expenses include housing, education, transportation and basic living expenses. ABLE account beneficiaries may be eligible to claim the Saver’s Credit for a percentage of their contributions. This is a nonrefundable credit for people who are 18 or older, aren’t dependents or full-time students, and meet certain income requirements.