Posts Tagged ‘401 k’

Estate Planning: Avoiding Probate Court

Posted on: June 7th, 2010 by

Financial Planning - Rockville, MDWhen Elvis Presley died, his estate was worth over $10 million…. Then it went through probate.  After appraisal costs, legal fees, executor’s fees, and estate taxes, “The King’s” estate was left with only $3 million.  Because of improper estate planning, nearly 73% of Elvis’ estate was wiped out.  How can you avoid this?

Probate is the process of proving if a will is valid, clearing your estate of any debt, and making sure no one challenges it.  All of this takes place in court, only adding to the cost.  Will or no will, an estate must go through probate.  But there are ways to reduce or eliminate costs associated with the complicated legal process.  One of the most efficient is establishing a trust.  Assets and property with a properly drafted trust don’t have to pass through probate.  On top of that, your assets will be passed on much quicker and are more protected from creditors.

But trusts aren’t your only option.  If you a 401(k), an IRA, a life insurance policy, or all three, then you have three separate beneficiaries to name.  By routinely updating your beneficiary designation, you avoid unwanted inheritances and ensure your wishes are carried out.  Any assets that pass through beneficiary designations aren’t subject to probate, which makes their accuracy even more crucial.

You can also choose to own assets jointly with someone else.  From stocks to houses, if you own something jointly, that property is automatically passed on to the survivor.  Also, many brokerages and banks will allow you to name a beneficiary on your personal accounts by establishing a Transfer on Death (TOD) account.  It’s just another way to ensure that your assets will pass on relatively quickly and to exactly who you want.

One other option is to gift your assets to family or friends before you pass away.  By gifting the maximum tax-free amount each year, you reduce the amount of your estate.  This will, in turn, reduce the amount of probate costs, which are usually based on the total estate value.

By properly planning your estate with a financial professional, you can increase your chances of decreasing probate costs and avoid costly mistakes.  Wile not many people like to discuss their own mortality, the thought of family, friends, or charity losing large percentages of their inheritance and your estate to costs, fees, and taxes, should be enough for anyone to start planning.

3 New Ways to Save for Retirement

Posted on: April 19th, 2010 by

Financial Planning - Rockville, MDHalf of Americans don’t have a retirement plan through their employer, and those that do, few are saving enough to finance a retirement that will last several decades.  To encourage more workers to plan for the future, federal initiatives were established to make saving easier.  Often, when employees are left to their own devices, they fail to sign up for their company’s 401(k) plan.  To get more workers to save though, many large companies now automatically enroll their employees unless the worker takes the initiative to opt out.  A new rule also makes it easier for smaller companies to automatically sign up their employees and increase their amount of savings each year.

Another easy way to save is to convert your unused sick & vacation days into your 401(k).  The new federal initiative allows workers to roll over their unused days into their retirement account.  Although many workers have not taken advantage of this, it can pay off tremendously in the long run.  One theory is that, on average, US workers only receive about 15 paid days off per year and people value these days tremendously.  They may not use them all within the year, but employees tend to hold these days very close and are not willing to convert/roll them over.

Finally, especially for those that have filed extensions on their tax returns, you can have a portion of your tax return directly deposited into an IRA OR you can easily purchase Series I Savings Bonds simply by checking a box on your return.  Additionally, next year, it will become available to add co-owners to the bonds, such as children.  You can speak to your tax preparer about how to go about doing this.