Posts Tagged ‘estate planner’

2 Major Obstacles to Your Retirement Plans

Posted on: February 9th, 2015 by

Estate Planner - Rockville, MDWhen it comes to retirement, there are many things to consider: taxes rates, vacations, and maybe where you plan on living.  But experts are saying that there are 2 major obstacles that must be factored into your plans: the old notion that, “hey, I can work later in life” and make up for my savings then, and the diagnosis, either by you or a loved one, with Alzheimer’s disease.  Research has indicated that many Americans plan to keep working as a way to make up for not having saved enough or invested wisely enough for retirement, or as a way to keep health insurance.  These are both good reasons to continue working, however, many companies, according to the unemployment reports, are still laying off, specifically, 55 years and older employees.  No assumptions can be made that a job will be there for you when you reach that age or are coming up to that age, so you should look at other options now.  You should speak with a financial adviser, as it is never too late to plan for your retirement, but not doing it at all can prove problematic to your future well-being.

The second possible obstacle is Alzheimer’s disease, either suffered by you or a loved one.  It is estimated that around 5.3 million people now suffer from this disease.  And the prevalence of Alzheimer’s is supposed to grow by at least 80%  by 2025.  You don’t have to go on facebook to realize that there is only one degree of separation between you and someone with Alzheimer’s or dementia; and you may also realize that those most affected by this terrible disease are women.  When families are faced with this diagnosis, they are often left scrambling and are subject to fall victim to any one or all of these fraudulent practices: medical, financial, and legal.  Because of this, understanding that there is a 3-20 yr. lifespan for this disease, and speaking with an estate planner or financial adviser about how to plan for 20 years of dependent care (just in case) is the most responsible financial move you can make.  The second most important decision you must make is choosing your beneficiaries and power of attorney(s).  The more decisions you take control of now, the less worrying you will have later.

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.

What You Need to Know About Estate Tax

Posted on: May 11th, 2010 by

Estate Planning - Financial Planning - Rockville, MDPeople often mistakenly associate the word “estate” with an abundance of wealth or a large home when, in reality, it is relevant to everyone.  An estate is everything a person owns when he or she dies, including home and personal property, all investments, whether they be accounts (of all varieties), retirement plans, real estate, or businesses.  Most of us have not necessarily been paying much attention to estate tax in recent years because it wasn’t effecting our financial plan.  But as of January 1, 2011, the Federal estate tax is scheduled to rise from the ashes.  Only $1 million will be exempt with the rest being taxed at 55% (sometimes 60%).  With that in mind, we need to start going over the ins-and-outs of estate tax again.

First, assets inherited or received as gifts from a spouse are not taxed; its called the “unlimited marital deduction.”  It doesn’t avoid estate tax, it postpones it.  Anything that remains when the second spouse dies would be taxable as part of their estate.  This just leaves the remaining spouse more to live on while he or she is alive.

One big mistake people make is buying a life insurance policy and naming themselves as the owner.  When they do that, the proceeds become part of their estate, only adding to the amount that they are leaving behind.  If that total is more than the exemption amount and they left it to someone other than their spouse or charity, it becomes subject to estate tax.

Charitable gifts you make during your life can be much more tax-efficient than gifts through your estate plan. One advantage is that you can take an income tax deduction for the year in which the gift was made.  Another benefit is that the donation reduces your net worth and leaves less that could be subject to estate tax.  In contrast, if you make a gift in your will, it reduces your taxable estate, but there is no income tax write-off.

Most methods of saving estate taxes require you to totally give up ownership and control over assets, whether you are giving them to people directly or putting them in a trust.  If this is the route that you choose to take, make sure you are leaving yourself enough, and to be on the safe side, you should assume you will live to an advanced age.

The biggest mistake people make is failing to make an estate plan.  No one is immortal and its a realization we must all come to.  You can’t just assume that your loved ones will know what you want done with your estate.  And you are also leaving a bigger burden on them if you fail to plan for the pitfalls of the estate tax.  We all want what is best for our loved ones, so take the time to plan so that you can care for them when you are no longer here as well.

How People Lose Money Trying to Save Money

Posted on: May 11th, 2010 by

Estate Planning - Financial Planning - CPA - Rockville, MDDeath and taxes are the two inevitabilities in life that induce strong feelings of loss that can take over our decision-making, especially with regard to money.  No one wants to hand over their hard earned money to a government that can often be wasteful, well more wasteful than they would be.  In their zeal to avoid such fate, investors often overlook the big picture, which is their net profits, rather than tax savings.  From this, mistakes are made.  A lot of investors will sell their investments that have taken a loss at the end of the year to offset a gain elsewhere.  While this is a good tax move, that should not ultimately drive your investment decisions. Those stocks have often shown to rebound.  Instead, you should sell holdings whose investment thesis you no longer believe in or stocks you were planning to sell anyhow.

On the flip side, people all too often  hold stocks way too long to avoid paying taxes on the gains.  If you believe a stock is at its peak or is high enough for you to be happy with the gains, you should sell, rather than wait for it to slowly decline.  What goes up, must come down.

Minimizing taxes is an important part of estate planning, but definitely not the only part.  In setting up a trust, it’s vital to make sure you can live with the terms.  A charitable remainder trust, for example, will provide tax-advantaged income in exchange for your charitable gift.  The downside, however, is that once you make the gift, you can’t undo it.  Make sure you explore all of your options with your estate planner before jumping to a decision.

After Congress extended the Worker, Homeownership, and Business Assistance Act of 2009, floods of people rushed to buy homes by April 30 just to receive the tax credit.  You really need to regard a credit just for what it is, a credit or added bonus, not a reason to act.  Instead, with the home credit, people bought homes they couldn’t afford, paid to much, or failed to undertake proper inspections.  This goes to the same theory that just because something is on sale doesn’t mean you need to buy it.

What have we learned?  Speak with a financial adviser if you have questions.  Don’t base your investment strategies entirely around taxes.  And don’t get mixed up by incentive traps.  Always take the time to research and think reasonably about what you are doing.

Things to Remember About Estate Planning

Posted on: April 19th, 2010 by

Estate Planning - Rockville, MD“In this world nothing can be said to be certain, except death and taxes.”  – Benjamin Franklin

Benjamin Franklin makes a very astute point that the problem is death and taxes.  While facing your own mortality is not the most pleasant thing, it is something you must do and estate planning is very important, especially to those you leave behind.  The first thing you must do is prepare a will.  Dying without one is probably one of the messiest mistakes you can make – people argue, mud gets thrown, and all of it could have been easily avoided.  There are many things to consider in your will, including who will care for your children, what to do if you get put on life support, and ultimately, who will get what.  Resolving these issues now will prevent a lot of problems later.

Details, details, details… they are of the utmost importance in estate planning.  There are many obvious details, like funeral planning or finding a guardian for living dependents, but there are easily overlooked ones as well.  Make sure that you have appropriately (and are up to date on) assigned beneficiaries for your retirement accounts.  Also, you need to choose a reliable executor and set up a durable power of attorney to direct assets and investments.

Make sure that you have an adequate amount of life insurance.  If your estate doesn’t amount to enough to replace your income  in terms of supporting your family, then the death benefit from an insurance policy may be the answer.  You need to calculate how much yearly income you will need to replace to determine how much insurance you will need to carry.  Remember to reassess your calculations though as your financial situation changes.  As your situation changes, so should your policy.

Although many of these things can be done on your own, if your estate is complicated, you may want to consider consulting with an accountant, estate planner, or estate lawyer to resolve any possible tax issues now.

Rockville, Maryland – Basic Estate Planning Steps

Posted on: March 16th, 2010 by

CPA Rockville - Estate PlanRockville, Maryland – There are 8 basic steps to follow to planning your estate that coincide with the steps in your life:

1) Once you reach adulthood (18 yrs old), you should create both financial and medical powers of attorney.

2) Upon marriage, both you and your spouse should have, at the very least, a simple will.  At this time, powers of attorney can be switched over to your spouse if you so desire.

3) At the birth/adoption of the first child, both parents should acquire a sufficient amount of life insurance to ensure their child’s well-being until at least adulthood.  Legal documentation must also be drafted to ensure individual(s) designated to care for their child will , in fact, be the one(s) awarded custody.  As the number of children increase, so should the insurance policies.

4) As your assets increase and your children age, a trust may be developed to preserve your assets for the benefit of your children.

5) When you become an “empty nester”, your life insurance coverage may be reduced, but you may want to consider investing in long-term care insurance.

6) Your end of life wishes must be discussed and adequately documented by an estate planner in Rockville.

7) Prepaid funerals, burial plans, and cremations are very common these days.  These services only increase over time, however if you make arrangements and payments ahead of time, you can often get today’s rate for a future date down the line.

8 ) Within your trust, you should include an itemized list of your valuable possessions and who you are willing them to, to prevent turmoil in the future.

Rockville, Maryland – When Should You Begin Estate Planning?

Posted on: March 15th, 2010 by

Estate Planning - Rockville CPARockville, Maryland – Contrary to popular belief, estate planning is not just for the elderly; it’s a necessity for people of all ages, especially those with children.  Not only do you need to determine who will care for your children in the event that you are unable, the people you choose must be willing to do so, and it must all be well documented in writing.  Once this decision is made, you can start thinking about your property and your possessions.

An estate plan is a living document that will grow in volume as you and your family advance in life.  Just as your financial planner in Rockville encourages you to revise your financial plan on an annual basis, your estate plan should be reviewed and revised as needed.  There are a number of basic steps for a solid estate plan, but are by no means inclusive of the entire process.  Each step your chosen estate planner in Rockville goes over with you is important to address at each of the different stages throughout your life.

Rockville, Maryland – What Is Estate Planning?

Posted on: March 15th, 2010 by

Rockville, MarylandRockville, Maryland – Although, one’s estate can most easily be defined as his or her property, there is no precise definition for estate planning.  It is, generally, a series of steps to be taken so that when you die, your property will be handled in a way that reflects your values and wishes regarding your survivors and any charitable interests you may have.

A good estate plan is designed to bring reality in line with your desires to the greatest extent possible, given the limitations and practical problems you may face.  The drafting of this plan will usually include candid family discussions, drafting a will and trust, changing the designated beneficiaries on certain accounts, buying life insurance (and which type to buy), etc.  As for limitations or “problems”, the most common include insufficient money to fund all of your goals and survivors who do not act as hoped or expected.

The most important thing to remember is that an estate plan needs to be given adequate thought and consideration.  If you hire the best estate planner in Rockville, MD for you, who has your best interest in mind, the process is not as daunting as you may fear.