Tag Archives: financial problems

Money Matters: Estate Matters

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By Nathaniel Sillin

Adulthood brings certain financial responsibilities like the building of budgets, bank accounts and proper insurance. It’s surprising how few consider a proper estate plan part of that essential mix.

In fact, a recent ABC News poll found that only about 50 percent of Americans have created a will and significantly fewer have created the supporting estate documents like a living will or a power of attorney.

Preparing now for the end of your life or for illness may not sound like fun, but it is necessary. Having a plan for the future can help bring you peace and even put you on the road to stronger financial security. It can also help those you care most about. We’ve all heard cautionary tales about relatives or friends who did not have a will, and family members who were left with difficult but avoidable situations.

So, how do you start an estate plan? It has a lot to do with carefully drawn documents, but it’s the planning behind them that really counts. I would encourage you to work with a qualified financial, estate and/or tax professional in your home state at the earliest opportunity to make sure your plans fit your needs and the needs of your loved ones. Here’s a bit more detail on each.

will-signingA will, also called a testament, is the starting point. Wills are generally seen as the umbrella document that drives the rest of an individual’s estate process. A will generally accomplishes the following:

  • It details how you want to leave your property to specific people or institutions after you die.
  • If you have minor children, it allows you to name a guardian to care for them after you die or become incapacitated. It also indicates who will manage your kids’ assets, including what you leave them.
  • It lets you name your executor, the trusted person who will carry out all your wishes in the will.

If you die without a valid will, your state’s court system may get involved in distributing your assets depending on intestacy laws on the books.

A living will – also known as an advance directive – allows you to define how you want to be medically treated under specific situations, including irreversible injury or terminal illness. Depending on your state laws, living wills allow you to express your exact wishes about feeding, breathing assistance and other life-sustaining procedures in addition to how you want them carried out at certain decision points in your care. A living will may also provide information on pain or infection medications you either want or don’t want administered as well as specific instructions about your remains, including release to your family or donation for medical research.

Powers of attorney are legal documents that allow you to name a specific person to take care of your money or healthcare wishes if you are incapacitated. It is particularly wise to seek professional counsel from a qualified trusts and estates attorney in writing these Power-of-attorneydocuments. The person you designate as healthcare power of attorney will be speaking with doctors and executing your wishes on various forms of treatment; your financial power of attorney will be in charge of paying your bills and depending on the range of responsibilities you outline for that person, handling your investment and business affairs. Both are extremely important jobs that should be carried out by people you trust, and that’s why they need to be people in the know. Make their preparation part of your estate planning so they know how to step in and carry out the assignments you’ve given them efficiently.

Bottom line: Estate planning is the final, responsible step in all good financial planning. While it may be unpleasant to do, it is essential in taking care of family, loved ones and causes you support after you’re gone.

 

Money Matters: Keeping the Peace Between Adult Children in Estate Planning

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By Nathaniel Sillin

When you die, will your kids fight over your money?

It’s an important question that might be hard to answer now, but parents who devote themselves to estate planning with relevant updates over their lifetimes can potentially keep arguments between adult children to a minimum.

As of 2013, American retirees are the sixth most generous in the world when it comes to the amount of assets passed on to family, according to a survey by HSBC, the global British bank. The latest survey noted that 56 percent of American retirees planned to leave an inheritance with an average amount of $176,814.

How you allocate your estate, no matter what the amount, requires planning and proper communication. Here are a few ways to start.

Know where you stand first. If you haven’t updated your estate planning in the last 5-10 years, do so now to fully understand your complete financial picture. Like all personal finance issues, estate planning should be adjusted when significant life changes happen or there is a major shift in assets, such as when a relative needs help. In short, your estate picture has to reflect current financial realities, so before you decide how to allocate your wealth either before or after you die, seek qualified financial, tax (https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Estate-and-Gift-Taxes) and estate advice.

Once you’ve determined distribution, confirm your plan. Managing money and family are usually parallel issues until the topic of estate planning arises. For some families, splitting money, property and possessions more or less equally among adult children is a smooth process. However, when it doesn’t result in the fairest outcome for everyone involved, it can be trickier to navigate. Varying situations for each child might mean that an even split won’t work. Once you are able to determine your assets, start thinking through how you can distribute them.

Re-affirm your executor and powers of attorney. Making a will and designating various health, financial and business powers of attorney as applicable are the standard first steps in estate planning. Certain kinds of trusts might also be relevant. Generally it’s good to have documents in place (http://www.practicalmoneyskills.com/estateplanning) early in life. As your children get older, it’s a good idea to review those documents and designated leadership.

Start communicating. Hollywood has produced many a movie scene with family members sitting nervously in a lawyer’s office waiting for the will to be read. Such moments make for great comedy or drama, but not great modern estate planning. Based on what you hope to leave your family, the state of your relationship with your adult children and whatever weigh-in you get from qualified advisors, it’s usually better to communicate your plans to your children in advance in person and make sure your legal documents confirm exactly what you plan to do.

Bottom line: Could your current estate planning eventually put your kids and other family members at odds? Don’t wait – the time to update or start estate planning is right now.

 

Money Matters: Take a Close Look at Social Security

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social-security-card

By Nathaniel Sillin

If you’re not close to retirement age, it’s easy to ignore what Social Security is doing. However, some significant announcements late last year make now a very good time to pay attention.

What follows is a summary of notable changes to Social Security at the start of 2016 and ways to ensure you’re making the right retirement planning and claiming (http://www.consumerfinance.gov/retirement/before-you-claim/) decisions based on what’s ahead:

  1. 2016 Social Security payments won’t increase. In late October, Social Security (https://www.ssa.gov/myaccount/) announced that there wasn’t enough inflation in 2015 to create a cost-of-living adjustment (COLA) to monthly benefits this year. Understandably, this announcement shook up recipients who look to Social Security for a significant part of their monthly income. It’s only the third time payments were frozen in the past 40 years since automatic COLA adjustments began, but here’s the rub – all three occasions occurred after 2010. In short, most seniors will have to live with an average monthly payment of $1,341 with married beneficiaries receiving a total of $2,212.
  2. Married and divorced individuals may have to rethink the way they claim benefits. Also last October, Washington settled a federal budget battle in part by closing some notable loopholes in Social Security law that allowed certain married couples to substantially increase their benefits over time and certain divorced individuals to claim benefits from former spouses under certain circumstances. These new restrictions on so-called file-and-suspend and restricted-claim strategies go into effect this coming May. In short, if you’re close to age 62 (the earliest age you can start claiming Social Security benefits) getting qualified advice has never been more important.
  3. Other COLA-related issues. When there’s no cost-of-living adjustment, there’s no change in the maximum amount of earnings subject to the Social Security tax, which will stay at $118,500 in 2016. This means earnings above that level aren’t subject to the Social Security portion of the payroll tax or used to calculate retirement payouts. At the same time, the Social Security earnings limit for people who work and claim Social Security payments will stay at $15,720 in 2016 for people ages 65 and younger. Social Security beneficiaries who earn more than this amount will have $1 in benefits temporarily withheld for every $2 in earnings above the limit.
  4. Some benefits are going down – a little. The highest possible Social Security payment for a 66-year-old worker who signs up for Social Security this year will be $2,639 per month, down $24 from $2,663 in 2015. The reason? Social Security noted that despite no cost-of-living adjustment there was an increase in the national average wage index, one of the statistical guideposts the agency uses to calculate benefits.
  5. Service changes. If you haven’t created a My Social Security account, do so for two reasons: First, there have been reports of ID theft related to thieves attempting fraudulent signups for such accounts. Second, the agency is making more detailed account data available online such as estimates of monthly payments at various claiming ages. Also, Social Security expanded office hours in some of its field locations in 2015, so if you need face-to-face assistance, check hours of operation at your closest local office (https://secure.ssa.gov/ICON/main.jsp).

Bottom line: Social Security froze benefit amounts for the coming year, and that has an impact on both current and future recipients. You can’t fully understand your retirement without understanding how Social Security works, so now’s the time to learn.