Tag Archives: money

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.

 

Create a Financial Calendar for the New Year

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By Nathaniel Sillin

When was the last time you made a financial resolution on New Year’s Eve? If you can’t remember, you’re in good company.

The Allianz Life Insurance Company of North America’s annual New Year’s resolutions survey for 2014 reported that 49 percent of respondents said that health and wellness were their first priorities for the coming year, up from 43 percent in 2013. Only 30 percent ranked financial stability as their top goal for the year.

new-years-resolutions1

In 2016, maybe it’s time to push financial fitness to the top of your list by creating an annual financial calendar that helps you save, spend and invest a little smarter. Here are some suggestions to build your calendar:

Set three important money goals for the year. Three money goals may not sound like a lot, but if you’ve never thought about money goals before, establishing these targets can make a major difference in your financial life. Set goals that address key money concerns or serve as a springboard for a solid financial future. Choose what makes sense for you, but here are three basic goals to start with:

Create or reset your budget. If you’ve never made a budget before, spend a month or two tracking everything you spend. Review your findings closely and see whether you’re spending less than you earn. If not, determine if you can cut spending to direct more funds to meet key goals. If you already have a budget, consider reevaluating your finances to see where you could cut costs.

Build an emergency fund. An emergency fund (http://www.practicalmoneyskills.com/emergencyfund) contains between three to six months of living expenses you can draw upon only in a real financial emergency such as unemployment, illness or a major unplanned expense.

Save for something special. Make one of your three goals a fun goal – a vacation, a new bike, a wardrobe upgrade – something that feels like a reward.

Here are calendar items that might help you reach those goals.

Make sure you note staggered receipt dates for each of your three free credit reports from Experian, TransUnion and Equifax so you can keep a steady eye on your credit and spot irregularities if they happen.

Prevent severe money surprises by marking key repair or replacement dates on home, appliance and other personal expenses that might be coming up in the future. Use the time you have now to schedule inspections and estimates for each so you’ll be able to start setting aside funds in advance.

Retirement readiness is another key calendar item. At least once a year, consider reviewing your holdings in retirement or investment accounts to make sure they’re still performing as you’ve planned or if not, whether you need to restructure the investments in your portfolio.

Put the open enrollment dates for employer- or self-employment benefits on your calendar and then mark a date several weeks before to allow you to start thinking through necessary changes. The way you choose employer or self-employment benefits is a key part of your financial planning and should intersect with other independent money decisions you’re making for yourself and your family.

Insurance renewal dates are important to mark as well. If you’re not comparison-shopping for the auto, homeowners or health insurance coverage you buy on your own, there’s a good possibility you’re losing out on money, service or coverage.

Set two dates each year to review your overall finances. You might consider dates in June and November to see how you’re doing with budget, savings, spending, investment and tax issues. The June date is for corrective actions; the November date is to determine the last-minute spending, savings or tax moves you want to make before December 31 and to set financial goals for the New Year. If you work with a qualified financial or tax expert, consider involving him or her in the conversation.

Bottom line: If you use a calendar or datebook to keep on schedule, add important money dates and activities so you can meet your lifetime financial goals.