In this issue:
Who Needs Estate Planning? You Do!
Nine Common Errors Made on Tax Returns
Teaching Kids About Financial Independence
|Who Needs Estate Planning? You Do!
Estate planning can help preserve, protect and manage your assets after you are gone or if you become unable to manage your affairs on your own. Some people see no need for estate planning until they reach a certain age. Others believe the strategy is only for the wealthy. But in truth, it’s wise for everyone to start the estate-planning process as early as possible. You’ve worked hard to build your assets. Doesn’t it make sense to work just as hard to protect those assets for your heirs?
TAKE CARE OF THE BASICS
Regardless of the size of your estate, start with the essentials. This includes:
GET STARTED ON YOUR PLAN
- Telling your loved ones where they can find your legal documents and a list of your accounts, assets and insurance policies.
- Having an estate-planning attorney draft a will and final letter of instructions.
- Establishing durable powers of attorney and healthcare proxies in case you become unable to make your own financial and healthcare decisions.
- Updating your asset titling and beneficiary designations.
- Considering the funding of a revocable living trust with your titled assets, along with a "pour-over" will (a will that transfers your estate to the trust when you pass away) to ensure that other assets avoid a costly probate process. Because probate generally involves lawyers and court fees your estate would have to pay, it's smart to try to avoid it.
Most people can meet their estate-planning goals by taking these simple steps:
Define your estate-planning goals. Answer these questions before you meet with an estate planner to save you time and money:
- Take stock of your assets and liabilities.
- List the value of your home and other physical assets.
- Gather recent statements from your bank and brokerage accounts.
- Make a list of all insurance policies, their cash values and death benefits.
- List all liabilities, including mortgages, lines of credit and other debt.
Have an estate-planning attorney draft your documents.
- Who do you want your assets to go to and in what proportions?
- Who do you want caring for your minor children?
- How much do you want to put aside for your children's ongoing care and education?
- Who should manage your financial affairs if you become unable to manage them for yourself?
- Who should be responsible for distributing your assets after you pass away?
- Who will make healthcare decisions on your behalf if you become unable to make those decisions yourself?
Laws regulating estate settlement vary from state to state, so it is recommended that you meet with a qualified local attorney to prepare your estate plan. He or she will review your objectives and explain the tools – wills, trusts, power of attorney and more – you can use to help accomplish your goals.
Follow through on your plan.
If you set up a trust, fund it promptly. If you fail to do so, the agreement won’t take effect, and your assets may not pass to your beneficiaries as you had intended.
Article courtesy of www.charlesschwab.com
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|Nine Common Errors Made on Tax Returns
Errors made on tax returns may delay the processing of your return and the arrival of your refund. Avoiding the common errors below will help ensure your refund arrives on time:
1. Recovery Rebate Credit - Many returns filed in 2009 have errors involving the Recovery Rebate Credit, a credit for people who did not receive a stimulus payment in 2008 or who did not receive the maximum amount. To avoid delays in tax refunds, it is critical that taxpayers know whether they received a payment in 2008 and the correct amount of that stimulus payment. For people using a paper tax return, the stimulus payment amount will be required when completing the related worksheet. For people using tax software, the stimulus payment amount will be needed as part of the return preparation process.
2. Incorrect or missing Social Security numbers - When entering SSNs for anyone listed on your tax return, be sure they are entered exactly as they appear on the Social Security cards. Incorrect or transposed numbers will cause delays in the processing of your return.
3. Incorrect or misspelling of dependent's last name - When entering dependents' last names on your tax return, ensure they are entered exactly as they appear on the Social Security cards.
4. Filing status errors - Make sure you choose the correct filing status for your situation.
5. Math errors - When preparing paper returns you should review all addition and subtraction to ensure it is correct. Remember, when you file electronically, the software takes care of the math for you!
6. Computation errors - Take your time. Many taxpayers are making mistakes when figuring the taxable income, withholding and estimated tax payments, Earned Income Credit, Standard Deduction for age 65 or over or blind, the taxable amount of Social Security benefits, and child and dependent care credit.
7. Incorrect account numbers for direct deposit - If you are due a refund and requested direct deposit, check your financial institution routing and account numbers.
8. Sign and date the return - An unsigned tax return is like an unsigned check; it is invalid.
9. Incorrect Adjusted Gross Income (AGI) information - Taxpayers filing electronically must sign the return electronically using a personal identification number. To verify your identity, you will be prompted to enter your AGI from your originally filed 2007 federal income tax return or your prior year PIN if you used one to file electronically last year. You should not use an AGI amount from an amended return, Form 1040X, or a math error correction made by IRS.
Article courtesy of www.irs.gov
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|Teaching Kids About Financial Independence
While some schools offer money and credit management or financial education courses, a significant number of high school students still lack a basic understanding of general financial concepts related to stocks, bonds, savings accounts and checking accounts, according to a survey from the National Jump$tart Coalition for Personal Financial Literacy. The average score on the 2006 survey, given to high school seniors to measure their knowledge of basic financial concepts, was only 52.4 percent.
The National Foundation for Credit Counseling (NFCC) suggests parents take the following steps to arm their children with financial skills that can place them on the path to financial literacy rather than debt overload.
Article courtesy of National Foundation for Credit Counseling.
- Examine your own attitudes about money. Like it or not, most children will not necessarily practice what you preach, but instead follow by example. Imagine a child who sees a parent always purchase the latest technology gadget versus a parent who saves for several weeks to purchase a new TV or computer.
- Communicate openly with children about personal finances. Words like reconcile, savings, interest, credit and debt are commonplace for adults, but not for children. Take the time to sit down with young children and teach them what each of these terms mean. For older children, start to talk about the importance of IRA and 401(k) retirement accounts, and the difference between risk and return on stocks and bonds.
- Arm children with basic financial tools. Open a savings account for your child - whether s/he is a newborn or about to enter high school. Show your children how to add gift money or part-time income to a savings account. Or consider purchasing a savings bond or some stock for your child to let her/him see firsthand how the money can grow, and at what speed.
- Teach children about budgeting. Consider giving your children an allowance and talk to them about plans to save or spend the money. Explain that if they use the $5 on candy, it will take them longer to save money for the latest video game they wants.
- Where possible, turn errands into personal finance lessons. Let your children see you compare prices, use coupons, or broker a discount on a large purchase. Take the time to explain how and why you make your purchasing decisions. Show children smart purchasing tips such as sticking to a list of needed items, or purchasing birthday gifts in bulk.
- Teach children the correct ways to use debt. With credit card companies targeting college students and more parents giving their teenage children credit cards, now is the time to teach children how to use credit wisely. Explain to children the circumstances under which debt can be used wisely and the importance of paying off the credit card every month - or paying at least double the minimum payment.
- Teach children about loans. Most children don't necessarily realize that their parents don't "own" their house, or realize the products for which people take loans. Take the time to teach children about the importance of having a monthly loan within your monthly income, and the importance of paying all bills on time to ensure a good credit rating, which can translate into a lower loan rate.
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