Financial News and Tips

Whether your estate is large or small, nearly everyone can benefit from having a well-designed estate plan in place. But many people – even those who realize the importance of proper financial planning – haven’t developed an adequate plan for their estate.

Some haven’t developed an estate plan because they don’t want to face their own mortality; others just can’t seem to find the time to put a plan together. When it comes to estate planning, what’s not done is often the biggest mistake that people can make.

Take Control of Your Estate Planning
You work hard to build your estate. Don’t you want to be in charge of who inherits it? Your estate can build a legacy for your heirs. By implementing proper estate planning strategies, you’ll be able to provide for your loved ones according to your wishes, while also planning for and protecting against unexpected events that may preempt your best-laid plans along the way.

Without an estate plan in place, federal and state laws will dictate how property, personal items, and assets are divided, with no regard for your wishes. Conflicts due to family issues and legal problems could result, tying up the estate and slowing down the distribution of assets. Additional administrative expenses and taxes, which must be deducted from the estate, can also reduce the overall value of your estate.

You can prevent this scenario by taking steps now to put together an effective estate plan.

Take Inventory of Your Assets
For federal estate tax purposes, your assets include your investments, retirement savings, insurance policies, and real estate or business interests, as well as items like cars and collectibles. Next, decide who you would like to inherit your assets.

Create a Will
Everyone needs a will. If you and your spouse die without a will, a state court judge will not only appoint a guardian for your minor children but will decide how to distribute your assets among your heirs in accordance with state law. If you have a large estate and fail to protect it from federal estate taxes, you could end up forfeiting tens or even hundreds of thousands of dollars to the IRS that otherwise could have enriched the lives of your children or beneficiaries.

Consider Setting Up a Trust
Trusts aren’t just for the wealthy. Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay, and publicity of probate court, which administers wills. Some trusts offer greater protection of your assets from creditors and lawsuits. In addition, there are many non-tax reasons for having a trust, especially when your trust beneficiaries are too young, or otherwise unable, to manage your property themselves.

Name Durable Powers of Attorney
By naming a property and/or a health care power of attorney, you are appointing someone to make decisions and do business on your behalf if you are rendered incapacitated or become legally incompetent.

Keep Documents Current
Once you put your estate plan in place, occasionally review and possibly amend it in response to changes in the estate tax law, changes in your marital status, substantial changes in your net worth, the birth or adoption of a child, or the death of a beneficiary. Let loved ones know where they can find your important documents.

Maximize Your Estate Goals
The legacy you leave will depend on the estate plan you prepare. Through careful thought and use of proper tools, you can leave your beneficiaries with the estate you’ve always envisioned.

Tags: estate plan, financial assets inventory
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How To Choose A Savings Account

It’s always a good idea to build up a fund of savings, or emergency fund, to meet any unexpected expenses and generally provide a bit of financial breathing space, and investment for our futures is becoming more and more important as uncertainty over pension arrangements in the long term grows. There are also compelling reasons to take savings seriously as the after effects of the recent credit binge become ever more apparent.

So savings are a good idea – okay – but as with most things financial, things aren’t as simple as they seem at first. There are several different kinds of savings account on the market, and which one you choose depends on your financial circumstances and how you plan to save into the future.

Regular Savings Accounts

With regular savings accounts you commit to depositing an amount of money each month, either a fixed sum you decide on before you open an account, or any amount within a range specified by the bank. These accounts often have attractive interest rates, as their limits on deposits mean that the total interest paid out is also limited and so the bank’s exposure is under control.

Regular accounts make sense for people with no capital to invest, but some surplus income each month. They can also work as part of a mixed strategy, with any capital invested in a long term, high interest account, and new deposits put into a regular saver to take advantage of the good rates.

Deposit Accounts

These accounts don’t impose any kind of limits on deposits – within reason, you can deposit as much or as little as you like, whenever you have funds to invest. They make sense if you have some capital to invest but no fixed regular surplus income. There are three kinds of deposit account, with different levels of access to your money:

Instant Access – With these, you can withdraw your money at any time, without losing out on any interest already earned.

Interest Penalty – No interest is paid for any month in which a withdrawal is made.

Notice Accounts – A specified number of days notice must be given before a withdrawal is made in order to avoid any interest penalties.

In general, the more restricted your access to your money, the better the interest rate you can expect to receive.

Bonds

The final type of savings account we’ll look at is perhaps moving more into the realm of investment rather than savings per se, but as these accounts are offered by many mainstream banks they’re worth considering.

With a bond, you hand over a fixed sum of money which is locked away for a specified period of years, with no access allowed at all. At the end of the term, your initial investment will be refunded along with the return it’s made. Depending on the type of bond, this return will either be a fixed rate of interest, an interest rate tied to base rates, or the results of a stockmarket investment usually with a minimum guaranteed return.

These accounts are only really suitable for people with plenty of capital to invest, with no need to access the funds during the term, and who are looking for a good return without the uncertainty involved in other possibly higher yield types of investment such as shares.

Tags: deposit accounts, savings accounts
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Most taxpayers have already filed their federal tax returns, but many may still have questions. Here’s what the IRS wants you to know about refund status, tax preparation and record keeping, mistakes and what to do if you move.

Tax Refund Information

You can go online to check the status of your 2009 refund 72 hours after IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after you mail a paper return. Be sure to have a copy of your 2009 tax return available because you will need to know your filing status, the first Social Security number shown on the return, and the exact whole-dollar amount of the refund. You have three options for checking on your refund:

Go to IRS.gov, and click on “Where’s My Refund”
Call 1-800-829-4477 24 hours a day, seven days a week for automated refund information
Call 1-800-829-1954 during the hours shown in your tax form instructions

What Tax Records Should I Keep?

Normally, tax records should be kept for three years, but some documents — such as records relating to a home purchase or sale, stock transactions, IRAs and business or rental property — should be kept longer.

You should keep copies of tax returns you have filed and the tax forms package as part of your records. They may be helpful in amending already filed returns or preparing future returns.

Tax Preparation and Change of Address

If you move after you filed your return, you should send Form 8822, Change of Address to the Internal Revenue Service. If you are expecting a refund through the mail, you should also file a change of address with the U.S. Postal Service.

What If I Made a Mistake in Tax Preparation?

Errors may delay your refund or result in notices being sent to you. If you discover an error on your return, you can correct your return by filing an amended return using Form 1040X, Amended U.S. Individual Income Tax Return.

Visit IRS.gov for more information on refunds, record keeping, address changes and amended returns.

Useful Resources:

Where’s My Refund
Publication 552, Record Keeping for Individuals
Form 8822, Change of Address
Form 1040X, Amended U.S. Individual Income Tax Return

Tags: amended returns, change of address, record keeping, tax info
Posted in Tax Information, Tax Preparation | No Comments »