The Road to Financial Stability

Finance | Mark J. Ackerman | Feb 06, 2015

Americans, by and large, are “do-it-yourselfers”. Books, websites, and software programs exist solely to help to tackle all levels of everyday challenges. The same holds true for tax preparers and for estate planning. There is certainly no shortage of information for those thinking it is no big deal to prepare their own financial planning documents and to do their own financial plan. Although do-it-yourself financial planning can cost a fraction of what accountants, attorneys, and financial planners charge, depending on your personal situation, this may be cheaper now, but very expensive down the road.

It is true that something is better than nothing, but do-it-yourself planning may increase the risk that your spouse or children’s financial future may be compromised. The state may step in and make important decisions for you, such as how the property will be distributed, who will care for your minor children, and what medical care you will receive if you are unable to make your wishes known. The financial plan has to be exercised when you or a loved one dies or becomes very ill. What seems to be simple isn’t always what it appears to be.

Most people’s net worth does not require planning to manage federal estate taxes (typically those with more than $5,430,000 in 2015). Most financial plans today aim to meet the common complexities of today’s culture. Common complexities such as children with special needs, children from current and previous marriages, property that has appreciated in value resulting in capital gains, and property owned prior to your current relationship, make planning extremely important at any age or circumstance.

The documents that are ultimately produced (the will, health proxy, power of attorney, trusts, etc.) are merely the tools used to put your wishes into effect and accomplish your goals for your situation. A financial plan has no age restriction. In fact, young people with young and/or older parent responsibility, often have more of a need for a solid plan than elderly people.

Common areas that must be addressed in order to avoid making a mistake that can cause financial and personal devastation to your family include:

Failure to execute a Will, a Health Care Power of Attorney, a Living Will, and a Financial Power of Attorney will cause unnecessary delays. Without these documents in place, your family may need to go through a lengthy probate court procedure to get the person you desire to be appointed your guardian, your executor, or trustee. Once executed, these documents should be revised on an annual basis and changed if necessary to meet your changing circumstance.

Failure to make sure that you and your life partner have enough life, disability and long-term care insurance to provide for your families future.

Failure to use a trust in your plan to ensure that your life partner and your children do not recklessly deplete their inheritance or transfer of wealth during your lifetime. You want your assets to pass to the heirs you want. This may especially be appropriate in the case of second marriages where there are children or step-grandchildren.

Failure to use a trust or transfer on death provisions for your assets, resulting in your estate needing to go through probate, a costly time-consuming court process, to distribute assets not specifically named on the original asset title.

Failure to designate a person who will raise your children if both parents die without a will or without naming a guardian in your will. It is a very big responsibility, mentally and financially. Make sure you discuss this with them before you make provisions. Make sure there is enough life insurance to provide for what may be a long and costly time period. This should include the cost of food, insurance, education, health insurance, and possibly special needs.

Failure to organize your records, causing stress on your family and loved ones who are trying to find all of your important documents. Make sure that your spouse is totally familiar with all aspects of your family’s finances. Make them an integral part of this process and plan! Make sure they know your normal financial obligations and where they are being paid from.

Failure to designate beneficiaries of your IRAs, 401k and other retirement plans, resulting in negative tax consequences for your heirs.

Failure to plan your business succession to avoid chaos and possibly causing your business to fail or sell at a bargain price.

Failure to pre-plan your funeral, causing stress for your family and loved ones when you die.

There are many reasons for being reluctant to start financial planning. Many we hear all the time: “My partner or spouse takes care of the finances,” “I don’t know where to begin,” “I don’t have time,” and the most famous, “if I do a financial plan, I am tempting fate.” There are overwhelming reasons to start! Taking charge of your finances means taking charge of your life.

Taking pride as a “pro-active” firm means helping our clients reach their financial goals. We act as the quarterback of your financial team. If you already have an attorney or a financial planner, we will work with them. If you do not, we can recommend one that will fit your personality, needs, and goals.


Top Ten Year-End Tax Planning Checklist

As the year draws to a close, taking proactive steps in your financial planning can significantly impact your tax liability. This checklist provides a guide to key strategies that individuals can consider before the end of the year to potentially decrease their income tax. By strategically managing income, deductions, and investments, you can optimize your tax situation and position yourself for a more tax-efficient financial future.

Read More »