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Avoid These Common Estate Planning Mistakes

Aug 09, 2022

Most of us don’t enjoy thinking about it, but we all need to make a plan for our assets (and other final wishes) after we pass away. But because estate planning can often involve complicated legal maneuvers, it can be easy to miss something important. Save your loved ones a lot of time, money, and stress by watching out for these common estate planning mistakes. 


The DIY approach. Nope, you shouldn’t just write out your own final wishes and hope that your loved ones will abide by them. These situations actually tend to invite legal challenges, and that can be costly for your beneficiaries who need to defend their right to what you bequeathed to them. It’s better to consult an attorney and draft a more airtight version of your final wishes. 


Failing to name beneficiaries. Many types of financial assets, such as retirement accounts and life insurance policies, allow you to name one or more beneficiaries. This way, the assets can be transferred very quickly after your death, allowing them to bypass the time and stress of probate court. But that can’t happen if you don’t name beneficiaries, along with backup beneficiaries just in case. 


Leaving it up to your spouse. If you’ve divorced the other parent of your children and subsequently remarried, you might hope that your new spouse will leave everything to your children after you both die. But if you pass away first, there is nothing stopping them from changing beneficiaries on accounts or making other decisions that are contrary to your original wishes. 


Leaving a timeshare to your kids (or anyone, unless you’re certain they want it). If you include your timeshare as an asset in a trust, it will be automatically transferred to your beneficiaries upon your death. The problem is, not everyone wants to be saddled with the expense and hassles of a timeshare! Instead, allow your death to serve as an “opt out” on the property. That way, no one inherits something that they regret. 


Overlooking the value of a trust. Trusts are such a valuable estate planning tool, because you can place assets in them for immediate transfer to your heirs upon your death. That means no waiting through probate court, no fighting over assets, and often lower fees from your estate planning attorney. There can be tax benefits from doing things this way, too. 


Because estate planning dovetails with your overall financial future, we can also help you make decisions in this area. Let’s discuss your plans at our next appointment, so that we can help you avoid any potential pitfalls. 

Life Insurance for Different Life Stages: Tailoring Your Policy to Your Needs

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Life insurance isn't one-size-fits-all. Just as your life evolves over time, so too should your insurance coverage. Whether you're starting your career, raising a family, or enjoying retirement, understanding how to tailor your life insurance policy to your current life stage is essential for ensuring adequate protection for you and your loved ones. Starting Out: Young Professionals As a young professional just starting out in your career, life insurance might not be at the top of your priority list. However, this is the ideal time to secure coverage, as premiums are typically lower when you're young and healthy. A term life insurance policy can provide affordable protection for your loved ones in the event of your untimely passing while also allowing flexibility to upgrade to permanent coverage later on. Growing Family: Parents and Homeowners For parents and homeowners, life insurance becomes even more crucial. You want to ensure your family is financially secure and able to maintain their standard of living if something were to happen to you. Consider a combination of term and permanent life insurance to cover immediate expenses, such as mortgage payments and childcare costs, as well as long-term financial needs like college tuition and inheritance planning. Midlife Milestones: Empty Nesters and Career Climbers As your children grow up and become financially independent, your insurance needs may shift. You might choose to adjust your coverage to reflect your changing financial obligations and goals. This could mean reducing coverage amounts or transitioning to a policy with cash value accumulation features, such as whole life insurance, to supplement retirement savings and leave a legacy for your heirs. Retirement: Golden Years and Legacy Planning In retirement, life insurance can still play a valuable role in your financial plan. While your need for income replacement may decrease, you may still want coverage to cover final expenses, estate taxes, or leave a financial legacy for your loved ones. An insurance policy with guaranteed death benefits, such as universal life insurance, can provide peace of mind and help protect your assets for future generations. Review and Adjust Regularly Regardless of your life stage, it's essential to review your life insurance coverage regularly to ensure it continues to meet your needs. Major life events, such as marriage, divorce, birth of a child, or career changes, may warrant updates to your policy. Working with a trusted life insurance broker can help you incorporate these changes into your long-term plans and make informed decisions about your coverage. Life insurance is a vital component of your financial plan at every stage of life. Meet with us now and regularly in the future so that we can help you evaluate and adjust your life insurance policy to ensure that it truly meets your needs.

How to Safeguard Against an IRS Audit

08 Apr, 2024
Receiving a notice from the IRS for an audit can be a nerve-wracking experience. The time, effort, and potential financial consequences make it a situation you'd rather avoid. Fortunately, many audits stem from avoidable errors. Here's how you can avoid the five most common audit triggers and keep your tax returns in the clear. Ensure You Report All Income Income discrepancies are a major red flag for the IRS. While taxes are typically withheld from regular wages, other sources of income, like business earnings or capital gains, may not have taxes automatically deducted. Be vigilant in accurately reporting all sources of income, whether you receive a 1099 form or not. Document and report any non-wage income meticulously to prevent underreporting. Explain Significant Income Fluctuations Significant fluctuations in income from year to year can draw the IRS's attention. If your income varies widely, provide explanations or notes with your tax filings. Whether it's due to changes in business circumstances or other factors, clarifying these fluctuations can help prevent misunderstandings. Document Business Losses Carefully While it's common for businesses to experience losses, chronic or substantial losses can raise eyebrows at the IRS. Keep detailed records of your business finances, especially in the early years. Additionally, if you operate a sole proprietorship, ensure your business activities are distinguishable from hobbies to justify loss deductions. Support Your Deductions Certain deductions, such as large charitable contributions or home office expenses, may attract scrutiny. Be prepared to provide supporting documentation for all deductions claimed on your tax return. Thorough records can help substantiate your deductions and alleviate concerns during an audit. Accurately Value Assets For estate tax returns, undervalued assets are a common trigger for audits. When valuing assets without a public market price, seek multiple appraisals from qualified professionals. Having multiple valuations can strengthen your position and minimize the risk of an audit. Remember, even if you enlist professional help for your taxes, the responsibility for accuracy ultimately lies with you. Review your tax returns carefully before signing them to ensure everything is in order. Understanding the Different Types of Audits IRS audits come in three main varieties, each with its own level of intensity. Correspondence Audit. Conducted through the mail, this audit is often triggered by missing information or minor discrepancies. Office Audit. Requires a visit to an IRS office, typically for more complex tax returns or multiple disputed items. Field Audit. The most comprehensive type, conducted in person at your home or business, involves a thorough examination of your return. Regardless of the type, the IRS will provide a written request for specific documents beforehand. By being proactive and thorough in your tax reporting, you can minimize the risk of an audit and ensure a smoother process if one does occur.
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