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Diamond Bar Accountant On: “Planning For Uncertainty”
"Until you make peace with who you are, you’ll never be content with what you have." -Doris Mortman
I happen to think that we’re in a sort of "in between" stage right about now, when it comes to the tension between making online commerce technology "easy", but also ensuring the fraudsters are also kept at bay.
For example, I ran across this again the other day, and though it’s been around for a bit, not very many people know about it: Some credit cards now offer their clients a "temporary" number for online transactions. This feature (called "ShopSafe" by BoA: http://www.bankofamerica.com/privacy/index.cfm?template=learn_about_shopsafe), allows you to create a unique temporary credit card number every time you make an online purchase. What’s great is that this number acts exactly like your *real* credit card number, except that it has a lower limit and a quick expiration date. For example, if you are purchasing a $35 item, you can create a temporary number with a $40 credit limit that expires in two months.
Merchants won’t know the difference, but if their lack of security compromises the number you use, the thieves will find themselves with $5 more credit on a card that may already be expired!
Pretty nice, huh?
In the future, I’m sure that there will be new technology tools that make online commerce even that much more secure.
We’re also in an "in between" stage with the estate tax and estate planning world, and if you get complacent, you could be in for a rude awakening.
Here’s what I mean…
Rowel Manasan’s
"Straight Talk" Personal Strategy
Don’t Let Estate Tax Uncertainty Come Back and Bite You
Did you, like many people, breathe a sigh of relief when the estate tax exemption was set at $5million?
Well, don’t get complacent.
A number of our clients and others are planning very aggressively and taking significant advantage of what may be a small window of opportunity. After all, we don’t know what tomorrow will bring.
You see, after the temporary suspension in 2010, the estate tax had been poised to jump to 55% with a $1 million exemption, or $2 million for couples. Instead, the rate was set at 35% for two years and applies only to estates worth more than $5 million, or $10 million for couples.
However, the word "temporary" occurs 43 times in the 2010 tax act’s 30 pages. That is simply a fact we have to take into consideration in our financial plans, as a result.
In the end, many clients who don’t have $5million in assets are driven to do an estate (wisely) in order to avoid chaos and discord among beneficiaries, to avoid probate, and to protect children from mismanaging their inheritance. We see that all the time.
But the point is — don’t think that just because there’s an exemption now that it will always be there. Plan for each circumstance. And let us help you do so: (888) 285-0508.
Diamond Bar Lawyer Reports: “These Are Just Wrong”
"The most important thing in communication is hearing what isn’t said." – Peter F. Drucker
A few weeks ago, I wrote about common myths around the process of estate planning. Look, it was in the middle of the holidays, so I won’t blame you for missing it.
But for the sake of clarity, one of the things I’d like to do with this series is establish this truth: Estate planning is MUCH more than avoiding the estate tax.
In my opinion, this is why so many regular families get taken by surprise when they least expect it–or need it. After all, *their* estate shouldn’t be subject to the estate tax.
But then they get socked with all kinds of other fees, maybe even placed in probate and their wishes aren’t honored by the courts.
All because they never went through the process with someone like us.
So, in that vein, I’m continuing my series from a couple weeks ago and doing some "myth busting". Read on…and send your feedback…
Rowel Manasan’s
"Straight Talk" Personal Strategy
More Reasons Why People Mistakenly Forgo Estate Planning…
A few weeks ago, I wrote about these common myths–still held by the majority of Americans. In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.
Much of the reason for this is because of misconceptions about estate planning, and I dealt with two already:
Myth 1. Only rich people prepare estate plans.
Myth 2. Everything goes to your spouse, if something happens.
Well, I’ve got three more for you to chew on, and dispense with.
Myth 3. After I create my will or living trust, there’s nothing else to think about.
Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.
On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.
In fact, it’s a good idea to meet with us every 3 or 4 years to make sure your plan is fully up-to-date. (Which, incidentally, we provide free to certain clients. Ask us about that.)
Myth 4. If I have a will, my estate automatically won’t go through probate.
Well, again–that’s not the case. In fact, ALL wills are subject to "probate". This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.
So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.
Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush. Which is why it’s important to walk with a competent guide on these matters.
By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.
Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.
Myth 5. I could be held responsible for a deceased parent’s debts.
No, you’re not responsible for credit card debts from your parents.
In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.
Most of all, we’re here to help.
Use This During Tax Time
"A daily routine built on good habits and disciplines separates the most successful among us from everyone else." – Darren Hardy
Last week I wrote about financial resolutions — and, well, John Tierney of the New York Times must be a reader!
The columnist devoted a fantastic column to the keeping of resolutions and though he didn’t name me directly, he made a bunch of great points. I read this in the paper version, but I wanted you to see it online. In my opinion, here’s the key bit (my emphasis):
The study, led by Wilhelm Hofmann of the University of Chicago, showed that the people with the best self-control, paradoxically, are the ones who use their willpower less often. Instead of fending off one urge after another, these people set up their lives to minimize temptations. They play offense, not defense, using their willpower in advance so that they avoid crises, conserve their energy and outsource as much self-control as they can.
Alright — so perhaps he’s not talking about the automation and financial resolutions which I discussed! But I do hope you noticed what I emphasized there: sometimes our best method to stick to our resolutions is to not rely on our simple willpower — but to outsource it.
I’m running down some tools for you on this for next week, which I hope will help. But may I also suggest that — as many people told me over the holidays — setting up a secure plan for your family finances in the case of emergencies or tragedy is very simple to outsource. To us. Call: (888) 285-0508 and we’ll help you check that one off your list!
And just because we outsource, doesn’t mean we have to "dump".
So with the help of my CPA, I’ve put together this list of items you should be gathering these next few weeks as you prepare for tax time. It’s my hope that this will help YOU to delegate this sometimes-painful process effectively. I hope it’s helpful!
Rowel Manasan’s
"Straight Talk" Personal Strategy
Manasan’s Tax Season Checklist
This list is mostly complete–but I’m always looking to add to it! Let me know if you think I missed anything.
Personal Data
Social Security Numbers (including spouse and children)
Child care provider tax I.D. or Social Security Number
Employment & Income Data
W-2 forms for this year
Tax refunds and unemployment compensation: Form 1099-G
Miscellaneous income including rent: Form 1099-MISC
Partnership and trust income
Pensions and annuities
Alimony received
Jury duty pay
Gambling and lottery winnings
Prizes and awards
Scholarships and fellowships
State and local income tax refunds
Unemployment compensation
Homeowner/Renter Data
Residential address(es) for this year
Mortgage interest: Form 1098
Sale of your home or other real estate: Form 1099-S
Second mortgage interest paid
Real estate taxes paid
Rent paid during tax year
Moving expenses
Financial Assets
Interest income statements: Form 1099-INT & 1099-OID
Dividend income statements: Form 1099-DIV
Proceeds from broker transactions: Form 1099-B
Retirement plan distribution: Form 1099-R
Capital gains or losses
Financial Liabilities
Auto loans and leases (account numbers and car value) if vehicle used for business
Student loan interest paid
Early withdrawal penalties on CDs and other fixed time deposits
Automobiles
Personal property tax information
Department of Motor Vehicles fees
Expenses
Gifts to charity (receipts for any single donations of $250 or more)
Unreimbursed expenses related to volunteer work
Unreimbursed expenses related to your job (travel expenses, entertainment, uniforms, union dues, subscriptions)
Investment expenses
Job-hunting expenses
Education expenses (tuition and fees)
Child care expenses
Medical Savings Accounts
Adoption expenses
Alimony paid
Tax return preparation expenses and fees
Self-Employment Data
Estimated tax vouchers for the current year
Self-employment tax
Self-employment SEP plans
Self-employed health insurance
K-1s on all partnerships
Receipts or documentation for business-related expenses
Farm income
Deduction Documents
State and local income taxes
IRA, Keogh and other retirement plan contributions
Medical expenses
Casualty or theft losses
Other miscellaneous deductions
Resolution-ed Out?
"It is in your moments of decision that your destiny is shaped."
- Anthony Robbins
This first full week of the year is often cited as one of the most difficult and depressing weeks of the year. Far from shiny newness, experts say that with all of the let-down after the holidays, coming back to work, or leaving behind family, can bring a heightened sense of loss. That, combined with the fact that we’re staring at 2-4 months still left of winter (depending what part of the country you call home, of course–we have clients and friends reading this from across the country)…
Well, can be a tough week.
So, I thought we would lighten the load for you in two ways:
Firstly, I was sent this extremely funny short video the other day. Now that the holiday season is over, what better than to laugh at it? We just got bombarded with a ton of "Top __ of 2011" lists, but I’m not sure this video was on any of them. If you want a quick pick-you-up, here’s a funny prank pulled on helpless Target employees on Black Friday last: http://www.youtube.com/watch?feature&v=CYbVpAwGGGs
Check it out, then you will want to come right back to me when you’re done.
Alright, funny time over. The second way I’d like to lighten your 2012 load is by giving you some simple, actionable guidance on FINANCIAL resolutions which are easy (and profitable) for you to keep. And if you’re a little sick of resolutions, the good news is that these are easy — you only have to do one per year!
You see, I hope you don’t mind that I see it as my role in your life to not only provide authoritative and actionable estate planning advice for your specific situation, but also to play a role as a "coach" for your finances, and even your mindset.
This is why our clients and their friends seek us out for *more* than simple will preparation, but a whole host of other services as well–from complete estate and tax planning, to other legal services, to simple encouragement. I get to be someone in your life who says: "You can do this. You’re not alone."
It’s my great hope that our relationship will continue to grow into 2012, and beyond. And not just for "business purposes". We love our clients — you’re like family to us (the *good* kind of family, that is)!
So, with my coach hat firmly in place, here are some thoughts for effectively creating and pursuing your personal financial goals, as we move into 2012…
Rowel Manasan’s
"Straight Talk" Personal Strategy
Manasan’s Financial Resolutions for 2012
Here’s the thing about most financial resolutions: They don’t usually last even until the end of January. That’s because making a permanent change in our behavior requires both time and a steely resolve. But I’ve found that we can develop financial character one action at a time.
So in that vein, here are some financial practices to take you from pauper to prince or princess if you add one each year. If you’ve already got one down, move to the next on the list.
By the way — no matter where you are on this list, if you are over 21, you should have a Will, an Advanced Medical Directive, and a Durable Power of Attorney. Most who are receiving this email from me will have those handled already (if not? call ASAP).
#1 MOST CRITICAL: Resolve to become (and stay) debt free. Now, I’m not Dave Ramsey, but there’s a reason why he’s become so popular: his approach works. I’d say that you can have a fixed-rate fixed-year traditional mortgage on your house — but nothing else, please. No equity line of credit on your house. No car payments. Certainly no credit card debt. Because you simply have to learn to live within your income — which, unfortunately, sometimes means going without. The millionaires among us really are frugal. So learn to enjoy that process, and it’s a fantastic start.
#2 Automate your savings (AKA Pay Yourself First). You can start by getting the entire match if your company offers a 401(k) plan. Usually this translates to saving 5% of your salary while the company contributes a 4% match, which is the fastest way to get an 80% return on your money. Most Americans forgo this match, believing they need to spend 100% of their salary. But you can learn to think like a millionaire and live well on 95% of what you make. If you don’t have a 401(k) plan, act like you do, and sock away 5% automatically.
#3 Fully fund your 2012 Roth IRA. This is $5,000 in 2012 and $6,000 if you are older than age 50. If you can’t manage the entire amount in January, put in $416 monthly. Automating deposits in an employer-defined contribution plan is easy. Fortunately, automating saving in a Roth IRA or a taxable savings plan is equally painless. Most brokers offer an automatic money link between your checking account and an investment account. Set your savings on autopilot, baby!
Remember — these steps build off one another, so if you already have done the first 3, here’s your next step:
#4 Save another 5% in a taxable investment account. Automating savings is great, automating investment is even greater. Key word here: automate. At this point, you’re hitting a mark of saving 15-20% of your income. That’s a fast-track to long-term prosperity.
But I’m not quite done, grasshopper. However, I’m going to leave you with these for now, and come back to this again in the weeks ahead.
Happy New Year!
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