Financial Wisdom Center

Prezi

2011-06-14T11:11:00.000-04:00

How to Write a Will

2010-02-04T16:37:00.003-05:00

A will or testament is a document in which a person (the testator) assigns personal property rights to others following the testator’s death. "Will" is a general term, while "testament" usually applies to personal property. An attorney is not necessary for drafting wills but is suggested after you know what is needed. Your understanding and catalyst starts here...

How to write a will
Any person of legal age can create a will. However, there are certain requirements for the will to be deemed legal. The testator must clearly identify him or herself as the maker of the will and that the will is being made. The words "last will and testament" will satisfy this need.

If previous wills have been created, the most current will must include language that revokes all previously made wills and codicils, which are amendments to existing wills. If the earlier wills are not revoked in the most current will, the earlier wills can revoke the most recent one. However, if a newer will is completely different from earlier versions, the earlier ones will be considered revoked by implication.

The testator must be able to prove that he or she has ownership of the property outlined in the will, and that it is being given willingly.

The will must be signed and dated by the testator, usually in the presence of at least two disinterested witnesses, typically witnesses who are not beneficiaries. Pennsylvania is the only state that does not require witnesses for the signing of the will. The signature must be placed at the end of the will. If there is text following the signature, it will be ignored and may invalidate the document altogether. There may be additional requirements for a will to be recognized in your state.

It’s essential to review a will periodically to make sure it reflects your current state of affairs and wishes. Most people will draft several wills over the course of their lives; in general, it’s a good idea to have a new will invalidate all previous versions. Failing to do this can result in lengthy probate court battles that will keep your heirs from accessing your estate.

Dying without a will
If a person dies without creating a will, also known as dying intestate, the state will decide how that person's property is distributed. If the deceased has a spouse and no children, parents, siblings, nieces or nephews, the spouse will receive all of the deceased's property. If the deceased has children, parents, siblings, nieces or nephews, the spouse will generally receive half of the deceased's property. If the deceased has two or more children, the spouse will generally receive one-third of the deceased's property.

All property that is not given to the spouse is distributed as follows: the deceased's children, parents, brothers or sisters (if they are not living, then to their children), the deceased's grandparents (if they are not living, then to their children), children of a previously deceased spouse, relatives of a previously deceased spouse and then to the state of the deceased's legal residence.

Wills and guardianship
For parents with modest estates, property and guardianship planning are the important things to consider in estate planning. Parents need to decide how to provide income for their children, who will receive their property and who will manage the finances for the children. Parents also need to designate someone to care for minor children in the event that both parents die before the children reach the age of 18. An estate planning lawyer may be needed to help plan for the care of minor children.

Additional provisions are required for special needs children who will require care and finances beyond the age of 18. An attorney and special needs organizations can help plan for the future for special needs children who may outlive their parents. Parents can set up a trust for the special needs child that can ensure that the child’s assets are not used in place of public benefits, which can make that child ineligible for government programs.

Parents also need to appoint a guardian to make decisions on behalf of the special needs child. The named guardian should be someone who knows about the child’s needs. In most cases, a responsible sibling or an aunt or uncle will be chosen as the guardian.

Even if you don’t have a lot of property, parents of minor and special needs children must have an up-to-date will. Without one, your children’s future will be decided by the state until they reach the age of majority. They will also be prevented from accessing your estate.

Drafting your own will
There are no legal requirements that a will be drafted by a lawyer. However, there are pitfalls to creating a will without a lawyer. The person who makes the will is not available to explain themselves or to correct any technical errors in the will when it comes into effect upon their death, leaving no room for mistakes or ambiguity. Minor mistakes in wills can cause great havoc among family members. A lawyer can act as your spokesperson and ensure there are no mistakes.

A will should be updated periodically, especially when there are changes in your family or financial situation including divorce, the birth of a child, the death of an heir, the acquisition of property or a significant change in the value of an asset. It is also important to review your will when there are changes in the law.

Wills are important legal documents that will help ensure your assets and property are distributed according to your wishes. They are also documents that will ensure the proper care of your family. Whether you are in poor health or excellent health, if there are important people in your life, you need to create a will to protect their interests after your death.

How do H S A’s work?

2010-02-04T16:17:00.000-05:00

What is a health savings account plan?

An HSA is a special tax-sheltered savings account for medical bills. It is similar to an IRA. Instead of buying high-priced insurance with low co-pays, you buy a low cost policy (with a “high” deductible) for the “big” bills and save the difference–in the HSA–to cover “small bills”. Money deposited into the account is 100% tax deductible and can be easily accessed by check or debit card to pay medical bills tax-free (even stuff not covered by insurance like dental and vision). What you don’t use for medical bills is yours to keep–it stays in your account and keeps growing on a tax-favored basis to a) cover future medical bills; or b) supplement retirement, just like an IRA. In sum, the HSA offers 1) lower premiums; 2) lower taxes; 3) freedom of choice; and 4) more cash at retirement.

Establishing an HSA plan is as easy as 1-2-3…

1. Take out a “high deductible” HSA-Qualified health insurance policy. Your monthly premiums will be low because of the nature of the policy. CAUTION: Not just any policy with a so-called “high deductible” will qualify you for the HSA plan—it must be a policy that meets the specific HSA design specified by Congress.

2. After the HSA-Qualified insurance policy is issued and in-force, then establish the actual HSA savings account at a qualified financial institution. Under the HSA law, you have a wide variety of investment options in addition to fixed accounts, including mutual funds, stocks and bonds. You are always free to maintain the account at any financial institution that is a bona fide HSA custodian registered with the IRS. Blue Cross offers a program through Mellon Bank.

3. Begin funding the savings account. There is no minimum contribution required; however, just like an IRA, there is an annual maximum. Be sure not to contribute more than the maximum amount allowable each year. Click here to learn more about the current HSA guidelines (as established by Congress).

Etcetera…

When you file your taxes each year, all of the money you have deposited into your own HSA will be tax-deductible on line 25, front page, of your 1040 form (assuming you have qualifying income as a self-employed person or you are participating as an employee at a company with under 50 employees). This will cut your tax bill by an average of $1,200 for a family (and about $500 for a single). It is absolutely correct to say that with an HSA, you are paying medical bills with money you would otherwise have paid in taxes! How cool is that? (see examples below—you also save money on the actual bill in most cases)

When you visit a physician, you pay with tax-free money from your savings account. The account is easily accessible by debit card or check. If your provider is a member of the PPO discount network you have joined (with your HSA insurance policy), your bill will actually be reduced before you have to pay it. (Example: $60 Dr. visit reduced to $42. You pay the $42 with tax-free money from your HSA.)

When you need to purchase prescriptions, simply visit a participating PPO discount pharmacy (most all major chains participate) and pay your discounted amount on the spot either by debit card or check directly from your HSA account (again, with tax-free money).

Some medical expenses not covered by the insurance policy may still be considered allowable expenses under the HSA. For example, dental work, including braces, vision care, including glasses, eye surgery, alternative therapies such as acupuncture, etc. can all be paid for with tax-free money from the HSA.

Keep funding the HSA every year to the maximum amount allowable by year (now up to 100% of the deductible amount with the new HSA). This will reduce your taxes each year plus, more importantly, will give you a larger and larger cushion against unexpected “catastrophic” type claims in the future. After only two or three years of good health and steady funding of the HSA, there should be more than enough in the savings account to cover any foreseeable medical expenses without ever having to dip into your pockets. (Note: dipping into your HSA savings account is not the same as dipping into your pockets—your HSA is the functional equivalent of “insurance” coverage for the small bills—what you don’t have to use is yours to keep—which is dramatically different than paying an insurance company a few thousand dollars a year to do virtually the same thing…insure the “small” bills)

Remember, what you don’t use for medical bills from the HSA is yours to keep—just like an IRA. The balance continues to grow and grow on a tax-sheltered basis. Once you reach age 65, the account can basically be used just like a traditional IRA (withdrawals subject only to income tax-reporting—no “premature withdrawal penalties”).

Life Insurance Review Checklist

2009-05-19T14:01:00.003-04:00

When is the last time you sat down with an agent and went over all your policies? This post is to give you the right questions to ask so you will get the right answers.

Dedicate this time to understanding how your life insurance plans are working today and in the future. Here is a list to get you started. Post any questions that you may have.

Update your address
Update your beneficiaries. Be sure to name a 2nd beneficiary. Remember that if your children are named, they will not have access to the benefits until age 18.
Verify riders on the policy. Waiver of Premium, Accidental Death, Accelerated Death Benefit, Long Term Care Rider. Know when the rider expiry dates are.
Confirm rider expiry dates on Spouse and children coverages - Is there someone on your policy that is uninsurable that should be converted before the rider expires?
Do you have loans on your policy? This important part will determine if your premiums will go up in the future. Call your company and get an updated projection summary based on your current cash values and interest rate.
Know your guaranteed rate and the current rate.
Learn how to read your annual statements.
Check the ratings on your company. Are they tied up with the sub-prime market fiasco?

Your Personal Budget Worksheet

2009-02-27T14:50:00.007-05:00

To understand where your money goes it is important to start with your checkbook. Get it out and list your monthly expenses in the worksheet provided. Print it up and take to your trusted adviser. If you would like someone to help you, please post an email to me and I will review it with you.

Your Personal Budget Starts Here! Click here and download a spreadsheet that will give you a macro view of your finances.

Financial Advocacy Starts Here

2009-02-27T14:11:00.002-05:00