Editor’s note: Money Monday is a weekly column on personal finance, provided by investment advisor Momodou Bojang and sponsored by Arlington Community Federal Credit Union.
As a financial advisor I have the opportunity to help people in many facets of their financial life.
People are eager to have these conversations, yet it’s often more difficult to tackle the hard topics like how to plan for what to leave behind. Whether we like it or not, death is a crucial part of our financial life. Here’s an article that really speaks to this topic and frames this type of financial planning in a more positive light: leaving a legacy.
Leaving a proper legacy has become a science. Here are the basics to help get you started.
A person’s legacy cannot be measured by one solitary event in his or her life. Rather, legacies, like lives themselves, must be measured as a whole. If you’ve ever taken a step back and examined your own life and legacy, what have you found?
Do you feel comfortable with what you’ll leave behind? How do you want people to remember you when you’re gone? More importantly, how can you make sure people remember you in death, as you were in life? Estate planning has become an important tool in deciding how your life’s work will be viewed. Without it, the courts may decide who gets what. With the proper planning, you decide what individuals or charities receive your assets.
There are a few basic tips to estate planning that will help you formulate a proper legacy. The first, and most basic choice, (but one of the most important), is to choose professionals who can help guide you through the process. Estate planning is tricky and by enlisting the help of a professional you help ensure your planning is done properly and efficiently.
The second is education. By knowing the basics of estate planning, you have a better idea of what you need to do. Here are a few basic tips on what you’ll need to begin estate planning.
Think Ahead: Before preparing the most crucial documents needed for estate planning, it’s important to sit down and decide who you’ll put in charge to make medical and financial decisions for you. You’ll also want to decide who gets what. Picking out beneficiaries and an executor of your estate are two of the most critical decisions you can make. If you have younger children, it’s also important to decide what would happen to them in case of an emergency.
Know which documents you’ll need: In general, it’s recommended that you have a will, a financial power of attorney, a medical power of attorney, and a living will. All of these documents will designate who will make decisions when you’re gone, or if you’re alive but unable to make important choices regarding medical care or finances. Your financial power of attorney will make your financial decisions. Your medical power of attorney will be the person you put in charge of medical decisions, while the living will describes the type of medical decisions you want your proxy to make.
Survey your finances: Make sure you know what you’ll owe when you die, including the costs of probate. Subtract that from your assets and make sure you have a general idea of how much money you’ll have left over. By keeping tabs on your remaining assets, you’ll be more prepared to know what you’ll pay in taxes.
Be ready for anything: When planning your estate, you must be prepared in all areas of your life. From medical to financial decisions and everything in between, it can be an uncomfortable subject, especially when you involve your family in the planning. But by working with a team of professionals, you make sure your estate is covered from all angles.
In the end, you want your legacy to be protected. By carefully planning your estate, you can rest assured that all of the proper measures have been taken to protect your family’s future.
Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory Services offered through USAdvisors Wealth Management, LLC, SEC Registered Investment Advisor Firm. Momodou Bojang, Representative. Arlington Community Financial Services, USAdvisors Wealth Management, LLC and the Securities America companies are unaffiliated. Securities America and its advisors do not provide tax advice. Please consult with your tax professional regarding your individual tax situation. Written by Securities America for distribution by Momodou Bojang. * Not NCUA Insured * No Credit Union Guarantee * May Lose Value
Editor’s note: Money Monday is a new weekly column on personal finance, edited by Arlington Community Federal Credit Union investment advisor Momodou Bojang.
According to the 2011 Retirement Re-Set study by SunAmerica Financial Group, nearly half of Americans 55 and older say they expect to provide support for their adult children while simultaneously saving for their own retirement. While helping your children may seem like the right thing to do, you should avoid letting yourself become the Bank of Mom and Dad.
As more baby boomers reach retirement, they are finding their savings diminished due to unrecognized overspending. For some retirees, they found much of their savings went to helping their adult children in financial difficulty. According to CNN, parents in the U.S. extend about $45 billion in loans to their children each year, for everything from student loans to credit-card debt to buying a home or starting a business. A study by Ameriprise found that 90 percent of boomer-age parents have provided financial assistance to their adult children – including 40 percent who had to use their own savings and 17 percent who had to take a loan to do so.
Even parents who have taken a hard line against bailing their adult kids out of financial trouble have softened their stance in the face of the economy and its fallout. If you decide to provide financial help to your child or grandchild, follow these guidelines to avoid tapping into your own savings.
Loan or a gift? Parents often start out resolved to make their child repay the money but fail to follow through. Keep in mind that you can gift up to $13,000 a year (for 2012) without filing a gift-tax return. Remember though, if you call it a gift, don’t harbor expectations your child will repay it. In general you should aim for a one-time gift. “If you can spare the cash, give your adult children a lump sum for them to budget rather than just paying their expenses or paying off their debt, and make it clear that’s all you are willing to give,” advises Kiplinger’s Kimberly Lankford. This will generally incite them to stretch the funding and cut out nonessential expenses.
Only offer essential assistance. If handing over a chunk of cash is not appealing, offer to help pay for only a few critical bills, such as health insurance or car insurance so coverage is never lost. If you decide you will or can help your children only in an emergency situation, make sure you stick by this. Explain to them in detail what you consider an emergency and avoid granting any assistance unless it constitutes what you both agreed upon originally.