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Settling an Estate
By the Financial Planning Association
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The adjustment to the loss of a loved one is hard enough without the inevitable workload of settling their affairs. Even if they don’t have much in the way of assets, the process takes time – typically up to a year. It makes sense to get advice from tax, estate and financial planning experts in the preparation of an estate plan. Talking with your Capital Advantage, Inc. advisor can be a good resource before starting the process.
It also makes sense to have an idea of how that year will go, so here’s a list of what needs to be done at critical intervals of the process. But this is not just a list to help survivors. This can be a key estate-planning tool for you as well. Remember the way that you handle your estate, financial and funeral arrangements can lighten the load on family members. Tailor the following list to your own needs, and discuss it with your chosen executor while you’re in good health. And if you need to make changes, keep them informed.
Step #1 – Round up key documents:
An executor has to find, identify and organize a deceased person’s financial records, tax returns, and other key papers to figure out what the decedent owned or controlled. If that individual was working closely with a financial planner or investment manager, they may have all that material summarized in one place. But otherwise, the executor needs to look for bank accounts, brokerage accounts or other investments, life insurance or annuity policies, retirement plans, deeds to real estate, automobile titles and other evidence of assets with value. An executor will also be looking to see if the decedent had a will or trust that directs what they want done with the previous items. Also, the executor needs to track down all records of outstanding loans, mortgages or credit card bills. Make sure at least 10-20 copies of the death certificate are ordered. This won’t be done in a day, even if the deceased was extremely well organized.
Step #2 – Start making key phone calls:
The executor needs to inform key contacts that the person has died. Make sure they contact:
• Social Security if the deceased was receiving benefits;
• The Veterans Administration if they were a qualified veteran for burial benefits;
• Their employer, health insurer, credit unions, mortgage company and credit card companies for possible death benefits;
• Life insurance agent for possible death benefits;
• Automobile insurance agency if they owned a car;
• All creditors – mortgage companies, credit card companies, any organization that’s owed money by the deceased – needs to be notified that their customer has died. They’ll probably request a copy of the death certificate, so make sure you have enough copies.
Step #3 – Get permission to check safety deposit boxes:
If there isn’t a will in an easy-to-find place or an at-home lock box, the executor may need to try and get into a bank safety deposit box, which can take a bit of time. The procedures vary from state to state, but the bank should be able to direct the executor. This is why it’s good to keep important papers in an at-home lock box.
Step #4 – File the will for probate:
If you find a will, the executor named in the will should be notified, and a decision should be made about whether to file the will for probate. It is usually not necessary to probate a will unless there is property in the name of the decedent that needs to be transferred, so if everything is in joint names with a surviving spouse or surviving children, there may be nothing to pass under the will. This is something for which the advice of a lawyer might be needed. If there is a trust document, the trustees or successor trustees should be notified.
Step #5 – Bring in a lawyer if necessary: The executor may or may not choose to work with an experienced estate attorney. Generally, it can be a good idea. If there is no will and no trust, the property owned by the deceased will pass to the "intestate" heirs determined under state law, and one or more of those heirs (or some other qualified person) will need to file a petition for "letters of administration" in order to sell or transfer the decedent's property. The procedures for probating a will, or petitioning for letters of administration, vary from state to state, and may require the services of a lawyer.
Step #6 – Make sure bills get paid: The executor needs to make sure that all the deceased’s bills and other outstanding debts continue to be paid until they are disposed of. If assets are insufficient to cover these debts, the executor will have to find another way to pay them or make sure talks take place to lower the amounts.
Step #7 – Make sure taxes are paid: The executor needs to make sure there is a final tax return filed on behalf of the deceased. A federal tax return needs to be filed if the gross estate is over $3.5 million in 2009.
Step #8 – Make sure assets are properly distributed: The executor, working with estate and tax experts, can determine after all expenses and taxes are accounted for, that all of the assets are distributed properly. Only at that time can the estate be truly closed. |
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Time for Your Midyear Financial Checkup
By the Financial Planning Association
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The weather’s great, so staying inside with your finances probably doesn’t sound like a very entertaining option. But a midyear review of your tax situation, retirement and spending issues can be far more valuable than the rushed attempt most people make at the end of the year—or when it’s too late at tax time.
Summer’s actually a good time to do this task because there’s still enough time to correct lapses in savings, spending or tax planning. Here’s what most people should cover:
Retirement savings:
Given the state of the economy, it’s not a bad time to review your retirement funds and your current investment allocation. If you are on schedule to max out your contributions to your company retirement plan this year, great. But don’t forget to check your existing IRAs and other retirement accounts to see if you’ll have enough cash on hand to contribute the maximum in each account by their respective deadlines next year.
Health and Insurance:
Increasingly, what we pay for health insurance will be tied to the state of our health. While the weather is good, commit to a plan to walk or hit the gym a specific number of hours a week. Many insurers reset premiums at mid-year in a rising cost environment, so make sure you’re ready to switch plans or negotiate different coverage if necessary during open enrollment in the fall.
Taxes:
If you received a sizable refund in April or found it necessary to empty savings to pay Uncle Sam, it’s definitely time to reassess what you’ll owe at tax time next year. Also, if you think you’ll have some losing stocks in your taxable investment accounts, consider selling them at a loss to help offset potential capital gains at year end.
Spending:
Either on your computer or on paper, take the time to figure out where you’re money’s going. A look at the last six months of spending may reveal opportunities to reduce spending and redirect money toward more necessary goals. Also, take a look at such things as gym memberships, magazines that are piled up and coffee expenses. If you’re not using these things, you can probably live without them. Doing this exercise can identify a surprisingly large amount that’s unaccounted for that can be redirected to debt payment, savings and investments.
Reserve fund:
Most financial experts encourage you to have between three and six months of living expenses in an emergency fund. If you don’t have that minimum, go back to your spending review and see where you can start socking money away.
College savings:
If you are saving for your child’s education or your own, check to see if you’re on track with the goals you made for the year. It’s also a good idea to read the latest news on financial aid since schools change their financial aid policies annually. Even if your kid’s still in grade school, it’s a good idea to learn as much about college financial aid while you’ve got plenty of time to learn.
Special goals:
If your car is suddenly looking like it will need to be replaced or if this might be the last year for your furnace, see if you can direct more money into a reserve fund to cover replacement costs or at least a heavy down payment. If there’s a vacation you want to take by the end of the year or a special household purchase you want to make, focus on the cash you’ll set aside to make that happen. Of course, if you have credit card debt rolling over from one month to the other, maybe that should be your initial focus.
Credit:
If you haven’t set a schedule for receiving your three credit reports throughout the year, do it now. You have the right to get all three of your credit reports – from Experian, TransUnion and Equifax – once a year, for free. You can do so by ordering them at www.annualcreditreport.com. By staggering receipt each of your credit reports at different points in the year, you’ll get a continuous picture of how your credit picture looks. Also, you’ll have the opportunity to focus on possible errors in a single report, which will give the other two credit agencies time to update their files.
Please call our office at (925) 299-1500 or toll free (888) 299-1500 if you are interested in scheduling a review of your investment strategy and/or financial plan. If you are not a client of Capital Advantage, Inc., we offer free no obligation consultations. |
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Economy Threatening Your Retirement Plans?
By the Financial Planning Association
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Not only have retirement funds dropped in value with the market, but many people have been tempted to tap savings as a way to cut debt or otherwise shore up their finances after a job loss. Still more have found that employers have dropped matching contributions to shore up their own finances.
Worrying about retirement seems to be widespread. A January survey by the National Institute on Retirement Security noted that 83% of Americans are concerned about their ability to retire.
Yet the worst thing to do is tap or give up on your retirement funds. No one can know with any certainty when the investment markets will rebound, but even if you can contribute something, you stand to gain once markets start to rebound. Even more important, you risk penalties and the lost potential for the earnings if you turn your back.
Before you make a move, seek out some advice. It’s a good idea to check in with your financial advisor at Capital Advantage, Inc. to see where your retirement funds stand in light of all your finances before you do anything.
In the meantime, here are things you can do to put your retirement funds in better shape:
Don’t stop funding your 401(k)
under any circumstances:
In March, the Spectrem Group, a Chicago-based consulting firm, reported that 34% of U.S. employers have reduced or eliminated matching contributions to their defined contribution retirement plans – which include 401(k)s and 403(b)s – since January 2008. The Pension Rights Center reports that besides the Big Three automakers, dozens of major companies have cut back their match, including Motorola, Starbucks, and JPMorgan Chase & Co. It’s a significant impact. US News & World Report recently reported that a worker who earns $50,000 annually and receives a full employer match of 50 cents to the dollar on six% of his or her pay, the match cut means $16,000 less for retirement. An employer dropping its contribution is bad news, but you should make every effort to keep up with your contribution because if you don’t, you’ll miss valuable tax deductions and the chance to build your funds more effectively for the long term.
Stay invested:
Because no one precisely knows when the market is headed up or down, it’s best to stay invested at a time when everyone is waiting for a rebound. Keep in mind that the market’s top performing days typically come at the start of a recovery, so leave your money in your 401(k) and IRAs.
Keep in mind that withdrawing or borrowing your funds can be costly: If you have an emergency situation, be careful. Workplace 401(k) plans do allow for hardship withdrawals, but you might have an option to take a loan, which would save you the taxes and the 10% penalty that accompany hardship withdrawals for account holders under the age of 59. The majority of 401(k) plans allow you to borrow up to 50% of your vested account balance or $50,000, whichever is less.
Adjust your spending so you can save more:
If you have an existing Roth or traditional IRA or other means of saving for retirement, do whatever you can to get more money into these accounts. It may not come close to meeting the shortfall from losing an employer’s contribution or the chance to add to a 401(k) after you’ve lost your job, but it’s critical to keep some savings going.
Please call our office at (925) 299-1500 or toll free at (888) 299-1500 if you are interested in scheduling a review of your investment strategy and/or financial plan. If you are not a client of Capital Advantage, Inc., we offer free no obligation consultations.
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Contact Us
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John Hayman, CFP
Founder & President
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Donna Zinman
Senior Financial Advisor
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Gary Clarke
Senior Financial Advisor
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Rick McNamara, CFMC
Director of Investments
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Dawnalizabeth Henke
Chief Compliance Officer
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Catherine Norris
Manager of Client Service
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Aimee Schwartze
Director of Client Service
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Amy Montano
Office Manager
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