A lot of us resolve to get more organized for the New Year. Below is a great article I found on lawyers.com with helpful tips on getting your legal and financial business in order for the new year. I especially like the tips at number 3 through 5, as I have found that many of my clients over the years are unfamiliar with household finances, as they have allowed that to be their spouse’s primary responsibility.
Everyone’s busy all year long. There’s work, school, and kids’ sports. Tack on summer vacation and the holidays at the end of the year, and you have even more to do. It’s easy to forget about taking care of some things that really need to be done each year. Taking some time to do them now can save you and your family time and headaches later.
1. Review and Update Your Will
You should look over your will each year to make sure it’s up-to-date. The laws don’t automatically add people to your will or automatically remove them, either. Did you get married this year? Divorced? Did you have a baby or adopt? Are your children now young adults? Your will needs to be updated for these and other life events.
While you’re at it, check your powers of attorney, too. Make sure the person you’ve named to take care of your affairs (your “attorney in fact”) is still willing and able to do so. If not, you need to make a new power of attorney.
Don’t have a will or any other estate planning tools? Get them. You can find everything you need at Lawyers.com. Whether you’re married or single, a good place to start is a planning worksheet. If you have questions or concerns, talk to an attorney.
And don’t forget about your digital assets, like online bank accounts and passwords to social media and other websites. Make a list of them and keep them in a safe or safety deposit box with your other important papers.
2. Insurance
There are all kinds of insurance matters to take care of:
Homeowner’s and Renter’s insurance: Did you make any improvements to your home, like remodel a kitchen or finish your basement? Did you buy a new TV? Check to make sure that your homeowner’s or renter’s insurance covers them.
Car insurance: In most states, it’s illegal to drive without auto insurance. You don’t want to be overinsured, though. You can save a few dollars over the year by reducing your coverage on an older car or one that’s been paid off. You can also save some money by increasing the amount of your deductible – the amount you have to pay when you make a claim against your policy.
Life and health insurance. Do you have enough life insurance to take care of your family in case something happens to you? Talk to your insurance agent about your new baby or a change in your marital status. The same thing goes for health insurance. Talk to your human resources professional at work or your agent about changing your coverage.
3. Start Getting Ready for the IRS
It’s never too early to start gathering receipts and other documents for next year’s taxes. Most employers send out W-2’s or “earnings statements” before Jan. 31, so if you’re ready before then, you can file fast and get your refund early.
Preparation is crucial especially if you itemize deductions, such as out-of-pocket medical expenses, mortgage interest and expenses related to your child’s college education. You’ll want to gather your paid medical bills, billing statements from schools, prescription receipts and receipts for cash donations you made to your church or favorite charities.
4. Credit Reports
Each year you’re entitled to one free report from each of the major reporting companies (Experian, Equifax and TransUnion). Get and read them carefully. Any errors, like credit accounts that you didn’t open, should be reported to the agency in writing. The agency will investigate the matter, usually within 30 days, and will let you know how the matter was resolved.
With identity theft so common today, it’s a good idea to take advantage of the free credit reports each and every year.
5. Credit Cards
Check the terms of your credit cards. Rearrange your budget and try to pay off your cards in full. At the very least, shop around for a credit card with a lower rate and see if you can transfer the balance to the new card. This could save you thousands of dollars in interest.
6. Licenses, Permits and Leases
Practically all of these important documents have expiration dates. Here are few to keep in mind:
Driver’s license. These usually expire every few years on your birthday, so check the date on yours. Driving with an expired license may lead to points against your license and higher insurance rates
Business license and permits. Many professions and trades require you to have a license. Attorneys, electricians and plumbers usually need one. Bars and restaurants typically need a permit to sell liquor or sell food. Check the expiration date. Don’t practice your trade or profession on an expired license. You may have to pay fine, and you may even be barred from practicing for a period of time
Leases. As the expiration date on your home or apartment lease nears, contact your landlord to see if a rent increase is planned for the next lease term and try to negotiate. As a car renter, you should check the mileage to see if you’re in danger of going over the number of miles given by the lease. Consider asking the dealer to sell you extra miles, or perhaps take an early trade-in if you’re near the limit
7. In the US on a Visa?
Be certain to check the expiration date on your visa if you’re in the US temporarily. Start the renewal process early because it could take some time. You may be deported for being in the US after your visa expires, and you may not be able to return to the US for a period of time. Contact the local U.S. Citizenship and Immigration Services (USCIS) office if you have any questions.
8. Computer Security
It’s always a good idea to keep your computer’s security settings and software up-to-date. Shopping online, using a software program to prepare your taxes and online banking makes your computer a treasure trove of valuable information. Be proactive, not reactive, when it comes to your personal information and identity theft. Once the hackers or scammers have your information, it’s too late.
Learn how to protect yourself from viruses, phishing attacks, scams and even exposing you and your family to legal risks from participating in social networking.
9. What about the Kids?
New technologies come out every day it seems, like smarter, faster computers, hand-held devices and cell phones, to name a few. You may or may not pay much attention to these things, but your children almost certainly do. If any of these items are on a gift list, start looking into security and protection for their computer and cell-phone usage.
And if you don’t already do so, maybe it’s time to monitor your kids’ computer and cell phone activities. Don’t think of it as an invasion of privacy. Rather, think of it as protecting them from the bad things that you know are out there.
10. Get a Check-Up on Your Health & Records
It’s a good idea to see your family doctor at least once a year for a regular check-up. While you’re at it, take care of some other health-related matters, such as getting a copy of your medical records, asking your doctor about how your electronic medical records are kept safe and making sure your living will and health care power of attorney are in order.
It is very important to select the correct filing status as this will impact the amount of your standard deduction and your tax rate. You may fall into more than one category, so you should choose the one the produces the lowest overall tax. An individual may be single, a surviving spouse, head of the household, married filing jointly, or married filing separately. Filing status is determined on the last day of the tax year.
The basis standard deduction amounts for 2016 are:
Single 4,050
Married filing jointly and surviving spouses 12,600
Married filing separately 6,300
Head of Household 9,300
You are considered single for the whole year if on the last day of the tax year, you are unmarried or legally separated under a divorce or separate maintenance agreement. You are considered unmarried if you and your spouse did not live in the same household for the last six months of the tax year. If your home was the main home for a qualifying child or relative and you provided more than half the cost of keeping up your home for the tax year, you are eligible to file as head of household instead of single which provides a higher standard deduction and lower tax rates.
A single taxpayer qualifies as a surviving spouse during the two years following the death of a spouse if the household is maintained for a dependent child and you do not remarry. Tax brackets for surviving spouses are more favorable than filing single.
Married individuals may opt to file jointly or separately even if only one spouse had income. In most situations, it is advantageous to file a joint return due to higher deductions and lower tax rates; however, there are special circumstances where filing separately produces a lower tax bill. It is advisable to calculate your tax both ways and use the filing status that yields the lowest aggregate tax. Considerations other than tax savings should also be considered. If you believe your spouse is not reporting all of his or her income or you do not want to be held responsible for any taxes due because your spouse did not have enough tax withheld or pay enough estimated tax, filing separately may be ideal.
If you are unsure which status applies to your situation, consult your tax advisor.
Brandi Morgan is a CPA and Manager at Wilkins, Miller, Hieronymus LLC, Certified Public Accountants and Advisors. She can be reached at wilkinsmiller.com or 251-410-6700. Her office is located at 41 West Interstate 65 Service Road North, Suite 400, Mobile, Alabama 36608.
Divorce and the Family Business: What happens to the Family Business when you get divorced?
The business you and your spouse co-founded and run together is thriving. Your marriage? That’s another matter. Many people put off filing in situations like this because they fear that it will soon mean the end of the company. It does not have to be that way, especially if your lawyer is sensitive to the fact that the two still need to cooperate and that it will take a quite careful approach in figuring out severing some financial ties, but also having to keep the business alive.
A Census Bureau estimate from 2007 found that nearly 4 million businesses in the U.S. are operated by husband and wife. With a 50% divorce rate, divorce clearly affects a lot of small businesses. Overall, there is no question that it can be a very difficult situation involving two people. Though it may initially seem like a battle, it can work if you work together. Research says that it all depends on the individual couple, but also how the company runs and the skills of your divorce attorneys.
Some things to keep in mind:
Respect each other- this can be hard, especially if the reasons for the split were particularly painful. In some cases, if there isn’t any trust left between the two then there isn’t any respect, and it is probably be best to cut off communication.
Know when to get help- Unlike a lot of separated couples, the ones that operate a business together have to see each other a lot, even after the divorce is finalized.
Create agreement-This is a very important legal step that many couples haven’t though out when they found the business together. The agreement explains what will occur in the event someone wants to sell.
Sit down and discuss the situation with your employees- They will know what is happening, and what you don’t want to happen is for them to choose whose side to be on. Choosing sides can always slow the process down so its always in each party’s best interest to try to get along.
To many people who are experiencing the trials of divorce, it can sometimes feel like a full-time job. It can consume all aspects of your life. Between phone calls with your attorney, to contact with your ex-partner, to figuring out child custody and where to live, it can consume all aspects of your life. And regardless of how affluent the couple may be, there is often stress about your financial future.
A lot of times after two people have separated or divorced, someone has to start from scratch. While some degree of worry and apprehension is to be expected, these fears can be eliminated by a little work and planning on your part. This planning can help you feel confident and secure while you establishing your new life.
1. Fear of not getting a fair share.
Many people worry when they begin the process of divorce that they may not end up with their fair share of the finances. If your finances are simple, it can be easy to evenly divide your assets. But many times other items are involved that make things more complex. Things items can range from anything to multiple homes to closely held businesses and non-liquid investments. First, determine exactly what you own and how much it is worth. Next, establish a fair value for each asset. When doing this, be cautious that some things may be prone to subjectivity and manipulation in the divorce context.
Appraisals of real estate of other valuables such as jewelry or art may be advisable.
2. Fear of not knowing what you will have.
Fear of not knowing what you will have is a justified fear that many have when entering a divorce. When dealing with a divorce, it is easy to get lost in the details and lose sight of the bigger picture. It is crucial to stay focused on what your finances are going to look like post-divorce. Not only should you know how much you have, but you need to know exactly what and where you have it. One tip to help with this fear is to meet with a financial adviser before the divorce is finalized, that way you can make sure that not only are you getting your fair share, but that you don’t get stuck with non-liquid assets while the other party gets the cash.
3. Fear of not knowing how your lifestyle will change.
This fear stems from your cash flow. How much will you have left? Many people worry that after alimony, child support, income and basic living expenses there will not be enough money left over to keep living the same day-to-day lifestyles they had before the divorce. To squash this fear, have your financial adviser create a post-divorce income and expense report for you. If you do not have a financial adviser, you can look at your recent spending history to determine what your anticipated monthly expenses will be. By doing this, you will be able to see how your new finances will affect your lifestyle.
When you experience a divorce, it is common to go through a wide range of emotions. For a spouse who isn’t financially savvy, fears and uncertainties are after a common experience. However, if you plan ahead and have a little help, you will be able to feel at ease about your financial situation and can focus on other aspects of the separation.
As we all know, one of the biggest issues in a divorce is the family home. It all starts to get messy when the decisions of what will happen to it and who is going to live in it become a concern for the parties. Typically, parties go from having two incomes to contribute to the mortgage and other household expenses during the marriage to having only one income to contribute to those expenses after the divorce.
Below are important questions people need to ask themselves when they aren’t sure if they should keep their home when going through a divorce.
1.Is your marital home a great fit for your new lifestyle?
2.What is your house worth today?
3.What would be the cost to keep the house up?
4.Are you willing to sacrifice financially in other areas to keep the house?
5.Is there any equity in the house or are we “upside down?”
6.If there is equity, can I afford to buy my spouse out?
7.Do I have the income and credit to refinance if the Court so orders?
8.Would it benefit me/us more financially to sell the house?
Having to choose whether or not to keep your residence could possibly be one of the most difficult decisions you will have to make during divorce, as there are likely many good and bad memories associated with your marital home. Its always wise to give yourself time to think it all through very carefully. Everyone needs to be able to manage their assets and develop a plan for financial stability and security in the future.
