When it comes to retirement, you want to feel secure. You’ve put in a good few decades of work, and you want to be able to ensure that you’re able to live out the rest of your life comfortably. Estate planning can help you do so. There are several things to consider when you are working retirement into your estate plan. This article will cover the basics when it comes to planning for retirement, but you’ll want to contact an estate planning attorney for more detailed information on your particular situation. 

The Relation Between the Two 

Technically, a retirement plan should include a good estate plan (as opposed to the other way around). The period during which you are retired is likely to be the one where your estate plan comes into effect. When it comes to retirement, you can plan out your finances through a few tools. The IRA, Roth IRA, and 401(K) are three of the most common—and the most often-conflated. 

What is an IRA?

“IRA” stands for “Individual Retirement Account.” The IRA lets you save money for your retirement in a way that is tax advantaged. The IRS wants to encourage responsible money-saving for retirement, and tax-advantaged plans are one way of incentivizing that. A traditional IRA is pretty straightforward. You make contributions to your IRA with money that the IRS will allow you to deduct on your tax return. The earnings on the money in your IRA are then tax-deferred until you withdraw them in retirement. Then, once withdrawn, they are taxed. 

What is a Roth IRA?

The Roth IRA differs from a traditional IRA in the taxation. With a traditional IRA, the tax payments are deferred until you withdraw your funds. However, the Roth IRA switches that. You are taxed on the contributions you make into your Roth IRA. Then, when you make withdrawals, those withdrawals are not taxed. 

You might want to choose a Roth IRA if you think your taxes will be higher when you are retired than they are now, while you are working (and not spending your IRA). However, there are income limits. You might be barred from opening a Roth IRA if you make too much income. You can only put in $5,500 a year if you’re under 50. People over 50 are capped at $6,500 per year. There is no minimum requirement for either age bracket. 

What is a 401(k)?

The 401(k) is another retirement plan that you’re likely to hear a lot of. The 401(k) is qualified, and it allows employees to save and invest their earnings into a retirement plan. Employers sponsor this 401(k). Only employers can sponsor their employees, which makes the plan different from an IRA/Roth IRA, where people sponsor themselves. 

The 401(k) is given that name because it is the section of the tax code that sets the plan up. The payments are tax-deferred, and employees contribute untaxed portions of their wages into the plan. When they make a withdrawal, the withdrawals are subject to taxation.

Listing Financial Information

When you’re considering these retirement plans, it’s important to think of the big picture with estate planning. You should make a comprehensive, detailed list of all of your financial tools and beneficiaries when you are creating your estate plan. This not only makes it easier for you to be organized, it helps your family get a clear picture of your finances after you pass on.

Again, these are just the basic definitions of tools for retirement. Consulting with an estate planning attorney will allow you to get a better handle on your estate plan and how the two relate.

Valentine’s Day is the season of cards, flowers, roses, and chocolate. This romantic holiday has been around for centuries, ever since 496 A.D. Back then, the Romans hosted the holiday, which they called Lupercalia. Lupercalia was celebrated as the beginning of springtime, but, over the years, it has been changed both in name and in purpose. 

Valentine’s Day is all about showing love. While cards and chocolate are nice gifts, they are somewhat fleeting. If you want a gift that will last, consider how you can use estate planning to achieve that goal. 

Your Spouse (Or Spouse-to-Be)

Your Estate 

If you are married, about to be married, or are in a civil union, estate planning is important to ensure that your spouse has some protection in the event that you die or fall ill. Even if you and your partner are not married, failure to plan will cause you to have issues with inheritance and end-of-life medical care. 

A typical estate planning tool that can provide for a spouse/long-term partner after your death is a revocable trust. A revocable trust arrangement can take many forms, but the most common is the continual income trust. This legal document is devised by the grantee (you) for the grantor’s (your spouse’s) remaining life. Your estate will pay out a distribution to your spouse after you die for the rest of their life. Other grantors can include your children, grandchildren, or other relatives. 

An example of this is Frances Bean Cobain, the daughter of Nirvana frontman Kurt Cobain. After her father’s tragic death, Frances Bean Cobain revealed that Cobain left a huge chunk of his estate. She gets over $100,000 per month from his estate to this day.

Medical Care

Another important aspect of this type of planning for spouses/partners is end-of-life medical care. If you make your spouse your power of attorney, that will allow him or her to have a say in your financial and medical decisions when you are unable to make them for yourself. Assumedly, you trust your spouse and find them responsible. Giving the person closest to you control over such important, personal decisions is an important aspect of an estate plan. This works both ways. 

Your Kids

If something were to happen to you and your spouse, who would you want to take care of your children? Part of your estate plan should involve your kids. This includes not only estate distributions, such as in the case of Kurt Cobain’s daughter, but also guardianship. Guardianship refers to the person who will take care of your kids until they reach the age of majority (18).

Discuss these plans with your proposed guardian to make sure they are on board and consider themselves fit to assume the role of guardian, should anything happen. Most common choices include grandparents and aunts and uncles. 

Your Parents/Grandparents 

This one applies to those of us who have aging parents. If your parents or grandparents have not put together an estate plan, it is important that they do so. For example, if you know your elderly relatives have very specific medical wishes (such as a DNR), they should include those in an estate plan. That way, the hospital and end-of-life caregivers will honor these wishes even when your elderly relatives cannot communicate them.

Other Loved Ones 

Estate plans can include anyone. If you have assets that you want to leave to specific relatives, that is something that estate planning can handle. If you don’t make these arrangements before death, your chosen relatives might not get what you want them to. Instead, your assets will be divvied up and sold off by probate court.

As you can see, there is more than one way to show your loved ones how much you care about them. Estate planning provides a useful way to give a gift that will last long after you’re gone. 

I think we can all agree that one of the highlights of paying taxes (since we all have to pay them) is seeing how much we can avoid having to pay. In this article, we’ll talk about how to make the most of exemptions for which you might qualify. Don’t forget—tax day is April 15th, and you should start working on your taxes now to avoid possible penalties for lateness or inaccuracy. 

What is a Tax Exemption? 

Getting the vocabulary correct is essential to accurate taxes. A tax exemption is the removal of a liability to pay. A tax exemption reduces or removes a compulsory payment that you (or your estate) would have to pay. Tax-exempt status, as it’s known, can provide complete or partial relief from taxes. An example of an entity with tax-exempt status is a church. 

What is a Tax Deduction? 

A tax deduction is a little different. This income is the result of expenses you incur, usually for a business. A tax deduction reduces your income, and they are a form of tax incentive. Exemptions and credits are the other two tax incentives available. 

What is a Tax Credit? 

Thirdly, a tax credit is a tax incentive that allows taxpayers to reduce the payment they owe to the IRS. They subtract the amount of the credit accrued from the total payment owed to the IRS. This credit can be granted as a form of state support or as a recognition of taxes that you have already paid. 

Each of these incentives is unique in their own way, but the bottom line is the same. These incentives allow you to pay less money to the government, if you know how to take advantage of them.

Standard v. Itemized Deductions

With standard and itemized deductions, you pick one or the other. A standard deduction is a flat dollar amount that you can subtract from your income before the income tax is levied. The standard deduction changes based on your filing status (Married, Single, etc.). For example, in 2019, people who were filing as Head of Household over the age of 65 in 2019 could take a standard deduction of $1,650. 

Itemized deductions, by contrast, require their own form. These are eligible expenses that you can claim on your tax form. These expenses are deducted from your final, taxable income. They decrease your taxable income, and you can claim itemized deductions if you are not taking the standard deduction. Making the decision as to which to take—itemized or standard—is easy. Pick the one that saves you the most money. If your standard deduction would be (for example) $2,000 and your itemized deduction $1,850, take the standard deduction.

Most Overlooked Itemized Deductions 

Should you choose itemized deductions, make sure that you aren’t overlooking some common ones. The most commonly-itemized deductions include charitable payments, medical expenses, dental expenses, home mortgage points, work-related education expenses, state/local income tax, sales/property tax, personal casualty losses, business use of your home, and more. All of these have their own caps and requirements to take them. 

Note that several deductions will be unavailable through 2025. The IRS took them off the list in 2018, and they will remain that way for five more years. Items like home equity lines of credit, loans, alimony, moving expenses, certain types of casualty losses, and other miscellaneous deductions are not available. 

Who are your picks for the Oscars? Perhaps you have your bet on the dramatic, eerie Joker or the gritty war movie 1917, directed by Sam Mendes. Regardless of whoever wins, it’s safe to say that this preceding year has been a great one for filmmakers and moviegoers alike. However, while we all love to see drama onscreen, having drama in your life off-screen is far less entertaining. 

But, alas, people go through events that shake up their lives, and, sometimes, drama cannot be avoided. In this article, we will talk about how your estate plan should adopt to some of the biggest dramatic changes that you might (but hopefully will not) go through at some point. 

Divorce

Once a divorce is finalized, a spouse will be stricken from your will and estate plan automatically in most states. However, people don’t always get divorced when they decide they want to. If you and your spouse are estranged but still married, he or she could still take under your estate if you die. Another example is if you and your spouse are still in one another’s medical plans as POAs, that might still be valid. 

The wisdom of having an estranged family member as your power of attorney is debatable. You want your POA to have your best interests at heart—something that is not always the case even in the most amicable of divorces. Bottom line: change your estate plan to reflect changes between you and your spouse, even before the divorce papers are finalized. 

Other Peoples’ Divorces

Divorce is hard outside of the nuclear family. You might have loved your child’s spouse but, now that they are divorcing, it would be in the family’s best interest to exclude your child’s spouse from your will. Make sure that you keep drama to a minimum by including people who are actually part of your family in your will. If this is a change you feel you need to make in your estate plan, do it sooner, rather than later.

A Death in The Family 

A death in the family works the same way. While the deceased family member will not take your asset if they die, the person who does get the asset might not be your second choice. If you intended to leave money or property to a family member who dies, make sure your estate plan reflects that change. Pick where you want the money or property to go in the absence of your original choice. This way, you can keep your estate plan concurrent with your wishes.

Estrangement 

Estrangement is, sadly, common in families. Every family has its ups and downs, and statistics show that 10% of American mothers are estranged from at least one of their adult children. That same study found that 40% of people have been estranged from a family member at one time or another. 

Whether that estrangement is permanent or temporary is something that only you can answer. However, make sure that your estate plan reflects estrangement. Include or exclude people, depending on what works best for your family dynamics. You can always make changes later on—they key is keeping the plan current. 

Sickness 

Another interesting statistic is one regarding illness in families. Six out of ten Americans say that they have a family member who is chronically ill. Sickness is something with which we are all, unfortunately, familiar. Therefore, considerations for end-of-life care (such as a medical directive or power of attorney) are an important part of estate planning. You want medical professionals to act in a way that reflects your wishes, and you also want your power of attorney to do the same.

Needless to say, this article is somewhat of a bummer. While, hopefully, you never have to experience these events, it’s important to be prepared just in case. Keeping the drama to a minimum will allow you to deal with them and move forward. By being proactive in your estate plan, you can prevent a bad situation from getting even worse. 

Well, it’s here again. Tax season is inevitable, as the old saying goes, and this article will give a brief primer on the top ten things you should know about tax season, including why filing is important, how life changes can affect your taxes, and, of course, penalties you can incur if you run afoul of the IRS.

Top Ten Tax Things to Know 

10. E-Filing 

Coming in at number ten (though it could fall anywhere on this list) is e-filing. E-filing is a good way to save money, as opposed to doing your taxes on paper and mailing them in via snail mail. You can use tax software (like that at H&R Block, for example) to help you save time, trees, and, most importantly, money. 

9. Always Look for Exemptions 

Being married and having kids are two major examples of exemptions. Chances are, even if you don’t fit into either category, you might fall into an exemption that will save you money. For example, if you fall into a lower tax bracket, you might be eligible to save on your taxes. Taking your time to find out whether you can save is a wise idea.

8. Three Words: Adjusted Gross Income 

That’s what really matters. Your AGI (Adjusted Gross Income) is the number you get after the government subtracts expenses, like IRA contributions or education tuition. AGI determines credits and deductions we can take. After deducting those, we get our taxable income. The word “AGI” is all over your tax forms because it is really important at the end.

7. Credits = Money Saved

Exemptions and credits are not the same thing, even though they’re both good. An exemption reduces your taxable income. Credits actually reduce how much taxes you owe. Credits are simple to understand: a credit is money you don’t have to hand over to the government. 

6. Standard Deduction

Standard and itemized deductions are always somewhat of a source of confusion for people. Here are brief definitions for both. First, a standard deduction is worth somewhere between $5,800 and $11,600. If you have simple taxes, you don’t have to go through a huge process to get deductions. A standard deduction is just a reduction off your taxable income. It’s a flat number. You take it, and you pay less.

5. Itemized Deduction 

…Which then brings us to itemized deductions. For itemized deductions, you will need to list out each deduction you can take. If your itemized deductions together equal more than your standard deduction, this is the deduction you take. Examples of itemized deductions include charitable donations, mortgage interest payments, and medical expenses.

4. Why Filing Is Important (AKA Don’t Procrastinate)

Filing is important because there’s no way around it if you make over a certain amount. Because figuring out what exemptions you qualify for and what deductions to take might take some time and digging, you should get started ASAP, not on April 15th or the day before.

3. Ok, So You Procrastinated 

However, someone is always going to procrastinate for whatever reason, and the IRS knows that. You can file for an extension if you need more time. This is not a good idea if you’re putting it off because you don’t have the cash to pay it. If finances are the issue, you can use a credit card (if your bill is low) or go on a payment plan. 

2. Penalties 

If you don’t pay your taxes, bad stuff can happen. The IRS will send you some scary letters and charge you fees for not paying. In very extreme cases (the big-name, Al Capone tax evasion cases), you can even do prison time. If you’re having trouble paying, you can talk to the IRS about a payment plan. They will take it easy on you if you do that, but not if you simply don’t pay.

1. Don’t Mess Up Your Filing Status 

If you get one thing right out of this entire process, it needs to be your filing status. This is the question on the tax form that asks you if you’re single, married, etc. This status will affect how much you pay, and getting it wrong will be a huge hassle.