There are many different financial mistakes that could set you up for disasters in the future. Many people struggle to understand the basic concepts of financial planning or find these so overwhelming that they’re not sure how to step forward and cover all of their interests.

Not having an asset allocation plan is a problem that is easily avoided. Asset allocation is in fact the most critical factor in determining the return and the risk of the investments you make. However, most people have accounts with randomly selected mutual funds, meaning that you could potentially be under-diversified with 10 funds that all move towards the same type of investment. You want to take a look at these different funds to verify that your different accounts are properly diversified, or you could consolidate all of your accounts. Consolidating your accounts could have potential tax benefits if you have a taxable account and prioritize any of your tax-sheltered accounts that generate high taxes such as high turnover mutual funds, high yield bonds, or REITs. Moving your retirement accounts into an IRA or your current employer’s plan is another positive way to manage your asset allocation strategy.

We will help you get a comprehensive picture of your financial planning goals and ensure that you have the right asset allocation and risk management approaches for all your planning. Our firm has extensive experience in working with people to complete this process.

Having an outside professional guide you through this process can make it much easier to approach all of these complex goals and to keep them working together collaboratively. Set aside a time to meet with an experienced and knowledgeable estate planning lawyer about your next steps.

Many people worry about having the appropriate documents on hand. In this four-part series, we’ll explore the various issues associated with keeping documents so that you know exactly what to hold on hand for the long term and what can be disposed of in a safe manner after an appropriate period of time. Certain documents should only be kept for three months or less. 

These might initially seem important or have personally identifying information on them, but they don’t need to be kept over the long haul and could actually expose you to a higher risk of identity theft if they’re floating around your home.

These may be good to keep for a couple of months, in case you become incapacitated and your financial power of attorney agent needs to step in. These documents to keep for 90 days or less include:

• Utility bills
• Receipts for everyday purchases
• Credit card receipts
• ATM receipts

Unless you have specific issues, like business deductions on your income tax return or company reimbursement practices, these receipts become inconsequential after a three-month period and can only add to the clutter in your office or your home. Your canceled checks or credit card and bank statements can be proof of payment for regular purchases and utilities. Certain documents need to be kept on hand for longer and we will explore these in tomorrow’s blog.

When a spouse passes away, it can be an alarming discovery to realize that they have more liabilities than they did assets. Paying off these expenses can be extremely confusing for a spouse who was appointed as the personal representative of the estate. When an estate does not have appropriate assets to pay all of the debts in full, they must be prioritized. The first of these debts that should be paid are all funeral expenses and any of the expenses and costs associated with administration. 

If the funeral expenses were advanced by the surviving spouse, those can be paid back first. Furthermore, someone who is serving in the process of probating the spouse’s estate will be able to get reimbursed for the cost of administration, like legal fees. Next in line for debts to be paid are taxes that are entitled to preference under state or federal law. Hospital expenses and reasonable medical expenses are the next in line to be paid, particularly to the point that they relate to the final illness. If there are medical bills for treatment that was not related to the final illness, that is included in the remaining category of unsecured loans and credit card bills.

Every legitimate claim in a category should be paid first, before moving on to the next category. This can be a difficult situation for a spouse to find themselves in after the loss of a loved one when the grief and other elements of moving through the claim can be especially difficult. To understand your rights and to move forward with powerful knowledge about the future, schedule a consultation with an estate planning attorney.

If you’re a parent and you have used the New Year to do some estate planning for the year ahead, it’s important to get the perspective of an attorney while you do it. This is because many parents have good intentions, but actually set up a ticking time bomb for their children if the proper tax planning hasn’t coincided with setting up the future of your estate. 

Taxes can be hefty when an asset is sold, and the amount of the tax depends a great deal of how the asset became the property of the heir.

One such example has to do with real estate: well-meaning parents might pass on a residence deed to their children to avoid probate or to protect it from impacting their ability to qualify for government long-term care services. The child who receives it, however, would not have paid the parents the fair market value for the property. This is why the house would be seen as a gift, and one that potentially necessitates a gift tax return. If a child inherits the home and later sells it, the difference between what the parents paid for it and the price it sold for could be taxed as income for the child.

Any major assets like this should be considered carefully, whether you intend to pass them on during your lifetime or after. The advice of an estate planning attorney can prove especially fruitful during this time.