Springfield Business Journal Articles


Valuable Checklist For Your Financial Well Being This Year

Each January 1st millions of Americans resolve to get in shape. This year, why not resolve to get your financial affairs in shape. Here is a list of items to get you started.

First, take a financial inventory. List all of your assets, including account numbers and values. Next, list all of your liabilities. A financial inventory will help you evaluate your needs. It will also be invaluable to your family members in the event of your death.

Review or make a will. If you have a will, review it. Has your family situation changed since it was written? Are you married to the same person? Did you have children when it was written? Has your financial situation changed? Would you still name the same person as guardian for your children or as executor of your estate? Do you want to include or change any charitable gifts? If you do not have a will, write one with a software program (but be very careful doing so) or have one written for you by an attorney. A will is not for you. It is for your family (or other beneficiaries) who survive you. If something happens to you, it will make things much easier for your loved ones if you have put your wishes in a will.

Review your beneficiary designations. Life insurance, retirement plans and annuities do not pass under your will. Instead, they pass according to beneficiary designations. You probably designated a beneficiary when you purchased the life insurance or annuity or opened the retirement account. If you need to update your will, you probably need to update your beneficiary designations as well.
Review your life insurance needs. If you died, would you family have enough money to maintain their standard of living? Would your children be able to afford college? If your children are grown, are you overinsured?

Review your disability insurance needs. Do you have disability insurance? How would your family function if you were unable to work? Generally, disability insurance will replace sixty percent (60%) of your income in the event of your long term disability. Is your disability insurance provided by your employer? Do you need a separate policy that you will be able to maintain if you change employers? In evaluating your disability insurance needs, keep in mind that if an employer pays for your disability insurance, disability payments will be subject to income tax. If you pay for your own disability insurance, disability payments will not be subject to income tax.

Consider long term care insurance. Nursing home costs continue to rise quickly. The younger you are when you obtain long term care insurance, the more affordable it will be.

Review your liability insurance. How much liability insurance do you have for a car accident or an accident in your home? Do you have a personal umbrella policy? What is your exposure to liability?

Review your homeowner's insurance. Has the value of your home increased significantly since you purchased it? Have you increased your homeowner's insurance accordingly? Have you scheduled all of your valuable personal property? Many homeowner's insurance policies will pay only $500 for items such as jewelry, furs or art unless you schedule the property separately and pay additional premiums. An insurance agent will review all of your insurance needs with you and recommend changes or additions to your current coverage.

Analyze your income tax exposure. Have you talked to your accountant about reducing your income taxes? Your income tax planning will be much more effective if you begin in January rather than waiting until November.

Will your estate be subject to estate taxes? On January 1, 2002, the estate tax exemption amount increased to $1,000,000. If the value of your estate exceeds that amount, it will be subject to estate taxes. Keep in mind that the full value of all life insurance proceeds and retirement plan benefits will generally be included in your estate for estate tax purposes. Talk to your tax advisor about ways to reduce your estate tax exposure.

Review or consider powers of attorney and a living will. A power of attorney allows someone to handle your affairs in the event of your incapacity. A financial power of attorneys allows that person, your "agent," to control your assets such as bank accounts, securities, real estate, etc. Your agent will not be supervised by a court or state agency. Unfortunately, it is not uncommon for an agent to abuse a power of attorney. Therefore, you must trust the person you name as agent completely.

A medical power of attorney allows your agent to make health care decisions for you if you are unable to do so. For example, if you had a stroke, your agent under a medical power of attorney could authorize necessary medical treatment. A living will expresses your wishes regarding life support -- whether you would want life support terminated in the event your doctor determines that you have an incurable and irreversible injury, disease, or illness and that your death is imminent except for the life support. It is extremely important that you discuss your wishes with your family members. The decision to terminate life support is extremely difficult, and your family will be better equipped to make such a decision if you make your wishes known to them.

I wish you all good luck with your resolutions whatever they may be and a peaceful and prosperous New Year.
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