Corliss Law Group Estate Planning Tips for People under 40

It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns.

The following tips, aimed at those under 40, can help you approach and simplify the estate planning process:

Start now, regardless of net worth. Estate planning is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. "Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'" he says. "Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important."

This is especially true if you are responsible for financially dependent individuals, such as young children. "The less you have, the more important every bit you've got is to you and the people you care about," says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. "If you don't have much money, you really can't afford to make a mistake."

Have the "what if?" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you.

"We find that the best transitions and financial transfers happen when all family members are involved in the decision making," says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. "This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions."

Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process.

In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. "Young people can't afford to die," he says. "They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan." Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals.

Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. "Don't feel like you have to jump at the first person whose name is given to you," Kirchick says. "I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on."

According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location.

Continue to review your plan over time. Finally, your estate plan should never be a "one and done thing," according to Henn. "Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children," he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place.

Corliss Law Group: 4 Tips for Getting Started on Your Estate Plan

Once you've assessed your need for an estate plan and selected an attorney to work with, you'll need to create your foundational estate plan. Depending on your current family situation and financial status, your foundational estate plan will consist of four or five essential documents. In order to put these essential documents together, there will be things that you'll need to do and many important decisions that you'll need to make. Here's a list of what they are.

• Assemble a list of your current assets and liabilities.

This will help your estate planning attorney calculate your current net worth and determine if you already have or could potentially have a taxable estate. Your list of assets and liabilities will also indicate if your loved ones will have any difficulty paying the estate tax and/or other debts after your death. If your attorney sees a problem, he or she can suggest options for easing the financial burdens that your loved ones will face during a difficult time. Your list of assets will also help to identify if there are any problems with how your property is titled, what assets will need to be funded into your Revocable Living Trust, and what accounts will need a change of beneficiary to coincide with your foundational estate plan.

• Determine who will receive your assets.

In 49 states and the District of Columbia you can disinherit anyone you choose except for your spouse unless your spouse waived the right to your estate in a premarital or postmarital agreement (Georgia is the only state where you can disinherit your spouse). Aside from determining your initial beneficiaries, you'll need to decide who will inherit your assets if a beneficiary predeceases you or if a charity you select is not in existence at the time of your death.

• Decide how and when your beneficiaries will receive your assets.

There are basically two ways to leave your assets to your beneficiaries - outright or in trust. Which way you choose will depend on the beneficiary's age, health, and family and financial situations. Your estate planning attorney will walk you through the needs of each beneficiary and then help you decide what to do for each one. If a trust is recommended for a beneficiary, you'll need to determine how long it should continue - for a fixed number of years, until the beneficiary reaches a specific age or achieves a specific goal, or for the beneficiary's entire lifetime. You'll also need to determine what will happen to the assets remaining in the trust if the initial beneficiary dies before the trust funds have been completely used.

• Choose someone to be in charge.

This is probably the most important step in creating your foundational estate plan - choosing someone who will act in your best interests if you become disabled, or in your beneficiaries' best interests after you die. Each of the four or five essential estate planning documents will require you to select a fiduciary to act on your behalf either during your lifetime or after your death. Your estate planning attorney will explain the function of each fiduciary and help you decide who to choose in each situation. You'll also need to select one or two backups in case your initial choice isn't able or doesn't want to serve.

Corliss Law Group: Get ahead of your estate planning

What you need to know about estate planning, including why you may need a will and assigning a power of attorney.

1. No matter your net worth, it's important to have a basic estate plan in place.

Such a plan ensures that your family and financial goals are met after you die.

2. An estate plan has several elements.

They include: a will; assignment of power of attorney; and a living will or health-care proxy (medical power of attorney). For some people, a trust may also make sense. When putting together a plan, you must be mindful of both federal and state laws governing estates.

3. Taking inventory of your assets is a good place to start.

Your assets include your investments, retirement savings, insurance policies, and real estate or business interests. Ask yourself three questions: Whom do you want to inherit your assets? Whom do you want handling your financial affairs if you're ever incapacitated? Whom do you want making medical decisions for you if you become unable to make them for yourself?

4. Everybody needs a will.

A will tells the world exactly where you want your assets distributed when you die. It's also the best place to name guardians for your children. Dying without a will -- also known as dying "intestate" -- can be costly to your heirs and leaves you no say over who gets your assets. Even if you have a trust, you still need a will to take care of any holdings outside of that trust when you die.

5. Trusts aren't just for the wealthy.

Trusts are legal mechanisms that let you put conditions on how and when your assets will be distributed upon your death. They also allow you to reduce your estate and gift taxes and to distribute assets to your heirs without the cost, delay and publicity of probate court, which administers wills. Some also offer greater protection of your assets from creditors and lawsuits.

6. Discussing your estate plans with your heirs may prevent disputes or confusion.

Inheritance can be a loaded issue. By being clear about your intentions, you help dispel potential conflicts after you're gone.

7. The federal estate tax exemption -- the amount you may leave to heirs free of federal tax -- is now set permanently at $5 million indexed for inflation.

In 2013, estates under $5.25 million are exempt from the tax. Amounts above that are taxed up to a top rate of 40%.

8. You may leave an unlimited amount of money to your spouse tax-free, but this isn't always the best tactic.

By leaving all your assets to your spouse, you don't use your estate tax exemption and instead increase your surviving spouse's taxable estate. That means your children are likely to pay more in estate taxes if your spouse leaves them the money when he or she dies. Plus, it defers the tough decisions about the distribution of your assets until your spouse's death.

9. There are two easy ways to give gifts tax-free and reduce your estate.

You may give up to $14,000 a year to an individual (or $28,000 if you're married and giving the gift with your spouse). You may also pay an unlimited amount of medical and education bills for someone if you pay the expenses directly to the institutions where they were incurred.

10. There are ways to give charitable gifts that keep on giving.

If you donate to a charitable gift fund or community foundation, your investment grows tax-free and you can select the charities to which contributions are given both before and after you die.

Corliss Law Group 4 Cases on how life settlements have bounced back

We’ve repeatedly said that the life settlement market has improved substantially this year.  But the best way to illustrate that is to share the details of some recent cases with you.

1. $3 million Survivorship UL, wife deceased, male age 90:  The policy was originally bought for estate taxes, which due to the American Taxpayer Relief Act (ATRA) of 2012, were no longer a problem for this client.  We shopped the policy last year and got an offer of $700,000, but the client decided he would try to maintain the policy. This year he came back to us because he had trouble coming up with the premium payments. Though his life expectancy decreased by only 4 months, a year later we were able to get him $815,000 for the policy, which had a cash surrender value of $246,000.  He was thrilled!

2. $2 million U.L. on female, age 79, with relatively modest health impairments:  Life expectancies obtained were 122, 142, and 129 months.  The policy had only $43,000 in cash surrender value and the client could no longer afford the premiums.  The client received $131,000 in a life settlement.

3. $500,000 U.L. policy on a male, age 90:  The family was running out of money to pay for his long term care in a nursing home. His life expectancies were 36, 36 and 48 months.  The client received $217,000 for a policy with no cash surrender value, which gave everyone comfort that he would be able to continue to receive care at his existing facility.

4. $4 million Survivorship U.L., husband deceased, female age 82:  Life expectancies were 102 and 134 months. Changes in the estate tax law eliminated her need for this insurance. $575,000 was received for this policy,which had a cash surrender value of $168,000.

All these policies were about to be lapsed or surrendered. And, as you can see, a life settlement was a far better solution. Look at the meaningful difference that the additional cash made to these policy owners.  

When you hear that your clients have policies that they no longer need, want or can afford, you owe it to them to explore the life settlement alternative. Remember, it can’t hurt to try ─ it can only hurt not to!  And the timing for trying today is better than it has been in years!

Corliss Law Group | 5 Must-Do Retirement and Tax Planning Tips

As 2013 winds down, I want to offer a few simple reminders and pass along some retirement and tax planning tips that will help you end the year on a high note and propel you into a prosperous 2014.

401(k) plans. Let’s start with an overview of some retirement plans, their contribution maximums and specific timetables. The 401(k) is the basic plan that everyone’s heard about, but not many people, especially young professionals, take full advantage of. You can put up to $17,500 each year into your 401(k), and if you’re age 50 or older, you can contribute another $5,500, called a catch-up provision.

It’s important to remember that with a qualified 401(k) plan, all contributions have to be made before Dec. 31 of this year. So, if you have a little extra money that you didn’t spend on gifts for the family, remove all temptation to buy something for yourself and make one final contribution. Another thing to remember is to leverage your corporate match program. Find out what it is, and take advantage of it. It’s basically free money.

Individual retirement accounts. If you have an IRA or Roth IRA, things are a little different. You can’t put away as much money each year, but the trade-off is that with a Roth IRA your future withdrawals are tax-free. Because the total contribution amounts are lower, it’s important that you contribute the full $5,500 each year, and if you’re age 50 or older, take advantage of the $1,000 catch-up provision.

Your contribution deadlines are also a different with IRAs and Roth IRAs. You have until tax filing time in 2014, plus any extensions, to make IRA and Roth IRA contributions for 2013. That being said, I would not advise you to procrastinate in making your contributions. Try and hit the maximum contributions by the end of 2013 because your retirement planning will be done for the year. Making the full contribution by the end of the year also helps simplify next year’s planning and budgeting process.

If you’re an individual business owner, or it’s just you and your spouse who own the business, you can place your money into a 401(k) called a solo 401(k) plan. This plan allows you to contribute up to $17,500 for each individual in 2013. The company can then contribute up to $33,500 as a corporate match, as long as the amount contributed doesn’t exceed 25 percent of your income. Also, like the 401(k), there is a catch-up contribution of $5,500 available for individuals over age 50. The Dec. 31 deadline still exists for contributions, but since a solo 401(k) plan doesn’t have to comply with nondiscrimination testing rules, the filing process is much simpler.

One last retirement planning tip: If you are age 70.5 or older, you must take your required minimum distribution this year because it’s a calendar year program. I cannot stress enough how important this is, and you literally cannot afford to forget! If you don’t make your scheduled RMD payment, the Internal Revenue Service will assess a 50 percent penalty on what you don’t withdraw. It’s one of the steepest penalties that the IRS can impose.

Shrinking Your Tax Bill. Let’s move on to tax planning. If you want to do tax planning, you have to do it during the current tax year. That may seem obvious, but sometimes people lose track when tax cycles begin and end. I have a calendar that I update regularly to show when I need to make local, state and federal tax payments. I created this calendar for two reasons: I want to avoid unnecessary tax penalties, and I want to show the months when I have less discretionary income than I would ordinarily have. If you create a similar calendar it will help you keep track of your expenses and plan for 2014.  

Now that we know when we have to pay our taxes, let’s discuss legal ways to lower our tax bill. For many investors, tax loss harvesting is an essential tool used to reduce the yearly tax bill. When properly executed, it can help you save on taxes and help you diversify your portfolio in ways you may not have considered.

For example, let’s say you’ve had a great year and “investment A” has given you a fantastic rate of return, but your other investment, “investment B,” has resulted in a loss. As long as both investments are within taxable accounts, you can sell your losing positions to harvest your losses, which can then be applied against your gains, leaving you with a smaller amount of gains and thus a lower base for taxes to be applied against.

Fortunately or unfortunately, this has been a really good year, and most people only have gains. However, if you have a stock or a piece of real estate that didn’t fare so well, you will have to sell it in order to take your loss and offset the capital gains tax.

Gifting. Another strategy that you may want to consider is gifting. It’s important to note that charitable contributions can help reduce your taxable income. As an individual, you’re allowed to gift $14,000 to any individual each year. That means you and your spouse could give a combined total of $28,000 per calendar year. As a result, you only have a few days left to make that 2013 gift.

Business expenses. If you’re a business owner, you can deduct some of your business expenses from your income, thus lowering the taxable income. The expenses follow a calendar year cycle as well, and must be taken by the end of the year, so you can claim them in this tax year.

529 contributions. One last tax strategy that you may want to consider is the 529 educational savings contribution. Certain states will allow you to take a deduction against state income taxes based on the amount of money contributed to a 529 plan. Remember that it doesn’t have to be your own 529 plan; it can be for your children or grandchildren. Just like expenses, you must make the contribution by Dec. 31 in order to reduce your taxable income for this filing year.

Don’t forget – while you can wait until tax filing season for some of these strategies, you absolutely must claim expenses and make 529 contributions by the end of this year. Completing one or more of these basic retirement and tax planning tips will help maximize your retirement accounts.

I hope I’ve given you some great ideas to consider and execute before the end of the year. The most important, above all tips, is to take a look at where you are and where you need to go, both investment and retirementwise. Then set a plan to meet those goals. Once you have designed your plan, review it to make sure you’re keeping up with your responsibilities in order to be successful in the new year. Have a great 2014.

Kelly Campbell, certified financial planner and accredited investment fiduciary, is the founder of Campbell Wealth Management and a registered investment advisor in Alexandria, Va. Campbell is also the author of “Fire Your Broker,” a controversial look at the broker industry written as an empathetic response to the trials and tribulations that many investors have faced as the stock market cratered and their advisors abandoned their responsibilities to help them weather the storm.

Tips for Planning your Retirement by Corliss Law Group

Here are the top 10 things you need to know as you plan for retirement.

1. Save as much as you can as early as you can.

Though it's never too late to start, the sooner you begin saving, the more time your money has to grow. Gains each year build on the prior year's -- that's the power of compounding, and the best way to accumulate wealth.

2. Set realistic goals.

Project your retirement expenses based on your needs, not rules of thumb. Be honest about how you want to live in retirement and how much it will cost. Then calculate how much you must save for retirement to supplement Social Security and other sources of retirement income.

3. A 401(k) is one of the easiest and best ways to save for retirement.

Contributing money to a 401(k) gives you an immediate tax deduction, tax-deferred growth on your savings, and -- usually -- a matching contribution from your company.

4. An IRA also can give your savings a tax-advantaged boost.

Like a 401(k), IRAs offer huge tax breaks. There are two types: a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; a Roth IRA, by contrast, doesn't allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals.

5. Focus on your asset allocation more than on individual picks.

How you divide your portfolio between stocks and bonds will have a big impact on your long-term returns.

6. Stocks are best for long-term growth.

Stocks have the best chance of achieving high returns over long periods. A healthy dose will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg.

7. Don't move too heavily into bonds, even in retirement.

Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can erode the purchasing power of bonds' interest payments.

8. Making tax-efficient withdrawals can stretch the life of your nest egg.

Once you're retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible.

9. Working part-time in retirement can help in more ways than one.

Working keeps you socially engaged and reduces the amount of your nest egg you must withdraw annually once you retire.

10. There are other creative ways to get more mileage out of retirement assets.

For instance, you might consider relocating to an area with lower living expenses, or transforming the equity in your home into income by taking out a reverse mortgage.

--CNN Money

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