Show Me The Money

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Money matters. By taking certain steps, one can optimize finances, address estate planning and ensure that personal digital assets are preserved for future generations.

“Prepare a statement of net worth,” says Brad Griffin, senior vice president and location manager for Arvest Asset Management. “Simply list your assets – home, 401(k) balance, IRAs, bank accounts, life insurance – and your liabilities – mortgage, auto loans, credit card debt. This will provide you with a base line of net worth on which to build.”

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Goal-setting and budget preparation are crucial, says Griffin. Pay yourself first with a savings goal of, for example, three to five percent of your pay. Contribute up to the matching amount in your company’s 401(k) or 403(b) plan or set up an Individual Retirement Account. In preparing the year’s budget, your bank’s online system and your credit card company’s year-end summaries provide useful information to consider for spending/saving goals. After reviewing, differentiate between wants and needs, thus overcoming tendencies to overspend. Pay down credit card debt, setting a goal to pay more than the minimum amount each month.

Once armed with information, rebalance your investment portfolio, as some asset classes may have performed better than others in the past year, says Griffin. This is especially helpful considering changes coming in estate taxes in 2015.

“The tax-free amount, by which you can give away money during your life or after your death while avoiding the incurrence of death or gift taxes, is going up as of Jan. 1, 2015,” says Gale Allison of The Allison Firm, PLLC. “The amount will be $5,430,000 – which is an increase of $90,000. The tax rate of 40 percent is staying the same, so every dollar owned above that amount is taxed at 40 percent.”

Allison points out that while the majority of folks do not have to worry about death taxes if their estate isn’t in the millions of dollars, they often erroneously think they don’t need estate planning.

“Estate planning is more important than ever as income tax laws have been made more draconian,” she says. “Most American households have an IRA or 401(k), and poor planning on these can cause the benefits to be subject to early taxation for failure to plan on state and federal taxes often exceeding 40 percent. In addition, failure to plan often means they will not avoid an expensive trip to probate court.”

An attorney can do death tax planning through a living revocable trust or a will, says Allison. Properly drafted and funded, living trusts avoid the probate court procedure.

“There is a myth that living trusts are for the uber-wealthy and involve serious tax planning,” she says. “There is no difference at death in what you can do in a will versus what you can do in a living trust with the big exception that passing your property by [a] will means your estate will for sure go to probate court. But if you pass your property on via a living trust, you generally avoid the public and expensive probate procedure.”

Ever wonder what would happen, upon your passing, to your online finances, photographs, videos, music and other items across various platforms and social media?

“People need to get their digital assets in order as this has become a serious estate planning issue,” says Allison. “Track all passwords and logins and gather all such information for inclusion in wills, living trusts and powers of attorney.”

Do a digital inventory – including important items on phones, thumb drives, backup drives, computers, etc, Allison says. Many digital assets are not transferable upon death including iTunes music and e-books. By appointing a digital executor in your will or living trust and arming them with the essential data of passwords, you authorize them to take legal possession of transferable digital assets. Doing so can help prevent, for example, continual social media updates after a person is deceased.

With planning and savvy, one can rest assured their financial and eventual end-of-life affairs are in order.

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