Why You Should Have A Will.

Image by julianrod via FlickrI was over at my lawyers office this week to modify my will. I remember going many years without having a will. It was very foolish not having one because if you don't, you have given up any say in your affairs after your death. You take such good care of your life and family during your life, why not provide direction after your gone.

What is a Last Will and Testament? Most of us think we know what a will is, but do we really? If you said that a will is a document where a person declares who gets his or hers assets upon death, you are only partly right. A will does much more than that.

Guardianship of your Children.

Do you ever wonder who your children will live with after your gone. They may go to relatives you don't approve of, if your wishes are not stated in a will. If you have children under the age of 18, a will is the place where you declare whom you want to be the guardian in the event of your death.

The courts will decide who gets custody of your minor children based on what is in your childrens's best interest, but judges will give great weight to the stated wishes of a child's natural parents. Judges can't do this unless you have stated those wishes. And the place to state them is in your will.

Administration of Your Estate.

You don't have to be rich to want to ensure that after your death your property and assets are not squandered or stolen. A will is the place where you appoint someone you trust to administer, manage and distribute your assets. If you don't appoint someone to do this for you, the court will appoint a total stranger to serve in this capacity for a fee.

Guardianship of Your Children's Property.

Minors do not have the capacity to contract and therefore do not have ownership rights to property. An adult must be appointed to manage a minor's property until the minor becomes of age. But even after your children reach the age of 18, you probably won't want them to have full ownership rights to your property because if they are anything like I was at 18 they'll probably blow it all in beer. A will is where you not only decide who gets your property but when and how they will get it.

Separate Writing

Florida law allows you to keep a list of special items you wish to leave to certain benificiarys upon you death. This list may be updated by you at anytime without the need for revision of or amendment to your will.

Some examples:

• An engagement ring to a niece
• A baseball card collection to a nephew
• A library to an grandson
• A photo album to a brother

Living Will

Sounds like a contradiction in terms, right? Well, a Living Will is a document that tells your healthcare provider under what conditions you wish not to be revived. It is an essential part of your estate plan. In it you will name one or more health care surrogates who are empowered by you to make decisions about your health in the event you are incapable of doing so.

Durable Power of Attorney

A durable power of attorney is a document that you execute authorizing someone of your choosing (usually a close relative or trusted friend) to handle your affairs in the event you become incapable of doing so. Like the Living Will, this is an essential part of your estate plan.

For so long I put off having a will made. Don't make the same mistake. For only a few hundred dollars you can have piece of mind. This week make plans to see a lawyer and draw up a will.

If There Is A Goverment Shut Down, What Services Will Be Curtailed?

Image via WikipediaCongress has till Friday to finish it's work on the budget, if it doesn't, the government will shutdown. What does it mean for the government to shut down? How will it hurt the average citizen? Democrats and the President say it will hurt Americans deeply. What does that mean, I am not convinced. Let's look at the facts.

Fact: Only one in four federal employee would likely be furloughed, that's 800,000 workers. These workers would not be connected with any services connected to human life or protection of property. That's according to a 1981 law called the Deficiency Act.

What would stay open?

Armed Forces. The troops would continue to work and Congress is trying to pass a law to ensure they are still paid. Border security would be operating and our ports and airports would still be open.

Secret Service. The president would still be protected.

Airport Traffic Control. All traffic controllers at airport would still be at their job. Even the good ole' TSA would still be patting us down.

Post Office. The Post Office would still be delivering your mail because it is a self financing service running on it's own funds, not needing taxpayer support.

Federal Reserve. Ben Bernanke would still have to go to work along with his whole crew.

Social Security. Everyone would still get their social security checks. But new applicant would have to wait till new funding arrives.

What will shutdown?

Passport Applications. If your in a hurry to get your new passport or a renewal, you are going to be waiting a while.

The Federal Housing Administration. If your dealing with the FHA you will be experiencing a slowdown in your application.

Internal Revenue Service. You will be waiting a little longer to get your refund. The IRS is not on the priority list of essential services.

Of course who is to blame for all this, you guested it, our friendly representatives in Congress. They have had since September of last year to get this job done. They have constantly voted to extend the passage of the budget till the last minute. The blame is squarely on their shoulders. Both parties

10 Ways to Cut Housing-Related Costs in Retirement

Image via WikipediaNot only is Morningstar.com is a great resource for all your investing needs, it has some great articles about the spending side of the equation. Morningstar's director of personal finance and author Christina Benz has a great article about how to reduce your housing costs in retirement. Housing costs in the accumulation years of your life can make or break the amount of money you save for retirement. It is even more critical when you are in retirement.

I like the way Christina speaks of your retirement as a "work in progress". Just as in your working life you have to adjust and readjust your your savings and spending, so also you must in retirement. It's not a set it and forget it. You are regularly having to adjust your plan for what life throws at you.

One of the largest expenses we all have to deal with in our lives is the housing expense. Even cutting costs in this department can make a big impact on your bottom line. The list contains many palatable to some unpalatable choices. It's not a one size fits all choice. It also depends on how much money we have to spend. According to our income, some may have to compromise our first choices for more affordable second choices. Lets get to the list.

1. Consider a Cheaper Location. Moving is no pleasure and moving to reduce housing costs has many tradeoffs. Leaving friends and family is a big downside to moving. So is moving to a location where there is less to do. The locales with more to do usually have a higher cost associated with it. What about the overhead costs of selling your home, buying another, and all the moving expense; this may be the downside. But when you sell you may be freeing up a large amount of equity that can help in your retirement goals.

2. Downsize in the Same Location. Here we have solved two of the problems of leaving freinds and family, also freeing up needed equity. Your getting an immediate reduction in monthly expenses and still enjoying all the comforts of staying in your city.

3. Consider Combining Households. Living with your grown children or relatives will save you money in housing expenses. It's beneficial for both partys financially. But if you have any relational problems it could turn out to be a nightmare. For the seniors in the home it may be a necessity someday to have family there to look after you should the need arise.

4. Don't Pay For Care Until You Need It. A choice of living in a senior assisted living home may be right for some. As we grow older and have the need for more daily care, if your already living in a retirement community that has assisted living care available if needed may be a comfort for some.

5. Consolidate Two Homes Into One. Some of us are lucky enough to have a home and a vacation home. It may be smart to access which of these homes you can sell. Try to figure out which home is under utilized. Either sell or rent the under utilized home for a financial benefit. If you sell a vacation home you can still rent in the desired location. And you'll have the flexibility of not being locked into one vacation destination.

6. Rent a Second Home at Least Part of the Year. Make your second home become a business by renting it out all year or seasonally to supplement your retirement income. Leaving the home empty only increases the financial drain on your cash flow. Having a plan of renting it a fixed number of years, saving the income for future needs may be what's needed for a faltering nest egg.

7. Refinance. Maybe it's time to refinance. This will lower your payment and also free up cash flow for other necesities. Tking some cash out may be the right thing to do if you have some other debts that need to be cleaned up.

8. Cut Loose Your Home Equity Line of Credit. Many lines of credit have a yearly fee. If so releasing this will free up that amount of money.

9. Apply for Property Tax Exemptions and Freezes. After your mortgage payment the property tax is your largest expense. Signing up for all the exemptions, freezes, and credits you can will only add to your cash flow. Also check if your assessment is correct.

10. Contest Your Home's Assessed Value. Check to see if your tax bill refects accurately your homes actual features like square footage and amenities.


I like these tips for reducing housing costs. They should be applied also to homeowners of all ages. It should be a part of your lifelong financial planning.


For further good information check out other articles by Christina Benz at Morningstar.com

Does Cancelled Debt Have To Be Reported On My Income Tax?

Image via WikipediaIt was worth it, you had to jump through a few hoops but that credit card canceled your debt. It was a great feeling not having to worry about that anymore. But you received in the mail a 1099-C that states you you owe taxes on that forgiven debt. Do you have to report it on your tax, you don't have to but expect a stern letter from the IRS if you don't.

Don't even think about ignoring it because Uncle Sam gets a copy of that 1099-C, too. They are going to be looking for it on your tax return. A Form 1099-C is issued when a debt of $600 or more is forgiven or canceled.

The IRS stated that the number of 1099-C's grew from 1 million forms to 1.9 million forms in 2008. Estimates for 2010 go as high as 3 million 1099-C forms. It's strange because people that couldn't pay their debts are now expected to pay taxes. So they will be forced to put the tax bill on their credit card and here we come full circle.

If you have $50,000 in debt forgiven , expect to pay $15,000 in taxes.

But be careful, all forgiven debt is not taxable. If you had a student loan that was forgiven because you worked in an under served community, it's not taxable. But the forgiveness of the remaining student loan balance after 25 years in an income-based repayment program is taxable. Given the complex rules, you should provide the 1099-C to the tax preparer. This applies only to a principal residence — not a second home. And the exclusion applies only if a foreclosure or short sale takes place from 2007 through 2012. The canceled debt must have been incurred to buy, build or improve your main home.

As with all things of this complexity, seek out a competent tax accountant to do it right.

What Do I Do If I Can't Pay My Taxes?

Image via WikipediaWith tax day only a few weeks away, people are scurrying to get their tax returns done. If your nervous about the whole procedure you're either afraid your not going to make the deadline or you know you owe Uncle Sam money.

If you don't pay by the deadline of April 18th, you could be in store for some tough interest and penalties. The IRS could garnish your wages or your bank account. It also has the power to place a lien on your property, which could ruin your credit rating.

Even if you don't have the money, you should file anyway because failing to file brings with it a penalty of 5% of the unpaid tax for each month the return is late, up to 25% of the amount owed, plus interest. So it's better to file because the IRS will only charge a late fee that is only one-half of 1% a month.

What if I can't file or pay the taxes? Get a short-term extension. If you know you'll have the money in 120 days or less, ask the IRS for a short-term administrative extension. You'll still be liable for the failure-to-pay penalty and interest. You can request a six-month extension by filing IRS Form 4868. Approval is automatic. Filing for an extension doesn't give you more time to pay, so you'll still owe interest and late-payment penalties for every month you're overdue. However, you'll escape the failure-to-file penalty. Include your best estimate of the amount you owe. To request an extension, call 800-829-1040.

I have the tax returns ready, but I don't have the money to pay. Pay with a credit card. The IRS accepts plastic. But unlike most retailers, the IRS won't cover the cost of processing the transaction. You'll have to pay the fee, which ranges from 2.35% to 3.93%, depending on which provider you choose. The fee will be added to your balance.

Is there a way I can make monthly payments to the IRS? The IRS offers a program that allows taxpayers to pay their tax bill in monthly installments. If you owe $10,000 or less and are in good standing with the IRS, approval is automatic. The fee to set up an installment plan is $105, but the IRS will reduce it to $52 if you agree to have payments electronically debited from your bank account. You'll also pay interest, but the rate, which is adjusted quarterly, is considerably lower than the interest on a credit card balance. To request an installment agreement, file IRS Form 9465. In general, the IRS will give you up to five years to pay off your debt. You can choose the amount of your monthly payments. And if you miss a payment, the IRS has the right to demand that you pay the entire balance.

I am so broke, I will never be able to pay my tax bill, What can I do? Under certain circumstances, the IRS will agree to accept less than you owe. The percentage of people that receive this kind of help is very low. You have to convince the government that you don't have the money and that you probably never will. The fee to apply for an offer in compromise is $150, although the IRS will waive it for low-income taxpayers. You'll also be asked to document your assets and liabilities in excruciating detail.

With matters as serious as these, it will not be a bad idea to seek professional tax help. A certified tax accountant will hold your hand through these times and give you the needed guidance.

For a more detailed explanation check out "Losing Sleep Over Owing The IRS?" over at Forbes.com

The Mystery Of Medicare

Image via WikipediaI have gone through most of life not thinking about Medicare. I didn't have to, it wasn't for me, it was for those old timers over there. Now that I have become one of those old-timers, I am getting curious. Even though I am to young for it yet, you have to be 65. It's still over the horizon for me, but with a lot of my baby-boomer brothers and sisters closer to it, I thought a little info searching was in order.

So what does it cover? Do I need it? When should I sign up? Lots of questions. So I headed over to the HQ for all things about retirement, our old friends at AARP.org. They have created Medicare Starter Kit to get you up to speed on all things Medicare.

They start out with the Top Eight Do's and Don'ts:

1. Do give yourself time to learn about Medicare: It's a system with many choices and deadlines. Being informed is the best way to avoid mistakes that cost money.

2. Don't expect to be notified when it's time to sign up: Unless you're already receiving Social Security benefits, you must apply for Medicare. But you won't get any official notice on when or how to enroll.

3. Do enroll when you're supposed to: To avoid permanent late penalties, enroll at age 65 if you're not working, don't have employer insurance or live abroad; or, beyond 65, enroll within eight months of stopping work — even if you continue to receive COBRA or retiree health benefits from an employer.

4. Don't despair if you haven't worked long enough to qualify: You may qualify for Medicare on your current or former spouse's work record. Or you may be able to buy into the program.

5. Don't worry that poor health will affect your coverage: If you qualify for Medicare, you receive full benefits. You can't be denied coverage or charged higher premiums because of current or past health problems.

6. Do remember that Medicare is not free: You pay premiums for coverage and copayments for most services, unless you qualify for a low-income program or have other, extra insurance.

7. Don't assume that Medicare covers everything: It covers a wide range of health services (including expensive ones like organ transplants), prescription drugs and medical equipment. But there are gaps.

8. Don't expect Medicare to cover your dependents: Nobody can get Medicare under age 65, except those who qualify through disability. Medicare has no family coverage.

This is only a small taste of what the Medicare Starter Kit has to offer, get over to AARP.org and find out more.