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The First Steps to take in Estate Planning

Death.

Well, your death to be more specific. It’s not something you want to think about and we should not be obsessed with it.

However, not planning for it is a major mistake many people make. We will all die one day. Death is something we can’t plan but we can plan to provide for our family and loved ones once the inevitable happens.

Estate Planning can actually be a relief to many who do it. It eliminates a lot of stress for you and your loved ones. How many stories have you heard of someone’s sudden death and the spouse and family being left with thousands of dollars in debts and no money to cover funeral expenses.

So, now is the time to take the First Steps in Estate Planning. Those all-important first steps should include the following:

  1. Create a Will and sign it: This first step is so simple and yet seems to be the most difficult or most often forgotten. (Only 43% of adults have a will according to a 2011 Harris Interactive Survey.) However, this is the most important and simplest step of all. Your property needs to be identified and the heirs to them named. So, in your will, name an executor who can properly disburse your property according to your wishes and pay off any estate debts. If you fail to execute a will, your property and debts may be passed on equally to your spouse and children according to the Law of Intestacy. That may cause hardship and incur extra legal costs. It’s much better to have a will and also be sure to sign and date it.
  2. Leave a detailed letter: Sometimes, you need to say more than the will allows. In this case, write a detailed letter stating your desires for your funeral arrangements, wording for the obituary, sentimental items you want to give to heirs, funeral program and other items. This letter would be kept and read by your attorney and/or executor. (You may have to amend this letter, along with your will, over the years.)
  3. Create an advanced health care directive: Many people fail to plan for health care emergencies. This unfortunate lack of planning and insight leaves their loved ones having to plan or decide on how to take care of them causing great stress and expense. A stroke, cardiac arrest or other major health crisis occurs and you may be unable to express your end-of-life desires to your family. This is a nightmare scenario. So, plan your “Advance Health Care Directive” giving explicit directions on how you should be treated when that moment occurs. Many people have a “DNR” or “do not resuscitate” orders on their medical and HIPAA release form. Your estate planning attorney can prepare this form for you and they can give your health care agent/case management team the right to get this information under the HIPAA rules. (You can find out more from the ABA’s “Consumer’s Toolkit for Health Care Advance Planning.”)
  4. Hire a Durable Power of Attorney (DPA): Your will and executor are a great start but you will still need an attorney to make sure all your wishes are known and executed should you be too sick to have it done. You may need to choose a trusted family attorney or a financial advisor. It should be someone familiar with the legal and financial issues and also someone who provide professional and compassionate advice to your heirs. (A relative is not recommended in this case as they would not have necessary objectivity needed in making decisions.)

This is only the start of estate planning. We will get into more detail in future blogs. The main point here is this: get that will written and signed. Everything after that can be done in time. Make this sadness less stressful for you loved ones by making sure they are taken care of and your property and assets go to those whom you want to have it. It’s not too late to do it today, in fact.

If you need more advice on estate planning, we have licensed and experienced attorneys at A. K. Burton, PC who can help you plan every step of the way. Contact us at (301) 365-1974 for more information or email us at info@cpa-maryland.com.

 

What to do if Investment Losses Hurt Your Finances

“Buy low, sell high.”

It’s a tried and true investment philosophy. Every stockbroker and financial advisor proclaims it.

Unfortunately, investing in the stock market also means losing money-real money. Every honest stockbroker and financial advisor also tells their clients to be prepared for it, no matter what the insiders say or who is in the presidency or congress. Losses happen.

financial losses A. K. Burton, PC

So, how can you handle investment losses? Does it spell financial ruin? Sell it all to recoup your losses? Stop investing entirely and move to Costa Rica?

No, that is desperate and rarely smart. Here are Five Tips to Handle Investment Losses that Could Hurt Your Finances: 

  1. Accept that investment is a risk: Your stockbroker or financial advisor does not control the market. It is completely out of their hands and quite unpredictable. So, accept that any investment you make is a risk. You will win and lose. If you cannot accept that truth, don’t get involved in it as it will only bring disappointment.
  2. Claim your investment loss as a “Realized Loss”: This happens when you sell an investment at a lower price than you paid for it. For instance, you may make $1,000 in capital gains but lose $4,000. You may not pay taxes on the $1,000 but your net loss may be used to offset income and you may be able to claim it this year and future years as a loss. (See your licensed financial or tax advisor for more details.)
  3. Avoid making a “Wash Sale”: If you sell a stock at a loss, only to buy that exact stock back during a 30-day period, it is considered a “wash sale”. If you do that, you may lose the tax benefits of it. Badly-performing stocks you’d like to sell for tax purposes but own again later, you should wait until the wash-sale period ends before buying them back. Bottom line: Cut your losses and move on. Your losses will lower your tax burden and can be carried forward for gains and income in the future.
  4. Investment in Bankrupt Companies: This one is easy-well, sort of. If you invested in a company that has filed for bankruptcy and closed its doors, you can claim a total capital loss on your tax returns. However, the IRS will need documentation from you on why the stock is now considered worthless. So, make sure you have documents on when it became worthless and that it is of zero value.
  5. Be efficient in taking losses: Do your best to document and take your investment losses in the most efficient and ethical way possible. The IRS knows and accepts tax losses as a part of doing business in the fickle world of tax investments. Your tax bracket also is a factor in taking losses. For instance, if you are in the 10% or 15% tax bracket, you are not liable for any losses. The main point here is this: keep accurate documentation of all losses so you and your tax advisor have all the information they need to take advantage of all tax benefits coming to you when your risk goes awry. (Please refer to www.irs.gov)

Investment losses can be painful and heartbreaking. However, it does not mean bankruptcy nor does it mean that you depart the investment world. A smart investment loss strategy that you can develop with your financial and tax advisors makes all the difference and will help in the short- and long-term.

Tax and investment advice is one of the many services we offer our clients at A.K. Burton, PC. (http://cpa-maryland.com/services/accounting-services/) Our experienced and licensed staff can help you, your family and your business make smart tax and investment decisions. Call us at (301) 365-1974 for more information or email us at info@cpa-maryland.co