Category: Eldercare

IF YOUR MARRIAGE FAILS…

No one likes to think that their marriage might not work out, but half of today’s marriages end up in divorce.  So even if you think your marriage was made in heaven, it’s wise to protect yourself from the unexpected by taking some key defensive steps as early as possible.  Look for ways to protect yourself that don’t require your partner’s participation or knowledge and keep in mind that assets in your name are subject to disclosure in the event of a marital breakup.

Maintaining privacy

Here are two examples of simple but effective steps you can take to safeguard information about your personal financial affairs.

  • Get your own safe deposit box. If you own a business, you can make the box even more private by opening it in the name of the corporation.  Give access to another person who you trust and leave instructions for your spouse to contact that person in the event of your death.
  • Have certain mail delivered to your business address or to a post office box rather than to your home. Credit card bills, statements from your stockbroker, and similar sensitive mail usually contain information you might prefer to be kept confidential.

Taxes and trusts

There’s nothing that reveals more about your financial situation than your income tax form.  If you file a joint return, look for some investments that yield tax-free income which doesn’t have to be reported.  Or you might consider filing separate tax returns even if your taxes are slightly higher.

One of the best ways to conceal assets is through a Living Trust, which guarantees secrecy while you are living and avoids probate when you die.  You can act as its trustee and can designate an alternative trustee to administer and distribute its assets according to your wishes after you die.  Another advantage to a living trust is that although you must report income earned by the trust, you do not have to report the source of that income.

You can also protect your assets by putting them in your children’s names and designating yourself as the custodian of the children’s accounts.

Pre-nuptial agreements

Pre-nuptial agreements have become quite common and are an accepted way to protect the interests of both husband and wife.  They detail exactly how all finances, including child support and alimony, will be handled in the event of a divorce.  Pre-nuptial agreements also segregate assets owned before marriage.

Pre-nuptial agreements are yet another way to spell out the distribution of assets if there’s a divorce, but certain states do not enforce them as stringently as others.

TEN MAJOR PERSONAL MONEY MISTAKES TO AVOID

  1. Paying more taxes than you have to.  Keep good records so you get all the deductions you’re entitled to.  Shift income to a year when you’ll be in a lower tax bracket.  Shift deductions to a year when you’ll be in a higher tax bracket.
  2. Not preparing for the unexpected.  Set aside at least two months income to protect yourself and your family from serious cash flow problems in the event of an emergency.
  3.  Not putting your money to work.  Take all excess funds out of no-interest or low interest checking and savings accounts.  Put the money to work in liquid but higher yielding places such as mutual funds.
  4. Not setting financial goals.  If you don’t have goals, you can’t make a plan to achieve them.  Write down where you want to be and when.  Then start making a plan.
  5. Making investments based on tips.  No matter how well-intended, a tip is the worst reason to make an investment.  Investment decisions made under pressure are also unwise.
  6. Failing to have your will updated.  Your situation changes along with that of your heirs.  Your will should always reflect your present circumstances.
  7. Not establishing credit in the name of each spouse.  No one likes to think about death or divorce, but not having credit can be much more than a minor inconvenience.
  8. Borrowing money when it’s not necessary.  Not all interest is fully deductible.  Interest deductions have been sharply curtailed.  Don’t assume tax benefits when you consider borrowing.
  9. Not keeping organized financial records.  Poor recordkeeping can cost you significant tax savings, cause you to make bad financial decisions, and leave your family with unnecessary problems if you become ill or die.
  10. Failing to put a yearly tax plan to work as early as possible.  Year-end tax planning can be costly.  The sooner you put your tax plan to work the greater your savings.