Category Archives for Estate Planning

When you’re newly married, you’ll probably face some new challenges and might not feel that you’re ready for these new responsibilities. A lot of young couples don’t anticipate how different managing their finances can be once they get married.

It’s important to understand how merging your finances will impact the way you spend and manage money. There are common mistakes most couples make, and you can avoid some difficulties by being aware of these errors. 

These are the five most common money mistakes young couples make:

1. Not communicating about money. It’s crucial to talk about money and agree on how you wish to spend and save money as a couple. You’ll find yourselves fighting over money issues if you avoid this for too long or if one spouse isn’t upfront about money.
2. Failing to build your savings. You might feel that you’re not earning enough to save money, but most couples can find at least a little to save by cutting back on the more flexible expenses. Cover your bases and prepare for a brighter future by saving for these events: 
   • Starting a family. Going through a pregnancy and raising a baby is expensive!
   • When you’re ready to settle down, you’ll need a down payment to buy a home.
   • Children’s education. College is expensive and it is never too early to start 1saving.
   • Health expenses. Open a health savings account if you don’t have a comprehensive health insurance policy.
   • Retirement. Being young means you can take more risks when you invest and saving up early will help you retire more comfortably. It also gives your savings time to grow from the interest you’ll earn over many years.
3. Failing to effectively manage debts and credit cards. Some couples encounter challenges because one person wasn’t upfront about how deeply they’re in debt or because they use their credit card too often. Even though both spouses still have separate credit scores, both should be responsible for managing debt and credit: 
   • Set some goals and strategies to raise both your credit scores.
   • Decide what your credit cards should be used for and how much you can charge on them.
   • Make paying off your loans or outstanding credit card balances a priority.
4. Buying a house before you’re ready. You’ll see benefits in waiting until you’re financially stabile before purchasing a house. There are still some costly mistakes to avoid once you are ready to buy a home:
   • Buying a house that is too expensive to fix or maintain.
   • Applying for a mortgage you can’t afford.
   • Not making a down payment that is large enough to lower your mortgage.
   • Failing to take advantage of the help available to first-time buyers.
   • Buying a house before taking the time to raise your credit score.
5. Not looking for ways to strengthen your financial standing. You can set some financial goals and do your best to save money, but most young couples eventually need to find a way to earn a higher income to meet their goals.
   • You could, for instance, make some plans for your career, move to a city where you can get better jobs, or decide to go back to school.

If you think you’re making any of these mistakes, it’s a great time to schedule a money discussion. Make plans to bypass these mistakes and get started on the right track for a bright financial future together.

College is expensive! Sixty percent of those who graduate from college with a bachelor's degree also graduate with around $26,000 worth of student loans. For those who go on to pursue a postgraduate degree, the debt can be significantly higher. 

Luckily, there are some ways to reduce, and in some cases eliminate, this debt.

Loan Forgiveness Programs 

There are several programs you may want to consider that can eliminate part or all of those loans:

1. Volunteer for community service. If you apply to the AmeriCorps program, you can help people in your community while also reducing your debt. The program will repay part of your loans based on your service. 
   • The Peace Corps and Volunteers in Service to America also offer loan forgiveness programs.
2. Military service can help you pay for school. If you enlist in the military before you start college, you can get help paying for your schooling. 
   • There are some loan forgiveness programs available if you enlist after you’ve graduated.
   • Speak to a military recruiter about a plan that could work for you.
3. The profession you choose may help you pay down your debt. If you pursue a career in teaching or the healthcare field, speak to your employer or Human 1Resources Department about programs to reduce or pay off your debt from student loans.

Financial Hardship Programs 

If you don’t have a job, earn very little, or your loans are a large percentage of your earnings, one of these plans may be able to help:

1. Income Contingent Repayment Plan (ICRP). This program applies specifically to Federal Direct loans that aren’t PLUS loans. 
   • ICRP bases the amount of your monthly loan payments on how much money you earn. The payments can be as little as a few dollars per month. Even better, once you’ve made these small payments for twenty-five years, any debt remaining on the loan is forgiven.
2. Income Sensitive Repayment Plan (ISRP) for your FFEL loan. The amount of the loan, your income, and size of your family all determine how much you will need to pay each month.
   • The payments you make have to be at least enough to cover any interest that accrues, and the loan must be paid off within 10 years.
3. Income Based Repayment Plan (IBRP). This plan is available on both FFELs and Federal Direct loans. IBRP offers flexible payment options for twenty-five years. After this time, the rest of the loan is forgiven.
   • In order to qualify for this plan, you can’t be in default on your loan payments.
4. Hardship Repayment Plan on Perkins Loans. This plan has a minimum payment of $40/month. There are also extensions under certain circumstances, such as if you’ve been without work for a while or if you have a long illness.

More Programs - No Financial Hardship

These options can also help you, even if you’re not having hard times financially:

1.  Loan consolidation. Combine several high-interest loans into just one, lower-interest loan. This option allows you to get a lower interest rate and cut down on multiple payments.
2. Defer your student loans. If you're experiencing economic hardship, a period of unemployment, or if you’re going back to school, you may be allowed to defer your student loan payments until a later time.
3. Get a loan forbearance to give yourself more time to pay off the loan. A forbearance is a temporary reduction in payments.
   • A lender may grant you a forbearance if you’re unable to pay off your loan after a certain number of years. They may also grant a forbearance if your payments on your student loan are greater than 20% of the money you earn each month or if you run into a number of other unforeseen problems.

These tips and payment plans can help you manage and pay off your student loans. Consulting with a financial expert can bring to light additional ideas that can help, too.

Most people view estate planning in the same way they view a root canal: Put it off until the pain is too great to ignore any longer. Also, those with little income or net worth believe that estate planning doesn't apply to their situation. But estate planning is much more than just the allocation of cash, real estate, and other assets. There are other things to consider, too.

There are many errors that occur again and again in estate planning. Avoiding these mistakes is half the battle.

Steer clear of these mistakes for a successful estate plan:

1. Procrastination. Estate planning is a little like completing a tax return. No one really wants to do it. But it's so important to push your reticence aside and get it done!
2. Not paying attention to the conflicts that exist within your beneficiaries and estate plan. For example, if your will declares that your husband receive your retirement account, but your ex-husband's name is still listed as the beneficiary, this could prove to be a big challenge.
3. Not using the unified credit to your advantage. This only applies to those with a significant net worth, but this mistake is made regularly. In most cases, assets pass to the surviving spouse. Up to $5,250,000 can be excluded from taxation.
   • If this isn't handled properly, though, the surviving spouse will only have their exclusion available when passing assets on to their heirs.
   • There are ways to potentially shelter this money from taxation in the future. One solution is a credit shelter trust.
4. Not having adequate life insurance. Life insurance can be a great estate-planning tool for the affluent, but life insurance is vital to those with low income as well.
   • Consider how your family will survive financially if you or your spouse were to die unexpectedly.
   • If you have significant wealth, you might consider using life insurance in conjunction with an irrevocable trust for tax purposes. An attorney that specializes in estate planning can make recommendations based on your unique situation and explain the details.
5. Creating a plan that lacks flexibility. Creating a plan with a little wiggle room will allow your heirs to take advantage of any new laws as well as use the assets in the most advantageous fashion.
6. Not gifting assets. Up to $14,000 can be gifted to each beneficiary per year without incurring a gift tax. This can be a great way of reducing the taxes imposed on your estate at the time of your death. You also have the chance to see how well your beneficiaries can manage your assets.
   • Additionally, you have the advantage of being able to witness someone enjoying your assets. You can't do that after you're gone!

Estate planning isn't the most enjoyable activity, but it is likely to be one of the most important things you do for your family.

Everyone should have a basic estate plan that spells out their wishes. This is important even if there are no children or assets. An attorney can be invaluable unless your estate is very simple. And even then, the $100+ it will cost to have an attorney take a look at your documents will be money well spent.

Perhaps you, like many others, believe that once your will has been drawn up, that's the end of the process. While wills have never been anyone's idea of fun, it's important to review your will on a regular basis. There are many reasons to pull out your will and give it a thorough review.

Let's examine the most common reasons:

1. New family members. In general, if a will is worded properly, any children that are born after the will has been signed will be entitled to the same share of the estate as the pre-existing children. Even so, if you have a new child, check with your attorney just to be sure everything is worded according to your wishes.
   • Also consider how your wishes might change based on other new people in your life. What if you re-connect with a family member? What if you make a new best friend? Maybe one of them would be the person to take good care of your boat when you're gone. Consider all new people who've entered your life since you signed your will.
2.  Moving. States have different laws regarding estate taxes and how property is treated. So if you move from one state to another, there may be some major issues that need to be examined. Consult your attorney anytime you move to a new state as this can have significant ramifications.
3. A windfall. A large increase in your wealth may require another look at your will. Again, this depends on your state. Some states have monetary limits for certain types of inheritance items. Creating a trust might be the right move for you now.
   • With your new wealth, you may also have a greater degree of flexibility to take advantage of certain tax shelters. And you might be considering being more generous regarding who's included in your will.
4. Divorce. Most of us aren't interested in leaving anything to our ex-spouses. If you've gotten divorced since your will was drawn up, it's time to talk to your attorney. A proper and thorough revision will reduce the likelihood of the will being contested. Consider the fact that if you don't change this document, your ex could end up with everything!
5. Death. If your spouse or only child passes away, your will should undergo a thorough review. This event may radically change how you wish to distribute your assets. Back-up recipients are usually specified within a will, but it never hurts to take another look.
6. Change of heart. Most wills are drafted by people who are still quite young. As you age, however, your wishes may change. Maybe you were very close to your brother at one point, but haven't spoken to him in the last five years.
   • Additionally, as some people age, they become more involved with charitable organizations. Maybe you'll have the desire to include such a group in your will.

Your will we most likely not be a static document throughout your life. As your circumstances, family, and social connections change, some modifications will likely need to be made.

Review the list above and note if any of these items have occurred since your will was completed. If so, schedule some time with your attorney today. In this case, more than in many others, it's better to be safe than sorry.