San Diego Estate Planning Blog: Creating Legacies

How You Can Use that 2% Tax Cut toward Financial Freedom

From the Desk of Kristina Haymes, Del Mar, Solana Beach, Carmel Valley, San Diego North County Estate Planning Group

Two Percent Can Go a Long Way

You may not have noticed it but your paycheck has increased by two percent (2%).

The 2010 Tax Relief Act (H.R. 4853) extended some of the current tax rates and it also reduced the Social Security payroll tax by two percent for 2011.

As unimpressive as 2% may sound, you can actually do quite a bit with it.

Here are a few tips to make that little extra go a long way:

Pay Off Those Credit Cards

About 67% of the bankruptcy filings in the United States are directly linked to credit card debt. And it’s easy to see why when you really look at the numbers.

The average credit card carries an interest rate of 14%. That means for every hundred dollars you put on your credit card, you’re actually spending $114.00.

Take that extra two percent in your check and increase the amount you pay each month on your credit cards. You’ll pay them off that much faster and save a substantial amount of money in interest. You can then start putting money toward your long term savings goals.

Put The Extra Money Into Your Retirement Plan

Most financial experts will advise you to increase your contributions to your retirement plan by 1% to 2% per year. By putting the extra 2% you’ve received this year into your plan, you can give yourself a pay increase for your retirement without even missing the money.

In 2011, the annual contribution limit for 401(k), 403(b) and 457 plans is $16,500 (it’s $22,000 if you’re 50 or older). If you’re not already maxed out on your planned contributions for this year, put that little bit of extra money into your plan. That will do you more good in the long run than just about anything you could buy.

Do You Have a Specific Savings Goal?

Is there something specific you know you need (or want) to be saving toward? College for your kids, a new home, or maybe a vacation? Use that extra 2% to open an investment account if you don’t already have one and make saving toward that goal a reality.

Starting to save is the hardest part of the process. By taking this little bit of extra money and putting it away, you can establish an account without really feeling the pinch. By the time the Social Security tax break expires, you could be well on your way to meeting that financial goal without ever feeling like you’ve deprived yourself. The money would have gone toward taxes anyway.

Open an IRA

If you’ve already maxed out your 401(k) or other retirement account or if you’re self-employed or don’t have access to an employer sponsored retirement account, use this reprieve from Uncle Sam to open a Roth IRA or a traditional IRA. In 2011, your maximum contribution to all IRA’s is $5,000 ($6,000 if you’re 50 or older).

Contributing to an IRA might even get you an additional tax break. Contributions to traditional IRA’s are usually tax deductible (but there are income limits if you are contributing to an employer sponsored retirement plan as well) as opposed to contributions to Roth IRA’s which are after-tax contributions (with income limits).

Granted, none of these options sound as exciting as using that extra 2% to pay a note on a new Harley Davidson or as indulgent as a monthly trip to a new spa, but every one of them will help you live more comfortably in your golden years.

Don’t be a victim of the “If I’d known I would live this long, I would have saved more” mistake.

Call us to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call (858)794-1426 and ask for Sarah Kerr today and mention this article.

San Diego Trust Attorney,

Kristina Haymes

Serving Del Mar, Solana Beach, Rancho Santa Fe, Carmel Valley, Fairbanks Ranch, Santa Luz, Encinitas, Carlsbad, La Costa and all of San Diego County

with offices in Del Mar and Carlsbad

Posted by kristina at 3:31 pm on April 22nd, 2011. No comments... »
Categories: Uncategorized.

What If? Why you need an estate plan and more

From the desk of San Diego Estate Planning Attorney, Kristina R. Haymes, wills and trusts with offices in Del Mar and Carlsbad, CA.

What If?

Most people start the process of estate planning to deal with “What If”.

What If you died and your children were still too young to care for themselves?

What If you were no longer physically able to care for yourself?

What If you had very specific instructions for how your property should be passed on?

Every person on the planet has an individual list of things they worry about. And those worries are often what drive them to start thinking about estate planning.

Unfortunately, many of these same people go online, find a cheap Will, fill out the form and think they’ve taken care of everything.

Or worse, they believe the myth that a handwritten will is all they need. After all, as long as they tell someone in writing how they want things handled, everything is fine and that’s all they need to do, right?

Wrong.

Either of these choices can create a costly, messy nightmare for the people left behind to deal with and end up doing nothing that you wanted.

Let’s Speculate For a Moment

Let’s say you’re a young woman, divorced and the mother with two small children, maybe ages 4 and 7. You go online and complete the basic form for a Will leaving everything to your children to be divided equally between them. Does that online site tell you that minors can’t own property or control money?

No.

But you’re not really worried because you really plan to be around at least until your children are grown.

Then you run face first into Murphy’s Law and the worst that can happen does. You get the cancer diagnosis. Good thing you thought ahead and filled out that Will online. Your kids will be okay.

What you don’t know is that because of the way the form you used is worded, your property and money will have to go through probate, the court will have to appoint a guardian to take care of the assets you left to your children and the court will have to appoint a guardian to take care of the children themselves.

The form you used didn’t provide for naming a specific guardian of your choice for your children. But their father has been largely absent since the divorce so you told your sister you want her to take care of your kids. That’s all you needed to do, right?

Again, the answer is No.

That may be what you want but it isn’t likely. The more likely choice, after a lengthy (and pricey) legal process, is that the father of your children will take the kids (and take control of your assets for their benefit).

Makes you think twice, doesn’t it?

Estate Planning Isn’t a Cookie Cutter Process

The things you worry about are specific to you.

Your children…

Your property…

Your end of life care…

Your list of concerns is as specific to you as the color of your eyes or the sound of your voice. Why would you use a cookie cutter form to address those concerns? It doesn’t make sense but we see it happen every day.

Online form sites don’t spell out all the things that can go wrong and all the things you need to think about to ensure that you’re actually doing what you intend.

Even if you don’t have children, your assets have to be owned in a specific way to protect them and preserve their value for whoever you leave them to. A clear title is not enough.

You don’t get a “do over” in planning your estate. Often when the mistakes are discovered, it’s too late for you to fix them. Your loved ones are left with the headache of cleaning up the mess instead of being left with what you worked so hard for. Look at the fine print for online legal documents – the sites themselves will tell you they are no substitute for legal advice.

If you really want to save some money, skip the lattes for a year. Don’t skimp on your children’s future.

Call us to schedule your Family Wealth Planning Session today. Our Family Wealth Planning Session is normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today (858)794.1426 and ask for Sarah Kerr our Client Services Specialist and mention this article.

Posted by kristina at 6:45 pm on April 17th, 2011. No comments... »
Categories: Extraordinary Client Service, Kids Protection, Trust and Estates, Wills.

Global Giving — the Ins and Outs of Charity Around the World

From the Desk of San Diego, Del Mar/Carmel Valley Trust Attorney, San Diego Estate Planning Group, Haymes Law Group — Kristina R. Haymes

The Ins and Outs of Global Giving

Earthquakes… Tsunamis… Typhoons…

We watch in horror as these natural disasters and the human suffering they bring unfold before our eyes.

And we want to help…

We reach for our cell phones to text a donation to the Red Cross…

Or we reach for our credit card or checkbook to send money where it’s needed.

Not just in the United States but virtually anywhere on the planet.

Whether it’s the ongoing suffering in Africa from AIDS, poverty, or famine, to natural disasters in Japan, Haiti, Chile, there is no shortage of need for charitable giving.

The tax deduction for charitable donations is almost an afterthought when you’re trying to get funds to charities in an emergency; however, especially if you give a sizable donation, you really need to consider the tax implications.

Americans give approximately $300 billion every year to charity. And about five percent (5%) of that amount is given to international causes like many of the organizations currently helping out in Japan.

Before you write that next check, here’s what you need to think about:

Make Sure the Nonprofit is Registered with the IRS

Global giving is a wonderful thing and technology has made it as easy as giving to the local Girl Scouts. But not all international nonprofits are registered as tax exempt with the Internal Revenue Service.

If they aren’t registered, your donation is not eligible for a tax deduction.

There are a lot of nonprofits registered in the United States that support international relief. And many of them are very well organized and highly effective. If you’re going to give money to an international assistance agency or group, you might as well get the tax deduction for it and know that your money is going to a reputable organization. Some of the better known ones are:

- American Red Cross

- Doctors Without Borders

- Oxfam America

- Global Fund for Women

- Grassroots International

- Development Gap

- Living Goods

- CARE

- Mercy Corps

If you want to give money and you’re still not sure about the reputation of the organization you’re considering, check out CharityNavigator.com to find out which agencies are working in which areas.

Giving Beyond the Next Emergency

If you want to make a habit of planned giving to philanthropic organizations, you can establish a Charitable Gift Account through a national charitable fund. Sometimes called “donor advised funds”, these charitable accounts are open to anyone who can give $5000 or more. Your contributions to the fund are tax deductible. The funds you contribute are invested and the proceeds are used to make future contributions to organizations you choose.

This type of fund is especially helpful if you want to give to international causes. You can choose charities that are actually based in the United States but do the bulk of their work internationally. Since they are based in the United States, it’s easy to determine if they’re recognized as tax exempt by the IRS and your contributions will be eligible for a tax deduction.

Yet another option for global giving is to give to an intermediary organization like Give to Asia or Rockefeller Philanthropy Advisors. They will charge you a fee for handling your donations but they are very familiar with local charities in the regions you want to donate to so they know who to contact to ensure that your money gets to where it’s needed.

Do Your Homework

Ultimately, the best thing you can do for yourself and the people of the region you want to help is to do your homework.

If you know you want to give but you’re not really sure where the help is needed most (if a natural disaster isn’t making headlines), go to websites like OneWorld or visit the Reuters Foundation. Either of these sites will give you information on the regions with serious humanitarian needs. You can even select the issue you want to research and donate to (i.e., malaria, hunger, AIDs, etc.).

If you’re still confused about the best way to give and receive the tax benefits of charitable donations, give us a call. We can help you make the best decision for everyone concerned.

Call us to schedule your Family Wealth Planning Session today. Our Planning Sessions are normally $750, but this month I’ve made space for the next two people who mention this article to have a complete planning session with me at no charge. Call today and mention this article.