Striking a Balance Between Funding Your Retirement and Your Child’s Education

From Brett Lee Shelton, licensed Family Business Lawyer™

Many parents perceive a conflict between funding a child’s college education and building their own retirement nest egg.  The conflict usually arises from the lack of financial resources to do both while funding daily living expenses, so parents become stuck between priorities and usually wind up doing nothing at all.

One of the things a Personal Family Lawyer® can help you do is sort out your priorities in a way that supports your family for the long-term.  With that in mind, here are some guidelines on striking a balance between saving for your retirement and your child’s education:

Build an emergency fund first.  This should be 3-6 months of living expenses that you have saved to fall back on in an emergency.  If you don’t have it, you will likely be forced to raid your 401(k) or other retirement account, spending more for penalties and taxes to cover the cost of the emergency.

Save for your retirement or build a business to fund your retirement second.  It is difficult for many parents to accept that they may not be able to fully fund a child’s college education, but consider the alternative.  You aren’t being “selfless” if you spend what you should have saved for retirement or to create a business to fund your retirement on a child’s education, and then run out of money right when your kids are having their own families and trying to save for their own retirement.  Then you will be financially dependent on them – just what you (and they) don’t want.  There’s a reason there are loans for education but not for retirement.

Save for your kids’ college education last.  Only after you have funded your emergency stash and your own retirement accounts (or built a business to fund your retirement) should you funnel cash to a child’s education fund.  If you invest in a 529 college savings plan, the earnings grow tax-free.  Also, other people in your child’s life — like grandparents and generous aunts and uncles — can contribute as much as $14,000 per year (annual gift tax exclusion) to a child’s 529 plan. 

If you would like to learn more about strategies for getting your financial future in balance, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

5 Tax Tips for Small Business

From Brett Lee Shelton, licensed Family Business Lawyer™

According to SBA data, more than 79 percent of small businesses have no employees – meaning that a majority of small business owners are doing it all.  And when tax season rolls around, it can mean plenty of stress for owners of small businesses. 

A recent Washington Post column provided these five tax season tips for small business owners:

1.  Track all itemized deductions, including assets.  Thanks to Section 179, small businesses can deduct a majority of their capital purchases for the year those items were purchased.  This includes office supplies, software programs, equipment, vehicles and more than can add up to deliver a significant reduction in your tax bill. 

2.  There’s an app for that.  There are dozens of apps for iPhone and Android that help simplify the tax process.  Tax Tracker and Receipt Filer let you take and store photos of receipts during the year that will help drastically reduce the time spent searching and organizing paper receipts.

3.  Stay organized.  Make a list of all the expenses you want to track and then create files for each category.  Drop your receipts into these files as you acquire them, and voila!  You’ve got all your expenses organized and categorized for the tax year.

4.  Seek out the savings.  The Small Business Jobs Act of 2010 contains a number of great savings for small businesses, so don’t overlook the opportunity to take advantage of these.

5.  Update your W-9s.  You will need to report all your contract employment expenses, so you need to be sure that you have current W-9 forms on file for all your contractors.

The SBA also warns small business owners of common audit traps to avoid, including misclassifying employees as contract workers, mixing personal with business expenses, taking a large sum miscellaneous deduction and claiming a home office deduction that does not qualify.

If you’re a small or mid-size business owner, call us today to schedule your comprehensive LIFT™ (legal, insurance, financial and tax) Foundation Audit.  Normally, this session is $1,250, but if you mention this article and we still have room on our calendar this month, we will waive that $1000 of that fee.   Call 303-255-3588 for your appointment and don’t put it off any longer.

The Risks of Poorman’s Estate Planning: How to Pass on Property & Avoid Probate the Right Way

From Brett Lee Shelton, licensed Family Business Lawyer™

They call it the “poor man’s estate planning.”  Put your child on the title to your deed and avoid probate.  Yet this “poor man’s” planning often ends up, well, poorly; and costing a lot more for the people you love. Here’s why and what you can do about it:

Risk #1 of Poorman’s Estate Planning: If the deed is titled with the name of parent and child (or any time there is more than one name on title and the parties are not married to each other) ownership of the property could be categorized as tenants in common – meaning that if one property owner dies, his or her interest in the property goes to an heir via probate, not directly to the other owner(s).  That’s exactly what the poorman’s estate planning was trying to avoid.

Solution: To accomplish the desired objective, the deed would have to stipulate ownership as joint tenants with the right of survivorship or similar language. Even then, passing property outside of probate using a deed may create problems because if both joint tenants die or become incapacitated at the same time (such as in an accident) the property is headed right into probate.

Risk #2 of Poorman’s Estate Planning: If the child you put on title to the property is sued or has some other type of creditor issue, even divorce, the property could be at risk.

Risk #3 of Poorman’s Estate Planning: Gifting property to your children, which is what happens when you put a child’s name on title to your property, could create adverse tax consequences.  One of the benefits of death (probably the only one) is that your heirs take your property at a new basis equal to fair market value of your property.  This may not happen if you’ve added your child to the title of the property if it’s determined that you made a gift of the property, your kids inherit your tax basis and lose valuable tax savings.

If you would like to learn more about strategies for protecting your assets and avoiding probate, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call 303-255-3588 today and mention this article.

No More Reasons for Delay in Implementing These 5 Estate Planning Essentials

From Brett Lee Shelton, Licensed Personal Family Lawyer™

Last year’s uncertainty about the future of the estate and gift tax caused many people to put their estate planning on hold, even though estate and gift tax planning is only a teeny tiny piece of estate planning.  Now that the clouds have lifted and Congress has given us clarity, there is simply no reason for anyone to delay in implementing these five estate planning essentials:

Will.  Look around you right now.  Everything you see has to be distributed in the event of your death.  Your Will names the person you want to handle it all and can also indicate who you want to receive it all.  If you don’t have a Will, a Judge decides who is in charge of your affairs and State law provides who receives everything you own.  Take control now by getting your Will in place today.

Kids Protection Plan®.  If you have minor children at home, you need a comprehensive set of documents to ensure they are taken care of by the people you want, in the way you want, no matter what.  Not just for the long-term, but also in the immediate term if and when something happens to you.  A Kids Protection Plan® does just that.  Only a licensed Personal Family Lawyer® has the skills, training, and resources to create a comprehensive Kids Protection Plan for your family, so call us today if you do not have one in place already.

Advance Medical Directive.  Also known as a health care proxy, durable power of attorney for healthcare or living will, this document provides the legal right for the person of your choice (your representative) to make healthcare decisions for you in case you become incapacitated and unable to make those decisions for yourself.  Plus, it also lets that person know HOW you want decisions to be made if you cannot make them for yourself.  Without an Advance Medical Directive in place, your family could have their hands tied when it comes to ensuring you get the best care possible, in the way you would want.

Power of Attorney.  In the event you cannot communicate, your Power of Attorney will allow your family to gain access to your financial accounts so they can pay your bills and manage your financial affairs. Without this in place, they’ll face an expensive, long and public court process to take matters into their hands.  Don’t leave your family in that position, handle this today.

Trust.  If you own any property that would go through the probate process (a home, bank accounts, brokerage accounts, business assets, investment real estate, and other investment assets), you’ll want to make sure to have a Trust set up as soon as possible so your family isn’t stuck dealing with an expensive, unnecessary, long, and totally public Court process in the event of your death.  A revocable living trust puts the people you know, love and trust in control without having to go to Court. 

If you’re ready to do the right thing by your family, call our office today to schedule a time for us to sit down and talk. We normally charge $750 for a Family Wealth Planning Session, but because this planning is so important, I’ve made space for the next two people who mention this article to have a complete planning session at no charge. Call our office at 303-255-3588 today and mention this article.