Finance Assistance

When someone dies without a will, the state determines who will receive the remaining assets. Unfortunately, the state’s decisions may not reflect the person’s wishes. Before you assume a deceased family member did not have a will, be absolutely sure.

STEPS TO TAKE:

VISIT
the county’s Probate Court to see if a will was ever filed.

LOOK
for a copy of the will in the deceased person’s home, especially in fireproof boxes and file cabinets.

SCAN
checkbook registers and bank account statements for payments made to attorneys. A will may have been filed with the deceased person’s lawyer.

FILE
a petition with the Probate Court seeking permission to access the person’s safe-deposit box to look for a will, if there is no living co-owner of the box.

If you plan to move to a different state, be sure to have your estate plans reviewed by an estate attorney in that state. Changes may be needed. For example, laws governing state income taxes and state inheritance taxes differ from state to state. Some states require you to name an executor who is a state resident. And there are durable-power of attorney and health-care directive issues that should be resolved to ensure that what you want is carried out.

People who suffer a serious financial setback or fail to set aside enough for taxes have more options than they realize when it comes to paying Uncle Sam. If you aren’t able to borrow or come up with the cash to pay your taxes, the next best step is to apply for the IRS’ installment payment plan.

HOW IT WORKS:
You commit to pay a specific amount each month until the debt is wiped out. To start the process, fill out IRS Form 9465, Installment Agreement Request, and staple it to the front of your Form 1040. For more information, go to www.irs.gov and type “can’t pay taxes” into the search field.

Want your heirs to be comfortable?
Too many people think of estate plans as a series of expensive documents for the superrich. As a result, they never get around to having them drawn up, which is a serious financial mistake. Everyone needs basic estate planning. Without these documents, your heirs could wind up spending a fortune trying to collect assets you wanted them to have. Estate-planning essentials:

Will.
This document states who you want to receive specific assets.

Beneficiary forms.
Assets in your retirement plans are counted as part of your estate at death—but who gets them is determined by your account beneficiary forms, not your will. Call financial institutions to be sure beneficiary forms are filled out correctly and up to date.

Durable power of attorney.
This document names someone to legally manage your affairs if you become incapacitated.

Living will.
This document tells healthcare professionals which medical procedures you do or do not want if you are incapacitated.

Durable power of attorney for health care.
This document names someone to make medical treatment decisions if your physician declares you incapacitated.

Letter of instructions.
While not legally binding, this letter tells surviving heirs who you want to receive assets of modest or sentimental value. It also can express how you want children raised by guardians. Such personal letters go far to limit family feuds and estate litigation.

Trusts.
If you want assets left to heirs protected from taxes and spending abuse, consult an attorney to set up a trust. A trust can outline who is to receive assets, when they will get them, and under what specific conditions.

Protect your will from greedy relatives

While you can’t stop heirs or relatives from legally contesting your will’s validity upon death, you can discourage such actions.

WHAT TO DO:
Simple solution—add an in-terrorem clause to your will. This clause says that anyone who contests your will loses what you left him or her.
Greater protection—set up a living trust that will receive your assets upon death, making it more difficult to challenge a will or claim you were incompetent when the will was drawn up and signed.

The alternative minimum tax (AMT) was created in 1969 to ensure that wealthy Americans could not deduct their way out of paying taxes. But the AMT was never indexed for inflation—so millions of families now are being hit by the tax formula, which calculates a higher tax due than the standard calculation, just living in a high-tax state with two or more children can put you in AMT territory.
WHAT TO DO:
If you think you’ll qualify for the AMT, visit a tax professional, who can run calculations carefully and advise on ways to minimize the tax. For example, you may be advised to lower your taxable income before year’s end by contributing the max to retirement plans, flexible-spending and health-savings accounts, and charities. You also may need to review whether you hold municipal bonds in taxable accounts—the interest from the bonds are not exempt from the AMT.

Is your favorite charity on the level?
Before writing a check to a charity, be sure that the organization is legitimate and financially committed to its cause. What to check:

Tax status.
Verify that the IRS recognizes the organization as a charitable group. Go to www.irs.gov and type “search for charities” (online version of Publication 78) into the search field.

Commitment.
Before you give money, take a look at how much money a charity uses to cover administrative costs vs. how much goes toward its cause. Three watchdog groups: www.charitywatch.org, www.give.org, and www.charitynavigator.org.

Legitimacy.
Check the charity to be sure it’s the one you had in mind. Some charities have names that sound like other, more respected groups but may not be as well operated. Also avoid spam e-mail charity appeals that follow major disasters. They may be scams.