Year-End Financial Checkup

Use this guide to help you evaluate your financial health

ESTATE PLANNING
Start now. “As long as you’re not dead, there’s time to do estate planning,” says Lori Anne Douglass, a partner in the trusts and estates practice at the law firm of Moses & Singer in New York City. At a minimum, everyone should have a will and medical and financial directives in place. “Without a will, state law prevails,” says Douglass, and the state might not distribute your assets as you would like. What is most important: A will is the only place where parents of minor children can legally designate a guardian for them, Douglass notes.

Keep track of changes. The most significant news on the estate planning front is the expected rise in federal estate tax rates. Net estates that exceed $1 million in value may be taxed at the rate of 55%; only the first $1 million will be exempt. In 2009, the first $3.5 million was exempt. If the bar is lowered, many more people could be affected, says Douglass, who points out that $1 million isn’t hard to reach with real estate in the equation. “You need to know the federal and state laws and work with a lawyer who can help you plan for them,” says Douglass.

Take note of assets and changes. Identify assets that have increased significantly in value, and account for changes such as divorce or death that will affect your beneficiaries. Evaluate whether your estate documents are appropriate for where you are in your life now. If you expect to have assets valued at $1 million or more in 2011, have a financial professional do an estate tax analysis now to determine what your estate tax liability will be and to explore options for reducing or deferring it, advises Karen Lawrence-Webster, CPA, vice president and district manager with AXA Advisors.

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  • Dorina

    You should claim the pro-rated amnuot you paid on the old property and any pro-rated amnuot you paid on the new property (often in advance of the year-end billing), then remember to make any necessary adjustments after official tax bills come out and get re-divided. In theory, you paid the taxes by giving the money to somebody else (or putting it into escrow for taxes) and you are allowed to assume they actually made the necessary payments to the necessary authorities. A lender holding tax escrow should give you an annual statement of taxes collected, held and paid out.