Property Pitfalls - Page 3 of 3

Property Pitfalls

become injured on, or in relationship to, her property.

Enroll in her company’s short-term and long-term disability program. At her age, the statistical probability is disability, not death, so Stewart should have a plan in place to provide her with income. If she does not currently qualify for the plan, then she should make the necessary adjustments to qualify within six months.

Draft and execute a will, revocable living trust, and durable power of attorney for healthcare. Stewart needs to create a revocable living trust and have the building owned or re-titled in the name of the trust. By doing so, she will create an uninterrupted succession in the event of illness or death. A named trustee would then carry on the duties of the building. She also needs to make sure her company’s life insurance, supplemental life, and 401(k) plans have beneficiary designations. Kirkland suggests that Stewart review all bank accounts and add a “pay on death” name onto the accounts; this way a parent or other named beneficiary would simply need to present a death certificate to lay claim to Stewart’s money. Otherwise, since she is single, her assets would automatically go into probate.

Make adjustments to tax withholdings. Stewart needs to have her withholding elections reviewed by a tax professional. If she is receiving a large tax refund, that refund is money that could be rerouted to increase her cash flow. Kirkland says Stewart may be missing some deductions she is entitled to by trying to economize on her tax preparation; she needs to hire a certified public accountant.

Postpone investing in any new areas. Don’t undertake any other new e
xpenditures, education costs, or real estate purchases until debt has been substantially reduced and cash management improved. This means postponing plans to pursue an M.B.A. in business management. She should also continue contributing and increasing her contributions to the 401(k) as cash flow improves.

Increase rental payments. When the current tenant leases are up, Stewart should increase the rent. Kirkland suggests Stewart get figures of what the market rents are in her area and make sure that hers are comparable. Kirkland also suggests that Stewart verify that she has the Homesteader’s Exemption on her property.

Find part-time work in real estate. Another idea that Stewart should look into is investigating a part-time position with a real estate office. It would be good exposure since she has an interest in this area. And as she generates income to pay down her debt, she can work among professionals who can provide her with insight regarding the purchase and maintenance of property. She’ll be in an environment that will give her the knowledge and experience that will benefit her in the future.

Financial Snapshot: Veronica Stewart

Gross Income $80,700
Checking $397
Savings 200
401(K) 7,674
IRA 51
Value of Home 320,000
Value of Car* 6,000
Total $335,272
Mortgage $228,000
Student Loans 32,116
Revolving Debts 2,000
Total $262,116
NET WORTH $73,156

*According to Kelley Blue Book.