I am taking this article in a different direction. Instead of communicating facts and opinions about the tax code or personal finances, I have chosen to invoke the power of the question. Despite my best intentions to communicate strategies to legally avoid taxes or disclose certain best practices regarding one’s finances (which seems to most people as blah, blah, blah), I have purposely presented points for people to ponder. Hopefully, some of these questions will be timely in your current stage of life.
- Do you have a will? If so, does more than one other person know where it is?
- Do you have a place to keep your important papers?
- Do you have advance healthcare directives?
- Do you have a centralized location for all your usernames and passwords? If so, does someone else have access to the list? If not, would you be more peaceful if someone you trusted had access to it (in case of your untimely demise)?
- Do you have life insurance? Does your beneficiary have a copy of the policy?
- Do you have health insurance?
- Do you have automobile insurance?
- Do you have an umbrella insurance policy?
- When was the last time you checked your list of beneficiaries related to your retirement plans, life insurance, bank accounts, etc.?
- Have you taken steps to avoid probate? Or, do you plan to have probated costs and legal fees eat up a good chunk of your assets before they transfer to your heirs?
- Do you have a revocable living trust? If so, has the title to all the assets you owned been transferred to the trust?
- Why would someone set up a revocable living trust?
- Do you know your basic three options regarding your Social Security retirement benefits?
- Do you have a favorite charity to which you plan to leave a substantial sum? If so, have you weighed your options on how to do it tax efficiently?
- Do you have a special needs child? If so, have you considered setting up a special needs trust to provide for them after your departure?
- Have you set aside one day per year (or more often) to assess your assets, liabilities, and family commitments?
- Have you considered all the ways COVID-19 may have permanently changed your previous plans for the future, or retirement?
- Do you have a written monthly spending plan (budget)?
- Are you serious about getting out of debt?
- Do you have disability insurance?
- Do you know your credit score? Do you need to work on improving it?
- Do you have a team of trusted advisers with expertise in taxes, insurance, investments, and legal issues?
- Are you taking full advantage of employer retirement contribution matches?
- Do you understand your Medicare options and available Medicare Supplements?
- Are you an owner or a partner in a business? If so, have you considered options like buy/sell agreements funded by life insurance (so the company will continue if you pass unexpectedly)?
- Did your retirement funds take a beating in the past few months? If so, would you be interested in some conservative alternatives to stocks and bonds?
- Should you consider forgiving a friend or family member for hurting you many years ago? You may not yet realize that holding a grudge is only hurting you. That person may not know they hurt you deeply. Reconciliation or forgiveness will unburden your soul.
- Is it time to pay back a loan from a family member, or return a tool you borrowed from a neighbor?
- Have you set up a college savings plan for each your children?
- Have you considered how a nonqualified retirement account could save tons of taxes in retirement?
- Do you have an approximate idea of your net worth? Did you know that the estate tax exclusion (currently $11.4 million) will drop to the pre-TCJA limit of about $5?
- If you are a business owner, do you have significant exposure from a Dept. of Labor FSLA audit?
- If you are a business owner, do you have significant exposure from an IRS payroll audit or income tax audit?
- Do you have current or potential financial obligations to pay the living expenses of a family member, such as a parent in a nursing home?
- If you are close to retirement, have you considered moving to a state without an income tax, like TX or FL?
- Have you considered the points I made in my June and July articles regarding Disaster Preparedness? (How to minimize the financial devastation of a catastrophe. I also mentioned considering the likelihood and setting priorities.)
- If you are seriously dating, or engaged, have you had a conversation with your sweetheart about finances, yet? You might want to avoid, or perhaps postpone a legal event that would transfer $50,000 in credit card debt, or $100,000 in student loan debt to you.
- Do you owe the IRS more than $10,000 in back taxes, penalties, and interest? (The percent of the population in debt to the IRS is staggering. There are several strategies that could resolve that situation, get the IRS off your back and give you our life back.)
- As a result of COVID-19, are you heading toward filing bankruptcy? (If so, don’t be ashamed, no one could have predicted the impact on millions of people and small businesses. Also, please be aware that certain tax debts qualify to be discharged in bankruptcy. Make sure your attorney consults a tax expert to get your back taxes included in the legal discharging of your debts.)
If some of these grab your attention, my goal is that you will take appropriate action.
Aric Schreiner, CPA, PFS, is managing member of Columbia CPA Group, LLC.
