When doing any kind of work, it’s important to have a contract. Sure, it may seem a bit daunting for a beginning entrepreneur to delve into legalese, but contracts don’t need to be scary. They can be as simple as a plain-language document that outlines the general business between you and the client. In the world of small business, they’re important for the following reasons:
Never feel awkward about insisting a client works with a contract. It’s a mark of professionalism and should actually inspire confidence, knowing that you take your business seriously. Any client who refuses to work with one should be treated suspiciously as that’s a serious red flag. And any small business owner who works without at least having something in writing, whether it be a formal document or just confirming emails, is destined for some serious heartache later down the road.
Original source: http://businessofillustration.com/the-importance-of-contracts/
According to the Alzheimer's Association, dementia “is a general term for a decline in a person’s mental ability which is severe enough to interfere with daily life.” Dementia is not a specific disease, but rather refers to a wide range of memory decline or thinking skills which impacts daily life. Millions of Americans have some form of dementia, and millions of more Americans will develop some form of dementia as our population continues to age. Different types of dementia may progress at different paces, which makes it important to consider the topic of estate planning fairly quickly for persons prone to or in the early stages of dementia. Being diagnosed with dementia or having a loved one diagnosed with dementia can be a scary, confusing time. Families dealing with dementia often have many questions. If you or a loved one are dealing dementia, perhaps you have considered the questions below. Or, if you have not, the questions below may give you some food for thought as you begin to approach the topic of estate planning in the context of dementia.
1. I am concerned I may develop dementia based on my family history. When should I start to think about estate planning?
If dementia is a concern for you, the time to plan is now. Watching a loved one or family member struggle with dementia can be a significant factor in driving individuals to prepare estate plans. Most people caring for loved ones with dementia want to make sure that future generations do not have to deal with the pressure of preserving and protecting assets on top of struggling with the grief and/or emotional turmoil of watching a family member battle dementia. Planning early will ensure that your wishes are clearly laid out, and that you have adequate plans in place to alleviate stress on future generations.
2. My doctor has told me I have dementia. Is it too late to create an estate plan?
Often times, dementia is progressive, and individuals in the early stages of most forms of dementia still have the ability to make important decisions. Receiving a “diagnosis” of dementia does not necessarily mean that it is too late to create an estate plan. However, it is important to act quickly to make sure that you have sufficient time to outline your wishes and create an estate plan to provide for your needs. The sooner the estate planning process is completed, it is more likely that you will be able to exercise the control you would like over your estate plan, and more planning options and techniques will generally be available to you. Once dementia progresses to the point where you are no longer able to understand the nature and effect of creating an estate plan, it will be too late to preserve your wishes and desires. However, until that point, you are able to, and should, implement an estate plan. Depending on the type of dementia and its stage of progression, it may make sense to have a medical opinion outlining the ability to make estate planning decisions.
3. How does a person get appointed to act for me when my dementia progresses to the point I am no longer able to act for myself?
If you have prepared an estate plan, the terms of the estate plan will outline how someone takes over for you. Most times, this transition can happen without probate court involvement.
If you have not prepared an estate plan, it is likely that a family member or other interested person will seek to have a Guardian and/or Conservator appointed by the probate court to act on your behalf. In Michigan, Guardians are appointed for incapacitated persons to make decisions on the living arrangements, medical care, among other things, for the incapacitated person. Conservators are appointed to act as the financial and legal representatives of incapacitated persons. Both Guardians and Conservators are appointed by the probate court and both have ongoing reporting requirements to both the court and the family members or other persons interested in the well-being of the incapacitated person.
4. If I am concerned about dementia, what are the advantages of using a trust?
The use of a trust may make sense for individuals facing dementia. However, as with all trusts, it is important to properly transfer all assets to the trust to avoid the necessity of probate, both during lifetime and at death. Your trust will likely contain a detailed plan for determining your incapacity and a detailed plan for use of the trust’s assets for your benefit during incapacity. Trusts maintain privacy and allow for greater flexibility in planning. If you are considering the use of a trust, you should seek both legal and tax advice to make sure your objectives are being met.
5. I don’t have long-term care insurance. How do I protect and preserve assets in light of increasing cost for long-term medical care?
Planning to receive Medicaid benefits can be a difficult task. Medicaid eligibility follows strict guidelines, both in terms of the amount of assets you own and the amount of income you receive. Additionally, if you receive Medicaid benefits, the State of Michigan can attempt to recover for benefits paid on your behalf through the Medicaid estate recovery program. If you are likely to need Medicaid benefits in order to provide for your long-term care, you should seek legal advice to learn more about the qualification and reporting requirements associated with these benefits.
6. I own a business with other individuals. How will dementia affect my ownership of the business?
Often, bylaws or operating agreements associated with a business outline how the business owners’ interests will be passed upon death or disability. Business owners should carefully review these provisions to ensure that they are fair and understood by all other owners. In the event changes need to be made, it is important to make those changes as soon as possible.
Absent a provision in the business’ governing documents, the business interest may end up being managed by a person appointed under a Durable Power of Attorney or by a court-appointed Conservator, as the case may be. Often times, the remaining business owners are not comfortable with having a “new partner,” which can cause tension. Therefore, it is vitally important for the business documents to properly outline the agreements of the business owners.
Original source: http://www.shrr.com/estate-planning-and-dementia-answers-to-common-questions
Despite their wealth and business savvy, more than one-third of high-net-worth families have not taken the most basic steps to protect and provide for their loved ones when they die, according to a recent survey by CNBC.com.
The CNBC Millionaire Survey found 38 percent of those with investable assets of $1 million or more have not used a financial expert to establish an estate plan, while 62 percent have.
Individuals with $5 million or more (68 percent) were more likely to do so, compared to those with $1 million to $5 million in assets (61 percent), according to the survey, conducted by Spectrem Group for CNBC, which polled 750 millionaires.
Republicans (68 percent) were also more likely to use a financial advisor to establish an estate plan than Democrats (61 percent) or independents (58 percent).
The numbers don't surprise Mitch Drossman, national director of wealth-planning strategies for U.S. Trust, who said the constant changes to the federal estate-tax law for nearly a decade (until it was made permanent in 2013) resulted in "estate-planning fatigue."
"We have had an incredible amount of uncertainty with respect to estate taxes, and every change led advisors to reach out to their clients to explain these changes and be sure their documents were up to date and reflective of those changes," he said. "Clients finally said, 'Enough already.'"
The higher federal estate-tax exemption amount, which now stands at $5.43 million per person due to annual inflation adjustments, has also rendered estate planning a lesser priority for many wealthy families, said David Mendels, a certified financial planner and director of planning for Creative Financial Concepts.
Married couples can combine their exemptions to give away $10.86 million tax-free in 2015.
"I think people tend to think of estate planning as being primarily a means to reduce estate taxes, and therefore, if they don't have to pay estate tax, they may feel they don't have to do any planning," said Mendels.
But 15 states, including New York, Connecticut and Massachusetts, as well as the District of Columbia, levy their own estate taxes, which kick in at much lower thresholds. New Jersey's exemption, for example, is $675,000, Rhode Island's is $921,655, and Maryland's is $1 million. "Depending on where you live, estate taxes may still be a factor," said Mendels.
Estate planning, however, is about much more than the size of one's taxable estate, he said.
It's a series of documents that protect your assets, provide for your children and delineate your wishes regarding end-of-life decisions. Absent specific instructions, family members are left to guess at what you would have wanted, causing unnecessary stress and infighting.
"Estate planning is not necessarily synonymous with tax planning," said Drossman at U.S. Trust. "There are still many valid reasons to do non-tax estate planning to address property management, to protect assets and to address exactly where you stand on issues you may confront later in life, like cognitive decline or disability.
"That's going to be a bigger issue with longer life expectancies, better medical care and the aging population," he added.
For families with minor children, a last will and testament is the most critical estate-planning document they can have, said Mendels at Creative Financial Concepts.
"If you have young children, you need a will," he said. "It's not about the money. You need to name a guardian for your children, in case something happens to you and your spouse."
It can also be used to set up trusts for any property your child will inherit and to name a trustee to handle the property until your child reaches the age you specify.
Failure to do so means the courts would have to decide who is best suited to care for your children if tragedy should strike. A medical power of attorney is another important weapon in your estate-planning arsenal, authorizing an individual to make health-care decisions on your behalf in the event of physical injury or cognitive impairment.
If you're married, that's typically your spouse, but if he or she dies first, you'll need a backup—ideally, someone who is geographically nearby who can communicate in person with your health-care providers, said estate-planning attorney and CFP Austin Frye, founder and president of Frye Financial Center.
"If, God forbid, you are put in a situation from which you are not going to recover, you want to keep control over what happens to you," said Frye.
Such documents are often created alongside an advanced medical directive for physicians, also called a living will, which clarify your wishes regarding end-of-life medical treatment, including resuscitation and organ donation. (Make sure you have a HIPAA form attached, which grants your power of attorney the right to access your medical records, which are protected under privacy laws.)
A durable financial power of attorney document is also necessary, as it identifies the person you'd like to manage your money if you are unable to make decisions for yourself, said Frye. Such legal documents grant that person legal authority to pay taxes on your behalf, borrow money, pay your bills, invest and handle bank transactions.
With higher income-tax rates in effect, tools and techniques that help minimize the income-tax hit to your estate—and your heirs—are playing a far bigger role in estate planning today, said Mendels at Creative Financial Concepts.
Indeed, the top marginal tax rate for wealthy taxpayers now stands at 39.6 percent. Those with higher incomes also face a higher capital gains rate of 20 percent instead of 15 percent, a 0.9 percent tax on earned income (wages) and a 3.8 percent Medicare surtax on net investment income, plus the phaseout of personal exemptions and deductions.
"As estate taxes have come down, the income-tax consequences are much more important," said Mendels.
For example, trusts remain a valuable tool for protecting assets from creditors, legal claims and offspring with poor money-management skills, but due to recent tax-law changes, they could also leave your heirs with less.
Effective in 2013, trusts that accumulate income are now hit with the 3.8 percent Obamacare tax that applies to net investment income. The beneficiaries are also subject to the highest income-tax rate of 39.6 percent and the top capital gains rate of 20 percent on any income received from the trust in excess of $12,150.
By comparison, the top income-tax rate for individual taxpayers kicks in at $400,000 for single filers and $450,000 for married couples filing jointly.
"Trusts are very versatile, and they can do a lot of things, but these are things that need to be thought through," said Mendels. "Your heirs may end up paying much more income tax by leaving property to them in trust than if you just gave it to them outright."
Drossman at U.S. Trust said income-tax implications, as a component of estate planning, have taken center stage at his firm, too. That, and what he calls "reverse estate planning."
"In some cases we're helping clients unwind or reverse some of the estate planning they had done in the past, because it may no longer be needed, given the significant estate-tax exemption or because it would add to their income-tax cost," he said.
"The probability of something happening may not be high, but if it does and you haven't planned, anything is possible, including litigation, higher taxes and complete chaos."-Austin Frye, founder and president of Frye Financial CenterSome families, for example, are taking assets out of trust and giving them outright to their heirs, since they now fall below the estate-tax exemption line. Others created LLCs or family partnerships years ago to facilitate a discounting of assets, but new rules in some cases prevent assets held in such structures to take full of advantage of the step-up in basis.
Remember: Those who inherit appreciated property, including real estate and stocks, receive a step-up in cost basis for tax purposes based on the current market value on the date of the benefactor's death. Thus, the beneficiary could sell the property immediately without incurring a capital gain, or sell it years from now and only owe gains based on its price appreciation from the day they inherited it.
"If held in a discounted entity, they're not stepped up as high as they would have been had they been held outside that entity," said Drossman. "They may no longer want that in place if they don't benefit from any estate-tax savings, and they get a lower basis."
It's never pleasant to contemplate one's own mortality. But high-net-worth families who fail to plan—and there are many—risk exposing their kids' inheritance to creditors, predators and bitter ex-spouses.
Worse, they leave life's most important decisions—such as who will care for their kids and whether their spouse should pull the plug—in the hands of the courts.
"You have to plan for the worst and hope for the best," said Frye of Frye Financial Center. "The probability of something happening may not be high, but if it does and you haven't planned, anything is possible, including litigation, higher taxes and complete chaos."
—By Shelly Schwartz, special to CNBC.com
The following material is provided for informational purposes only. Before taking any action that could have legal or other important consequences, speak with a qualified professional who can provide guidance that considers your own unique circumstances.
A well written and signed contract with your client can be the cornerstone of a successful and claims-free project. Yet it is surprising how many design firms continue to start new projects with simply a verbal agreement and hearty handshake.
Architects and engineers give many reasons why they forego the formality of a written contract before starting their design services. These include:
The overriding assumption behind this reasoning is that a written contract is unnecessary because, chances are, nothing serious will go wrong with the project. And if something does go wrong, the parties will set things right.
Sometimes a designer and client can indeed iron out a project upset with a quick conversation and a handshake. But rarely does that happen when there is a lot of money at stake. All of a sudden, that trusted client isn’t quite so amicable and he or she doesn’t remember that verbal agreement quite the same way as you do.
Verbal Agreements Are Binding
“A verbal agreement ain't worth the paper it’s printed on,” Louis B. Meyer is supposed to have advised. Still, from a legal perspective, a verbal agreement in lieu of a written contract is generally binding. When you reach a verbal agreement with a client and start to perform services, you are both acting as though a contract is in effect. Therefore, in the eyes of the law, a binding agreement is in effect. The verbal agreement, no matter how brief, is a contract.
But what happens if something goes wrong with the project? In that case, you and your client will explain your respective understandings of what was agreed to. Not surprisingly, those understandings often differ. So while the verbal agreement is binding, the two parties are often in disagreement as to what each party is bound to do.
Who determines what each party to the verbal contract really said and meant? That responsibility typically falls to a trier of fact – a judge, jury, arbiter or mediator. Unfortunately, the trier of fact was not there to hear the verbal agreement, so they have the difficult task of making a ruling based on differing testimonies of the two parties. And in the case of a jury trial, the trier of fact likely does not fully understanding the types of services you render or the prevailing standard of care you must meet when delivering those design services.
One instance where a verbal agreement may not be held binding is when a written contract covering the same project is later drafted and signed. In such instances, the written contract now overrides the original verbal agreement.
Asking for a Written Contract
So how does a design firm instill the formality of a detailed written contract with a client who is used to a simple discussion and firm handshake? This shouldn’t be too difficult considering that a clearly written contract is extremely beneficial to both parties to the agreement.
Consider this scenario: You meet with a repeat client you’ve known for years to discuss a new project. The client immediately begins discussing the design services needed and doodling a quick drawing on a napkin. You pull out your notepad and begin recording the client’s explanation of the project.
“I’ll tell you what, Bill,” you say. “I think we would both greatly benefit if we documented this agreement in a formal written contract. I know we’ve worked off of a handshake before, and I trust you fully. But with a written contract, we can make sure we both have a full and mutual understanding of your wants and needs. It will help us avoid any misunderstandings, like that HVAC snafu we had on your warehouse project on Second Street. I want to make sure you’re completely happy on this new project and that I fully understand what you want.
“You know, Bill, I don't like the time and expense involved with these written contracts any more than you do. But I sure as heck would rather have you and I determine our fate rather than a bunch of expensive lawyers and folks who don't know us from Adam. A written agreement will help us make sure that should a dispute arise, it will be settled in accordance with the facts we agreed to, not the opinion of some outsider.”
If your client continues to balk about signing a formal written agreement before the project commences, reiterate that a contract is simply a tool to help avoid misunderstandings and resulting problems. Try to allay any fears that the contract is somehow a trap to be used against the client in the event of a dispute.
“Bill, don't look at a written contract as a weapon to hold over someone’s head,” you can explain. “See it as a confirmation of the terms and services we have agreed to. When it comes to what your project needs relative to my services, we will need to discuss a lot of issues to make things right, and we need to keep track of what it is we discussed. If we don't record what we talked about, one of us – or both of us – stand the risk of being in for an unpleasant surprise. I don’t know about you, but I can’t promise that I will remember everything said in our discussions. Understandings differ and memories can fade. By putting our agreement in writing, we can have a true meeting of the minds, based on what we see as the best road ahead.
“As we start down that road, we may run into a few unexpected bumps, potholes, curves or detours. We’ll talk about it and do our best to resolve problems – just like we always have. You want your project done right and I want to keep you as a valued client. The contract is a great roadmap to get there.”
Don’t Forget Third Parties
Another important reason for a written agreement is the ability to prevent third parties, such as a contractor or a tenant, from gaining the standing they need to sue you and/or your client based on a contention that they are third-party beneficiaries of your agreement. If your agreement with your client is verbal, the third party may enjoy an advantage. Juries are often sympathetic to third parties, especially those with whom they can readily identify as “the little guy.” Your written agreement with a client can address unauthorized third-party reliance, and can be attached to appropriate deliverables (such as reports) to help ensure any third party reviewing them understands the contractual limitations (scope, schedule, fee, general conditions) affecting them. A verbal agreement contains no such limitations and is difficult to defend.
One More Argument for a Written Contract
You may point out to your client that, if anything happens to either of you, or one of the parties to the verbal agreement leaves his or her firm, the project will be affected, problems will be likely, dollars will be involved and disputes will arise.
Explain, “A written contract will tell others what we intended to do. They won’t know about our verbal understandings. They need that guidance in writing.”
Is It Insurable?
Suppose you and your client enter into a verbal agreement and later have a dispute you can’t resolve. You go before a judge or jury who, based solely on your verbal testimonies, issues a judgment in your client’s favor. Your client should be happy, right? Well not necessarily.
Suppose the wording of the judgment, written by someone not well versed in laws and standards governing the design and construction industry, is perceived by your insurer as an uninsurable liability. Your client won the battle, but he or she may have just lost the war. Unless your firm can cover the damages, the client may have just lost your services and jeopardized the project from a financial standpoint.
Tell your client: “Bill, I have a great insurance company, solid coverage and a fantastic agent. She can help us review our written agreement and assist us in making sure that it’s insurable. This benefits you as much as me. An uninsurable agreement, verbal or otherwise, doesn’t do either of us any good.”
Short Is Not Always So Sweet
Some clients will grudgingly agree to use a purchase order, proposal or similar “short-form” contract, but they remain averse to long agreements that require more time to draft and review. The problem is that short-form agreements are, by nature, silent on a number of important issues. Once again, outside triers of fact are asked to resolve disputes without the benefit of a comprehensive written agreement.
Tell your client who only wants to offer a purchase order: “Bill, what is the harm of having a long contract rather than a short one? A long one serves to cover a broad range of important issues. As long as the contract is well written in reasonably understandable terms, what is the drawback? Some detail in our agreement might be relevant to a pressing issue, and we’ll be glad we took the time to address it. And if the issue doesn’t come up, no harm, no foul.”
You might also add:
“A big advantage to drafting and reviewing a thorough contract is that it allows us to discuss the ‘what-ifs’ and address potential solutions. The more we know about the project and reach agreement on various issues, the more we set out what we expect from one another. That’s not a bad thing.”
If you provide repeat services to a contract-adverse client, consider using a continuing service or “master” agreement. This document sets general terms and conditions that apply to all of the projects conducted over a particular period of time. Then you can develop just the scope, schedule and fees for each individual project. Your professional association may offer standard forms for these master agreements.
Arguably, the greatest value of drafting a comprehensive contract comes not from the words that go onto the paper, but from the process through which important issues are identified and discussed. The client gains a better understanding of project risks and what the two of you can do to manage them. The client also learns what the both of you can do to lower the likelihood of errors or omissions. And you can both set up a framework in which any problems that do arise can be addressed in a fair and equitable manner that focuses on problem resolution rather than finger-pointing and disagreement as to what you had verbally agreed to.
The contract-formation process, more than any other aspect of your project involvement, gives you the opportunity to demonstrate your professionalism and generate the communication, coordination and cooperation required for project success. And that’s something every client can give a thumb's up to.
Finally, if a client continues to refuse to enter into written agreements perhaps this isn’t the type of client you should be doing business with. A client who will not commit to fees, schedules and other commitments in writing may not intend to live up to those commitments.
Original source: http://www.camillericlarke.com/ArchitectEngineerNews/newsView.asp?NewsId=4096856
Entrepreneurs thrive on a DIY mentality: Do everything you can yourself and don't pay for anything new until you have absolutely have to. It's especially difficult to justify hiring financial help like a bookkeeper.
With user-friendly software such as QuickBooks available, many business owners feel they should be able to do keep their records on their own, even as they wrestle with finding the time and wonder if they're doing things correctly.
Deciding about "hiring a bookkeeper is something I struggle with all the time," says Randy Mitchelson, owner of National Web Leads, an Internet marketing company in Estero, Fla. While he finds basic accounting easy to do, it takes him away from working on his business. Meanwhile, his accounting and tax planning have become only more complicated in the six years since he founded his business.
Entrepreneurs who hire accounting help usually discover they weren't doing nearly as well on their own as they thought they were.
Zalmi Duchman, chief executive of The Fresh Diet, a meal-delivery company based in Miami, lasted five years without a bookkeeper then hired one three months ago. The new employee cleaned up records that incorrectly mingled expenses and assets, reviewed employee purchases for duplications, and took over the mundane but critical task of paying bills. Duchman estimates his company is saving $500 to $1,000 in late fees every quarter. "I definitely have been able to make better and more educated decisions," he says.
So what are a small-business owner's options for professional help with financial tasks? Here is a primer:
Do I Need a Bookkeeper or an Accountant?
Actually it's a trick question. You may need both.
Aaron Sylvan, a serial entrepreneur who lives in New York, compares the situation to needing to hire both a carpenter and an architect when building a house.
An accountant can analyze the big picture of your financial situation and offer strategic advice. He or she produces key financial documents, such as a profit-and-loss statement, if needed, and files a company's taxes.
After tax season is over, an accountant can also act as an outsourced chief financial officer, advising an entrepreneur on financial strategies, such as whether to secure a line of credit against receivables when introducing new products.
In contrast, a bookkeeper does the day-to-day hands-on tasks: making sure new employees file all the right paperwork for the company's payroll, submitting invoices (promptly) and following up on them, and paying the bills. The bookkeeper also tracks company expenses and can assure that every cost has been entered -- and recorded correctly -- into software like QuickBooks so that the business is ready for tax time along with filing any other reporting to, say, creditors or investors.
"I don't keep receipts; they're a pain," says Sylvan, who runs Sylvan Social Technology, an ecommerce-services company. "Every month I get a bank statement with a gazillion transactions," such as taxi rides, meals, conferences and other expenses he has placed on his company's debit card.
His bookkeeper spends a few hours a week sorting it all out. As a result, Sylvan has a better idea about how his expenditures stack up against his budget. He knows he won't bill clients incorrectly or miss important payments.
"Knowledge is power," even when it comes to the small details, Sylvan says. "If you don't have a bookkeeper, you're probably not being as strategic as you could be in how you spend your money."
When to Bring in a Bookkeeper
In his running a half-dozen businesses the past 15 years, Sylvan has typically hired a bookkeeper for a few hours a week within a few months after starting a new venture. For the first six to nine months, he's usually too busy to focus much on recordkeeping, then "things begin to stabilize," he says. "Then you can see trends and you can start to think strategically about where your money is going and where you can save." And this is when a bookkeeper becomes valuable. Since Sylvan has fewer than a dozen employees at each new company, the bookkeeping takes about one day a month, he says.
The rates for hiring a bookkeeper on a part-time basis in the U.S. can range from $15 to $60 an hour, depending on location, the workload and whether work is done at the company's office or from home.
Sylvan typically sees his accountant once a year, at tax time. But business owners requiring capital or frequently negotiating credit with a bank are likely to contact their accountants more often.
When to Hire a Staff Accountant or Bookkeeper
Many small entrepreneurs can probably stick to outsourcing accounting or bookkeeping services for quite some time. The typical service business can often outsource its chief financial officer tasks and bookkeeping until its revenues rises well above the $1 million mark -- or until it has about 30 employees. Until then, most businesses usually don't have enough work to keep a full-timer busy every day.
It's time to hire full-time help, though, when you're calling your accountant often enough that you wish he or she were in the office all the time. Bring in a full-time bookkeeper when your part-timer is spending two or three full days in the office and still falling behind.
Most new business owners find a staffing solution somewhere along the continuum that ranges from trying to go it alone and paying for full-time help.
Original Source: http://www.entrepreneur.com/article/219917
It's never too early to start estate planning, and if you already have a family, getting your personal affairs in order is a must. The sooner you start planning, the more prepared you will be for life's unexpected twists and turns.
The following tips, aimed at those under 40, can help you approach and simplify the estate planning process:
Start now, regardless of net worth. Estate planning is a crucial process for everyone, regardless of wealth level, says Marc Henn, a certified financial planner and president of Harvest Financial Advisors. "Many people will say, 'Well, I don't have a lot of assets, therefore I don't need an estate plan,'" he says. "Maybe you only have debt, but it still applies. If you want the people around you to appropriately deal with your finances, a plan is still just as important."
This is especially true if you are responsible for financially dependent individuals, such as young children. "The less you have, the more important every bit you've got is to you and the people you care about," says Lawrence Lehmann, a partner at Lehmann, Norman and Marcus L.C. in New Orleans. "If you don't have much money, you really can't afford to make a mistake."
[See: 12 Money Mistakes Almost Everyone Makes.]
Have the "what if?" conversation with friends and family. Before jumping into the estate planning process, it's important to establish exactly what you want, and need, to happen after you die and relay those wishes to those around you.
"We find that the best transitions and financial transfers happen when all family members are involved in the decision making," says John Sweeney, executive vice president of retirement and investing strategies at Fidelity Investments. "This way, after a loved one is gone, no one is squabbling over a couch or going, 'Why did person A get more than person B?' If wishes are laid out clearly while the individual is living, they can share the rationale behind the decisions."
Focus on the basic estate plan components. Experts say life insurance, a will, a living will and a durable power of attorney are all important aspects of an estate plan that should be established at the start of the planning process.
In the event of an untimely death, life insurance can replace lost earnings, which can be especially beneficial for younger individuals, says Bill Kirchick, a partner with Bingham McCutchen law firm in Boston. "Young people can't afford to die," he says. "They are going to lose a source of income if something happens to a young couple and they haven't had enough time to accumulate wealth from earnings to put aside in savings or a retirement plan." Also, the earlier you take out a life insurance policy, the more likely you are to be approved for reduced rates compared to older individuals.
The next step is to draft a will detailing how you would or would not like your assets to be transferred to your designated beneficiaries following your death. A will should also outline any designated child guardians or financial account trustees, if applicable. "Who is going to look after the accumulated wealth that was put aside for those who may be too young to do it themselves?" Kirchick says. As a general rule of thumb, the more detailed you make your will, the better.
[Read: How to Manage Your Digital Afterlife.]
Trustees can be appointed not only to manage the distribution of assets, but also to perform tasks such as accessing your bank account and selling your home. "We call it a durable power of attorney," Lehmann says. "That documentation is very important and should be appointed to someone you really trust because the power could potentially be abused."
A similar power of attorney should also be appointed as part of a living will to be responsible for important health care decisions if you become severely incapacitated or disabled. A living will document outlines how you want your life to be treated in the instance that you cannot make decisions for yourself. "Think of it this way: If you don't have the health care directives in place, or have given someone that authority, who knows what could happen," says Renee Porter-Medley, a certified financial planner and vice president of Key Private Bank in Naples, Fla.
Utilize estate planning professionals. To draft these basic estate plans, experts recommend carefully selecting a team of professionals who will educate you and draft what you need based on your individual situation. "Don't feel like you have to jump at the first person whose name is given to you," Kirchick says. "I think that people should interview two or more attorneys, accountants, trust officers, financial advisors and so on."
According to financial planning experts, the average initial cost for the legal drafting of a will, living will and durable power of attorney documentation is between $500 and $1,200, depending on the family size and location.
[See: 12 Surprising Facts About Boomer Retirement.]
To keep planning costs even lower, Porter-Medley suggests visiting a certified financial advisor before going to an attorney to become more educated about the overall process. "A financial planner can prepare individuals as much as possible before they go to an attorney so when that individual walks into their attorney's office, they have a good understanding of the situation and can efficiently use the time they are paying for."
Low-income individuals who want to start estate planning can review their state's legal aid societies and bar services to see if legal consultations are available for little or no cost.
Continue to review your plan over time. Finally, your estate plan should never be a "one and done thing," according to Henn. "Every five to seven years, the documents should be readdressed to adapt to significant life events, tax law changes or even the addition of more children," he says. It is also important to keep tabs on your insurance policies and investments, as they all tie into the estate plan and can fluctuate based on the economic environment. If you have to make revisions, Henn says it will cost as much as it did to create the documents in the first place.
Original article: http://money.usnews.com/money/personal-finance/articles/2013/09/19/estate-planning-tips-for-people-under-40?page=2
The stock market opened with a thud Monday, with the Dow Jones Industrial Average quickly dropping more than 1,000 points and the S&P 500 selloff briefly reaching correction territory, more than 10 percent off its peak. But by midday, #BlackMonday had brightened to a pale shade of gray, as the major indices began to claw their way back.
Still, if the turbulent trading of recent days has you nervous, here’s some good news to keep in mind: The sharp selloff hasn’t been prompted by some sudden worsening of the economic picture in the U.S.
The market’s dive was set off by fears about China’s slowing economy and, to a lesser extent, by a seemingly imminent move by the Federal Reserve to raise interest rates for the first time since 2006. But while a slowdown in China’s economic engine could still have global ramifications, the fundamental outlook for the U.S. hasn’t changed.
“The current panic is essentially ‘made in China,’” Julian Jessop, chief global economist at Capital Economics, wrote
GDP data due out next week could push the second-quarter growth rate above 3 percent, economists at Credit Suisse noted late last week, bringing the annual growth rate for the first six months of the year close to 2 percent, or just about what it’s been in recent years.
Falling energy prices and a recovering job market should — should — buoy consumer spending. “These conditions are likely to remain in place, and energy investment is unlikely to fall sharply again, despite still falling oil prices,” wrote the Credit Suisse analysts, who still expect second half GDP to grow at about 3 percent.
The fears of economic fallout in China may be overblown, too, Capital Economics’ Jessop says. The Chinese government has pulled back from propping up its stock market, but that primarily affects what UniCredit Global Chief Economist Erik F. Nielsen calls a “minuscule share of Chinese households” invested in the market.
“This is good news, not bad news, for everyone but those specific households — and as a share of total-China they hardly count,” Nielsen wrote Monday. “Therefore, the feedback loop from markets to the real economy in China is virtually non-existent because the stock market is so small compared to the economy.”
Even those Chinese households invested in stocks haven’t necessarily been slammed; the crash in the Shanghai composite index has simply taken it back just below where it started the year.
Similarly, fears about the Chinese slowdown might also be inflated. “The balance of the latest ‘real’ data out of China suggests a slight acceleration of growth in domestic demand again — not a decline,” Nielsen says.
Even if growth is still sluggish, the economic data out of China “are not weak enough to justify fears of a ‘hard landing,’” Jessop says. China’s contribution to global demand has stayed steady. “A shift to slower but more sustainable growth in China – particularly if it is less dependent on commodity-intensive investment and on exports – could leave the rest of the world better off.”
The economists also add that plunging commodity prices are more the product of increased supply rather than falling demand — and that those falling prices should benefit the global economy, on the whole. “Lower commodity prices is great news for Europe (and, to a lesser extent, the U.S.): It’s like a massive tax cut for non-commodity businesses and households — with no fiscal impact! I love it!” Nielsen wrote, exclamation points and all.
None of that is to suggest that the Chinese, U.S. or global economies will all just sail ahead without any additional turbulence. But the intensity of the market’s recent moves may be misleading if read as an economic forecast. “It feels like a severe episode of market hypochondria,” Nielsen says. “Not easy to cure, but a few deep breaths and a long walk might help. Panic certainly doesn't!”
(Reporting by Yuval Rosenberg)
This story was originally published by The Fiscal Times.
Read more: http://www.businessinsider.com/the-upside-to-black-monday-2015-8#ixzz3k7bOa5AS
Initiating a conversation regarding estate planning can be difficult. Make it easier with these tips courtesy of NDSU Extension. https://www.ag.ndsu.edu/pubs/yf/famsci/fs1684.pdf
Often considered by accountants and CPAs as just technicians or clerks, bookkeepers perform some of the same daily tasks as do accountants and certified public accountants. Many bookkeepers work as freelancers for small businesses in need of financial recordkeeping. Bookkeepers maintain daily accounting records, posting debits and credits, generating invoices for clients and checks for vendors as well as handling payroll. Many small business owners often double as bookkeepers. Bookkeepers typically lack the education of an accountant or CPA, as they gain on-the-job experience. Professional organizations for bookkeepers help to improve professional recognition for bookkeepers by accounting professionals as well as providing certification programs of abilities and skills.
Accountants have a four-year college degree. While many accountants have an educational background in accounting, some are more general business majors. Companies that generate more than a million dollar in sales each year might have an accountant on staff or hire the services of a professional accountant from an accounting firm managed by a certified public accountant. As the company grows, the accounting department expands to handle the increased fiscal responsibilities within the organization. Accountants work with accounting clerks and technicians who handle daily financial entries. Accountants oversee or perform billing, make general ledger entries, review accounts payable activity completed by clerks or technicians or handle payroll. A mid-level position in the accounting department, accountants report to accounting managers, company controllers or financial directors, all of whom might be certified public accountants.
Certified Public Accountants
Certified public accountants have a focused education in accounting and must pass the Uniform Certified Public Accountant Examination. CPAs must meet state education and experience requirements before they can sit for the exam. Accountants not meeting these requirements cannot use the CPA designation legally. A CPA can work within a company or create his own company to offer accounting services to the public. Certification is renewable every two years, subject to state requirements. CPAs have a higher level of responsibility than bookkeepers or accountants; because of their certification, they perform auditing, tax and financial services for individuals, corporations and other business or nonprofit organizations. CPAs work with accountants and bookkeepers, auditing and overseeing financial records.
Though a bookkeeper might perform the same duties as an accountant, accountants and CPAs often do not consider bookkeepers as accounting professionals. But when a bookkeeper signs checks or handles payroll, she has the same liability as an accountant or a CPA with the same responsibilities under IRS law. In an accounting organization or department, duties are segregated to reduce fraud, errors or misappropriation of funds and to ensure strong financial control under generally accepted accounting principles. Working for a small organization, a bookkeeper might handle the duties of several jobs that would be segregated in an accounting or corporate environment.
Will you be able to help your college-age child in a medical emergency? HIPAA Privacy Rule can get in your way
Don't get stuck in an information vacuum if your son or daughter ends up in the ER.
Early one October morning, Sheri E. Warsh, a mother of three from Highland Park, Ill., stepped out of the shower to a ringing phone. On the other end, her 18-year-old son’s college roommate delivered terrifying news: Her son—270 miles away at the University of Michigan—was being rushed by ambulance to a nearby emergency room with severe, unrelenting chest pain. “I was scared out of my mind, imagining the worst,” Warsh said.
In a panic, she called the ER for details. What she got instead was a rebuff from the nurse. “She asked me how old my son was, and when I said 18, she told me I had no right to talk to the doctor,” Warsh said.
Was the nurse acting within her scope by shutting out the anxious mom? In fact, she was. The ER chose not to disclose the son’s medical condition due to the Privacy Rule of the Health Insurance Portability and Accountability Act, or HIPAA.
“Once a child turns 18, the child is legally a stranger to you,” said Jane F. Wolk, a trusts and estates attorney practicing in New York and New Jersey, referring to the legal age in almost all states (in a few it's older). “You, as a parent, have no more right to obtain medical information on your legal-age son or daughter than you would to obtain information about a stranger on the street.” And that is true even if the young-adult child is covered under the parents’ health insurance, and even if the parents are paying the bill.
A medical provider can chose to disclose protected health information to a family member, even without the patient's authorization, if, in her professional judgment, it serves the best interest of the patient. But providers often come down on the side of patient privacy, particularly if they have never met the family member.
In this case, Warsh’s son didn’t intend to keep his parents in the dark. In the midst of cardiac-care chaos, he was in too much pain to give authorization. But a simple, signed legal document (or two, in some states) would have smoothed the way.
“Nobody is talking about this, even after I went to so many college meetings and orientations,” Warsh said. The irony of her story is that Warsh is an attorney specializing in the practice of trusts and estates as a partner at a Chicago law firm. “Now in my practice I have made it my goal to educate parents on what they need to do,” she said.
Moms and dads who still think of themselves as protectors and advisers, even after their children become legal adults, often don’t consider the real-world implications of that milestone birthday. They and their young-adult children need to think about the unthinkable in advance. Three forms—HIPAA authorization, medical power of attorney, and durabe power of attorney—will help facilitate the involvement of a parent or other trusted adult in a medical emergency.
If a student attends college out of state, fill out the forms relevant to the home state and school state to avoid any challenges. If the school has its own form, sign that one too, Warsh said. “When the doctor or medical institution sees it, you want them to be familiar with it and recognize it,” she said.
Once the forms are completed, it’s a good idea to scan and save them so that they are readily available on a smart phone or home computer.
You don’t need a lawyer to do this. Many websites have downloadable forms. But a lawyer’s involvement can benefit in making sure you are using the right form, explaining it, and advocating on your behalf in case something goes wrong.
Thinking about the unthinkable: 3 forms that help
A signed HIPAA authorization is like a permission slip. It permits health-care providers to disclose your health information to anyone you specify. A stand-alone HIPAA authorization (not incorporated into a broader legal document) does not have to be notarized or witnessed. This document alone, signed in advance by her son, would have sufficed for Warsh to get information from the hospital treating her 18-year-old son. Young people who want parents to be involved in a medical emergency, but fear disclosure of sensitive information, need not worry; HIPAA authorization does not have to be all-encompassing. They can stipulate not to disclose information about sex, drugs, mental health, or other details they might want to keep private.
Medical power of attorney
In signing a medical POA you appoint an “agent” to make medical decisions on your behalf in case you are incapacitated and cannot make such decisions for yourself. Each state has different laws governing medical POA and, therefore, different legal forms. In many states, the HIPAA authorization is rolled into the standard medical POA form. Whether the medical POA requires the signature of a witness or notary varies state by state.
For the sake of clarifying often-used terms: A medical POA sometimes goes by other names, such as health-care power of attorney, designation of health-care proxy, or durable power of attorney for health care. It is one type of advance directive. The other type is a living will, which specifies your wishes with regard to interventions in life-or-death scenarios in case you are unable to do so. In many states, the language for the living will is also incorporated into a hybrid document that includes the medical POA and HIPAA release.
Durable power of attorney
As an additional step, young-adult children might consider appointing a durable power of attorney, enabling a parent or other designated agent to take care of business on the student’s behalf. If the student were to become incapacitated or if the student were studying abroad, the durable power of attorney would be able to, for example, sign tax returns, access bank accounts, and pay bills. Durable POA forms vary by state. In some states the medical POA can be included in the durable POA form. “The durable power of attorney is sweeping,” Wolk said. “You do not want to give it to someone who you do not trust.”
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Original Source: http://www.consumerreports.org/cro/news/2014/08/will-you-be-able-to-help-your-college-age-child-in-a-health-emergency/index.htm#