Wednesday, November 30, 2011 Family Lawyer in Houston Says, "Make These Tax Moves Now Before 2012"
As promised, I have compiled some information on expiring tax breaks for 2011, as well as some suggested moves to make before December sees its ball-dropping end.
Filed under: Increased-Deduction Strategy
With one caveat: increasing deductions could cost you if you end up owing under the Alternative Minimum Tax (AMT).
1. Pre-Pay and Accelerate
Mortgage bills, college tuition, property taxes -- all of these can add deductions to your bottom line, so cherry-pick some 2012 bills if cashflow allows, and you will get to mark them against this year's taxes (only January's mortgage payment counts for this, I should hasten to say).
And you can "accelerate" certain expenses like optional medical procedures (dentistry is always a ripe source for procedures to implement, unfortunately ?), again, doing so if cashflow allows.
2. Donate
It is not just because 'tis the season, but often (if we are all honest) because the year-end is so close. So, obviously, when it comes to taxes, giving to a nonprofit can be like a money-saving gift to yourself. If you itemize your deductions, you can claim your charitable donations, both of cash or goods.
In fact, if you are *close* to being able to itemize deductions, making some nice gifts this month can push you over the top into some major tax-savings. And, of course, there is the added benefit of what happens to YOUR mindset when you give. If you need any help on recommendations to worthwhile non profits, please let us know!
Filed under: Buying stuff you already need -- and saving on taxes
3. Energy-Savings and Big Cars
The accountants have been pounding this drum for a while, for the simple fact that (because of the last "stimulus" package) replacing windows, doors, and HVAC systems-- as well as installing new insulation--could net you a $500 tax credit on your 2011 tax bill! Credits always beat deductions. A solar energy system gets a 30% credit with no upper limit.
How about that fancy new vehicle you have been eyeing? Or that energy-sucking flatscreen? Buy it before the end of the year, and you are eligible for a deduction on the state and local sales taxes.
But you can't deduct both state income taxes and general sales taxes, so the deduction is usually most beneficial to our clients who actually live in the no-income-tax states. By the way, this sales tax deduction is scheduled to expire on Dec. 31.
Filed under: Common sense
4. Please stop loaning extra funds to Uncle Sam
Do you intentionally get a big refund each filing season? Quit that! You are providing Uncle Sam an interest-free loan of your money.
Submit a new W-4 now so that your payroll withholding is more closely in line with your future IRS bill. It could even give you a few extra dollars at the end of the year to spend on holiday gifts!
Oh, and just so you know, it is growing very likely that whatever Congress decides on tax law changes, payroll calculators may not have time to update by January 1st. This means that even if you request the changes, your withholding may not reflect things until 2012 ... but making the change will still impact your taxes -- it just might not be obvious until next year.
5. Make your family happy (our specialty)
The clock is ticking on the very generous estate and gift tax exclusions that allow you to give up to $13,000 this year to any number of recipients -- and a total of $5 million over your lifetime -- without owing any federal gift tax. The $5 million lifetime exclusion expires at the end of 2012, and Congress may decide to reset it at a lower level.
While you are at it, you can always do it again on January 1st!
I hope these are easy, and that they give you some good ideas. Remember-- I am in your corner, and not just about generational wealth issues.
Wednesday, March 09, 2011 Houston Asset Protection Attorney On How To Prepare Your Finances For Emergencies
By: Kim Hegwood, Houston Asset Protection Attorney
It is my firm belief as a Houston Asset Protection Attorney that how you choose to think about your circumstances has a subtle, yet profound, impact on how you handle storms. I have written often on this subject, so I won't belabor it here.
Instead, this week, I thought I would give you a short run-down on specific, financial steps to put in place so you can be ready for whatever kind of situation you might find yourself in.
1) Put $1,000 aside. It doesn't amount to a real emergency fund, but it will do until you get your finances in order. You can accumulate the $1,000 by allocating $10 a day for just over three months. Most people go into debt because they live hand to mouth, spending 100% of their take-home pay. Then life happens. Having a mini-emergency fund can help you get out of debt and stay out of debt.
2) Remove yourself from credit card debt--forever. I suggest paying off your credit card by starting with the smallest balance in order to achieve small successes and then working to snowball your payments as you tackle the larger balances. These first two steps, having $1,000 and paying off debt, simply prevent you from facing a financial emergency by starting out wounded and bleeding.
3) Improve your ability to handle fluctuating monthly expenses. If you can, set up a monthly budget so your day-to-day expenses are less than 65% of your take-home pay. The difference between those growing rich and those remaining poor is not the salary they make. It is the salary they keep. Relative to their income, the rich are frugal. They save and invest. They spend less than 65% of their take-home pay on day-to-day expenses. They save at least 10% in their retirement accounts and another 5% in taxable savings. They direct another 10% toward unknown big purchases. And they even live frugally enough to give another generous 10% to charities.
4) Automate your cash flow to promote saving and investing. Every month, have 10% transferred into your retirement account before you receive your paycheck. Then automate the transfer of 25% of your take-home pay into an investment account a day or two after your paycheck is deposited. Automating your savings makes savings a high priority and ensures that you pay yourself first. This investment account will grow over time, and you can use it to pay for big emergencies and charitable gifts.
5) Set up an asset allocation for your investments that is diversified for safety while being invested for growth. If you make it to this step, you are well ahead of the game...but the game ain't over yet! Diversification works, and it is never more obvious than in times of market turmoil. Without diversification, portfolios can have a zero return over a decade. After being well diversified, the likelihood of no return over a decade drops significantly.
6) (If necessary) Mobilizing during an actual emergency. Having the discipline to budget for small financial emergencies will help you be prepared when you encounter larger financial crises. When some unknown spending need strikes, take the money to cover the expense from your growing emergency fund. Then, determine if you have been budgeting for this level of unknown expenses adequately.
Usually emergencies don't happen. So the money you have socked away makes more money. Keep an emergency fund for several years and it should double in value, giving you an additional emergency fund. Whether you need it or not, being prepared for a financial emergency means peace of mind, knowing that your lifestyle is frugal, so you won't be in trouble. Wednesday, February 02, 2011 Family Laywer in Houston Discusses How To Gradually Grow Your Children's Financial Smarts
By: Kim Hegwood, Family Lawyer in Houston
I will spare you the stories, but needless to say: As a family lawyer in houston, I have seen so many otherwise-loving and wise parents somehow forget to ready their children for the financial realities of adult life. Instead, they simply hand them credit cards, pack up their cars and head to school.
I will go out on a limb here, but I believe that it is this deficiency in financial education which has led, in part, to an adult population that spends beyond its means, engages in unsafe borrowing practices, and accumulates record amounts of debt.
Still, if we decide to instruct our kids how to responsibly manage their money -- much as we teach them how to read, tie their shoes, and ride bikes -- then perhaps they might avoid a Great Recession-like event in their own adult lives.
Sure, that all sounds good in theory, but how do you go about instilling proper financial values into your children?
1) Tackle the task as if you are once again teaching your kids to ride bikes. You first need to let them get comfortable on training wheels, and prepaid cards are the training wheels of personal finance. So co-sign for prepaid cards, load a certain amount of money biweekly and allow your children to spend freely. This will force them to learn how to budget and, since most prepaid cards allow online account management, you will be able to review their purchases with them.
By the way, I did some online searching, and these are some good choices for pre-paid cards for teenagers, etc.
Visa UPside: http://www.upsidevisa.com
MasterCard Facecard: http://www.facecard.com
American Express Pass: http://bit.ly/heWJRS (shortened link)
Visa Buxx: http://usa.visa.com/personal/cards/prepaid/visa_buxx.html
2) Once you are confident that your kids have exhibited responsible prepaid card use for at least a year, you can graduate to monthly cash allowances. This progression, which is tantamount to taking one training wheel off their bikes, will provide them with greater financial independence (given that you cannot monitor their spending with cash). It will also more thoroughly test their responsibility because the odds of losing money or exhausting too quickly are heightened with a monthly cash allowance.
3) If your kids demonstrate the requisite discipline after a year of cash allowances, you can take the other training wheel off. Do so by co-signing for and opening checking accounts in their names and depositing slightly higher monthly amounts while requiring them to pay for more of their own expenses.
With checking accounts, children will garner much needed experience writing checks and purchasing with debit cards. They will learn how to avoid overdrawing their accounts and bouncing checks -- and if they can't learn these lessons quickly enough, you can screw that training wheel back on and regress to cash spending. After all, when you took that last training wheel off, you didn't let go of the bike completely! You still had a grip on the handlebars and were providing assistance as needed.
4) If your kids' financial balance seems solid after 6-9 months, you can release the handlebars and either co-sign for student credit cards or give them small lines of credit as authorized users on your credit card accounts. Doing so will help teach them the principles of responsible credit use, such as spending within one's means and paying bills in full each month. Remember though that you are simply taking your hands off to see if your kids can ride. If they wobble, catch them.
This financial education progression will instill within your children various skill sets that will surely serve them well when they leave the nest. It's important to employ such a practical approach because it lets kids learn and inevitably falter while the stakes are low. Additionally, you can ensure that your children know how to handle their money before becoming independent, providing yourself with the kind of peace of mind that is valuable to any parent.
So before sending your kids out into the world, make sure they are ready for the financial implications of that independence!
Thursday, January 06, 2011 Estates Lawyer in Houston Discusses How To Set Those Pesky Financial Goals
By Kim Hegwood, Estates Lawyer in Houston
Not to make you feel guilty, but for every seven years you delay saving and investing for the future, you cut in half the income you would enjoy at the end of your life. So, as an estates lawyer in Houston, I want to encourage you to make 2011 the year you get on the right financial course!
Here are some suggestions to get started...
1) Set Realistic Goals First, ask the right questions and stay the course until you have found the answers. Goals that are shared are ten times more likely to be acted on. Don't wait until you have everything set up to seek out accountability.
2) Make those goals concrete and then document them. Set your savings goals as a specific annual percentage of your adjusted gross income (AGI). It is a great idea to save at least 10% of your AGI in tax-free retirement accounts and another 5% toward retirement in taxable investments. If you are behind on your savings, you may want to save even more in order to catch up.
Third, craft the best strategy to implement your goals, including prioritizing the appropriate retirement vehicles. Start by investing just enough to get the entire match from a company's 401(k) plan (if you have one) and then fund your Roth IRA accounts next. After these two, make certain you have enough nonretirement savings.
Fourth--and this is a BIG deal-- automate your plan. Automating putting money in an employer-defined contribution plan is easy. Automating a taxable savings plan is just as painless. Most banks or brokers offer an automatic money link between an investment account and a checking account. They should also offer a monthly automatic transfer between the two accounts.
Going into further detail would actually entail sitting down and creating a true, full financial plan--which is impossible over email!
But I will say one last thing: the most critical component of wealth management in the new year will be tax minimization. With the potential for tax rates to fluctuate even more than the stock market in 2011, it is never been more important to monitor what "Uncle Sam" is seeking to take from your wallet!
Thursday, August 12, 2010 Houston Elder Lawyer Reveals Your Most Critical Skill In This Economy
By Kimberly Hegwood, Houston Elder Lawyer
How can you maintain your sense of personal peace in this environment...while NOT simply "ignoring" everything? I've got four suggestions for you.
1) Firstly, DO be very selective about (even, yes, choosing to ignore) certain media elements that have an agenda of spreading fear. 24-7 news would make no money if it stopped preying on people's fear. (You realize the news networks are not a public service, right? They are in the business of getting ratings to sell advertising. Period.)
Have you ever noticed your feelings after watching just 20 minutes of CNN Headline News? Everything is going to pot. You'll find negative stories on the environment, war, disease, crime, and of course... the economy. It is laughable what they will come up with just to broadcast some bad news. A few weeks ago I spotted this "headline" story on the tube along with some sad-faced puppies: "PETS: Feeling the Foreclosure Boom!"
Everyone is selling crisis! This is true, from the media to the politicians. So stop watching CNN all day, refuse to participate in this circus, and instead start planning your first (or next) million. Seriously.
2) Look for the good news. Now, I am very careful here, because I am aware that some of my Houston estate planning clients and friends really are feeling the pinch, but let's ALSO look at the bigger picture, especially in comparison to the early 80's or 30's.
This was the topic of last week's p0st, and, again, I can send to you if you missed it. Short version: We are NOT in the Great Depression (by the numbers).
You can always find doom and gloom if you want to. So turn off your TV and focus on other activity. It will significantly help your inner peace!
3) Get out and do something profitable. That may mean actually starting that exercise regime you've been putting off. Take up a new hobby. ANYTHING to get your mind in a more "profitable" mode! Go do it.
These steps will NOT solve the problems in your wallet, and in the economy. However, how you choose to respond will affect your peace, and, actually...this WILL impact how you spend your money. Please, for your sake, tune OUT the fear, and tune IN to smart preparation.
4) Stave off fear by knowing actual numbers. The great problems many businesses and families face when money's "tight" is SIGNIFICANTLY compounded by not knowing. Any number of pessimistic scenarios play out in your head.
So here is how to fix that. Sit down with an advisor, get the real facts-and if they are bad, you can still come up with a plan. You will find that laying out action steps with somebody competent changes everything.
And, of course, we can sit with you, if you would like in this process--or point you in the direction of a highly-competent advisor.
I am personally dedicated to the success of your family -- and your state of mind! Can other lawyers say that?
Warmly,
Kimberly Hegwood, Houston elder lawyer
PS--If you are wondering if your Houston estate plan is up to date, we have space for TWO families to meet with us to review their plans. Call our office right away (281-218-0880) or send me an email to set up one of these special sessions. You will NOT be sorry!
PPS- Read more on Houston Elder Law here. Thursday, April 15, 2010 Swimming in Debt? 8 Ways to Pay It Down—Fast.
If you or a loved one is suffocating under a mountain of debt, this week’s article offers 8 vital strategies to help you pay it down, fast.
Essentially, the first step in getting out of debt requires you to break your strategy into two key components: 1) Reduce your interest rates/ determine what to pay, and 2) Pay it down.
Let us now examine what that looks like as part of your overall “get out of debt” strategy.
Reduce Your Interest Rate and Determine What To Pay
1. List information for all of your debts. Physically list out WHO you owe money to, the AMOUNT you owe, and the INTEREST RATE you are paying. Most people who are in debt avoid looking at these statements. The truth is often difficult to face, but facing this information honestly is important.
2. Call every place you owe money. This is especially important if you are delinquent in your payments. Let them know that you will be trying to pay off your current debt and ask for their assistance. Ask them for a lower rate of interest. Ask them for a payment schedule you can actually pay. Lenders are not gentle to middle-class deadbeats who charge too much and then have to be wrestled to the mat for payment. They are much kinder to people who contact them, explain their troubles and ask for assistance.
3. If possible, consolidate all your debt into the lowest possible interest rate. This may involve opening yet another credit card. The credit offers you get flooded with through the mail are *not* the cards with the lowest interest rate. They do not give you cash back, airline miles, or discount gift points. None of these reward programs are worth the high cost you are paying for them. Some credit cards may offer some number of months with little or no interest. These can give you some grace period to reduce your debt. You can get information on low-rate, no-fee credit cards at http://www.cardtrak.com
4. Pay everything you can on the debt with the highest interest rate. Pay the minimum on everything else. (Do this if you can not consolidate everything to the lowest possible interest.)
5. Collect all the credit cards in the house. Lock the cards with a high interest rate someplace safe. These are not to be used while you are getting out of debt. It does not matter what wonderful perks are offered for using these cards. They are never worth the trouble and heartache they cause your family.
Paying It Down
6. Try to reduce your fixed expenses and use the difference saved each month to pay off your debt.Eliminating features on your phone or dropping channels from your cable plan will consistently save you money each month.
7. Make one-shot reductions in your debt. You can hold a yard sale and use all the proceeds to pay down your debt.Pay cash for everything and use all your change to pay down your debt. Take an evening job or use all of a spouse's income for the next few months to pay down your debt.
8. Take drastic measures until debt-free.No eating out. No movie rentals. No discretionary spending. Realize that some people live on half of what you make. They use 65% of that for their regular expenses, save 15%, put 10% away for large purchases, and give 10% away to charities. If they can do that, you can live without cable television and gym membership until you are out of debt.
This is strong medicine...but I offer this advice as the best kind of friend: one who speaks the truth, in love.
And of course, we invite you to leave a comment below with any “get out of debt” strategies that have been particularly helpful for you or a loved one not previously mentioned above.
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In addition to her thriving Houston Asset Protection and Houston Estate Planning law firm, Kimberly Hegwood of Hegwood & Associates proudly assist clients with Wills, Trusts, Pet Trusts, Special Needs Planning, Elder Law, Veterans Benefits and Probate/Estate Administration and bankruptcy in Houston, Texas as well as Webster, League City, Seabrook, Kemah, Pasadena, Friendswood, Dickinson, Bacliff, La Porte and Deer Park in Harris County and Galveston County.
To schedule your complimentary Lifetime Legacy Planning Session ($750 value) designed to meet your legal needs and determine just how well your family and assets are protected in Houston, Texas, please call (281) 218-0800. Simply mention our blog to ensure your fee for this session is waived.
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