by Eric Heckman

by Eric Heckman

Have you thought about your plan to pass on your legacy to your children, grandchildren and beyond? Putting a legacy plan together requires much more than guesswork and simply jotting down a few notes in a journal expressing our wishes. For many, passing along a legacy involves heirlooms, antiques, traditions, morals and values. It also involves passing along your wealth.

There are many errors people make when it comes to passing along their legacy. If you’re thinking of passing on investments to your heirs, you need to be aware there is a possibility that those investments could be taxed.

Also, passing on your legacy is different from multiplying your legacy. That involves doubling the value of your legacy, protecting it from creditors and growing it without being subject to estate taxes.

Here are five steps to an effective plan.

1. Goal Evaluation – The first step is determining who you want to inherit your assets and how you want your property distributed. Do you want your money to go to your children’s education or to charity? Who would be a good candidate to serve as your personal representative and as a guardian of your children, if they are still minors at the time of your death? You can start this process by drafting a Personal Legacy Statement, which is a letter from you to your loved ones, sharing with them your love, your values and your life’s experiences.

2. Estate Inventory – Your next step is to inventory all of your assets. Once you create a listing of all your holdings, you’ll want to note how they are owned and place a fair market value on each asset. Lastly, you’ll subtract the sum of your debts from the value of your assets to determine your gross estate.

3. Will and/or Trust Preparation – You need to consider the tax ramifications of your plan and how to minimize liability. In addition, you need to know how to avoid excess administrative fees. Then you must determine the best vehicles to carry out your plan. Your will, or a trust, is the cornerstone of your legacy plan and will determine who will receive your assets and how those assets will be distributed.

4. Family Gifts – Lifetime gifts to your family can reduce your taxable estate and provide personal satisfaction. An individual may give up to $11,000 per person, per year, without reporting the gift to the IRS. If a couple makes a gift, the amount doubles to $22,000 per recipient.

5. Charitable Giving – You can make tax-free contributions to a qualified charity that may reduce estate taxes and result in a current income tax deduction.

There’s nothing that can be done after you’re gone to relieve your estate from taxes or to carry out your specific wishes. You’ll want to work with a trusted professional to make sure what you leave behind gets to your heirs the way you want it to.

by Eric Heckman

If you’re like most people, you’ve worked hard to accumulate assets, and expect to live your retirement years in comfort while leaving the balance of your estate to your heirs. If this is true, then legacy planning is vital for you.

When many first consider legacy planning, they immediately think of preparing a last will and testament. While wills have their advantages, they also have some drawbacks, such as probate. The probate process includes proving the authenticity of a person’s will, appointing an executor, identifying and inventorying a person’s property, paying debts and taxes, identifying heirs and distributing property.

There are alternatives to probate known as will substitutes. If you would rather be the judge of what happens to your estate, read on about substitutes and how they can avoid probate.

1. Assets held in a revocable living trust. The property you transfer into the trust passes directly to the trust beneficiaries after you die, without court involvement.

2. Balances of retirement accounts. When you open a retirement account, such as a traditional or Roth IRA, you are asked to name a beneficiary. Your beneficiary needs to provide identification and proof of your death to claim the funds.

3. Balances of tax-deferred annuities. The death benefit of an annuity passes the account value to a named beneficiary. Although the death benefit avoids probate, the value of the annuity is generally included in your estate for estate tax valuation purposes. Your named beneficiaries can choose to receive the funds as monthly income or a lump-sum payment and may be subject to ordinary income tax on the earnings portion of the proceeds.

4. Proceeds of an insurance policy where beneficiaries are named other than your estate. A policy owner contracts with the life insurance company to pay out a death benefit to a designated beneficiary.

5. Balances of payable-on-death bank accounts. Your financial institution will provide you with a form to name who you want to inherit the account(s). When you die, your beneficiary will need to provide identification and proof of your death.

6. Securities registered as transfer-on-death. Most states have adopted the Uniform Transfer-on-Death Security Registration Act that allows you to have someone inherit your stocks, bonds or brokerage accounts without probate.

7. Assets held jointly with your surviving spouse or with another person as joint tenants with a right of survivorship. Through right of survivorship, the surviving joint tenant immediately succeeds full ownership of the property upon the death of the other joint tenant.

Your loved ones will have enough to deal with emotionally and it’s wise to do what you can to make the inheritance process as simple and painless as possible.

About Eric Heckman
Eric Heckman is president of Heckman Financial & Ins. Services, Inc. Eric is a CFP®, ChFC, CLU brings a wealth of knowledge and over 13 years of experience to the field of financial planning. You can contact him at (408) 297-9800.

by Eric Heckman

Identity theft, including the misuse of Social Security numbers, names, driver’s licenses, bank accounts, PIN numbers and credit/debit card numbers, is one of the fastest-growing crimes for all Americans, young or old. The Federal Trade Commission (FTC) received 246,570 identity theft complaints just last year. According to an FTC survey, an average of one in every 30 Americans became a victim of identity theft in a one year period, beginning in spring 2002.

The total cost of this crime approaches $50 billion per year, with the average loss from the misuse of a victim’s personal information being $4,800, according to the FTC. It can take years of frustrating effort to set the record straight. The potential toll on retirees with vulnerable income sources can be severe.

Arizona, Nevada, California and Texas had the highest rates of identity theft in 2004. Arizona had 142.5 fraud cases per 100,000 people. Regardless of where you live, take precautions. It happens everywhere. With just your name, Social Security number and birthday, identity thieves can clean out your bank accounts, apply for health insurance, get a driver’s license in your name, open credit accounts or go on a shopping spree using your existing credit cards.

So what can you do? Identity theft is still primarily a crime of opportunity, so make yourself a hard target. Protect yourself by taking preventive measures to block the theft of your identity and your financial security. Here are some things you can do:

1. Guard your Social Security number. Don’t give it out, don’t carry it in your wallet or purse and definitely do not have it printed on your checks. If your number is stolen, contact the Social Security Administration fraud line (800-269-0271) immediately to place a fraud alert on your name and Social Security number.

2. Buy a paper shredder. Don’t just throw your personal information into the trash where a thief can retrieve it. Shred all documents that have your name, Social Security number, birthday or other personal information, including bank statements, insurance forms and even those annoying credit card offers that come in the mail.

3. If you carry a wallet or purse, photocopy the contents. Copy both sides of each license, credit card, insurance card, etc. Put the photocopy away in a safe place. If your wallet should be stolen, you will have a record of everything that was in it, including account numbers and the phone numbers needed to call and cancel them.

4. Immediately cancel any credit cards that are lost or stolen. Most importantly, call the three national credit-reporting organizations, Equifax (800-525-6285), Experian (888-397-3742) and TransUnion (800-680-7289), as well as the Social Security fraud line. The alert will indicate to any company that checks your credit that your information was stolen. Also, file a police report immediately in the jurisdiction where the theft or loss occurred. This will prove your diligence to the credit card company.

5. Check your credit report regularly. Review your credit report at least once a year. Be alert for credit activity that you have not authorized. False transactions can be disputed and removed.

According to the FTC, identity theft is significantly smaller if the misuse of personal information is discovered quickly. It will be even less of a hassle if you take the necessary steps to guard your identity from thieves. If you believe your identity has been stolen, report the crime to authorities and the FTC (1-877-IDTHEFT). It can help save what you work your whole life for – your assets.

About Eric Heckman
Eric Heckman is president of Heckman Financial & Ins. Services, Inc. Eric is a CFP®, ChFC, CLU brings a wealth of knowledge and over 13 years of experience to the field of financial planning. Contact him at (408) 297-9800.