Personal Financial Review · or, in other words, to “stage” your home for sale. Exterior Impressions The very first image that prospective buyers see is your home’s exterior,

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IN ORDERGetting Your Financial House

Volume 21, Issue 11

P e r s o n a l F i n a n c i a l R e v i e w

M any people may find the no- tion of creating and adhering to a financial plan about as appeal- ing as doing housework. As everyone knows, putting off chores can lead to further procrastination. And, the longer you let things go, the more difficult it is to get started. But event- ually, the time comes when you just have to buckle down and get to work.

Personal finances are a lot like household chores. If you don’t pay much attention to how you are spending your money, it may be difficult to get a foothold on where you stand financially. If you haven’t taken a look at your overall financ-es lately, now may be a good time to “tidy” things up a bit. Here are some tips to help you straighten up your financial house:

Organize the ground floor. Many of us would have some difficulty in locating all our important records, documents, and financial statements. Therefore, the first step to getting your financial house in order is to compile a list of your important paperwork. And, more importantly, move that paperwork to a central location.

Establish a regular maintenance program. If you haven’t already done so, set up a budget. Make paying yourself first a priority by putting a set amount into your savings and investments every month. Analyze your current spending habits and plan ahead for large bills and expenses.

Consider making some renova-tions. You may be at a stage of life

that requires different investment tactics. However, before you make any financial decisions, be sure to consult a qualified financial professional.

Review your life insurance coverage. The plan you established years ago may need updating to meet your current needs. There are many factors to look at, including changes in your family status, the arrival of a new baby, college funding requirements, retirement planning, and changes in your employment status. As you conduct your review, remember to include both personally-owned and employer-provided policies.

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WHO DECIDES HOW YOUR CHARITABLE $$ WILL BE SPENT?

It’s Your Money...

W hen you give $100 to your favorite charity, you are probably not overly concerned about how your donation is spent, as long as it advances the mission of the charity. On the other hand, if you are making a large dona-tion, it is more likely that you have specific goals in mind, whether to fund a particular program or sup-port another endeavor. This desire to specify exactly where your dona-tion dollars will go may jeopardize your ability to claim an income tax deduction. Therefore, proper plan-ning is essential.

If you want more control over how your donation is used, consider either donor advised funds or private foundations. Let’s take a closer look at these two options.

Donor Advised FundsMany larger public charities, partic- ularly those that support a variety of different charitable activities and organizations, offer donor advised funds. This type of charitable giving vehicle is based upon an agreement between the donor and the charity stating that the charity will consid-er the donor’s wishes with respect to the ultimate use of the donated funds. However, the agreement is non-binding, and the charity will exercise final control over the disposition of the funds, consistent with the organization’s mission.

Private FoundationsA private foundation is a nonprofit organization that typically has been created via a single donation from an individual or a business, and whose funds and programs are managed by its own trustees or directors. Through the choice of

directors or trustees, the donor has greater control over the specific use of funds, rather than relying on a public charity.

Private foundations generally fit into two categories: private operating foundations and private non-oper-ating foundations. Private operating foundations actually run the chari-table activities or organizations they fund, while private non-operating foundations simply disburse funds to other charitable organizations. A private foundation can also serve as a “family enterprise,” whereby mem-bers of the family can work together in supporting charitable causes over the long term.

However, the benefit of increased donor control through the use of a private foundation may come at a price. The following rules are designed to ensure that private foundations serve charitable interests and not private interests:

• Privatefoundationsaregenerallyrequired to pay out for charitable causes at least 5% of their asset value annually or be subject to a penalty.

• Substantialpenaltiesareimposed on transactions between the foundation and its donors or managers, although payment of reasonable salaries is permitted.

• Privatefoundationsaregenerally prohibited from benefiting a private individual.

• Aprivatefoundationisresponsiblefor ensuring that the funds it distributes to a private charity are expended properly. (Schools, hos-pitals, and churches are examples of public charities, to which this does not apply.)

• Anexcisetaxofupto2%ofinvestment income is imposed annually on investments.

• Therearerestrictionsonthetypes of investments made by private foundations.

The deductibility of contributions to private foundations is more limited than for contributions to public charities. Depending upon whether cash or property is being donated, deductions to private foundations arelimitedto20%to30%ofadjustedgross income, whereas deductions to public charities have higher limitsof30%to50%.Finally,theadministrative and legal costs of creating and managing a private foundation need to be considered.

Depending on the circumstances, a private foundation may allow for greater control over how your charitable donation is spent. It can be highly rewarding to be involved in charitable endeavors, however, be sure to consult your tax and legal professionals for specific guidance. 20/20

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WHO DECIDES HOW YOUR CHARITABLE $$ WILL BE SPENT?

STAGING YOUR HOME FOR SALEThe Blank Canvas:

I n life and in home sales, first impressions are everything. Pro-spective buyers may look at many homes before deciding which one to buy. Often, the first viewing fac-tors into whether a home receives a second look. In preparation for the prospective buyers who will look at your home, it’s important to put your property’s best face forward with presale home improvements or, in other words, to “stage” your home for sale.

Exterior ImpressionsThe very first image that prospective buyers see is your home’s exterior, so pay attention to the landscaping. It may be worthwhile to mulch and plant a few new bushes or flowers in your yard to spruce it up. Keep in mind that as a seller, you want to show prospective buyers the possibil- ities your home offers. You don’t have to plant a lavish new garden, but some simple, attractive landscaping can allow potential buyers to imag- ine what they could put in the out- door spaces, too. Also consider hanging a seasonal wreath on your door and filling planters for your

porches. A little goes a long way in beautifying the exterior of your home, so be sure not to go overboard.

You should also determine whether the exterior of your house needs to be repainted in order to sell it. A house that has peeling paint and bare wood spots may present as a home that has been neglected, which in turn could lead buyers to wonder what else hasn’t been kept up. Then, calculate the cost of painting the house. Are you able to paint it yourself? Or, do you need to hire a crew to do it? Perhaps you don’t need to repaint the whole building, but a fresh coat on the front door could accent your home’s attrac-tiveness just enough to create a favorable first impression.

Interior ImpressionsFor the interior, cleanliness is es-sential when it comes to showing your home to prospective buyers. While buyers may realize that some properties are “fixer-uppers” that will require some elbow grease, a cluttered, unkempt house tends to discourage buyers from even con-sidering the property. After seeing

any number of prospective homes, buyers are more likely to eliminate messy or unclean homes up for sale.

In addition to general housekeep-ing, a new coat of paint in each room can also help freshen up your home. While you may prefer walls in espresso brown or deep indigo, your tastes may not be shared by the prospective buyers. In staging your home, you want to offer a blank canvas to help buyers imag-ine possibilities. This means paint-ing the interior in neutral colors. It also means de-accessorizing your home, especially if your personal taste runs toward the eclectic. Keep your accessories simple, spare, and tasteful so buyers can envision a living space that matches their own pictures, lamps, and furniture.

The most common mistake prospec-tive sellers make is to showcase their personal decorating tastes and styles to impress potential buy-ers. Instead, when staging your home for sale, think Thoreau and “simplify, simplify” by offering the prospective buyer a blank canvas to draw on. 20/20

WHAT'S THE VALUE OF YOUR ESTATE?Cash, Castles, Future Compensation–

A lthough you may not own a castle, do you know which of your “treasures” will be included in your estate? Federal estate taxes can take a chunk out of the assets you hope to leave your heirs—up to 40% in2015.Federalestatetaxesaregenerally due if the sum of your net taxable estate at your death exceeds your individual estate tax exemption ($5.43millionin2015).

Regulations relating to the taxation of property owned at death con-tain a catch-all definition stating that the “gross estate of a decedent who was a citizen or resident of the United States at the time of his death includes the value of all property—whether real or personal, tangible or intangible, and wher-ever situated—beneficially owned by the decedent at the time of his death.” What does this mean?

The first step in understanding the potential implications of the Federal estate tax is to understand some of the major items that may or may not comprise your estate:

Personal assets. Many people are aware that their personal property, savings, real estate, and retirement plans, as well as the proceeds of any life insurance policies they own, are included in their estates.

The information contained in this newsletter is for general use and it is not intended to cover all aspects of a particular matter. While we believe all information to be reliable and accurate, it is im-portant to remember individual situations may be entirely different. Therefore, information should be relied upon only when coordinated with pro-fessional tax and financial advice. The publisher is not engaged in rendering legal, accounting, or financial advice. Neither the information pre-sented nor any opinion expressed constitutes a representation by us or a solicitation of the purchase or sale of any securities. This news- letter is written and published by Liberty Pub- lishing, Inc., Beverly, MA, COPYRIGHT 2015.

The information contained in this newsletter is not written or intended as tax, legal, or financial advice and may not be relied on for purposes of avoiding any Federal tax penalties. Entities or per- sons distributing this information are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel.

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continued from page oneGETTING YOUR FINANCIAL HOUSE IN ORDER

Refurnish your credit “room.” Look at the possibility of refinancing your mortgage. There may be options available that may help you save on your interest payments in the long run, or help reduce your tax liability. However, you should always seek guidance from your tax professional before you make an important decision to refinance.

Transfer credit card balances to lower rate alternatives. Read all credit terms carefully, and remem-ber that credit card finance charges are not deductible on your taxes. Your best move might be to consider paying off your credit card debt, and using the money you save on finance charges to begin a regular investment program.

Get on the retirement savings track. Many employers offer a

sponsored retirement plan, such as a 401(k), and may also offer a com-pany match on employee contribu-tions to further enhance the value of a retirement funding vehicle. In today’s changing retirement land-scape, this may be an opportunity to reduce your taxable income while saving for retirement.

Dust off your tax records. No mat-ter what time of year, it’s always helpful to your financial strategy to review your taxes. You may want to speak with your tax professional re-garding changes you need to make to brighten your tax picture for the current tax year.

Protect your home. Update your homeowners policy and make a video of your home, both inside and out, as well as your valuables. This helps to ensure that your possessions are

well documented in the unfortunate case of a loss.

Take a good look at your policy, as well as your automobile insurance policy. There may be adjustments you can make, including increasing deductibles to decrease your out-of- pocket expenses without damaging your insurance position.

When all is said and done, it’s always more relaxing to live in a clean and orderly home. By taking these steps to get your financial house in order, you may find that your spruced-up environment be-comes an inviting, enjoyable corner of your life! 20/20

continued from page threeCASH, CASTLES, FUTURE COMPENSATION– WHAT'S THE VALUE OF YOUR ESTATE?

Rights to future income. What may be less well known is that rights to future income, such as rights to payments under a deferred compensation agreement or part-nership income continuation plan, may be includable in your estate. These rights are commonly referred to as “income in respect of a dece-dent (IRD)” and may be includable at their present computed value.

Business interests. Likewise, interests in any business you own at death, whether as a proprietor, a partner, or a corporate shareholder, may be includable in your gross estate.

Social Security benefits. The value of Social Security survivor

benefits received as either a lump sum or a monthly annuity is not includable in your gross estate.

Stay Current Estate planning can help minimize estate taxes and maximize the amount you transfer to your heirs. It is important to accurately item-ize an inventory of your estate to project your potential liabilities, as well as to perform periodic reviews to make sure your plan is up to date. By developing strategies early on, you may be able to make the most of your tax-saving opportuni-ties and make sure that your assets are distributed according to your wishes. 20/20