No one likes to think about it, but it’s a fact of life. At some point, we will all need to have our financial affairs in order because everyone passes away. Making decisions early will allow you to have some semblance of security that your loved ones will be taken care of and will go through less grief when it comes to your financial affairs. Here are five things you can do to get your financial affairs in order.

First, you should really consider having life insurance especially if you have young kids or own property. If you think you may have estate taxes when you pass away or you will a lot of debt, it makes good sense to have life insurance. Purchase it as young as possible so that you will get better rates.

Second, you need to make certain that you have a financial power of attorney who can make decisions about your finances in case you become incapacitated. For instance, if you were to end up in an accident and then in a coma, you will need someone who can handle paying your bills, selling real estate if necessary and handling the other financial affairs that may come up.

Third, make sure that you protect your children as much as possible by naming a guardian who can take care of them and manage any money or property that you are leaving to them. A qualified estate planning attorney can help you with this.

Another important component of planning your financial affairs is covering any funeral expenses up front. You can set up a specific kind of trust that will allow you to deposit funds so that your affairs are taken care of without burdening your family or loved ones.

Finally, make sure that you store all of your documents in a place where your executor can find it. This includes things like your will, trust documents, stock certificates, real estate deeds, bank account information and life insurance information.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

As a small business owner, you understand how important each of your employees is to the success of your enterprise. And often, the most valuable, experienced employees are in their 40’s and 50’s – just the group that’s also likely to be part of the “sandwich generation.”

So, what happens when one of your employees has an elderly parent who falls ill, and needs substantial care and support? Caring for an elderly parent, particularly while running a household that includes children or teenagers, can be incredibly taxing. And while most employees who find themselves in this situation don’t leave their jobs, they often reach a point where something’s got to give – and often, this means relying on their employer to help out with flexible work arrangements or other forms of assistance.

You know that having your own, personal incapacity plan is important, and you know that it’s essential to have a succession plan in place when the time comes for you to exit your business. But have you thought about how you, as an employer, would deal with the life changes that your employees encounter when they become family caregivers?

The National Caregivers Library provides a wealth of information and resources geared toward employers planning for just this situation. It’s worth a look.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

When you’re choosing a financial planner, you have a lot of things to consider: what type of education and experience does your advisor have, what type of certification does he or she carry, and – far from the least of your concerns – how is your financial advisor paid?

Fee-Only Financial Planners

When a fee-only financial planner performs services for you, you are the one paying the bill. He doesn’t get a commission from a mutual fund company, a brokerage house, or any other source. You’ll generally pay for these services in one of the following ways:

• A flat fee, paid annually
• An hourly rate
• As a percentage of the investment funds managed on your behalf – this percentage is deducted from your account rather than you writing a check to your advisor

Fee-Based Financial Planners

Although the titles sound similar, a fee-based financial planner is not the same as a fee-only financial planner. Whereas you and only you are the one who pays a fee-only planner for the work he does on your behalf, a fee-based planner is allowed to be paid a fee by you, and also receive a commission from an insurance company, a mutual fund company, or a brokerage firm, based on the investments he sells.

Commission-Based Financial Planners

There’s another type of financial planner, as well – a commission-based broker, who is paid solely through commissions based on the investments he sells.

It’s important to understand which category your financial planner falls into, and to be aware of any potential conflicts of interest when it comes to investment products you’re being advised to buy.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

What do you plan to do with your tax refund this year? Here are three suggestions that could net you long-term benefits:

1. Reduce Your Debt: If you have credit card bills or other consumer debt hanging over your head, consider putting your tax refund to work by using it to pay down those debts. Not only will this reduce your current monthly bills and free up some cash, getting out of debt and staying out of debt can put you in a better position when the time comes to retire.
2. Pay Down Your Mortgage: There’s been a long-standing debate concerning whether it’s better to pay off your mortgage prior to retiring, or to invest money toward a retirement income that can help you cover your total living expenses – including your mortgage – once you leave the workforce. If your goal is to retire mortgage-free, your tax refund can be a great way to start chipping away at your outstanding loan balance.
3. 3.       Build Your IRA: If you don’t have high-interest debt to worry about, consider getting a jump on your 2011 IRA contribution. If you have a traditional IRA, your contribution will likely count as a deduction on next year’s tax return. With a Roth IRA, your contribution won’t qualify as a deduction, but it will be allowed to grow, tax-free until you’re ready to retire.

For more insights on saving for retirement – and for coordinating your retirement planning with your estate planning – you can speak to your estate planning attorney.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

A lot of estate planning advice focuses on the steps you can take to protect and provide for your spouse and children, while minimizing your tax burden. But what about taking care of your mom and dad? Many adult children are in a better financial position than their elderly parents, and want to know what they can do to share the fruits of their labor. Here are just a few suggestions:

• Give Gifts: Under the current federal gift tax law, you can give up to $13,000 in money or property  to an individual recipient annually, without triggering the need to file a gift tax return, and without dipping into your lifetime gift tax exemption ($5 million for the years 2011 and 2012). If you’re married, you and your spouse can combine your annual exclusions and give $26,000 to each of your parents.
• Pay Medical Bills: If your parents are unwilling to accept cash from you,  it might be helpful to pay their medical bills for them. As long as you make payments directly to the doctor or medical facility, the medical bills you cover on your parents’ behalf are not subject to gift tax. Plus, if the medical bills you pay on your parents’ behalf exceed 7.5% of your Adjusted Gross Income, you can claim those expenses as an income tax deduction. Of course, the IRS determines what constitutes an acceptable medical expense, and you’ll want to check with an estate planning attorney or your financial advisor to make sure you’re following the rules.
• Establish a Trust: There’s also the option of establishing an irrevocable trust, and naming your parents as beneficiaries.  You can serve as trustee, and use the trust to provide your parents with financial assistance, or even provide a home for them.

Your estate planning attorney can help you figure out the best strategies for providing your mom and dad with financial help while minimizing your tax burden.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

We all know the power of compound interest, and the Rule of 72 is a simple and elegant mathematical expression of that concept. It’s also a quick and easy way to figure out how long it will take an investment to double, and the only information you need to make the calculation is a fixed annual rate of return for the investment in question.

How does it work? You divide 72 by the rate of return, and you’ll get a rough estimate of the number of years it will take for your money to double. So, for example, $5,000 invested at 4% would take 18 years (72/4 =18) to become $10,000.

The rule works “in reverse” as well.  If you have a certain time period over which you’d like to double your investment, you can use the rule to determine what rate of return you’ll need. For example, if you wanted that same $5,000 to double within a 6 year time period, you’d divide 72 by 6, revealing the need to find an investment with a 12% annual rate of return.

A word of caution: the Rule only provides a rough estimate, and it’s more accurate when it’s applied to lower interest rates. And, of course, it’s best used for quick mental math, and not to guide any major financial decision-making.

You can find a Rule of 72 calculator, plus a calculator that estimates other growth factors, here.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Knowing your net worth is valuable not only for purposes of financial planning – it can help you track your progress from year to year and set goals for your family’s financial growth and security; but also for estate planning purposes – especially for letting you know whether you need to engage in estate tax planning.

If you don’t already know your net worth, it’s not hard to determine. All it takes is a little bit of time, a list of your debts and assets, and a calculator.

Step One: Add Up Your Assets

The first step is to list all of your assets. Start with your home and your vehicles, then add bank account balances, CD’s, stocks and bonds, and retirement accounts. Also, be sure to include valuable personal property, like jewelry, antique furniture, artwork, and gun collections. Next to each asset, list its current value. Once you have everything listed, total the values.

Step Two: Calculate Your Liabilities

The next step is to list all of your debts. These include your credit card balances, your mortgage payoff, the payoff for your car loans, and student debt. Don’t forget signature loans and other personal debt. Add up all of your debts, and make a note of the grand total.

Step Three: Do The Math

Finally, subtract the total of your liabilities from the total value of your assets. This number is your approximate net worth.

You’ll want to repeat this process on an annual basis, to keep tabs on your financial picture. And hopefully, to watch your net worth grow!

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

Of all the investment tools in our country, annuities are one of the most often misunderstood. And because there are different types of annuities – fixed vs. variable for example – the confusion grows even more.

But before you shy away from an annuity, know this: there are many benefits to this type of investing vehicle. Let’s look at some of the more common misconceptions about the fixed annuity.

• Fixed annuities are not a good investment if you are close to retirement. On the contrary, a fixed annuity is a good investment no matter what your age; it is a guaranteed income and is tax deferred.
• Your money won’t pass to your family. This is also untrue, the money does pass to a beneficiary, plus it will not have to go through probate.
• Fixed annuities have large penalties. This is partially true, but it is like any other type of investment that has penalties for breaking an agreement.
• Agents make large commissions from your investment. The agents do make money, but this is from the insurance company and not taken from your investment. It is like a travel agent that is paid from the tour company, it doesn’t cost you a penny more.
• Fixed annuities are an unsafe investment. In reality fixed annuities are one of the safest investments you can make; insurance companies guarantee them.
• Your money will be tied up and inaccessible. This is also not true. You can have access to your money anytime, and there will be no penalties as long as you follow the contract.

Don’t be scared off by horror stories about fixed annuities; take some time to research the subject and come to your own conclusions. If you do decide to purchase an annuity, make sure that you completely understand how this investment works, and then decide if it is a good choice for you.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

When you’re building your investment portfolio, you should always be sure to have some diversity in your accounts. This means spreading your savings over different types of accounts in a variety of sectors and with various levels of risk.

One of these investment options is the U.S. Savings Bond. Is this a good investment for you? Let’s look at a couple of the benefits to find out.

Savings bonds are relatively low-risk because they’re back by the U.S. Government, meaning that Uncle Sam is guaranteeing your investment plus your interest. If you’re looking for a low-risk solution to balance out your portfolio, the savings bond might be just the thing.

That said, because savings bonds are low-risk, they’re also low return so if you’re in need of a quick fix, this might not be the best option for you. On the other hand, if you’re content to just let your money sit and grow, a savings bond would work well. These bonds have a minimum five year investment period – any withdrawals before that will cost you a little interest.

Of course, you should always consult with a qualified financial planner before making any investment decisions. A good financial advisor can help you build an investment portfolio that meets your individual needs.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.

If you have a retirement account, like a 401(k) or a traditional IRA, then you need to know about Required Minimum Distributions (RMD’s). Generally speaking, starting when you reach age 70 ½ (or when you retire, if that’s later), you’ll have to withdraw a certain amount each year from your retirement account.

How much do you have to withdraw? This depends on the balance in your account and your life expectancy. Each year, you take the balance of your account on December 31^st of the prior year, and multiply it by a life expectancy factor provided by the IRS. The result is the amount you have to withdraw from your account by the end of the year.

What if you don’t take a Required Minimum Distribution? If you don’t take the full amount of your RMD, or if you miss the deadline, then you’ll pay tax at a rate of 50% on the amount of your RMD left in your retirement account . Of course, you can always withdraw more than your Required Minimum Distribution.

What about account beneficiaries? If you die before you have to start taking RMD’s, then different rules will apply to the beneficiaries of your account. They’ll have to withdraw all the money in the account either: within 5 years of your death, or over the expected lifetime of the beneficiary, starting no later than one year after your death.

What accounts are not subject to RMD rules? While traditional IRA’s are subject to RMD rules, there’s no Required Minimum Distribution for a Roth IRA, as long as the owner of the account is alive.

The Mendel Law Firm, L.P. is a member of the American Academy of Estate Planning Attorneys.