Recently in financial planning Category

OK, tax day is over - you can breathe a sigh of relief.

But wait - don't relax yet. April is Financial Literacy month - just how savvy are you about your finances? You can test your knowledge with these financial literacy quizzes and see how you stack up compared to based on high-school seniors across the country. The quizzes are part of the Jump$tart
Coalition for Personal Financial Literacy, a nonprofit dedicated to advancing financial literacy among students in pre-kindergarten through college.

If your scores are embarrassing, don't despair. There are some excellent consumer tools to help you get your financial house in order. Here are a few:

• As part of Financial Literacy Month, the nonprofit Consumer Federation of America would like to help motivate you to save. To sweeten the pot, they are giving away $500 to help one person reach their savings goal. Pledge to save by signing up to receive periodic text tips on saving, and you might win. You must sign up between April 1 and April 30, 2013 and you must be 18 years of age or older to win. Plus, standard text messaging rates might apply, depending on your plan.

• 30 Steps to Financial Wellness offers 30 days of tips and tools to help you get your financial house in order and improve your overall financial position. Don't miss the Tools for Success.

• MyMoney.gov - a resource brought to you by 20 agencies and bureaus of the U.S. Federal government that work on improving financial literacy and education. It includes great tools, such as Budgeting Worksheets, Calculators, and Checklists.

• 360 Days of Financial Literacy - tools from the American Institute of CPAs.

We reviewed past posts to select some good advice that will help to start your new year on the right footing.

1. Celebrate the New Year safely

2. Update your beneficiaries

3. Insure those valuables

4. Create a Home Inventory - here are a few home inventory apps

5. Review the year's life changes that should trigger a call to your insurance agent

6. Quit smoking & save on insurance

7. Factor in any losses to your tax time prep

8. Prepare for emergencies

9. Take 10 minutes to watch 23 and 1/2 hours:

Bonus Tip
The 25 Documents You Need Before You Die

Everyone's favorite time of year, tax deadline, is rapidly approaching. While there are still a few weeks left before it's time to get out the balloons and party hats, it's always a good idea to be over rather than under prepared for your yearly taxes. As you're thinking about the past year, make sure to consider any property losses you may have incurred in 2011. Many people up and down the East Coast suffered losses due to Hurricane Irene, which was by most estimates one of the top ten most destructive and deadly hurricanes to hit the United States since 1980. Irene was a tragedy, but the silver lining is that according to the IRS, losses may well be deductible.

Keeping the terminology clear may help you understand which losses are deductible and which are not. Remember, a casualty occurs when your property is damaged as a result of a disaster such as a storm, fire, car accident or similar event. A theft occurs when somebody steals your property. A loss on deposits occurs when your financial institution becomes insolvent or bankrupt. Any losses incurred as a result of hurricane damage are considered casualties, particularly since Hurricane Irene was one of the many federally recognized disasters in 2011.

However, while losses are deductible, it's important to know that if you have insurance, you must have filed a timely insurance claim. Any reimbursement you received from insurance must be taken into account and subtracted when figuring your loss. This includes any expected reimbursement even if you have not yet received it. This booklet on Casualties, Disasters & Theft from the IRS (PDF) will help you decide if the casualty, loss and theft deductions apply to you.

Taxes are never fun, but being prepared for all eventualities helps whether the disaster is a hurricane or a Form 1040. Make sure your accountant is aware of any losses you may have suffered in 2011.

There's a total of more than $32 billion in the nation's unclaimed property pools representing more than 117 million accounts. It's mostly money or assets that were either forgotten or abandoned - and in many cases, the abandonment occurred when the account holder died and nobody else knew the account(s) existed. Don't let your property become part of that pot!

We've previously talked about the importance of updating your beneficiaries on insurance polices and other financial records. Just like changing batteries in your smoke detector and getting your car inspected, you should set a routine time to do this annually - failing to do so might leave your loved ones wrangling with court proceedings - or even totally unprotected. The importance of planning cannot be overemphasized. Not to be grim, but you simply never know when your time will be up. For a statistical assessment, see our prior post What are the Odds where we have a lot of risk tools that you can play with. They range from actuarial tables to to calculators for finding out your relative risk of dying in the next year or being attacked by a shark.

OK, you get the point. Planning is important. This past week, the Wall St. Journal featured an excellent and very helpful article in their finance section about The 25 Documents You Need Before You Die - alternately titled as "Designing your death dossier," which makes it sound pretty fancy. The article makes the point that it is not simply enough to ensure that your policies are updated - it's also critical that somebody in your family knows what and where all your important documents are.

We counted more than 25 important documents referenced in the article - but it is unlikely that all will be relevant to your situation. Nevertheless, it's a great reference article to bookmark and keep as a checklist for your annual planning.

Oh, and about that unclaimed $32 billion, if you think any of it might rightfully belong to you, here's a good place to check: The National Association of Unclaimed Property Administrators will let you conduct a free search.

It's nice to have a gourmet meal prepared by a celebrity chef - but $70,000 is a little too much to pay for that privilege. That's the amount of money that one elderly couple lost in an unscrupulous investment scheme. They, along with about 90 other investors who "were elderly and of limited means," were cajoled into high risk investment schemes over fancy lunches and dinners.

Milt Freudenheim discusses these free-lunch scams in his New York Times article Bad Investment Advice Can Turn a Free Meal Costly.

"Financial fraud is the No. 1 consumer protection issue for AARP," said Andres Castillo, who heads an AARP program that monitors free lunch seminars and similar presentations. In an AARP survey last year of people 55 and older, 9 percent said they had attended a free financial seminar within the last three years. That translates into approximately 5.9 million people, the group said.

Freudenheim also offers consumer resources, some of which we're recommended previously:

• FINRA background Check - a free tool to help investors research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers
• The U.S. Securities & Exchange Commission's investor education site - check out brokers and investment advisers
• North American Securities Administrators Association - use the map to find your local regulator. The site has other good investor advice, as well.

Given that it's Life Insurance Awareness Month, we thought we might offer a few tools for you to assess your risk of imminent mortality. We've mixed the serious with the silly to lighten things up a bit.

Death Risk Rankings is an interactive tool from CarnegieMellon that calculates your risk of dying in the next year and allows you to compare that risk to others in the world.

Heart Disease Risk Calculator - estimate your chance of a cardiac event, dying from heart disease, and your overall chance of dying in the next 10 years.

Dead at your age - enter your birthday and find out what celebrities and famous people you have outlived.

Are you likely to die of a shark attack? Compare the relative risk of shark attacks to humans to various other risks.

Life Expectancy Table - find your age and your sex to learn the additional number of years you may expect to live. A footnote says that one-half of individuals can expect to live beyond their life expectancy and one-half will not live to that age.

The Death Clock bills itself as "the Internet's friendly reminder that life is slipping away... second by second." Enter your date of birth, sex, bmi and smoking status. You can choose to your results on a scale ranging from "sadistic" to "optimistic" - or just plain "normal."

Would you like to be buried in your favorite car? Or perhaps you'd prefer to be preserved as a mummy sitting upright and kept on display at your alma mater? And how would you like your assets to be dispersed? Would you like to leave your life's fortune to a precious pooch or to have it divvied up and doled out to strangers? Or perhaps after you've passed, you'd like to have a single red rose delivered daily to your surviving spouse, the way Jack Benny did? All these odd will requests and many others have been stipulated in wills at one time or another.

Whether your post-mortem wishes are highly exotic or purely pedestrian, they aren't likely to happen at all unless you take proactive steps to ensure that they do - and that requires filing a will and keeping it updated. Making a will is an important part of the financial planning process.

"Dying intestate" is the common term for dying without a will. When that happens, decisions about the disposition of your assets default to the applicable state law, which may or may not be in accordance with your preferences. Dying intestate might also result in a dispute among potential your heirs or a delay in assets being dispersed to your heirs. The CCH Financial Planning Toolkit adds some important considerations:

"The bad thing about dying intestate (other than dying, of course) is that a state's default rules may not go far enough to meet a deceased's distribution wishes. For example, although a surviving spouse is generally first in line to inherit, the spouse may end up having to share the estate with other relatives of the deceased. Also, if a person is not on the list of potential heirs, then he or she is out of luck (which may result in excluding a "life partner," lifelong friend, or favorite charity). The final indignity is that, if there are no relatives identified during probate, the state takes the assets the deceased spent a lifetime acquiring."

You can learn what is likely to happen to your assets should you die without a will by checking this map of intestate succession laws for all 50 states.

It's important to note that a will is not the be all and end all for ensuring the dispersal of your assets according to your wishes. The distribution of many of your financial assets - such as life insurance policies or 401K and IRA accounts - would be governed by who you named as a beneficiary. It's extremely important for you to keep your beneficiaries up to date because life circumstances change. You may or may not be pleased if your ex-spouse inherits your life insurance policy, but if you haven't changed the designated beneficiary, that could happen.