Every new year, it is a great idea to take inventory of the t0-dos for the whole year to get your legal and financial affairs in order, especially with tax season soon creeping up. If you’re wondering what you should take care of as part of this annual review, here are some tips:
- Update your Will & Estate Plan. Have there been any new children, births, deaths, separations, divorces, marriages, remarriages, or children turning 18 years of age in your family? If yes, you should update your Will & Estate Plan. If you don’t have one, now is a good time to put some thought into estate planning to protect your family and loved ones and plan for the future.
- Donating to any charities? Charitable contributions can help reduce your tax obligations in a pinch. If you have donated to any charities, be sure you have obtained receipts for your donations. To be tax-deductible, your charity must be a 501(c)(3) tax-exempt charity, and will provide you with a receipt for your tax records.
- Check Your Flexible Spending Account. Some flexible spending accounts are “use it or lose it” type accounts. Although employers can now allow plan participants to carry over up to $500 in unused funds, thanks to a recent change by the U.S. Treasury Department, you should make sure your balance does not exceed that – otherwise, you might lose some money. Check how much you actually spent in 2014 for medical expense, and if you are devoting too much or too little money to your FSA account, you should update it so you are not giving away any of your hard-earned money.
- Check Beneficiaries on your Financial Accounts. In a few weeks, you will receive tax statements for any investment accounts or other accounts that earned income in 2014. When reviewing your investments and bank records, make sure that your beneficiary designations on your 401(k), pension, life insurance, and other financial accounts are correct. These types of accounts generally pass directly to your heirs and do not became a part of your probate estate, which can provide significant tax advantages for your heirs. This means that they are not included in your estate plans, and go directly to your listed heirs.
- Check your Insurance. Do you have any children or family members now driving, or driving different cars than what was declared on your insurance policy? Insurance companies are notorious for denying coverage when a driver is found to be driving a family car in a manner different than what was listed on the insurance application. Do yourself a favor and take a second look at your insurance declarations page to make sure that all drivers driving family cars are listed, and that you have sufficient uninsured motorists / underinsured motorists (UM/UIM) coverage. UM/UIM coverage can be a lifesaver if a family member encounters a traffic problem with a poorly-insured at-fault driver.
The beginning of the new year can mark a time of transition, change, and often, a rush from all of the work piling up over the holidays. Before tax season starts, take a look at these important legal and financial matters and you could save yourself a headache over the next year.