Estate planning is an essential part of anyone’s personal finances — no matter how wealthy you are. But even for those who have been diligent about planning for their spouses and heirs, this is a year when it may make particular sense to re-examine your strategy.

With the nonstop flurry of legislative activity in Washington, Congress has still not acted on the phase-out this year of the estate tax. If nothing is done this year, the heirs of any person who dies in 2010 won’t be liable for any federal estate taxes, no matter how big the estate. (The carryover basis rules for 2010, however, may give rise to additional planning considerations.)

Yet the potential bad news will come next year when the estate tax is scheduled to return with a vengeance on all estates over $1 million in size (the threshold was $3.5 million for individuals in 2009) with a potential return to a 55 percent top tax rate..

It’s worth a trip to your estate planner and your financial planner to help ensure your paperwork is in order and the previous plans you’ve made won’t cause problems.

Family trusts – also called bypass or credit shelter trusts – are of particular concern. These trusts work this way: Individuals add what’s known as a formula clause to their will or revocable trust that distributes up to the maximum amount of assets that can pass free of estate tax to the trust if the individual dies before their spouse. The creation of the trust helps ensure that once your spouse dies, neither these assets nor any appreciation on them will be subject to estate tax. But if you die this year, a failure to address the formula clause could potentially cause you to unintentionally disinherit your spouse.

The bottom line: It’s worth making a call to a financial planner and your estate attorney to make sure your plans are still in order.

And what if you’ve never made an estate plan? Even if you’re not particularly wealthy, you definitely need one. Here are some specific things you should do and make sure you have in place:

Make a financial plan: You can’t have a very effective estate plan without a full grip on your finances. First, sit down with a financial planner to gain an understanding of all the various aspects of your finances from your income and investments to your debt. Add various facts about your family situation to the mix, and that’s the starting point for an estate plan.

Make a will your first priority: Unless you have a very complicated estate, a standard will with wording common to your state may be satisfactory to properly dispose of your assets, but it’s generally a good idea to get feedback from an estate attorney to make sure your will fits you and your financial structure.

Create all necessary directives: It’s important to create a durable power of attorney to oversee financial issues and a healthcare proxy to appoint a trusted individual to oversee health-related decisions if you are unable to do so for yourself. Some states will allow you to appoint more than one individual in each role to allow for checks and balances, but it’s particularly important to work with an experienced estate attorney to make sure things are done right.

Establish guardianship and financial directives for your children: If you and your spouse were to die at the same time, who would take care of your kids? Based on your state’s requirements, your decision may need to be written up as part of or an addendum to your will. It’s also a good idea to name alternates in case the people you name have a change of heart for any reason, or if something happens to them. If your children are to inherit substantial assets or insurance proceeds, it is also wise to make sure that their guardians are qualified to handle that money. If not, someone else should be legally named to do so.

Review all beneficiary information: Make sure all your beneficiary designations on retirement accounts, insurance and other assets not distributed through your will or trust are current and clear.

Consider transferring IRA assets to a Roth: You’ll take a tax hit with the conversion, but converting traditional IRAs into Roth IRAs removes another headache for your heirs because no income tax will be assessed once the funds are withdrawn, assuming certain requirements are met.

May 2010 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Martin V. Higgins,, a local member of FPA.

By Harvey Mackay

Disagreements happen. You can’t always get your way. Everyone has an opinion. There are two sides to every argument.

When you’re dealing with family or friends, you expect to have differences of opinion. Perhaps you are willing to fight for your views and what’s important to you. And often, because of the personal relationships you have, you find a way to work things out.

At work, the dynamic is very different. The professional relationships you develop are based more on achieving success and moving up. Of course, you’ve become friends too, but competition is still part of the system. You want to be seen as a team player, but you want your ideas respected. You don’t want to get a reputation for making trouble. You need to be picky about picking fights.

Disputes that are not worth pursuing fall into several categories:

• The other person will not change. Perhaps they are just as grounded in their principles as you are, and not willing to listen or consider another point of view. Compromise may not be an option in any case.
• The results won’t change the outcome substantially. Think hard about whether it is more important to get your way or to just let it go.
• All the facts aren’t available. Decisions need to be based on the best possible information. Guessing to fill in the blanks will not benefit anyone.
• Other issues are more important. Keep your priorities straight and concentrate on the most pressing issues. Not all issues carry the same weight.
• You’re just trying to prove yourself, not improve the situation. What you will prove is that your ego is more important than the problem you are trying to solve.
• You really have no chance of winning. You may be a voice in the wilderness, and 100 percent correct in your assessment, but save your breath until you can realistically bring others around.

But there are valid reasons for holding your ground, which need no explanation. Pursue a fight when: Your own ideas are being stolen. Your reputation is at stake. Your company’s reputation is being threatened. The action being taken is unethical or illegal. And cost is a major factor.

When an argument ensues, focus on the issue, not the person raising the objection. Make sure your facts are correct and complete. Have documentation available to back up your points. Stay calm — yelling and ranting make you look out of control rather than on top of the issue. Respect the other people and let them have their say. Compromise wherever possible. Bear in mind that you will be working with these co-workers and the success of future dealings hinges on how you treat them.

Letting a disagreement fester is counterproductive in many ways: It creates a hostile workplace, discourages teamwork, wastes time and resources, and in the end, accomplishes nothing. Everyone loses.

Fortunately, with some preparation, you can improve your chances of persuading others to consider your ideas. If I know I’m going into difficult negotiations, I don’t want the result to be an argument. I want everyone to feel like they contributed to the solution. It has to be a win-win situation. Here’s how I proceed:

• Anticipate the sticking points. I never walk into a presentation or meeting without considering what issues and objections might arise. I develop a game plan to deal with concerns and to convince them that the solution I am proposing will address their objection.
• Stay on topic. Stick to the issues, and redirect the conversation back to the original issue if conversation wanders.
• Don’t take objections personally. Pay close attention to the reasons others are challenging your ideas, and try to see the issues from their perspective. If my solution creates a new problem for them, I am willing to reconsider. The point is to solve problems.
• Ask for help. I look to advisers and employees for great ideas. This accomplishes two things: It helps me see the problems from several points of view, and it demonstrates that I am willing to be a team player. I want the best ideas out there, and I don’t always care where they come from.

Differences of opinion don’t have to be dead ends. Learn how to pick your battles, and put your energy into finding the best possible solutions.

Mackay’s Moral: You have a right to fight for what’s right.

[Ed Note: To learn more about handling disagreements in the workplace effectively, without wasting time or money, check out ETR's Epiphany Alliance personal success program. From your personal mentor Bob Cox, you'll learn dozens of techniques for organizing your life at home and at work so you can achieve all your most important goals. Find out more here.

Harvey Mackay has written five New York Times bestselling books, two of which were named among the top 15 inspirational business books of all time -- Swim With the Sharks Without Being Eaten Alive and Beware the Naked Man Who Offers You His Shirt. His latest book, Use Your Head to Get Your Foot in the Door: Job Search Secrets No One Else Will Tell You, was released on Feb. 18. Harvey is a nationally syndicated columnist and has been named one of the top five speakers in the world by Toastmasters International. He is chairman of the $100 million MackayMitchell Envelope Company, a company he started in 1960.]

A fast-growing generation of elderly people, needing care, is starting to put a great deal of pressure on caregiving family members. More and more we are seeing articles and books about the burden of long term care on families.

According to research By the National Care Planning Council, only about 16% of long-term care services are covered by the government. The other 84% are provided free of charge by family caregivers or provided by services paid out-of-pocket by families or from those receiving care. And the bulk of government care services are provided only after a care recipient has depleted all of his or her savings. The Council also estimates that at any given time approximately 22% of the population over age 65 is receiving some form of long term care support. About 44.4 million adult caregivers provide 21 hours a week of care with 4.3 years average time spent providing care. “National Care Planning Council”

Dilemma of Finding Eldercare Services
The need for care usually occurs without warning, when a stroke, heart failure or other medical condition or illness incident to age suddenly happens to an aging senior. Family members end up in panic mode trying to understand and educate themselves on what needs to be done and what resources are available. If they need to take time from work to handle the crisis then it becomes urgent to find answers and solve caregiving needs. The need to balance work with urgent caregiving responsibilities creates untold stress on employed family caregivers.

Most family caregivers simply don’t know where to turn for help and advice.
Long term care services are complicated and provider contacts are fragmented throughout the community. For the majority of Americans, eldercare becomes a frustrating do-it-yourself process. How do you find out what government services are available and what they will pay for? What legal documents are necessary and how do you protect assets? What type of home care or facility care is needed? Should you quit your job to become the caregiver? Will the government or insurance pay you for caregiving to help replace your lost income?

The question often arises as to whether to use long term care professionals or go it alone in arranging care and services.

“Using care professionals is the most cost effective and efficient way to provide help for a loved one. Hiring professional advisers or providers to help with long term care is no different than using professionals to help with other complex issues such as car repairs, dealing with taxes, dealing with legal problems, or needing trained employees to help run a business. With their education and training, long term care professionals also bring experience that only comes from dealing with countless hands- on caregiving challenges”. “The 4 Steps of Long Term Care Planning”

One Central Source for Locating Help and Advice
The National Care Planning Council recognizes the need for family caregivers to educate themselves and find the needed resources and professional help quickly.

To fill the need for caregivers nationwide, the National Care Planning Council web site “Long Term Care Link”, was developed as a comprehensive resource for long term care planning. There are hundreds of pages containing articles on long term care covering all aspects of caregiving and care services. Books are also available on how to plan for long term care and how to apply for your veterans benefits for long term care. NCPC books

If you are looking for government and community resources, there are lists with applicable website links. Some of those lists include National and State Area Agency on Aging Services, Senior Centers and Veterans Service Offices.

There are over 100 links to websites filled with reference materials. For example; the Gerontological Society of America, National Nursing Home Survey, Elder Law Answers, Senior Corps.

Find Eldercare Professional Service Providers in Your Area
The National Care Planning Council lists eldercare specialists and advisers who help families deal with the crisis and burden of long term care. These specialists can be found under the services category lists like the ones below, on the website. Each professional is listed under the State and area in the State that he or she services. A caregiver can go to the National Care Planning Council website and find someone in the area of need and read about the services of the listed company, individual or facility. Website visitors needing help can then call, email or fill in a request form to receive contact from a listed provider.

Listing categories on the website include the following specific services.

• Care Management, Guardianship, Conservatorship and Dispute Resolution
• Non-Medical Home Care
• Home Health Agency – Medicare-Covered Home Care and Hospice
• Home Maintenance, Deep Cleaning, Remodeling and Yard Work
• Veterans Benefits — Consultant for the Aid and Attendance Pension Benefit
• Geriatric Health Care Practitioner or House Call Doctor
• Reverse Mortgage Specialist
• Elder Law Advice and Medicaid Advice
• Estate Planning, Tax Planning, Trust Management Services and End-Of-Life Planning
• Care Facility or New Home Search, Relocation, Downsizing and Real Estate Services
• Adult Day Care Services
• Insurance Products, Retirement Planning and Financial Advice
• Funeral & Burial Preplanning

THE NATIONAL CARE PLANNING COUNCIL INTRODUCES
ITS STATE CARE PLANNING COUNCIL WEBSITES

A state care planning council is an informal statewide alliance of eldercare specialists and advisers that helps families deal with the crisis and burden of long term care. When you go to your state care planning website, your search for help is right in your neighborhood.

Purpose of the State Care Planning Council

1. Educate the public on the need for care planning before a crisis occurs.
2. Provide, under one source, a list of providers representing most of the available
3. government and private services for eldercare.
4. Offer a trusted team of providers and advisers that the public will recognize in their area and can turn to for expert help in dealing with the challenges of long term care.

One Stop Shopping for Eldercare Services
State Care Planning Council websites offer a closer-to-home option for finding help and services to solve caregiving problems. Many of the local service providers work together as a team to help meet specific eldercare needs of the individual.

For example:
Tim and Debra, both in their late 80’s, were adamant about staying in their home. Both were taking medications and were mobile with walkers. Their daughter, Julie was concerned about their safety in the home, especially with avoiding hazardous falls, bathing and preparing meals. Tim insisted he could drive his car, even though he was a hazard on the road. Julie had taken the car keys and therefore faced an argument every time she went to their home.

Lately, Julie noticed that the required medications were not being taken. Tim was a diabetic and required monitoring with his insulin and diet. Julie ordered “Meals on Wheels” which her mother quickly canceled. Frustrated at having no cooperation from her parents, Julie realized she needed outside help.

Checking the internet for resources in her area, she found the name of a Professional Care Manager in her area listed on her State Care Planning Council website. Jackie — the professional care manager and family dispute professional — had worked many times with families like Julie and her parents.

A meeting was arranged where all parties to the caregiving were involved. Tim expressed that he did not want to give up his freedom driving to the store or other places he liked to go. Jackie suggested selling the car and using the money to pay a taxi or community transit. She arranged for Tim to see a geriatric physician to get his diet under control for his diabetes. Some in-home help with bathing, meal preparation and medication reminders was arranged by having a local non-medical home care company come in daily. Jackie gave Julie explicit instructions on how to organize the house to help prevent falls. To pay for the extra expense, Jackie introduced a reverse mortgage broker who explained how their home equity– on a risk-free basis –could provide the money they needed for their care.

Every service provider or adviser Jackie brought in worked side-by-side with her on the state care planning council. Jackie knew they could provide the needed help with expertise and integrity.

Julie found that using professionals gave her peace of mind and confidence that her parents’ care was in good hands.

The State Care Planning councils are just starting to grow and be populated with professional service providers throughout the Untied States. Like the National, the State websites are filled with resource material and articles for the public use.

Locate a State Care Planning Council at http://www.longtermcarelink.net/a15state_councils.htm

There is no more important investment truism than this: that the very worst place in the world to be looking for guidance to the markets of the next ten years is a rear-view mirror, in which you can clearly see the last ten (or however many) years.

In fact, the more dramatic and extreme the last ten years were, in any respect, the more likely the next ten are to be not merely different, but just the opposite.

If you looked in the rear view mirror ten years ago—in the summer of 1999—you saw index returns of 20% a year streaming behind you. Moreover, you saw returns far greater than 20% routinely available from the “new paradigm” of tech, telecom and especially dot.com, as the Internet—for so the pundits said—was proceeding to repeal the business cycle—and with it, presumably, the market cycle.

It wasn’t long thereafter that the broad equity market declined 50%, and NASDAQ—cradle of the new era—went down 80%, taking some five trillion dollars of stock market capitalization with it.

Today, a hard glance into the rear view mirror shows ten years of essentially zero returns from equities, after a decade bookended on the front end by the aforementioned stock market implosion, and on this end by the total meltdown of the entire global financial system. If history is any guide—and it’s about the only guide we have—this isn’t the time to be anticipating a long period of substandard equity returns. Indeed, quite the contrary.

The chart, above right, shows that, far from being an entirely new and terrible phenomenon, the recent unpleasantness was actually the third time in roughly the last century that equities delivered no net return for ten years. The first ended in 1935—no surprise there—and the second in 1974. Much more to the point, the chart shows that ten-year rolling annualized returns trended higher for relatively long periods of time after both of those previous troughs, eventually cycling up toward 20%. There was really only one reliable way completely to miss these periods of exceptional returns. And that was to be guided by the relatively recent past—by staring fixedly into the rear view mirror.

Mark Twain famously said that history does not repeat itself, but it rhymes. The 1930s (a period of intense deflation) were quite unlike the 1970s (our only real episode of hyperinflation). And neither era has much resonance with ours, either in its causes or its effects. What remains, and seems ever to reassert itself, is the cycle.

A while ago, we were making too many gas-guzzling cars that were too expensive, not least of all because they had labor costs embedded in them that rendered them uneconomic. That has ended now—rather dramatically, in the bankruptcy of two of the Big Three U.S. automakers—and we’re not even producing as many cars as are (at historic rates) being scrapped. That probably can’t continue: at some point, people start having to buy new cars again, and the production cycle resumes.

A while ago, we were building far too many houses and condominiums on spec, and selling them to people who couldn’t afford them with mortgages that were little more than consumer frauds. Those mortgages were then packaged up and sold to (and by) banks and other institutions which apparently had no idea of the risks they were taking on. This, too, is spectacularly over, and (at wonderfully low mortgage rates) we are running off the inventory of unsold homes.

Given population growth and knockdowns of old houses, the long-term trend of housing starts in the US is around 1.6 million a year; in May we started them at a 532,000 annual rate. Again, at some point the cycle of new construction turns up, adding substantially to GDP growth, just as it penalized growth sharply in the recent housing depression.

A while ago, we decried the historically high levels of household debt Americans were carrying, and their penchant for using the ever-increasing equity in their homes as a species of ATM. Shocked by the economy and the markets, and fearing for their jobs, Americans are rapidly deleveraging today, and the savings rate is soaring.

To everything there is a season, as the author of Ecclesiastes says, and a time to every purpose under the heaven. You might do well, here—in consultation with your financial advisor—to take a deep breath, step back away from the news headlines, and try to start thinking again in terms of the cycle. As you do that exercise, have another good long look at this chart.

You may decide that it’s trying to tell you something.

© 2009 Nick Murray. All rights reserved. Reprinted by permission.

It’s a few short weeks until cap and gown season begins, and for grandparents hoping to do something nice for their grandkids and something sensible for their estate, there are several options to explore.

Roth IRAs: The Roth option is a good one if you want to help them start a retirement fund of their own or if you want them to inherit a Roth where they can make tax-free withdrawals after your death.

Roth IRAs aren’t a useful alternative for very young kids because the rules state that all Roth holders have to have earned income to be able to make contributions. If they fit that description – as many kids working in high school do – either their parents or guardians can open the account and grandparents can make contributions to match the percentage of earnings kids put in their Roth IRA. Grandparents simply match that contribution.

Also, if you have a Roth IRA, you can benefit your grandchildren by naming them as your primary beneficiaries, and when they inherit it, they’ll be able to make tax-free withdrawals for a home, an education or any other purpose.

Parents or grandparents may want to consider setting up and funding a Roth IRA for their children or grandchildren as soon as the children or grandchildren have enough earned income from part-time or summer jobs. This will ensure that the five-year requirement is met when the individual for whom the Roth IRA is established is ready to make a withdrawal to buy a home, for example.

529 Plans: Another great tool for grandparents is the 529 college savings plan. Grandparents can fill out a plan enrollment form designating a grandchild as beneficiary, select the investments from the plan’s options, and make future contributions either by check or by automatic contribution. It’s also fine for grandparents to make their contributions directly to a 529 account already owned by the grandchild’s parents.

As a refresher, 529 college savings plans – named for the federal law that created them in 1996 – allows a parent to open a tax-deferred college savings plan with as little as $25 to start in some states. A 529 college savings plan is not the same thing as a 529 prepaid college tuition plan. Prepaid tuition plans are just that – tax-deferred savings plans that allow you to save for tuition for in-state schools (though some plans allow you to transfer out a portion of those assets to out-of-state schools). Also, it’s important to note that prepaid tuition plans are not an automatic guarantee a student will get into that college.

Since 2006, withdrawals from 529 plans have been permanently tax-free. In some states, contributions may also be deductible on state tax returns. All 50 states now have 529 plans college savings plans, and a majority of them provides additional incentives, such as a state-tax deduction to in-state residents who invest in their respective plan.

It’s a good idea to have your financial adviser or your CERTIFIED FINANCIAL PLANNERÔ professional help you sort through the details of various state plans. There are various services – including Morningstar Inc. – that now rank the offerings of each state’s plan. www.SavingforCollege.com and www.FinAid.org are leading sites to help educate you in how these plans work.

Grandparents can treat their contribution as complete gifts, which means they can apply the $12,000 per year gift tax annual exclusion or an accelerated contribution of up to $60,000, with a special five-year, gift-spreading election. Check with your tax adviser first.

Another great benefit is that a 529 plan owned by grandparents should not affect the grandchild’s eligibility to receive federal financial aid because a grandparent’s assets are not reportable on the free application for federal student aid, or FAFSA, and the tax-free withdrawals from a grandparent-owned 529 plan are not counted as student income or student resources.

Coverdell Education Savings Accounts: For grandchildren heading to private school who are under the age of 18, most grandparents – check your eligibility with a tax professional first – can contribute up to 2,000 dollars annually per grandchild to a Coverdale Educational Savings Account. Coverdell earnings accumulate free of federal income taxes, and can be taken to pay for private elementary, secondary or college. Yet, your income is a factor. You can make a Coverdell contribution as long as your modified adjusted gross income is between 95,000 and 110,000 dollars if you’re single or between 190,000 and 220,000 dollars if you’re a married and filing jointly. Yet, if you exceed either of these requirements, you can ask the parent of the adult child to open up the account and make the contribution, though you will have to give up control over the account.

Make a direct gift of your grandchild’s tuition: Under current tax law, you can make gifts of any amount to cover your grandchild’s tuition. Yet, you’re going to need to pay the college directly and you need to be aware that it won’t dent your federal estate tax exemption (3.5 million dollars in 2009), but it will cut the overall amount of your taxable estate. You can, however, go ahead and make additional gifts per grandchild of $13,000 to help with other college expenses.

June 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Martin V Higgins,CFP,CLU,AEP, a local member of FPA.

After a marriage breaks up, about the last thing most people want to do is sit down with one more attorney. But no matter how old you are or whether you have kids, it’s important to consult both financial and legal experts to make sure you have an updated estate and financial plan for your new life once the divorce decree is final.

It’s also best to blend estate planning with financial planning post-divorce. If you weren’t working with a financial or estate planner during the divorce process, it’s time to do so now. The immediate months after a divorce can be disorienting – even if you don’t move, you are literally starting a new household that you will have to direct yourself, and that means new money issues to face.

This is why that the weeks immediately after a divorce are a good time to revisit short- and long-term spending and planning goals. Here’s a general road map to that process:

Start with a financial planner: Whether you plan to stay single, remarry or move in with a new partner, it’s good to get a baseline look at your finances as early as possible after the divorce is final.  Expenses for the newly single can pile up quickly and unexpectedly, and a financial planning professional can help you review your new current spending and savings needs, compare strategies to achieve long-term goals like college and retirement and give you critical tools to protect your assets and loved ones if you die suddenly. Even if you have a good relationship with an ex-spouse and you addressed key issues for your children as part of the divorce proceedings, you need to revisit all these issues as a single individual before you move on to the next stage.

Talk with a trained estate planning attorney about wills and other critical documents: True, there are software programs and other kit solutions available to write basic wills, powers of attorney and certain simple trust agreements. But it makes sense to coordinate the activities of a financial planner with an estate planning attorney who can tailor an overall estate plan specific to your needs no matter how basic they might be right now. Even if you are very young with few assets, it makes sense to get some solid advice in this area so you’ll be able to manage such planning as you age and your finances get more complex. Particularly if you have kids, such planning is important if you plan to remarry and if you want to guarantee that specific assets are guaranteed for them when you die.  In some cases where a spouse dies unmarried with minor children, an ex-spouse might automatically gain control of assets that were supposed to be earmarked for the kids. If you don’t want that to happen, you need to plan for that legally.

Make a guardianship game plan for your kids: It’s not enough to plan how money and assets will go to your children if you or your ex-spouse die suddenly or are incapacitated.  If your children are minors, it’s particularly important to make sure you and your ex-spouse have a guardianship plan for their upbringing as well as any assets they may inherit. You might completely trust your ex-spouse’s new husband, wife or partner to raise your kids if your ex-spouse dies before you, but there may be others better-equipped to do so – spell that out now.  Also, if there are any trust or wealth issues that will become effective for your children once they reach adulthood, it’s also important to establish an efficient legal structure for distributing those assets as well as appointing a trustee in a will to train and guide your kids through that financial transition.

Plan for special needs kids: If one of your children is disabled and is expected to need lifetime assistance of some type, then you should consult a qualified attorney to help you create a special needs trust. It will help protect your child from having to give up any public or social financial assistance as well as access to special doctors, medical help, special prescriptions or treatments that could be taken away if they were to personally inherit assets that would disqualify them for these programs. When such assets are held in trust, they are not counted as the child’s assets. The advantage is that those inherited assets may still be used to support their housing or other personal living needs.

Get solid protection in place: Most people focus on what may happen to their health insurance if they get divorced, but insurance issues like life, property/casualty and disability insurance are sometimes put on the back burner.  If you’re newly single, you definitely need the best health coverage you can afford for yourself and your kids, but life, property, liability and disability insurance becomes doubly important, particularly if you failed to address those needs during the divorce.  Even if your ex-spouse is cooperative with financial support, it’s wise to insure yourself as if they weren’t. A financial planner should be able to go through those options in detail.

Review all your investments for primary ownership and beneficiary information: Even if you were advised correctly to change the names on assets you and your spouse were dividing between yourselves, it still makes sense post-divorce to review that the names are indeed correct on those assets, and most important, to make sure all beneficiary information is correct.

June 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Martin V Higgins,CFP,CLU,AEP, a local member of FPA.

If you’ve ever fantasized about quitting your job and starting a business, you’re certainly not alone. However, it’s definitely not something to do on a whim – you’ll need time and good advice.

A business startup requires parallel planning in advance for your business and personal finances. That’s because business owners – even those who are acquiring ongoing businesses or starting their own companies on the cheap – quickly find their business and personal finances are inextricably linked.

That means that before you plan the business, plan your finances first. Here are some basic steps to consider right now:

Get some advice first:
You need not one, but two sets of financial advice when starting a business. The first involves the viability of your business concept. You should understand your business idea inside and out before you launch and what your new company’s immediate and long-term cash needs will be. The second set of advice involves your own finances and how prepared you are for what will surely be a major lifestyle transition. Because new business owners frequently underestimate their new business’s expenses starting out, they can find themselves funding those business needs out-of-pocket. That means less money for day-to-day living expenses as well as long-term planning for retirement. That’s why it’s critical to consult a tax and financial expert such as a CERTIFIED FINANCIAL PLANNER™ professional at the outset.

Get rid of your debts:
With the possible exception of mortgage debt, there’s very little “good debt” in the life of a businessperson. So while you’re researching your business concept and putting together your own financial plan, start cutting back and erasing as much credit card and adjustable-rate debt from your personal life as possible. The credit crisis is making it tough for any business owner – even experienced ones – to borrow money at attractive rates.  You’ll have the most flexibility when you owe as little as possible.

Work on your emergency fund:
While it’s wise for everyone to have 3-6 months of cash set aside for basic living expenses in case they lose their job or face a medical emergency, emergency funds are particularly necessary for new business owners. Startups can be particularly expensive, and most businesses are not profitable from day one. Plan a more extensive emergency fund for yourself and for the business as well.

Start thinking about your legal business structure:
Your personal financial situation and the kind of business you’re starting should determine the legal designation of your company.
Before choosing a business structure, such as a sole proprietorship, S or C corporation, partnership, Limited Liability Partnership (LLP), or Limited Liability Company (LLC), owners should reflect on their business in the context of their overall financial life and ask themselves a series of questions:

• Is the business going to be your primary source of personal wealth and daily cash flow?
• Is it a side business?
• Do you expect the business to pay for your retirement?
• Do you want it to provide other financial benefits?
• Do you want to pass it on to family members or sell it to existing employees or outside buyers?

The answers to these questions figure importantly into the decision, along with other key factors such as what type of business you’re starting, its risk factors, current tax laws, and regulations such as workman’s compensation.

Plan your healthcare and other basic benefits:
Automatic benefits are the plus side of working for someone else. When you’re working for yourself, you become your own HR department and chances are you won’t be able to match your old employer’s buying power. If you support a family with these benefits or if you have particular health concerns, you need to price the out-of-pocket costs of such benefits before starting your own company – depending on the business and the cost of those benefits, you might want to rethink your plans.

Price disability coverage now:
You might have short-term disability coverage as part of your current employee benefits, but that will likely end once you quit your job. You should price long-term disability coverage based on your present working salary so you can qualify for the highest possible benefit. Disability coverage is critical for self-employed people since they’re their own support system.