The poet Alfred, Lord Tennyson wrote, “Knowledge comes, but wisdom lingers.” He also said, “Hope smiles from the threshold of the year to come, whispering, ‘It will be happier.’” A new year brings new beginnings, new challenges, and new goals—many of which revolve around achieving a happier, more successful financial year. So to achieve that financial wisdom, here is a quick and easy guide to what you need to know to help you keep financially fit through 2016.

Certified Financial Planners

A Certified Financial Planner (CFP) has the tools to explain financial strategy and how to achieve personal goals. Once CFPs develop an understanding of their client, both personally and financially, they can help establish achievable financial goals. As circumstances in life shift, a CFP can guide you through these changes and their impact, and then alter your financial plan accordingly. A CFP is trained and certified to provide the guidance necessary to determine the investment vehicle best suited for your financial needs and then hold you accountable. At first thought, CFPs may seem more appropriate for affluent clients or those with higher tax brackets or trust needs, but a CFP can be an invaluable asset for everyone—whether you’re starting that first job, wanting to save more money, or considering estate planning.

Bank Services

Banks differ in the products and services they offer in regard to investments. Small and mid-size banks often have outside investment firms or independent advisory groups that provide products to bank customers. These products range from mutual funds, stocks and bonds, and managed accounts to annuities with insurance companies. Large banks generally have their own investment division within the bank. The bank staff, however, can help assist you toward building financial stability via savings, money market, and CD accounts, or by guiding you through reduction of personal debt or home mortgage refinancing.

Tax Season

If in doubt, contact a CPA. A tax professional is a valuable resource—especially during tax season. Tax laws change every year, and filling out a tax return is a time-consuming venture. A CPA offers peace of mind and prevents worry over incorrect tax returns.
To make the process run smoothly, whether you’re preparing the return yourself or having a tax professional complete it for you, make sure you have all documents gathered before you begin. Check to see that you have all W-2s, 1099s, and Schedules K-1. If you prepare the return on your own, TurboTax is the best home tax preparation product on the market, but do be careful not to answer the same question twice, as this might lead to duplicating a deduction. And if you’re deducting non-cash charitable items, use itsdeductible.com. There’s no cost for using the website, which is sponsored by TurboTax. If, however, you do have a tax professional, ask for their “organizer kit,” as this kit helps make sure you haven’t forgotten anything important.
Also key is avoiding procrastination! Complete your tax return as soon as possible. Early completion will provide time to review the return for obvious omissions or errors. If you are due a refund, file early, but if you owe tax, it’s better to wait until April 15 (or April 18 this year) to allow yourself time to review the return. Should there come a point when you simply cannot file on time, file for an extension. The extension offers you more time to file the return, but it does not allow you more time to pay the tax. Any tax you still owe after April 18 will be subject to 3% per annum interest.

Inheritance

For successful inheritance management, everyone, no matter their net worth, should have a final will, a durable power of attorney, and a medical power of attorney. In regard to taxes, it’s important to know that inheritance tax does not apply unless your net worth is in excess of $5,400,000. If you’re married, file an inheritance tax return, as this allows you to transfer any amount under $5,400,000 to your spouse. This results in $10,800,00 of net worth being tax-free. Also of note is that assets enjoy a “step-up” in basis upon death. In other words, don’t sell appreciated stocks immediately before death. Rather, allow your heirs to sell such assets after death. If sold before death, the appreciation of your stocks will be taxed, but if they’re sold immediately after death, there is no tax on the prior appreciation—the cost basis of the stock is “stepped-up” to its value at the date of inheritance. Additionally, to help avoid inheritance tax, you can gift up to $14,000 per year to as many people as you wish. Inheritance tax returns are complicated but not impossible. To make sure you achieve the most favorable tax outcome, consult a qualified CPA.

Kaitlin Einkauf

Kaitlin Einkauf is the Finance Director for the Plano Symphony Orchestra and a frequent contributor to Plano Profile. She received a Bachelor of Business Administration in Finance from the University of...