UPDATE FROM THE OFFICES OF CAROL McATEE & ASSOCIATES, CPAS, St. Petersburg, Florida

Carol McAtee & Associates, CPAs

. . . . .continued from last week’s post,

Never too Early to Start Thinking About Filing the Next Tax Return

It’s Time for You to Begin Discussing Your Tax and Financial Issues with Your Spouse

My years in practice have allowed me to witness certain family roles and responsibilities between spouses. In many cases I find that only one of the spouses has an understanding of the tax and financial issues. With the hectic busy lives that we live, it is difficult to grasp much of what is going on in our lives on a daily basis when it comes to money. The financial environment has changed dramatically. Payroll checks are directly deposited into a bank account; mortgage payments, car payments, utility bills, etc. are paid via electronic fund transfers. Food, clothing, gasoline, travel and entertainment are paid with credit cards and the credit cards are paid automatically out of the checking account on the due date each month whether it is a stated monthly amount or paid in full.

We have become a cashless society and when we do have cash we get it from an ATM and take it out in the form of $20 bills which disappear like raindrops. Many people do not reconcile their bank accounts and as a result they are not taking that important time to periodically review their financial lives and discuss that life with their spouse. Some individuals are frightened by financial and tax issues because they have never been taught about the importance of them or because they feel it is out of their realm of comprehension. Even worse, some individuals live in total denial of their financial responsibilities and the underlying consequences.

The reason I bring this up is that there are always life changes which will impact the need to know about your financial life. I have dealt with clients whose life was changed in a heartbeat because of the death, illness or divorce of a spouse and they had little or no idea about the money issues that they now needed to face. Some of them had not written a check in years, had no idea how much debt existed, did not know what assets they owned and how much money was in bank. Clients who are faced with the illness of a spouse also need to be aware of the finances, because now they also need to understand the health insurance coverage that is available, the deductibles that they must absorb, the amount of the co-pays, restrictions, etc. of the policy.

Many times the spouse who is “in-charge” of the finances is handicapping themselves, their spouse and their family when they do not take the time to get everything organized. Nothing is promised to anyone and everything is temporary and when a life change takes place you want to be ready for it the best you can. In order to get ready start with a 3 ring binder and fill it with the following information:

  • List the names of your lawyer, accountant, financial planner, stockbroker, insurance agent and every other important outside party with whom you have financial ties. Make sure to include their contact data such as address, phone numbers, e-mail addresses, etc.
  • Insert a copy of your will, living trust, insurance policies, including life, health, disability, umbrella policies, auto, homeowners, etc.
  • List all assets including bank accounts, brokerage accounts, ownership in any business, IRAs, pensions, social security benefit statements, homes, cars, boats, land, collectibles, etc. Include college savings plans that you have established for children, grandchildren, etc. If there are assets which are not in joint ownership you need to determine if there is a need to have the assets transferred to a joint account. You may even have to determine if jointly owned assets should be separated.
  • List all debts including mortgages, lines of credit, credit cards, auto loans, school loans, business debts, etc. Make sure you list how these debts are paid and the dates they are due for payment as well as a priority list as to which debts should be paid before others in case of liquidity shortages.
  • In some situations spouses may be planning on having the financial affairs turned over to a 3rd party such as a trusted individual who is skilled in financial issues, such as an adult child, other family member, close friend or a professional who is hired to take over the finances. In any case, the spouse should be made aware of the plan so that they are in the loop and know who to contact and who will be taking responsibility for their financial life. Informing the spouse about the skills and capabilities of these individuals or institutions is important.

If you would like to discuss these types of financial and tax issues, contact me soon so that you can feel confident that the stress to you and your loved ones is reduced.

 

 

 

If you have any questions about this topic or other tax related questions, please do not hesitate to contact us at 727-327-1999.

ANY TAX ADVICE IN THIS COMMUNICATION IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY A CLIENT OR ANY OTHER PERSON OR ENTITY FOR THE PURPOSE OF (i) AVOIDING PENALTIES THAT MAY BE IMPOSED ON ANY TAXPAYER, OR (ii) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY MATTERS ADDRESSED HEREIN.

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