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When Should You Meet With a Professional to Obtain a Will?

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It’s important to write a will, and even more important to make sure that it’s professionally done. There are many kits and templates that you can use to help you draft a will by yourself on the internet, but it’s best to meet with a professional. The following are some of the instances in which you should consider meeting up with a professional to obtain a will.

When You Need to Make Sure It’s Legally Binding

It’s no secret that the legal field is laced with a lot of jargon that the regular person may find hard to understand. This means that there’s always the risk of misrepresenting your interests when you choose to write your will yourself. It’s important to write a will and estate plan or set up a trust, which is something that about 32% of adults in the U.S. have already done.

It’s equally important to ensure that all your interests are clearly expressed and that the clauses you need to be met are legally binding. This will help you avoid the possibility of leaving your loved ones, whom you are trying to protect by writing a will in the first place, ending up in legal tussles over something that was not clarified in your will.

If You Need Help with Complex Family Dynamics

If you have complicated family dynamics and you want to make sure that your will is drafted correctly, you should get help from a professional. An attorney will probably know the steps to take as well as the clauses to include to make sure that your will reads as you want it to. They will help you finalize the details of your will so that you have peace of mind in the fact that you have done your best for your family.

No one needs to be left out or otherwise placed at a disadvantage while they should be covered fairly by your will. Of all the Americans aged over 65 years old, 50% of them have their wills up to date. This is something that may take the help of a professional to do right, making it worth the money spent on enlisting their services.

When You Want to Protect Your Interests

When drafting a last will and testament, you not only seek to protect your loved ones but yourself as well. This is true for events such as in case you get into an accident or suffer from a condition that leaves you incapacitated. Since you want to secure the best possible care for yourself, it’s important to outline these details in your will.

A professional can help you put your needs across more accurately and get the best outcome. They will point out some issues that they’ve come across in their experience and enable you to get a document that will satisfactorily cover your needs. This way, you can be sure that your future health is going to be in good hands and that you will get the care that you want. Up to 10% of people without a trust or will have actually sought advice from a professional advisor, including attorneys. Clearly, many people know the benefits of involving professionals in this sensitive matter.

If you are in any of the situations outlined above, you may benefit from meeting with a professional to get a will drafted for you. It’s going to be the best decision that you make for your finances now and in the future as well as for the continued safety of the ones you love.

The Financial Responsibilities of Sharing Your Life With Someone

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Living as a couple changes one’s life in many ways. It is not all about you, but about ‘we.’ Money issues play a big role in many couples’ arguments. Misunderstandings occur due to a lack of communication, power struggles, or clashing ideas. Planning for financial responsibilities is vital from the start to enjoy a smooth life as a couple. Couples should understand each other’s financial needs and support each other.

 

Decide on Estate Planning

Estate planning is essential for retaining and protecting control of your property during your lifetime and determining how to transfer your assets after death. Without estate planning, your beneficiaries may face problems during inheritance. The process of estate planning is easy. First, gather basic information on real estate holdings or any other asset.

Estate planning is confusing; that’s why 74% of Americans postpone it. Next, establish your goals and choose your beneficiary. It can be your spouse, children, or anyone else who matters to you. That said, make sure you update your will, power of attorney, and beneficiaries.

Budgeting for Basics

It is common for one partner to handle the bills and investments and the other to cater to other basic needs. The best way to share financial responsibilities depends on the partner’s income. Couples should be open about finances and adopt a joint approach. This way, both partners will be responsible and avoid overspending. Financial literacy is vital for both partners, from making decisions about the future to handling emergencies. A financial planner can help you plan for your financial responsibilities.

Home Renovation

Couples commonly take the time to decide where to live together. One spouse can move into the other’s house or purchase a new home. Although, a couple can opt to renovate the house if it’s old or outdated. Most U.S. homes require renovation because 80% of them are at least 20 years old. House renovation depends on one’s budget and needs, and the first step is to make a budget for all the expenses. You can also decide on home improvement financing if your monthly income is sufficient. How long will the renovation take? How big is the project? A couple should consider all these factors before embarking on the project.

Investing

It is best to have investments as a couple. Learn about basic investment concepts and decide what’s right for your family. Seek advice from experts and talk with your partner about what investment plan will help meet your goals. You can invest jointly or separately. It will all depend on your financial flexibility and comfort.

Filing Taxes

A couple can file their tax returns together or separately. A joint filing is cost-effective, although the couple’s circumstances could be starkly different. Differences could arise if one owns a business and another works for an employer that sends a standard W2 form. Partners can file separately if they don’t want to be part of another person’s business or if they prefer their independence in that realm. If a partner has a loan, deciding on filing separately or jointly may affect the loan repayments and could lead to the partner taking on some of the debt.

Wedding Expenses

Before you say ‘I do,’ couples should disclose their financial status to one another. Let your partner know your debts, assets, liabilities, and responsibilities for extended or immediate family members. Once you know your partner’s assets and finances, sign a prenuptial agreement to protect premarital assets and children from previous marriages. Although one couple’s debt doesn’t become the other’s responsibility after marriage, that debt can still affect your joint finances.

Who pays for the wedding expenses? A couple should plan how much and who will finance the wedding. An average couple spends $22,500 on a wedding or a ceremony. If you are a young couple with little savings, establishing a wedding budget and sticking to it is advised. You can scale back your expectations since the cost can double what you expected.

 

Most people think of companionship and love when entering a marriage. But it takes more than emotional commitment. Marriage comes with legal and financial commitments. Once you tie the knot, the process will have financial implications. Therefore, couples should be on the same page on finance matters and how to handle them.

How to Transfer Assets to Children Before Death

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If you are a parent, you already know it’s important to plan for your children in case something happens to you. One way to do this is by transferring assets to them before you die and in your estate planning. This can be done in a number of ways, and each has its benefits. In this blog post, we will discuss the different options available to you and how each can help protect your children’s future.

Remember: Generational Wealth building isn’t just for parents: grandparents, aunties, and uncles can change the shape of the entire next generation.

Work with A Family Law Attorney and a Tax Planner

family law attorney

There are many different ways to transfer assets to your children, and almost all of them require a lawyer and have tax implications. It is important to consult with an attorney as well as a tax planner, both to choose the transfer structure that is right for you and also to ensure that the documents are compliant with Federal and State property and tax law.

Draw Up a Will

One way to transfer assets to your children before death is through a will. A will is a legal document that outlines how you would like your assets to be distributed after you die. A will doesn’t actually transfer ownership of your assets until after you die, but it can be used to specify exactly who should receive what.

If you have a will, it is important to keep it up-to-date as your life and circumstances change. You should also review it regularly with a family law attorney to make sure it still meets your needs.

One important note: a will is great for establishing your wishes for the distribution of your assets are followed, but it will not keep your estate out of probate. Probate is the legal process of distributing a person’s assets after they die, via the courts in your state. It can be time-consuming and expensive, if you have substantial or complex assets, so many people choose a trust.

Create and Move Assets Into A Trust

will and trust documents

A trust is an arrangement in which one person (the trustee) holds and manages property for another person (the beneficiary). It’s a critical part of estate planning. Transferring assets into a trust can help avoid probate because the trustee can distribute the assets according to your wishes without having to go through the court system.

Moving assets into a trust that can be managed by a trustee will give your children access to the assets when they reach a certain age while ensuring that the assets are managed responsibly.

One common type of trust is a living trust, which is created during your lifetime. You can name yourself the trustee, which gives you control over the assets during your lifetime. Then, when you die, the trust remains in force and the beneficiary can receive the assets without having to go through probate. You can even trigger the execution of your trust before you pass away.

This is a good option if you want to maintain control over the assets during your lifetime, but also want to avoid probate.

Name Beneficiaries on Financial Accounts and Insurance Policies

name beneficiaries

Most financial accounts and life insurance policies allow you to name a beneficiary. This means that the account or policy will be transferred to the named beneficiary upon your death, without having to go through probate. Having updated beneficiaries is the cheapest and easiest way to transfer assets such as retirement accounts, bank accounts, and life insurance policies.

It is important to review your beneficiaries regularly and update them as needed, especially after major life events such as marriage, divorce, birth, or death. This can be especially important for single parents and blended families.

Transfer Assets During Your Lifetime

Another way to transfer assets to your children before death is through a gift or by selling the asset to them for less than its fair market value.

The upside of this option is that you are still around to help them manage the asset. The downside is that lifetime transfers have serious tax implications that vary depending on the value of the asset and your state’s laws.

Gift Assets to Your Children

You can give $16,000 per year, per child (or any other recipient) without needing to file any tax forms or pay any tax. If you are married, you and your spouse can each give $16,000, for a total of $30,000 per child. More importantly, the current (2022) Federal gift tax lifetime limit is $12.06 million per person, and you can also double it if married. While it would require you to file a form, gifts of any size can be given to your children without owing any gift tax, as long as the total amount gifted during your lifetime does not exceed the $12.06 million limit.

Sell Assets to Your Children for Less Than Their Fair Market Value

sell assets to children

You can also sell assets to your children for less than their fair market value. This is The most advanced move, absolutely requires a competent lawyer and tax planner, and is generally most appropriate for family businesses. Generally, this involves a contract in which you sell the asset to your children for an agreed-upon price that is less than the fair market value.

There are a few different ways to transfer assets to your children before death. The most common ways are through a trust, naming beneficiaries on financial accounts and insurance policies, or transferring the assets during your lifetime.

Each method has its benefits and drawbacks, so it is important to discuss your options with a family law attorney and tax professional to choose the option that best suits your family.

End-Of-Life Care Costs

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End-of-life care is a treatment someone nearing death receives in the final days, weeks, months, or sometimes years of his or her life. During this time, medical care and support continue regardless of whether the patient’s condition is curable or not. Many receive professional medical care in hospitals, nursing homes, or even in their own home. Patients are then placed in either palliative care or hospice care, and the costs are paid by Medicare, Medicaid, private insurance, charities, the individual, or other payment programs. Here are some things to know about end-of-life care costs.

Eligibility for Medicare’s Hospice Benefit

  • The patient must be 65 years or older
  • Diagnosed with a serious illness
  • Certification from a doctor that he or she has six months or less to live
  • Agrees to forgo life-saving or potentially curative treatment
  • Hospice provider must be Medicare-approved

Medicare provides care for two 90-day periods in hospice, followed by an unlimited number of 60-day periods. At the start of each period of care, a doctor must re-certify that the patient has six months or less to live.

Medicare’s hospice coverage includes a broad range of services:

  • Nursing care
  • Medical social worker services
  • Physician services
  • Counseling (including dietary, pastoral, and other types)
  • Inpatient care
  • Hospice aide and homemaker services
  • Medical appliances and supplies (including drugs and biologicals)
  • Physical and occupational therapies
  • Speech-language pathology services
  • Bereavement services for families

Hospice costs not covered by Medicare

  • Room and board
  • Emergency care such as ambulance fees or emergency room costs
  • Treatment or prescription drugs attempting to cure illness

Hospice costs are paid for in the following manner: Medicare – 85.4%; Medicaid – 5%; managed care or private insurance – 6.9%; other (including charity and self-pay) – 2.7%.

Respite care is a short-term break for caregivers of terminally ill patients. The patient can stay for up to five days in a Medicare-approved nursing home, hospital, or hospice facility.

Some Costs

Studies showed 42% of people died at their home at $4,760 in their last month of life. Whereas in a hospital it cost $32,379. Dying in a nursing home was the second most expensive, hospice care was third, and the emergency room.

Now that all of this has been explained, there are some things you need to do or things you should do to prepare for these costs.

Planning

You have to save for it. A lot of retirement planning is determined by how much you are going to spend in retirement. Heck, that’s basically all of what retirement planning is. You need to save and plan for this.

Not everyone has to be concerned about it. If you have all of your debts paid off and your retirement account is in a place where you don’t have to be worried about running out of money, then you probably don’t have to think about it too much. That doesn’t negate the fact that you should plan, your planning just looks a little different. Instead of buying final expense life insurance, maybe you’re buying a plot in a cemetery.

If you have all of your debts paid off and your retirement account is in a place where you don’t have to be worried about running out of money, then you probably don’t have to think about it too much. However, that doesn’t negate the fact that you should plan; it will just mean that your planning may look a little different from that of others. For example, it may be the perfect time to think about looking into final expense policies.

Final expense insurance is a life insurance product that’s purchased to pay for burial and/or funeral expenses. It’s also called burial insurance and senior insurance. In most cases, the benefit from the insurance product reimburses the costs incurred from burial and funeral, as this can take longer for those to get paid out. This could provide significant help to you and your family when that time comes and is something that you may want to consider if you want to start thinking about these scenarios now.

Planning will look different for everyone, but your circumstances don’t excuse you from planning. So, start thinking about it today.

Final expense insurance is a life insurance product that’s purchased to pay for burial and/or funeral expenses. It’s also called burial insurance and senior insurance. In most cases, the benefit from the insurance product reimburses the costs incurred from burial and funeral, as it takes longer for those to get paid out.

End-of-life care is a necessity for most people. It’s important to plan for it.

Related reading:

How Medicaid covers hospice care

The Cost of Medicare Plan G in 2022

10 Financial Hacks for a Funeral

Disclaimer:

**Securities offered through Securities America, Inc., Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc. Securities America and its representatives do not provide tax or legal advice; therefore, it is important to coordinate with your tax or legal advisor regarding your specific situation. Please see the website for full disclosures: www.crgfinancialservices.com

10 Questions You Need to Ask Your Parents About Their Finances Now

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10 Questions You Need to Ask Your Parents About Their Finances Now

If you’re the adult child of aging parents, having open, honest conversations about finances could be essential. By learning more about your parents’ situation, you can make sure that their future is bright. You’ll have a chance to intervene if necessary and prepare for emergencies. Plus, you’ll be better equipped to navigate their passing if you’re the executor of their estate. Thankfully, by asking the right questions, you can head down the right path. Here are ten questions you need to ask your parents about their finances now.

  1. What Does Your Financial Plan Look Like?

First, you want to ask your parents for an overview of their financial plan. Along with insights into their income and expenses, it’s wise to discuss savings and retirement account balances. That way, you can determine how long those funds will last.

Additionally, you may want to touch on other aspects of their financial lives. For example, since home equity can be tapped, knowing how much is available may be wise. Asking about their medical insurance – particularly their long-term care coverage – is similarly intelligent, ensuring you know how much funding is available if they need prolonged care.

  1. Are You Worried About Running Out of Savings?

This question is less about learning the nuances of their financial situation and more about discovering their mindset. It lets you know if their savings account balances are a source of stress, giving you an opportunity to find out more about their concerns. Then, you can work together to address them.

Additionally, it can let you know if there are mental health issues forming, such as depression or anxiety. In some cases, it may even allow you to discover signs of cognitive decline, depending on how their answers compare to the reality of their situation. In any case, it’s a smart question to ask.

  1. Is There a List of All of Your Accounts Available?

Having a list of all of the financial accounts available is crucial for several reasons. Along with simplifying the management of their estate after their passing, it gives you an overview of what has to be covered if they’re suddenly incapacitated or experience an unexpected drop in income.

Ideally, the list should include specific details regarding the accounts. For debts and expenses, the company name, account number, due date, payment amount, and remaining balance are critical, as well as any logins or passwords. For savings, investment, life insurance, or similar accounts, the company name, account number, logins, passwords, account value, and beneficiary name are musts.

  1. Do You Have a Will (and Who Is the Executor)?

Knowing if your parents have plans for their estate helps you prepare for their passing. If they have a will, find out its location. Additionally, ask for the name of the executor, as they’ll need to be involved quickly after your parents’ passing. You should also find out if they used an attorney to draft the document and the lawyer’s contact information, giving you another resource should your parents’ copy become misplaced or damaged.

If they don’t have a will or estate plan, it’s wise to recommend they get one in place. You could help them find an attorney and offer the pay the cost, as well as accompany them if that makes them more comfortable.

  1. Do You Have a Life Insurance Policy?

Ideally, information about any life insurance policies should be on the list of accounts. However, if you don’t see a life insurance policy, ask about it directly. If your parents are still working and have a policy through an employer, they may have forgotten to include it in their list, so it’s wise to follow up.

  1. Do You Have a Financial Power of Attorney?

A financial power of attorney gives a person the ability to name someone who can make financial decisions for them if they are incapacitated. Finding out if they have a financial power of attorney in place and who is named on the document is helpful. Then, if there’s an emergency, you know who is able to handle certain activities and make various decisions.

  1. Have You Had Any Trouble Remembering to Pay Your Bills or Balancing Your Accounts Lately?

While anyone can make a mistake on occasion, if your parents are forgetting bills or struggling to balance their accounts regularly, that could be a sign of mental decline. Many older adults with memory issues have trouble tracking their obligations. Additionally, they may struggle to handle the calculations involved in balancing their accounts or may have difficulty keeping tabs on the date.

If they are having difficulties, it’s wise to create a plan to ensure their financial life remains on track. Also, speak with them about scheduling an appointment with their medical provider to determine if there is an underlying cause.

  1. Where Do You Keep Your Financial Paperwork?

If your parents pass or become incapacitated, you may have a need for different kinds of financial paperwork. For example, you might require deeds to certain property, account statements, or past tax returns. By asking where they keep that information, you’ll know where to look should the need arise.

  1. How Do You Typically File Your Taxes?

Knowing how your parents usually file their taxes is beneficial. Not only does it give you a source of records, but it also lets you know if they’re receiving help or handling the work on their own. Plus, it could make filing any final tax returns easier if you can turn to the same method, though this isn’t always the case.

  1. Do You Have a Safe Deposit Box?

Many people use safe deposit boxes to store valuable items. If your parents have one, find out which institution it’s at, the location of the key, and any other details that help you access it after their passing or as an approved financial representative.

Without the location information, tracking down a safe deposit box can be tricky. Similarly, if you don’t have a key, getting access requires extra steps. You may have to pay a fee to have it drilled. Additionally, if they don’t have the ability to drill the lock on-site, you might have to wait to access the contents, which may not be ideal.

Can you think of any other financial questions you need to ask your parents now? Share your thoughts in the comments below.

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Here’s Some Investment Advice After an Inheritance

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Investment Advice After an Inheritance

Getting an inheritance is often bitter-sweet. While the money may be an opportunity, it is attached to losing someone who may have been important to you. As a result, it can be hard to think clearly about how to handle the windfall, potentially setting you up for some poor decisions. However, by using the right approach, you can make smart choices. Here’s some investment advice after an inheritance.

Take a Breath

First and foremost, don’t make any financial moves if you are still grieving. Emotionally difficult events often cloud a person’s judgment. If you are still struggling with significant feelings of sadness, anger, confusion, or frustration, you may make a choice that you wouldn’t usually. At times, that may be a decision you would later regret.

If you don’t feel emotionally calm enough to make big financial decisions, wait. Give yourself a chance to breathe and recover. That way, when you do make investment choices, you can be more confident about them.

Define Your Goals

Another step that you need to take before you choose any investments is to define your financial goals. Not only do you need to figure out your general plans for the money, but you also need to determine a timeline for its potential use.

Some types of investments are better for short-term objectives, while others are more suited for long-term ones. For example, while purchasing stocks, ETFs, index funds, or similar investments through a brokerage may work for goals positioned a few years out, while retirement account investments don’t usually align with short-term objectives.

If you want to save for a child’s college, a 529 plan provides you with benefits you won’t get elsewhere. If your goal is to set the money aside for retirement, then putting the money in an IRA, 401(k), or similar account could be your best choice.

By understanding your goals, you can choose investment vehicles that align with the objective and timeframe involved. That way, you get the best approach for your situation.

Understand Your Risk Tolerance

All investments include some level of risk. You are never guaranteed to receive a particular return. In fact, you may not just miss out on gains; you can also experience losses.

The amount of risk varies between investment options, at times dramatically. When risk levels are higher, the potential for significant growth and losses are both elevated. With lower amounts of risk, growth and loss rates are usually both reduced.

Not everyone has the same perspective when it comes to the amount of risk they find acceptable. Some investors are bolder; they are willing to tolerate a substantial amount of risk in exchange for the possibility of significant gains. While they understand that hefty losses are also possible, they feel the risk is worthwhile.

Others aren’t comfortable with high amounts of risk, accepting lower growth potential in exchange for a sense of increased financial safety. They would instead prefer that their investments feel reliable above all else, even if that means achieving less when it comes to gains.

Before you invest, you need to estimate your risk tolerance. That way, you can choose a strategy that meets your needs.

Diversify Your Portfolio

Regardless of your goal, you want to diversify your investment portfolio. With diversification, you reduce overall risk by having a variety of stocks, ETFs, index funds, bonds, or other assets in your portfolio.

That way, if one asset experiences a problem, you aren’t guaranteed to see losses across the board. Instead, the other investments may remain stable or could potentially rise, offsetting the decrease associated with the one asset or, at least, preventing widespread losses.

Get Help from a Professional

While some investing strategies are relatively straightforward, not all types are easy to navigate, especially for beginners. If you are new to investing, working with a financial adviser or similar professional can be a smart move. Sign-up to The Motley Fool for good advice.

When you work with an adviser, they can discuss your goals with you to understand what you want to achieve. Then, they can provide recommendations or outline all of your options, answering questions about the pros and cons of investing using each of those approaches.

As you start to research financial advisers, make sure to vet them carefully. Review their credentials. See if they are commission or fee-only. Read reviews from past clients. Request recommendations from trusted family members, friends, or colleagues.

Choosing the right financial adviser is essential. That way, you can get sound guidance that you can trust, ensuring you’re able to start your investment journey with greater ease.

Do you have any investment advice for after an inheritance? Did you receive an inheritance and think people could benefit from your experience? Share your thoughts in the comments below.

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Mistakes to Avoid in Retirement

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Mistakes to Avoid in Retirement

In many finance websites, blogs, and articles, a lot has been said about how to prepare for retirement, but I believe there hasn’t been enough written about what to do when you get there. More specifically, there’s a lack of content about mistake, or mistakes, to avoid.

In this article, we’ll explore several mistakes to avoid when you reach this milestone.


Spend beyond your means

This seems obvious, but once the psychological barrier of spending versus savings is breached, people (not everyone) develop this mentality of “I saved for 40 years for this moment, why shouldn’t I enjoy it?”

You should enjoy it. You worked your butt off for it, right? There are strategic ways to do this, however. The mistake is going gangbusters right away.

  • Create a budget/spending plan – Your budget in retirement will be different than your budget before retirement. Create line items for everything, and get real granular with your discretionary spending (i.e. sub line items to breakdown where the discretionary spending is actually going).
  • Plan for healthcare – Healthcare costs, generally speaking, will be your largest expense in retirement. Plan accordingly.
  • Income strategy – More than likely, you’ll have a few different income sources (social security, pension, retirement distributions, etc.). Create a line item for each source.
  • Senior discounts – Take advantage of every single one. There might be a psychological hesitation with this, as it forces you to come to terms with your age/where you are in life
  • Spoil grandkids – Every grandparent wants to spoil their grandkids to death, but it must be done within reason. Get creative and be strategic about when and how much.

Make Quick Decisions

Another mistake is making quick decisions. Don’t do it. Any decision you classify as BIG needs to be well thought out. This could be anything like moving, downsizing, vacations, or eliminating a vehicle.

I would argue that any decision about an expense that’s not in your budget/spending plan, should be thought about for several days. My rule of thumb is a week. By then, the euphoria of such a purchase has gone away, then you think more logically about it.

Investing Aggressively

Over the years, a big mistake clients make is the desire to invest more aggressively than they should. Oftentimes, this is to compensate for an inadequate savings rate during their working years or a significant market pullback that hurt their portfolio.

While capital appreciation is still an investment objective in retirement, it’s no longer the primary goal.

This primary goal should be capital preservation. Limiting losses on what you have. This has less to do with time and more to do with your decreasing ability to go out and make more money. Allocate your portfolios accordingly.

Ignoring Estate Planning

Estate planning is a key ingredient to your financial planning recipe. It mustn’t be ignored. Every debt and asset you have needs to be accounted for, listed, and given a task for when you pass.

Estate attorneys can be expensive, but I believe it’s 100% necessary to find one you trust, so your estate is well taken care of.

Isolating Yourself

Your social life is more important than ever. Countless studies show that people with strong relationships outlive those that don’t. So the mistake here is not making your social life a priority.

Join a community, volunteer, retain, and nourish friendships. Whatever flavor of social life sounds desirable, make it a priority.

Letting Yourself Go

Taking care of your mind and body is always important, but especially now. It will keep you healthy, therefore, lowering your healthcare expenditures, but it’s also another way for you to meet people.

Go for walks with neighbors and/or friends. Join a gym. Many of which have reduced rates for seniors. Additionally, many health insurance companies have “silver sneaker” programs that offer inexpensive services and programs for seniors.

Expecting it to be easy

This is a BIG life change and the transition will not be easy.

Not only will you shift from saving to spending, but those social connections you developed over your working years can reduce in frequency and strength.

Go easy on yourself and be patient.

Taking Social Security too early

Unfortunately, there are situations and scenarios where taking Social Security Income (SSI) distributions early is necessary. However, for those of you where this does not apply, speak with a trusted advisor about optimizing your SSI strategy.

Getting Swindled

Scammers adapted. They’re smart and they know how to target susceptible people. Unfortunately, elderly individuals are inherently more at risk than the general population.

Any email, phone call, or text that you receive (unsolicited, of course) should be greeted with a fair amount of skepticism. Don’t willingly give out any pertinent information (name, DOB, social security number, etc.).

Doing it alone

A BIG mistake people make is thinking they can plan by themselves. It would behoove you tremendously to consult with several experts. Estate attorneys and financial advisors should be at the top of this list.

Do your research, check online reviews, and get testimonials from trusted contacts. Having capable professionals in your corner could set you up for success and put your mind at ease.

Related reading:

Why Asset Allocation Matters

Your Go-To Budget Guide

Why Your Will Should Be Up To Date

Your Estate and Your Family

Moving: Another State, Another Country

Why Your Will Should Be Up To Date

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With the Coronavirus making its way through countries and countless healthcare systems, it’s a good opportunity to check in with everyone about their will and general estate planning.

We’ve written a couple of posts about the finer details of estate planning, but one of the most important things you can do is make sure that you have an updated will.

Beneficiaries

A beneficiary is anyone that will receive an asset, or assets when you pass away. You will have beneficiaries listed on your retirement accounts and life insurance policies. They can also be added to brokerage accounts via a Transfer on Death (TOD) designation.

It’s important to note that beneficiary designations and TOD designations bypass probate. The assets that the deceased owned at the time of death do not need to go to court. They go directly to the beneficiary (beneficiaries) listed on the account.

So…why is it so important to keep your beneficiaries up to date? The obvious answer is because life changes all the time.

Life Changes

People get married, divorced, re-married, etc. People have kids or marry someone that already has kids. The more grim circumstance is when a beneficiary predeceases you. It’s unfortunate, but something that does happen.

When you assign beneficiaries, there is often a box you can check labeled “per stirpes”. This simply means that if one of your beneficiaries passes before you do, that beneficiaries portion would be received by their children instead.

Not only can changes take place with your beneficiaries, but they can also change with the people you’ve entrusted with your estate. Roles like the power of attorney and executor.

Again, people can pass away before you and/or relationships can fall out of favor.

When it comes to your assets, those change often too. Good or bad years in the stock market can see drastic fluctuations in portfolio value.

Moving will change your residence, but it can also change your net worth depending on the value of your new home and how much you owe on that home. Remember Finance 101? Net worth = assets – liabilities?

Consequences

There could also be consequences for not having an updated will. The wrong beneficiaries could receive assets. Your power of attorney could be your brother and not your sister.

You actually have a much higher net worth than you thought, so now your heirs will have to pay estate taxes. Had you known that, you could have taken advantage of the gift tax exclusion and shared your wealth in order to bring your net worth down to avoid taxes.

To sum things up, you need an updated will because the items within it are going to change…plain and simple.

Related Reading:

How Long Should You Keep Financial Records After Death?

Your Estate and Your Family

Where Your Property Goes When You Die

Financial Planning Basics: The Financial Pyramid

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The first time I heard about the financial pyramid, I was instantly intrigued. I had never thought about it in this concept before, but I unintentionally had been practicing this in my own life.

In finances you have to build the base before you can reach the top or it will all fall apart, hence the allegory of a pyramid.

financial-pyramid

The Base

The base of your financial pyramid should be a solid financial plan. This includes your written budget, short-term and long term goals, and how you will make your income as well as an investment plan to be implemented in the future.

You should have a positive cash flow, meaning, no longer using debt to fund your lifestyle.

RELATED: The Importance of a Personal Investing Statement

Once you have implemented the base, you can move onto the first building block: protection.


Protection

You must protect yourself from the unimaginable, so I recommend everyone have a will and power of attorney, insurances such as life, health, auto, homeowner’s/renter’s, and disability, and a basic emergency fund of at least $1,000-$2,500.

I was thankful to have my mini-emergency fund when I had some car issues because I was able to pay cash to repair them instead of having to go into debt. The overall pyramid looks something like this:
the-financial-planning-pyramid

The second building block is low-risk wealth accumulation. This would include saving for a home, retirement, and children’s college education, in addition to reducing consumer debt.

Debt Reduction

Financial guru Dave Ramsey teaches that you should get completely rid of any debt before beginning savings, although, in my opinion, you should still invest in retirement while reducing debt only if your employer offers a match.

I, myself, am in the debt reduction stage but still contribute to my retirement account since my employer offers up to a 4% match into my 401(k).

Additionally in this step, you should create your emergency savings fund. Many people believe an emergency fund of 3-6 months’ worth of expenses is adequate.

Investing

The third building block is high-risk wealth accumulation.  This includes investing. Expanding on the second block, in this stage, you will max out your retirement accounts and then build a non-registered investment portfolio.

Once you have built your net worth to an amount sufficient to fund your lifestyle and retirement, you can move to the next stage of investing– speculation (also known as speculative investing.) In this stage, you invest money into investments such as start-up companies.

This is very risky, so you don’t want any debt by this stage. Also, you should only invest a small portion of your total investments into speculation. Also in this stage, you’ll want to begin tax planning, especially as your retirement investments increase.

Estate and Charity

The final building block is wealth distribution. You’ll gift and spend the money you have earned. As well as plan your estate for future generations or charity upon your death. Since your net worth increased quite a bit since you first started the financial planning pyramid, you should update your will and/or trust.

Finally, once you’ve got these basics nailed down, it’s time to hire some help. One approach a lot of millennials use is robo-advisors. A robo-advisor is a machine that uses various theories about portfolio allocation to make investing decisions. If you’re interested in a critical review of this, consider checking out Roboadvisorpros.com, they have a good article on the topic.

If you aren’t into trusting your cash to a computer, consider signing up with Personal Captial.  They’ve pretty much become an industry leader among the newer financial planning firms.

If you’re’ going to use them, please use this link or click on the banner below.  It will help keep the lights on here at The Free Financial Advisor.

personal-capital-pyramid
For help getting your financial pyramid in order, check out these great articles.

10 Best Financial Planning Blogs
Best Free Financial Advice
Become a Financial Expert Step-by-Step

Protecting Assets from Probate

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In a time when your loved ones are grieving, often they are tasked with organizing, coordinating, and sometimes fighting over your estate.

Make it easier on them and plan ahead using some of the tools below.

What is Probate?

Probate is the process by which a deceased person’s will is validated, and the general organization and distribution of that person’s estate.

During probate, if a person died with a will, the court validates the will and then formally appoints the person named in the will to direct (executor) the deceased person’s estate. This includes collecting assets, paying any outstanding taxes and debt, and distributing whatever is left to the beneficiaries listed in the will.

If a person died without a will, the court will appoint an executor to collect the assets, pay the taxes and debt, and distribute the remaining assets according to state law. What needs to be done with any real estate is determined by the county that person lived in.

The probate process is expensive, so anything you can do to speed up the process or avoid it, the better. You will go through probate whether you have a will or not, though it takes a lot more time when the individual died without a will.

Transfer on Death Designation

A transfer on death designation also referred to as a payable on death designation, is something you add to an account so your assets immediately go to your beneficiaries when you pass away without having to go through probate.

A TOD designation can be added to a brokerage account, individual stocks and bonds, and bank accounts.

When the individual with the TOD designation passes, the beneficiaries usually have to create an account in their name in order to transfer the assets.

Will

A will is a legal document, usually created by an estate attorney, in which the individual or couple list who will be the executor of the estate, guardianship of any minor children, arrangements for surviving pets, assets and property owned, insurance policies, beneficiaries, and what is to be done with the assets and property when the creators have passes.

A will lists all of the property and assets, even the ones that do not need further instructions for distribution to the beneficiaries (retirement plans, life insurance policies, TOD designated accounts).

Trust

A trust is a legal entity created by an estate attorney where the grantor (person creating the trust) appoints a trustee (or several) to follow the rules of the trust.

In a trust, the grantor can very specifically list what they want to be done with their assets while they are alive and/or when they pass away. They can list each asset separately and which beneficiary receives that asset or they can list them all at once and pick how those assets will be distributed to the beneficiaries.

They also have the ability to dictate how the care and financing for a minor, or a child with disabilities will be implemented.

Trusts are costly to set up but are a very useful estate planning tool. It’s also the only way to avoid probate, as long as the trust is the owner of the assets.

Life insurance proceeds

The majority of the time, life insurance avoids probate. There are two exceptions, however.

If the beneficiary named in the life insurance policy passes away and there are no contingent beneficiaries, the estate will receive the proceeds. The other is if the estate is directly named as the beneficiary.

Joint ownership

There are two types of joint ownership:

  • With rights of survivorship – when one of the owners dies, the surviving owner receives the decedent’s portion.
  • Tenants in common – when one of the owners dies, their portion is included in their estate. The other joint owner(s) have no right to that portion.

Conclusion

Probate is time-consuming and expensive. For the sake of your loved ones, namely the ones who will be taking care of things when you pass, plan ahead and make things as easy as possible.

I previously wrote an article about where your money goes when you die that goes into much more detail about wills and trusts. Give it a look.

If you’d like to learn more about estate planning, send me an email! I’d be happy to answer any questions you may have.

Please visit our website for our disclosures.

 

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