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Protecting Assets from Probate

March 25, 2019 by Jacob Sensiba 1 Comment

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.

 

If reading this blog post makes you want to try your hand at blogging, we have good news for you; you can do exactly that on Saving Advice. Just click here to get started.

Filed Under: Estate Planning, Planning Tagged With: Estate plan, Estate planning, Financial plan

5 Jaw-Dropping Financial Advisor Interview Questions

January 24, 2012 by Average Joe 14 Comments

Some people need professional help–not the type I’ve been told to find–but financial help. I’ve met many of these people firsthand. Over my years working as an advisor, it was difficult watching people walk into my office grossly underprepared for a meeting with an advisor know what to expect. I could tell by the look in their eyes that they hoped I was honest and actually knew what I was doing.

I know the look because it’s the same one on my face when I’m talking to an auto mechanic.

Luckily, you’ve come to the right place. There are five questions that are important to ask a financial advisor.

But is that all I need to ask? Five questions?

Nope. Hopefully these start you on the right track to building a dialogue with the advisor about your personal financial circumstances and dreams.

Whether you’ve found the name of an advisor from a friend (good idea), by their reputation (scary), or even through an internet, mailing or yellow pages search (most frightening), you’ll want to still ask these specific financial advisor interview questions. You have seen in the media that well respected names with degrees, certifications and mountains of clout have ended up as bad people. Although these questions won’t make sure that you won’t get ripped off, they will give you a better idea regarding your advisors methods and whether they’ll fit with your long term and short term plans.

  1. Tell me about your education. Listen to their experiences, any testing they’ve taken and professional credentials, such as a Certified Financial Planner (CFP), Chartered Financial Consultant (ChFC) or one of a host of other designations. For “vanilla” financial planning, the two listed above (CFP and ChFC) are the two broad certificate designations. Others, such as a Chartered Retirement Planning Counselor (CRPC) or Chartered Financial Analyst (CFA) either are more narrow designations or focus on one aspect of a financial plan.
  2. How long have you been practicing? Suze Orman recommends hiring an advisor who’s been practicing for at least ten years. Back when I started, I thought that advice was complete baloney. Once I’d been an advisor for ten years, I completely agreed with her. Why? Because there are so many nuances and situations that are new in the wide world of financial planning that for the first ten years you’re often running into brand new situations. Your financial life is important enough that you shouldn’t have your paid professional help “practicing” on you.
  3. How does your financial planning process operate? Here’s the scoop: you can throw investment darts as well as any advisor, so you aren’t hiring him for that purpose. People hire an advisor not for the 80 percent of stuff you can do easily yourself, but for the 20 percent that he can do with far more accuracy and efficiency than you.
    • The base of any advisor’s work should be encompassed in a written financial plan that’s backed up by hard data. You’ll use this to mark your progress toward your goals and to hold the advisor accountable to their promises.
    • This plan can only be written if you’ve taken home some type of survey about your expenses, income, assets and liabilities.
    • Finally, you don’t want an advisor who’s only concerned with your assets (unless that’s all you’re concerned about….but I dare anyone to tell me that your budget, estate plan, insurance needs and tax situation don’t all tie into your asset mix). Your plan should place weight on those areas of your financial house that need work now. If you’re talking budget and he’s talking Roth IRA, you know it isn’t a match.
  4. Who will be working with me? In larger practices, experienced advisors often have less-knowledgeable associates who work with some clients. I don’t want to hire one advisor only to find out later that I’ll end up working with another. Make sure you know how the relationship will work before entering into an agreement. The advisor might also have specialists that help out in areas outside their knowledge base. Ask how referral arrangements work between the advisor and any other professionals they recommend.
  5. How are you compensated? Advisors are paid three different ways:5 Financial Advisor Interview Questions
    • Fee only. Some people prefer these advisors because they’re only paid to dispense advice. You decide whether to take it or not and generally implement solutions on your own. Although I understand this thinking in a perfect world, I’ll tell you that the people who hired me did so NOT because they weren’t smart enough to plan on their own. On the contrary, I worked with people who were CEOs and CFOs of corporations, experts in taxation, engineers and entrepreneurs. These people had drive. I learned that they didn’t just hire me for knowledge. They hired me to make sure they took the time to implement the plan.
    • Fee based. These advisors charge a fee for planning, but may charge an additional fee for managing assets OR receive commissions for some products. I was this type of planner, charging anywhere from $750 per year to $5,000 per year, then collecting both fees and commissions. Critics say these types of advisors “double dip” on charges, and you can end up paying large sums of money. That’s all correct, if my client wanted it that way. I ALWAYS told my clients how to avoid my fees and commissions, and often helped them set up accounts at other places. Once again, it depended on the client. My job was to identify strengths and weaknesses. If they wanted me to babysit their money or there was a product through me that helped better than those elsewhere….I was paid for that additional support.
    • Commission only.  These advisors will perform financial planning analysis for free, and are only paid when you implement solutions through them. Critics (like me) believe that these plans have to be slanted toward the methods supported by the advisor’s company, because that’s the only way they’re going to bring home a paycheck. I must say, though, that I knew some commission-only advisors who were top people in their field. They would only support a product they sold in the correct situation, and would actively refer people away from their product if it didn’t fit the need.

As you can see, it’s difficult to find a “perfect” set of financial advisor interview questions for your needs. But by asking these five questions, you’ll gain an understanding of the process the advisor uses, their fee structure and how their practice operates. You’ll also see the advisor’s personal history and gain an understanding of their personal feelings. This is a good start. Once you’ve asked these five questions, move toward your goals and find out how you like the advisor’s answers. It’s like hiring a coach: if you don’t listen to them, it was a big fat waste of money.

Want more questions? Try these resources:

NAPFA.org (National Association of Personal Financial Advisors) How to Find a Financial Advisor

CFP.net (Certified Financial Planner Board of Standards) Questions to Ask When Choosing a Financial Planner (.pdf document)

Photo attribution: Icon Checklist (Wikimedia Commons, Ckepper), Discussion (Wikimedia Commons, HBS1908)

That’s my story, now it’s your turn: have you interviewed an advisor before? Any good questions or stories from that experience that our readers might like?

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Filed Under: Hiring Advisors Tagged With: Certified Financial Planner, Chartered Financial Analyst, finance, Financial adviser, Financial plan

What Did 2011 Teach You About Money?

December 28, 2011 by Average Joe 7 Comments

What’s one of my favorite activities this last week before the New Year? Once I’ve finished watching the Swamp People marathon, I like to turn the mirror on the preceding twelve months and determine what lessons I should remember to avoid future pitfalls. We won’t count lessons like “always check your fly before you walk into the bank” or “some people don’t appreciate grocery store coupons as stocking-stuffers.” Those are lessons we should have learned long ago, but refused.

No, there are bigger lessons that we should have learned in 2011. Not all of them had to do with money.

Here are five of my favorites:

Protect Your Downside

When I was a financial advisor, I was appalled by the sheer number of people who wanted to avoid insurances. 2011 taught us that bad things happen when we least expect it. Whether it’s the awful house fire in Connecticut this weekend, massive tornadoes in Alabama and Missouri, or the nuclear meltdown in Fukushima, Japan, we were reminded in the media that bad things happen suddenly. Because we don’t know when or where disaster is going to strike, it’s a good idea to put your financial house in order while times are good.

Related Ideas for Next Year:

– Build an Emergency Reserve

– Review Insurances

– Finish the Estate Plan

Know Your Money Managers

If you didn’t believe it when Bernie Madoff ran off with carts of other people’s money, the situation at a money management firm called MF Global should be another wake up call. After over $1.2 Billion (with a B) dollars went missing, the head of the firm professed to Congress that he has no idea what happened to the money. While I’ll admit that it’s impossible to know how a manager is keeping your assets safe, handing all of your money to one person is asking for disaster.

This doesn’t mean you should keep all of your funds in an FDIC insured savings account, but it does mean that you should perform due diligence.

2011 Here are some good questions you should be asking yourself:

How many different funds is my money spread among?

If all of your money is under the umbrella of one mutual fund, one asset manager, or one trader, you’re asking for trouble. This isn’t the same as having a single advisor. Good advisors will recommend you spread your money among many different managers, partly to ensure your safety.

How are your dollars protected against someone running off with your money?

Insurances such as SPIC cover investors, but you should know how it works.

What is the objective of each manager?

This question won’t help your funds from being stolen, but it can help you identify whether your advisor is actually recommending investments with your end goals in mind. If a fund is too aggressive, you may lose

How long have the managers of my funds been around?

Asking these questions won’t guarantee that your money won’t get stolen. Nothing can stand against a crafty criminal who’s working hard to steal your money. But you don’t have to make it easy for him. And, with a little planning, you can minimize your losses.

Related Ideas for Next Year:

– Meet with Your Advisors and Ask Questions

– Go to the FINRA BrokerCheck website to review your advisor’s record

– Diversify Your Financial Managers

Don’t Wait on Legislation to Make Decisions

Wow. Was there ever a more politically contentious year? Although there have always been (and will always be) fights between political parties, Washington has divided into two well-armed camps and compromise is a dirty word. It seems that the only legislation being passed are stop-gap measures to keep the government open. For the most part, these same issues will be voted on again in a matter of months.

When I have discussions with people about financial planning, I’ll frequently hear that someone is “waiting to see who wins the next election/whether the bill passes/how taxes are going to shake out/what the market is going to do.”

These are excuses.

There will always be new legislation, new market conditions, new headlines. An effective financial planner doesn’t wait to see what’ll happen. He adjusts to change.

Related Ideas for Next Year:

– Review Your Financial Plan

– Put a New Savings Plan in Place

Your Diploma Won’t Buy You a Job

Whether you agree with the Occupy movement or not, we’ve learned that there are many, many people out there who paid money they didn’t have for a degree, only to find out that there wasn’t a market for their services. Historically, people follow their dream through college and then beginning thinking about which career to enter. Sadly, it’s been proven to us now that before seeking a degree, we have to consider a cost-benefit analysis before deciding on a degree.

This doesn’t mean that you shouldn’t follow your dream. Certainly, you stand a better chance of being successful in your chosen profession if you love what you do. Following the theory that we only have one life to live, you owe it to yourself to establish yourself in a fulfilling career. But you should do some research about the career and how you plan to enter the market before you take on lots of debt.

An example: If you were to open a Mexican restaurant in a town full of other Mexican restaurants, you’re bound to fail to the leading establishments unless you can quickly identify how you’re different and how the competition is vulnerable. Armed with this knowledge, instead of taking out a loan to build another “me too” restaurant, an entrepreneur may decide that a Tex-Mex offering with live entertainment and only waiters fluent in Spanish is a better idea. You may change the hours or the decorations to stress your strengths. Will these moves guarantee success? Nope. But it’s a far better plan than taking out a loan and hoping to succeed, which is what many college applicants now do.

Related Ideas for Next Year:

– Review cost/benefit when taking on debt

– Build written plans to evaluate major financial decisions

Your Banker Might Not Be Your Buddy

Ah, my favorite topic: Bank of America. Like Darth Vader on steroids, BofA decided (without any thought about their reputation) that a five dollar debit card fee was a good idea. This time, protests by consumers and bloggers helped block the move. But the message is still clear: banks are searching for creative ways to replace income lost in failed mortgages and new credit card oversight rules.

Historically, bigger banks have been able to help you in ways that smaller firms couldn’t. Before I woke up, I used Bank of America for one reason: they had a larger network of ATMs than other banks. Then I discovered a little bank that would pay other bank’s ATM fees (I’d give you the name, but they no longer do this for new customers). Online banks are becoming highly competitive. As we move into the mobile banking age, the need for a ready ATM machine is dwindling. It’s time to review your bank and decide if it’s still competitive.

Related Ideas for Next Year:

– Review Your Bank Fees

– Explore Other Banks to Determine If There’s a Better Fit

There you have it. These were the five big lessons I learned in 2011. I’m sure there were many, many more.

Now it’s your turn: What were your biggest financial lessons from 2011?

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Filed Under: Meandering, Planning, successful investing Tagged With: 2011 financial year in review, 2011 money lessons, Bank of America, Bernard Madoff, Bernie Madoff, Financial plan, Investment management, MF Global

I’ve Joined the Yakezie Challenge

December 21, 2011 by Average Joe 10 Comments

(((Readers – today we take a break from our normal routine of aimless rambling and wandering prose to actually discuss something about blogging. I know, we don’t know anything about blogging either, but if you can stay awake through this post, I promise we’ll be back to regularly scheduled programming after this.)))

…hello, hello, is this thing on? ….uh…..hi, everyone, my name is Joe.

Hi, Joe.

….and, uh, well….I just wanted to say that I’m taking the Yakezie Challenge.

I think I’m ready. We’ve been practicing for weeks, getting our form “just right” (or more like right enough). We’re ready to take the plunge.

If I slip and say “we”, like I just did, that’s because I have a partner.

We together are taking the Yakezie Challenge. Yakezie is a group of financial bloggers who selflessly help each other promote the personal finance blogging space and who help promote each other’s blogs. I’ve read so many great posts by Yakezie members and Challengers that it’ll be our pleasure to promote more of these people and their work. In the near term, you’ll begin seeing many of them appear on our blogroll (on our Resources page).  

For the Yakezie community, let me introduce the FFA team. We’re kind of like cousin Eddie’s family on Christmas Vacation, only our Winnebago is a little dirtier.

I’m Joe, a 16 year financial planning veteran. Not only did I manage $60M working with around 200 families, I was on television and radio in my hometown dispensing financial advice. If you’ve been one of the three readers of our blog, I want to thank you.

Second, I have a partner, TheOtherGuy. He’s a ten year 13 year veteran of the financial planning industry. Generally, we keep him in the back room with a pile of code and hashtags. From time to time we loosen the chain enough to let him reach the keyboard when we need another article that actually is meaningful. Normally this will be on insurance or investing.

Although I’m declaring that we’re beginning the challenge, I already feel a strange kinship to several people in the Yakezie community already. You’ve made me feel very much at home, even though at times I haven’t deserved it. We had a ton of misconceptions about blogging when we fired up WordPress for the first time. Here are but a couple:

1) We thought “if you write it, they will come.” Here’s our understanding of how this silly “blogging thingy” worked: you threw stuff on a page and people begged you for more.

Instead, we’ve learned that there are two disciplines here (or more). You have to be able to write succinct, edible prose, but you also have to know how to expose your content to other people. I won’t be the first blogger to admit that I had no idea what a “back link” was and I thought affiliate links were connections to other people’s blogs.

2) We believed that financial blogging was a pretty small discipline. Holy $%^@ there are a ton of blogs out there. In the big scheme of things, there aren’t when compared to other fields, but I thought we’d be in a group of about 100 bloggers chasing eyeballs.

This is all the more laughable because we’re the “do your homework” kind of people. I was never the “here, I’ll take your financial plan and do it for you” kind of advisor. I was always the “I’m going to teach you what you need to know to do this yourself” dude. So, we’ve done our homework on financial planning, but ignored the blogging aspects.

Lesson learned.

What is the challenge?

– We promise to blog at least twice per week (we’ll be keeping our regular four posts per week schedule you’ve come to know and endure.)

– We promise to promote other Yakezie blogs. This will be easy. I have fun with our Blog Post of the Week! every Friday, and like making the rounds to other blogs to read what everyone else is thinking about.

– We’re going to work to place our blog in the top 200k as based on Alexa ranking in the next six months. Currently, today, we’re 549,616. We’ve been a long way, crossing the 4 million mark around October 1 and the 2 million mark at the beginning of November. It’s been rewarding to see that people will read posts whether we’re sober or talking Oompa Loompas.

Thank you to those who’ve been very supportive so far. You know who you are (I’m WAY afraid I’ll forget someone to begin mentioning names). There have been so many people helping us when we’ve had questions.

I’d also like to end with this note: if you’re a Yakezie member or challenger, don’t feel compelled to promote our site and work unless there’s something you really like. I promise, we’ll do the same. I love to network, but only when it actually is meaningful. I know that there are products I just couldn’t recommend in a million years.

As you get to know us, I hope you’ll want to send readers here for advice and humor. That’s great. We’d like to prove that this is a home for good, quality content and earn your respect.

For TheOtherGuy and I, it’s been a short, strange trip so far. I’m sure the adventure is only going to get better from here.

Cue the Muppets!

– Joe

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Filed Under: blogging, irrelevant stories, Meandering Tagged With: Alexa Internet, Blog, Financial plan, free financial advice, free financial advisor, Yakezie

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