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Posts Tagged ‘estate planning’

Saturday was a beautiful spring day in New England. Temperatures were moderate.  No humidity.  It was bright and sunny with languid puffy clouds hanging in the noon time breeze.  A beautiful day to be outside especially after the gloomy weather that Mother Nature has thrown at us during the winter and spring so far. A beautiful day for gathering with family and friends and celebrating the milestones of life whether a birth, a marriage, a graduation or connecting with others.

It so happened that I was attending the funeral celebration for a friend and client. Celebration is the right word.  While sadness always is part of these things, it truly was more fitting and proper to highlight and remember the qualities that we all should aspire to.

In this case we were gathered to celebrate a sister, aunt, daughter and friend who lived fully during her short 50 odd years.  A global traveler, talented cook and baker, gifted woodworker and gardener and charitable sort who always thought of others less fortunate.

Regardless of one’s religious persuasion, the celebrant of this service, a Roman Catholic priest, expressed it best when he said that many of us think a long life is synonymous of a good life.  But in reality, he emphasized, the teachings of many religions focus on the quality of life as opposed to its length. And this person, my friend and the sister of my very best friend, truly made her short time in the temporal world full and rich.

Like a light switch, one moment someone’s vivacious smile is there and in the next instant it is gone leaving us only with the warm glow of memory.  Whether it is better to have a sudden death or have time to prepare for the inevitable is a constant debate.  In this case, my friend was there one moment and in the next she was gone.

Inevitably, when confronted with such sudden tragedy, we tend to think of our own mortality.  I recall after the Twin Towers came down in NYC, how families were drawn closer together even if they didn’t have a direct connection to the victims of the terrorist attack.  And the interest in insurance and estate planning was at a high point.  Lawyer friends reported doing more wills and guardianship plans.  Insurance agents were fielding calls for new insurance policies.

It shouldn’t take a tragedy – whether public or personal – to get people motivated to act in their best interests but we are frail humans and tend to look at the present disregarding the future.

But we do that at our own peril.

Someday is Today

A person with friends is truly rich – remember “It’s a Wonderful Life.” While I truly believe that sentiment, it doesn’t mean abdicating one’s responsibility to care for family and friends by skipping the planning.

It is frustrating to be a financial planner and in trying to deal with such issues receive either blank stares or promises to deal with it later. At other times there is the all-encompassing answer to all: I’m All Set.

  • Someday, I’ll draft a will.
  • Someday, I’ll check my insurance coverage.
  • Someday, I’ll talk to my brother (or sister or friend) about guardianship of the kids.
  • Someday, I’ll deal with all these financial planning issues.

Someday is now.

Planning for the inevitable is not for you.  It is to help others.  It is selfish to think that things will just take of themselves.  Sure, plans will together.  But the stress on the family, friends and loved ones left to deal with picking up the pieces is not something you should burden someone with lightly when taking a few steps will help smooth the transition.

  1. At the very least, get a Will.  You don’t need to be rich to have one of these.  Better yet, make sure you have a Durable Power of Attorney in place so that your financial affairs can be coordinated.
  2. Review and update your Will periodically. Even if you do have a Will doesn’t mean that it still works for you.  Times change and so do tax and estate laws.
  3. Include written instructions.  Do you want to be buried or cremated? Who do you want to have certain sentimental, personal effects?
  4. Have a list of online passwords for your banking and social media accounts in a safe but accessible place.  Without them your heirs will have trouble dealing with some of your financial matters or your social media accounts could possibly be shut off.  And since most of our lives and communications are now so much online, your family might not be able to notify your extended network of your passing unless they can get online.
  5. Review your insurance as part of a comprehensive financial needs analysis regularly.  Too often people simply think that what they have in place covers them regardless of the simple fact that personal circumstances change and dictate changes in coverage.
  6. If you own property and have a mortgage or have young kids who would be raised by someone else when you’re gone, make sure you have insurance that at least covers the bills.  This means having a term insurance policy for at least the balance of the mortgage.  And if you have kids, figure out the costs to raise them (and pay for college maybe) and put a policy in place to equal that.  Otherwise, you may be leaving a spouse, friend, family member or business partner with trying to carry the costs without benefit of the resources.
  7. Check and update the beneficiaries on insurance policies, annuities, company-sponsored 401ks and personal IRAs. Maybe you had a divorce and never updated this so your ex-spouse may be the unintended recipient.  Or new kids, nieces or nephews have been born since the last time you did this.

In my banking and financial planning careers, I have seen both personally and professionally the impact on survivors left behind to pick up the pieces.  There was the client who needed to refinance to help pay for an elder parent’s funeral.  There was the friend who battled bravely against cancer but eventually succumbed leaving behind a wife, a three-year old toddler and a mortgage.

The pain caused by the loss of a loved one doesn’t need to be compounded by the stress, frustration and confusion of having to unexpectedly deal with financial challenges.

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All your ex-es may live in Texas as the country song says but do you really want your hard-earned money to follow?  And you may be a generous sort but would you rather have your wealth pass on to your family or Uncle Sam?  More examples of smart people doing dumb things when it comes to estate and legacy planning.

What do you think of when someone says “estate plan?”

If you think that it’s only for “old” people or those with lots of money, then think again.  If you have someone or something you care about, then you need a plan regardless of age or the amount of money involved.

Honey, I forgot the kids …

Think of Ana Nicole Smith and her infant daughter.  Think about the King of Pop, Michael Jackson. Take away the money and there is still the drama about custody and guardianship for the children that could have been avoided with a proper plan.  And this sort of thing happens daily with families of much lesser means but the same need for care of a loved one.

There is an old saying:  Those who fail to plan, plan to fail.

What Estate Planning Really Means to You and Your Family

The easiest definition of estate planning is controlling how and who gets what you have when you pass away or become disabled.

As estate attorneys in the Esperti Petersen Model define it:

Estate planning provides the ability to:

  • Give what I have
  • To whom I want
  • When I want
  • The way I want.

Legacy planning takes it a step further and provides for the transfer of wisdom, memories and experiences along with the material wealth.

Most estate attorneys and financial advisers start from the point of view about the money and taxes.  Most clients are categorized into three groups:

  1. Individuals
  2. Married with assets above the federal estate tax exemption (now through December 31, 2010 at $3.5M)
  3. Married with assets below the federal estate tax exemption.

But a more client-focused and value-oriented planning approach to estate and financial planning begins with conversations about what is important to the client.  Only then will a client understand the context of a plan as well as why there may be need for changes to keep it current and aligned with the goals expressed by the client.

Too often, I hear that “I’m all set” because “I took care of it” or drafted a will when their college senior was about 2 years old.

In an increasingly complex world with changing state and federal tax codes, fluctuating asset values and a litigious culture, it is even more important to create a plan and routinely review it.  (If you were traveling on a highway cross-country, you wouldn’t simply turn on cruise control and take a nap, would you? I hope not. Even if you have good insurance, are you sure who’s going to get the proceeds?)

17 Major Mistakes

There are more than 17 significant common  mistakes that people make regarding estate planning.  These include failing to coordinate the financial plan, improperly structuring life insurance policies, choosing the wrong executor, improperly gifting assets, failure to properly create and fund trusts and the list goes on.

We could talk about Qualified Personal Residence Trusts, Installment Sales to Defective Grantor Trusts, Family Limited Partnerships and Credit Shelter Trusts.

But that’s all legalese.  It’s sort of like asking someone for the time and they tell you how to build a watch.  That doesn’t matter to you as much as knowing the time.  There are lots of tools in the tool kit of a qualified estate and financial planner.  You probably don’t care about which tool to use as long as the right tool recommended by a professional does the job.

What happens when you deal with real people? (1)

Jack and Jill and a Boy Named Dale

Jack recently turned 32.  He and Jill have been married for nearly three years. Dale was born nearly 13 months ago.  When not at work as UPS delivery driver, he enjoyed getting his heart pumping by cycling with a local riding club.  During a weekend ride as the group of cyclists were descending a hill quickly, a car being driven by a dentist who was late for a client appointment overtook the riders thinking that he had enough time and distance to safely clear the group.  He abruptly turned right onto the street where his office is located.

Unfortunately, the other car coming from the opposite direction to the stop sign on the street the dentist was driving onto was being driven by a young driver who was distracted by her incoming text message which lead her to cross over her lane.  When the dentist’s car hit her at the corner, it caused the cyclists to swerve in confusion.

In the resulting melee, Jack went down hard breaking his collarbone and vertebrae in his lower back leaving him without the ability to walk more than a short distance and unable to lift more than a couple of pounds.

Richard and Anne and the Day that Changed Everything

Richard and Anne lived in an old colonial overlooking the river in a quaint New England town.  Richard had a successful position with Cantor Fitzgerald, one of the world’s premier bond trading shops located in the World Trade Center of New York City.  While Anne managed the home front and their two rambunctious boys age 7 and 4, Richard would commute by plane to meet clients or for meetings at the corporate offices in New York.

By all accounts, they had an ideal life.  They had family and close ties to the community.  Their weekends were filled with home improvement projects on their home or one of the three investment properties they rented out.

Their world was turned upside down a little after 9 AM on September 11, 2001 when Richard’s plane was flown into one of the World Trade Center towers.

Paul and His Long Lost Love

Paul had been married to Bertie for more than 5 years when Bertie asked for a divorce in 1967 fed up by Paul’s late night carousing. After a couple of years of the single life, Paul found Carol, a long lost love from high school days.

Flirtations became something more and Paul and Carol got married and lived a nice life together.

After more than 30 years of working at his job with the state, he decided to retire. But before he turned in his papers, Paul died suddenly from a heart attack.

Although the loss of Paul, her long time love, was devastating, the news that followed was even worse.  It seems that Paul had never quite gotten around to fixing the beneficiary listed on his pension so the estate of his ex-wife Bertie, long since dead, would be going to Bertie’s younger, sole-surviving sister from Texas leaving Carol without an income source for her retirement.

Sal and Pauline

The romance that would result in seven children, thirteen grandchildren and 4 great-grandchildren began when Sal and Pauline met at a USO dance at Fort Devens in 1943. Before shipping overseas with his Army unit, they got married.  More than sixty years later, they enjoyed the retirement years shuttling between family visits and weekly dances at the local senior center.

Then Sal noticed that Pauline started forgetting things.  With that many kids and grand kids, it wasn’t hard to imagine forgetting all their birthdays but soon she started forgetting to eat and dress.

Eventually, her doctor gave Sal the hard news that Pauline had Alzheimer’s and despite his best efforts she would need professional care.

After Sal and his sons brought Pauline to the nursing home, the reality hit home.  Despite their frugal lifestyle, Sal and Pauline had a sizeable nest egg and home.  After the first 120 days in the nursing home, Sal would need to start writing checks in the amount of $7,500 each month for Pauline’s care.  A lifetime of hard work and saving was being threatened.  What could he do?  Was there any other way?

Lots of Things Can Happen

Divorce.  Disability. Law Suits. Remarriage. Car Accidents. Business Partners.

If you think that these things can’t happen to you, think again.  Seek out the help of a good planning team that can coordinate these pieces.  While no one can predict what may happen, putting together a proper plan will help you and those you love with picking up the pieces after a personal loss or tragedy.  

Value-Oriented Estate Plan Foundation

(1) Note:  All names have been changed and situations presented are a compilation of various facts.

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Market news got you down?  Not sure you want to go to the mailbox? Afraid your 401k has turned into a 201k? Afraid you’ll have to start searching for spare change in your couch to pay for college tuition?

Times are scary. And it is in times like these that all of our preconceived notions and assumptions get tested.

And they have been sorely tested these past 15 months or so.  Who is one left to believe or in what to believe?

This is why it is important to get back to basics and retake control over those things one truly can control.

It is in this spirit that I am launching a weekly series of teleconference calls starting next Wednesday (March 11).

During these trying times it may be easy to give up and say that there is nothing one can do.

But that would be wrong.  There is plenty you can do to get back on track.

First thing is to take control over those things you can control.

And to do this I will outline a Road Map and review the basic Rules of the Road.

 

Aimed at getting people back on course and in control of their finances, the Financial Focus Road Maps series will explore a variety of topics that may be impacting your personal bottom line.  Investing is only one part of a successful financial plan.  Yes, we will address investing strategies for volatile markets but we will also get back to basics. This series will also focus on issues like estate planning for newly married couples, elder care finances, maximizing cash flow to pay off debt, paying for college without busting what’s left of your retirement nest egg, evaluating employer-sponsored benefits, choosing insurance and understanding mortgage options in the new financial order.

 Financial Focus – Navigating through Volatile Times” will be the inaugural topic of this free recurring series starting Wednesday (3/11/09) from 7 PM to 8 PM. In this program, I will highlight the low- or no-cost strategies you can implement RIGHT NOW to protect what you have and map your fresh start.  

Please join me. 

This is a FREE series but space is limited to the first 95 participants.

You can register at http://events.linkedin.com/Financial-Focus-Road-Map-Series/pub/41788 or by calling me directly at 978-388-0020 or steve@focus-capital.com.

Future topics will include:

·         Breaking Up is Hard to Do – Financial Planning for Divorce and Beyond

·         The Special K Diet – Options for Nursing Your 401k Back to Health

·         IRA Triage – Making Your Retirement Money Last When the Market Won’t Cooperate

·         Catching a Falling Knife – How to Position a Portfolio to Preserve and Prosper in Tough Markets

·         The Sandwich Generation – Taking Over Family Finances for Aging Parents

·         Campus Treasure Hunting – Paying for College Without Going Broke

·         The Banker’s Secret – How to Live Debt Free and Gain Financial Freedom

In this format I will present each topic, sometimes introduce a guest speaker and then open the lines up for comments, questions and further discussion. Participants will also receive a link to download supporting educational materials and resources related to the evening’s topic.

Participate from the comfort of your own home or wherever else you are with a cell phone.

To participate in the live discussion, please call (712) 432-0800 and use the participant access code: 802437# approximately two minutes before the start of each teleconference.  There are no costs for using the conference line but you will be responsible for your own toll charges to connect.

Recordings of the program and resource materials will be available for free download at Steve’s blog, www.moneylinkpro.wordpress.com or www.stevestanganelli.com.

For more information, contact me directly at 978-388-0020 or 978-621-8268 (cell) or steve@focus-capital.com .

Financial Success Begins with Focus.

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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 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 without adversely impacting qualifying for government aid programs.

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.

Manage Your “Windfall”:  People may mistakenly believe that that as smart as they are in other areas in life that they can make investing decisions after going through an emotionally-trying event like divorce.  It’s important to not be blinded by the suddend windfall one might receive.  There are long-term issues to consider.  And as tempting as it may be to blow off some steam with a vacation, a new car or truck or even a wardrobe, people have to think about the day after tomorrow.

That’s why it’s important not to go overboard with a little needed R&R but stash the majority of what may be received into cash to help supplement the emergency fund, cover debt service and any future moves in career or home. By meeting with a financial planner professional soon after the divorce, one can outline short- and longer-term goals to get prepared. Save any drastic changes to investment allocations or decisions to when things get settled down (maybe 3 or 6 months after the divorce is final).

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