April is Financial Literacy Month. Financial literacy is crucial in the estate planning process, which is why we want to take the time to blog about it! You may be asking yourself, what is financial literacy? Financial literacy is knowing and navigating your personal finances. This includes budgeting, saving, effectively managing money, and planning your future expenses. [Read more…]
January is National Financial Wellness Month. Take some time this month to sit back after the holiday craziness and do a check-up on your finances. It is important to set some achievable financial goals for the new year, and it is also a good idea to prepare for unplanned future expenses. Don’t know what goal to set? Don’t worry! We put together a list of 5 financial goals for our clients to choose from.
Consider this: imagine a classical orchestra with each musician given different sheet music. No matter how good the musicians are, you’ll end up with a cacophony. The same holds true for your team of financial and estate planning professionals. If there is no communication between the professionals you work with, you could wind up with a financial mess. This is highlighted in a recent article written by the staff of WealthCounsel, an estate planning networking, education and legal software company that helps estate planning attorneys practice excellence.
Many of us don’t consider ourselves to have a team of professionals. But think about those you’ve worked with in the past: insurance agents, CPAs, financial advisors and estate planning (or other) attorneys. For those owning a business, you might also have business managers or other professionals you work with regularly. Without communication between all these advisors, you could end up with a financial mess now and a disaster later for any heirs.
Think about what could happen if your estate planning attorney isn’t aware of a life insurance policy. If so, you may have designated your spouse as primary beneficiary of the policy with any children as contingent beneficiaries. While that’s pretty standard, what happens if you and your spouse pass away at a young age and before your children are grown?
Legally speaking, the insurance company is required to distribute the proceeds of the policy according to your beneficiary designation form, giving your young children the death benefit. While you would want your children to have access to any money they might need, you might also want a more experienced adult to assist them. Trust planning would allow for a trustee to come alongside them and manage the money for them until they come of age, or even thereafter.
What about financial planning? There may be assets with complex rules when it comes to inheritance, such as IRAs and other retirement accounts. With collaboration between your estate planning attorney and your financial advisor, you can ensure those assets take advantage of tax planning techniques and pass to your heirs in an efficient manner. If both these professionals are in communication with your insurance agent or accountant as well, they may notice other, more advanced planning opportunities, such as creating an Irrevocable Life Insurance Trust (ILIT) or charitable remainder trust. No communication could mean missed opportunities.
This is one of the reasons why we at Family Estate Planning Law Group strongly encourage our clients to hold a Family Care Meeting. This meeting gets the whole team together: your financial professionals, as well as those you’ve asked to become trustees or take on other fiduciary roles in your estate plan. It also introduces your financial and estate planning team to one another—giving them the opportunity to collaborate on your behalf and find new planning opportunities—but without any need to discuss assets or inheritances with heirs.
When we hold a Family Care Meeting, we highlight the basics of the plan, the advantages of the planning you’ve done and outline the roles and responsibilities of the fiduciaries. It’s far easier for your loved ones to hear about the plan now, before there’s a medical emergency or a death. Studies have also shown that heirs often tear assets out of trusts or away from financial professionals if they’ve never met the professional before. Often, that can lead to detrimental financial transactions or even exposing assets to creditors or divorce proceedings, if assets are torn out of a trust.
Giving heirs the opportunity to hear about how you’ve created a plan to take care of them after you’re gone can be one of the most important ways you care for them. And allowing for collaboration between your financial and estate planning professionals can mean an even more effective estate plan for you! For more information about the Family Care Meeting and the importance of collaboration between your financial professionals, explore our website and contact us to schedule your consultation today!
Reference: WealthManagement.com (March 24, 2017) “Planning is a Team Sport”
For many couples, one spouse manages the majority (if not all) their financial affairs. That might entail managing assets, bank and investment accounts, credit cards, or dealing with a financial planner, accountant or estate planner. When both spouses are alive and well, this works well, but what happens if the spouse managing financial matters passes away? We’ll take a look at some of the issues that arise in such situations, as well as some ways to prevent them.
You might still have plenty of time to take your required minimum distributions (RMDs) from traditional IRAs and 401(k)s, according to Kiplinger’s “FAQs About Required Minimum Distributions for Retirement Account,” but you’ll want to do it sooner rather than later. If you’re older than 70 ½, you must take them by December 31st and delays could mean lost opportunities. Remember that you aren’t the only one making this transaction if you wait till the end of the year, and you’re hardly alone if you wait until the last minute. It’s best to start planning now to make the most of your options.
Here’s some additional information to help you meet your deadline for IRA withdrawals and some special rules for 401(k)s.
The rules about when to start taking Social Security benefits are confusing to many. For people who file for benefits after their full retirement age but before they turn 70, a surprise comes when their initial benefit checks are smaller than they had anticipated.
Delayed-retirement credits increase Social Security benefits each month after you reach full retirement age (66 for those born between 1943 and 1954). If you accumulate the maximum credits by waiting until age 70, your first check will be for the full amount of those credits. However, if you claim your benefits prior to age 70, the size of the first check will be less and it won’t include the full power of the credits you’ve earned.
The simplest definition of a reverse mortgage is, “a special type of mortgage allowing a senior homeowner to tap the equity of their home and eliminate the monthly mortgage payment.” As long as the borrower lives in the home, they can’t default on the loan or be forced to move, so long as they maintain the home, pay property taxes and provide the required homeowner’s insurance. When the borrower no longer lives in the home, for whatever reason, the loan is repaid.
The Daily World, in “Reverse mortgages—your questions answered,” explains that in order to qualify, the homeowner must be 62 years of age or older and pass a credit check. Anyone applying must also use the home as their primary residence.
You may have watched first-hand as a beloved parent’s money management skills went from smart to questionable. Scam artists take advantage of this, stealing homes and emptying bank accounts of trusting seniors. Research shows that as we age, certain skills, including financial savvy, diminish. The problem is, seniors often still think they are able to manage their money, despite all evidence to the contrary.
US News explains in “8 Ways to Safeguard Your Financial Life as You Age,” that folks of just about any age should take action when they’re young to protect themselves from financial errors later in life. We’ll look at a few of these.
When it comes to making financial decisions, you want to arm yourself with as much information as possible. One often overlooked source is your Form 1040, advises CNBC in “Use your tax return for more than paying taxes.” Sharing this document with your estate planning attorney will allow him or her to get a clearer picture of your financial situation, as well.
Lines 1-5 (Filing status). If you need to check a different box for your filing status, you should review your estate plan. If you’ve gotten married or divorced, you’ll need to update your estate plan and the beneficiary designations for life insurance and retirement plans.
Line 6c (Dependents). An increase in the number of dependents is a good reason to update your estate plan! This might mean a change to your cash flow for college savings and insurance needs, too.
It’s not flattering, but it’s true: people spend more time planning vacations than they do on personal finance or retirement planning, according to Business Insider’s article, “A financial adviser shares a 5-step checklist…” That’s why many professionals advise taking the time to conduct a review of your financial and legal health. This should include assets, liabilities and estate planning documents. You may have had a lot of changes in the past year, you may have big plans for 2017, or you may have nothing on the horizon, but the habit of an annual review can provide great insight, help your planning and protect your lifestyle.
Here are some important financial steps to take for 2017.
