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Discussing Your Estate with Family

Posted by Frank McKinley on
 June 21, 2021
  · No Comments

Having this conversation before your death, when choices can be explained, will help avoid the potential relationship damage that can
happen if no one is aware or understands
your decisions.

Choose the Right Person for the Right Job
While you are likely to consider the feelings of your family members, try to take the emotion out of your decisions and select the people who will be best at certain tasks. Once people understand the various roles and what they entail, they tend to understand why a particular person was selected. The roles can range from
being the executor of the estate, to the guardian of your children, to making medical decisions on your behalf.

Prepare the Appropriate Documents
Once you have determined who will handle the key roles, you will want to get the proper paperwork drafted and notarized. These documents may include: your will, trust, 
durable power of attorney, healthcare power of attorney, and guardianship designations.

Prepare for the Conversation
You’ll want to take the time to think through this conversation and anticipate the questions people will have.

You will want them to understand what your goals are for the estate plan, what the various roles are and what they entail, and why certain people were chosen for certain roles. It is important to think through your family dynamic
in approaching this conversation. Should it be a more formal conversation that includes an attorney or financial advisor to help explain the roles and your choices? Should it be more casual discussion around the dinner table with only family?

Either way, you will want to make sure you set ground rules to avoid confrontation. You will want people to express their thoughts but if it becomes argumentative, let them know the
meeting will be canceled until it can be
discussed rationally.

Keep the Conversation Going
Let your family know that this will be an ongoing discussion as circumstances change, such as new marriages, new children, divorce, etc. By having regular conversations, you can avoid the “Mom would have wanted this” argument. Setting this expectation can help prevent future family tension.

Distributing Personal
Possessions

Dealing with major assets may be so time consuming that you don’t even think about your personal possessions, leaving distribution
decisions up to your heirs. But disputes over personal possessions are more apt to cause conflict. Some items to consider include:

Take time to think about who should receive treasured personal possessions. You might want to detail your wishes in a separate letter to your heirs to prevent disagreements.

Ask your heirs what possessions are important to them. Otherwise, you may inadvertently give a treasured possession to one child without realizing its importance to another child.

Don’t distribute assets based on arbitrary criteria. You don’t necessarily have to give your jewelry to your daughter or  your tools to your son.

Devise a method for heirs to distribute personal possessions. After you have determined how to distribute your most valued possessions, detail a method for heirs to distribute the rest of your possessions. It can be as simple as having heirs take turns selecting items or flipping a coin.

Financial Thoughts

Previously active investors who are unaware that they have experienced a decline incurred roughly a 15% loss in financial wealth. Inactive investors experienced about 6% in financial losses. More than half of the average loss was attributable to a decrease in the value of stocks, mutual funds, and investment trusts (Source: AAII Journal, November 2020).

The Employee Benefit Research Institute analyzed 401(k) plan balances for consistent participants for the years 2010 through 2018. The average 401(k) plan account balance increased at a compound average annual growth rate of 13.9% from 2010 to 2018, for an average increase from
$63,756 to $180,251. The median account balanced increased 17.3% over the same time period, to $90,015 at the end of 2018. Two thirds of 401(k) participants’ assets were invested in equities, with younger participants having a higher allocation to equities than older participants. Fourteen
percent of participants were in their 20s and 13% were in their 60s (Source: AAII Journal, November 2020).

Categories : estate planning, Financial Services, Wills

Do You Really Need a Will?

Posted by Frank McKinley on
 May 24, 2021
  · No Comments

Many people believe they don’t need a will. But how valid are the more common reasons for not preparing a will?

Your estate is too small. Some believe that if their estate won’t be subject to estate taxes (in 2021, your taxable estate must be over $11.7 million before estate taxes would be owed), there is no need for a will. However, a will’s purpose is not to save estate taxes, but to:

Provide for the distribution of your assets.
Without a will or other estate-planning documents, your estate will be distributed in accordance with state law, which may or may not coincide with  your desires.

Name guardians for minor children.
Without a will, the courts decide who will raise minor children when both parents die.

Select an executor for your estate.
The executor assembles and values your assets; files income, estate, and inheritance tax returns; distributes assets; and accounts for all transactions. You will typically be

in a better position, based on family relationships and individual qualifications, to decide who should be named executor of your estate.

All your property is jointly owned.  When one owner dies, jointly owned property passes directly to the joint owner, regardless of provisions in a will. Also, the unlimited marital deduction allows you to leave any amount of your estate to your spouse without paying estate taxes. Thus, many married couples use joint property ownership as their sole estate planning technique. However, individuals with very large estates may save
estate taxes by distributing some assets to other heirs.

A living trust will distribute your assets. Only assets actually conveyed to the living trust are controlled by the trust document. Typically a pour-over will is also needed, which places any asset not held by the trust at your death in the trust.

You expect your estate to grow significantly in the future. Some feel it is premature to plan their estate while it is being built. However, a will can be changed. In fact, you should periodically review your entire estate plan to see if changes in your personal situation, preferences, or tax laws require changes to your plan.

The Financial Aspects of a Death

The emotional trauma of dealing with a loved one’s death can be devastating. If you also have to handle the financial aspects, it can seem  overwhelming. Following is a checklist to consider:

Your most immediate concern will be to notify family and friends of the death and to make
funeral arrangements.

If a surviving spouse and/or minor children are involved, evaluate their means of support and determine whether care for the dependents needs to be obtained.

Locate any safe deposit boxes and follow  necessary procedures to have them opened.

If the deceased was employed, contact his/her employer to start the process of collecting any
outstanding pay, life insurance proceeds, or other benefits.

Locate important documents, including wills, trusts, deeds, investment records, insurance policies, business and partnership arrangements, and other evidence of assets and liabilities.

Meet with an attorney to discuss the deceased’s estate matters.

Financial Thoughts

Individuals in retirement face five risks: outliving their money (longevity risk), investment losses (market risk), unexpected health expenses (health risk), unforeseen needs of family members (family risk), and retirement benefit cuts (policy risk). A recent study found that the greatest risk is longevity risk followed by health risk. However, retirees believed that their greatest risk was market risk. Many discounted longevity risk and health risk because they believed they would not live long enough to outlive their savings or to accumulate a large amount of health costs (Source: Centerfor Retirement Research at Boston College, July 2020).

A recent study found that investors tend to flee volatility and chase stability, but end up with bad timing with respect to stock volatility. This leads to high exposure to stocks when volatility is high and low exposure to stocks when volatility is low, resulting in returns with higher volatility (15% to 20% over 10- year periods and 70% to 75% for 30-year periods) than buy-and-hold-returns (Source: AAII Journal, October 2020).

Categories : Blog, estate planning, Financial Services, Wills
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5 Facts about Estate Planning

Posted by Frank McKinley on
 February 19, 2021
  · No Comments

When it comes to the future, most Americans have a blind spot: estate planning. Maybe it’s because of an unwillingness to think about mor-tality or a sense that wills and trusts are only for the wealthy that people put off this important financial planning task. Whatever the reason, there are a lot of estate planning slackers out there. That’s a problem, because not having an estate plan could put your family’s financial future in jeopardy and cause other serious consequences. Here are five facts everyone should know about estate planning. 

1. Everyone Needs an Estate Plan

Yes, estate planning is absolutely necessary for the wealthy. But the rich are far from the only ones who need to think about the future. Pretty much everyone needs an estate plan, regardless of how old they are or how much money they have, and can benefit from putting documents in place that clarify who should receive their property after they die, what kind of healthcare they’d like to receive if they were incapacitated, how surviving family members will be provided for, and more. Estate planning is especially important for those who have children, complicated family situations, special needs family members, or own certain types of assets (like art, intellectual property, or a small business). 

2. A Will Is Not Enough

Wills are an important part of estate planning, but they are just one piece of a larger puzzle. Wills clarify who should receive your assets after you die. But you may also need other documents, like a living will, which explains what kind of medical treatment you’d like to receive if you can’t make decisions on your own, a healthcare proxy (a person who will make 

healthcare decisions on your behalf) and a power of attorney (a person who is authorized to make legal decisions on your behalf when you’re not able to). In some cases, you may want to set up trusts to provide for your heirs or charities. An estate planning attorney can help you understand which estate planning documents are necessary in your situation. 

3. Your Beneficiary Designations Supersede Your Will

Many people assume that the instructions in your will take precedence over any other directions regarding their estate. That’s not always the case. Beneficiary designations on retirement accounts, life insurance policies, and bank accounts aren’t superseded by your will. So, even if your will leaves your entire estate to your surviving child, a retirement account that names your brother as the primary beneficiary will still go to your sib-ling. That’s why it’s important you review your beneficiary designations regularly and update them when your life changes (birth of a child, divorce, etc.). 

4. You Can Leave More to Your Heirs if You Structure Your Estate Properly

If you have a sizable estate —

Estate planning is more than just creating a will

one that exceeds the $11.7 million federal estate tax exemption in 2021 — you may want to look into strategies that will allow you to pass that money to your heirs in a way that avoids estate taxes. There are numerous legal techniques you can employ to do this, such as transferring assets and property to a trust, making gifts during your lifetime, setting up family foundations, or leaving money to charity. Even those with smaller estates should keep taxes in mind. Did you know, for example, that life insurance proceeds pass tax-free to beneficiaries? That’s important to keep in mind when you’re considering how to make sure your spouse and children will be provided for if you die unexpectedly. 

5. It’s Important to Talk to Your Family about Your Estate Planning Decisions

Disagreements among family members about how to distribute an estate are far from uncommon. Often, those squabbles break out over unexpected or unclear provisions in the deceased’s estate plan. If one member of your family feels he/she isn’t getting his/her due, it can make the process difficult for everyone. Drawn out legal battles that eat away at the wealth you’ve accumulated — and wanted to leave to your heirs — may result. Even if you think your family can handle your estate civilly, it may still be a good idea to sit down as a group or with individual family members to discuss your wishes and explain your estate planning choices. If you plan to leave more of your wealth to one child than the other, make sure your children know about that so they don’t end up feeling blindsided and betrayed after your death.

If you would like more information or to discuss your financial concerns

Click Here
Categories : estate planning, Financial Services

Six Ways to Get Your Financial House in Order During the Virus

Posted by Frank McKinley on
 February 9, 2021
  · No Comments

Many families think they have a sound “financial plan” because they own investments or have established a saving strategy for retirement.  This is a good start but it’s incomplete. There are many components to ensuring your financial future and getting your “house in order” is the first step. What do I mean by that? I’d like to share 6 ways you can accomplish this. Let me explain…

Do you know what the three leading causes of death are in the United States? Many people correctly guess cancer and heart disease as numbers one and two. What is number 3? Accidents? Alzheimer’s? Strokes? You may be surprised to learn that the third leading cause of death in America is medical malpractice! The doctor’s fault? Nope- our fault. We go to the hospital totally unprepared. The average American over the age of 65 will take 11 different prescription drugs this year. You’re in an accident and brought to the hospital, the hospital administers a pain reliever and the combination of what you are taking and what they have given you- kills you. Have you ever had a heart attack? Do you carry nitroglycerine with you? Have you been warned that the combination of Cialis and Nitro will kill you? Is this a risk you are willing to take? Or maybe when they ask you what prescriptions you are taking you mispronounce Omicor when you meant Amicar. Yes, medical malpractice is third leading cause in America. We don’t want this to happen to you, so it is time to get your house in order!

Resolution number 1.  Don’t go to the hospital unprepared!

Do you remember the story about Terri Schiavo? At 26, Terri had a massive coronary, was resuscitated but experienced irreversible brain damage that left her in a coma. Fifteen years later, the Supreme Court made the final decision to remove the feeding tube. This long-term ordeal would not have happened if a simple healthcare directive and a living will had been in place. A misconception we frequently encounter is that healthcare directives are only for older adults. We’ve seen clients experience unexpected, lifechanging circumstances at all ages and believe that health care directives should be a priority for everyone. Please don’t let this happen to you or a loved one; get your house in order!

Resolution number 2.  Sign a healthcare directive and living Will.

What do Steve McNair, Abraham Lincoln, Pablo Picasso and the musician Prince have in common? They all died without a Will. Steve McNair’s mother was removed from the house he had given her because there was no Will to prove he had given it to her- I’m pretty sure that was not his intent. Having this document is essential to ensuring your wishes are carried out but it is one of the most frequently postponed documents to be put in writing. Your Will protects you and ensures that your future wishes for your estate are carried out. According to the Virtual Attorney, 32% of Americans would rather do their taxes, get a root canal, or give up sex for a month than create or update their Will! Even though I am not an attorney, I can help you facilitate this- let me help you get your house in order!

Resolution number 3.  Create or update your Will.

In 2005, Anne Friedman, a former school principal, died suddenly of a massive heart attack. She had accumulated over $900,000 in her Teachers’ Retirement Fund but never named anyone as her designated beneficiary. By law, her surviving spouse would have been entitled to the money. However, in 1978, in a previous job, before she was married, she had filled out a designated beneficiary form naming her mother, her uncle and her sister as her designated beneficiaries. Her mother and uncle had since passed away, but her sister was still living. By law, the sister was entitled to the money, which she received, and didn’t share a dime with the now destitute husband. We see this every day. Proceeds from Life Insurance, 401(k) plans, and IRAs are being left to the wrong beneficiaries because the owners never thought to update them.  Your financial documents must be regularly reviewed and evaluated as your life evolves, particularly when it comes to your beneficiaries. Marriages, divorces, births, deaths and other major life events can all warrant changes. These documents are too important to leave unattended. Let me review these for you.

Resolution number 4.  Review and update beneficiary designations with life changes.

How many of you own a business?  How about those of you that have a real estate investment?  Better yet, how many of you have children driving a car? Do you have proper insurance?  Have you fully limited your liability? Are your investments titled properly to limit liability? If you have trust documents, titling of property, insurance coverage(s) and other liability documents, also need to be regularly reviewed. I can help you do this.

Resolution Number 5.  Regularly review legal/liability documents.

Frederick Vanderbilt, J.D Rockefeller, JP Morgan, Franklin Roosevelt, and Elvis Presley all died without an estate plan. Please re-read that list. Some of the most successful, intelligent, and powerful people in America did so much for so many- they failed, however, to protect all the wealth they had created. Although we can’t predict the future, it’s important to have a comprehensive plan in place for how your money and other assets should be distributed when needed.  Your life stage will determine the needs of your estate plan. If you’re young and single, your plan may only include a few items, such as a Will, beneficiary designations and medical and financial powers of attorney. If you have substantial wealth, you may need one or more trusts to control how your assets are taxed, managed and distributed.

Resolution Number 6.  Establish an Estate Plan.

It’s critical to remember that financial planning is not solely based on investment planning or picking the right insurance coverage. While this must be done properly, there are many other vital areas that get overlooked or forgotten. Keep your financial house in order by regularly reviewing your plan and ensuring that you have the fundamentals in place. By this time next year, you’ll be glad you did.

If you would like more information or to discuss your financial concerns
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Categories : Blog, estate planning, financial planning, Financial Services

Financial Rules of Thumb

Posted by Frank McKinley on
 January 11, 2021
  · No Comments

Rules of thumb are designed to provide quick guidelines for your finances. However, you shouldn’t blindly follow them without giving
thought to your personal circumstances. Some of the more common
rules of thumb include:

Save 10% of your gross income. While this will give you a good start, it’s typically the minimum, not the maximum, you should be saving. Analyze how much you’ll need for your financial goals, and then work backwards to calculate how much you should be saving.

Plan on spending 80% of your pre-retirement income during retirement. This may be true if you don’t plan to be very active during retirement, but more and more people expect retirement to include extensive travel and expensive hobbies. On the other hand, if you’ve paid off your mortgage and your children have finished college, you may need less
than this. Review your individual situation to determine how much
you’ll need.

Set the percentage of stocks in your portfolio to 100 minus your age. With increased life expectancies, this can result in a portfolio that is too heavily weighted in income investments. Set your asset allocation based on your risk tolerance and time horizon for investing. Stocks should be considered for long-term financial goals of 10 years or more.

Keep three to six months of income in an emergency fund. While an emergency fund is a good idea, how much you keep in that fund will depend on your circumstances. You may need a larger fund if you are the sole wage earner in the family, work at a seasonal job, own your own business, or rely on commissions or bonuses.

A smaller fund may be required if you have more than one source of
income, can borrow significant sums quickly, or carry insurance to
cover many emergencies.

Pay no more than 20% of your take-home pay toward short-term debt. Once considered a firm rule by lenders, you may now be able to obtain loans even if you exceed this amount. Try to reduce your debt or at least reduce the interest rates on your debt.

Keep your mortgage or rent payment to no more than 30% of your gross income. While you can obtain a mortgage for more than that, staying within this rule will help ensure you have money to devote to other financial goals.

Refinance your mortgage if interest rates decline by 2%. This rule of thumb assumes you’ll pay significant refinancing costs, including points, title insurance, appraisal fees, and other fees. However, many lenders now offer refinancing deals with significantly lower costs.  Thus, you should assess whether it makes sense to refinance when mortgage rates decline by as little as half a percent.

Obtain life insurance equal to six times your annual income. Different individuals require vastly different amounts of insurance, depending on whether one or both spouses work, minor children are part of the family, or insurance is being obtained for other needs, such as to fund a buy-sell agreement or to help pay estate taxes. Thus, you should  determine your precise needs before purchasing insurance.

Most financial rules of thumb should not be followed without first considering your individual circumstances. Please call if you’d like to address your needs in any of these areas.

If you would like more information or to discuss your financial concerns

Click Here
Categories : Blog, estate planning, Financial Services, Life Insurance, Retirement

Estate Planning for Families with Children

Posted by Frank McKinley on
 October 7, 2020
  · No Comments
October-2020-newsletter

 

Categories : estate planning, Newsletters
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