Category Archives: Financial Planning

Transfer on Death

Who inherits when you die?

Most married people own their home, their bank account or their investments jointly as a couple. The most common designation on an investment account is “joint tenants with right of survivorship” (abbreviated as JT/WROS). What this means is that each has full power over the account. Either can deposit, withdraw or make changes in the account. And when one of them dies, the other automatically becomes the full owner of the account.

There are some accounts that cannot be owned as a couple. An example is an IRA, or a retirement account like a 401k. When the owner of this kind of accounts dies, the assets go to the persons named as “beneficiaries.” Therefore it’s important to review beneficiary designations on retirement accounts when life changes take place like death or divorce.

But what about accounts that are in the name of just one person without a named beneficiary? This is very often the case of people who were never married, are divorced, or widowed. Under those circumstances, when the owner dies the assets in these accounts are distributed under the terms of a will. This requires a process known as “probate.”

Probate is the legal process whereby a will is “proved” in a court and accepted as a valid public document that is the true last testament of the deceased.

There are two ways of avoiding probate. The first is place your assets in a trust and designate who will receive the assets on death. This requires an estate planning attorney.

The second way is to add a Transfer on Death (TOD) designation to the account. A TOD designation names the person (or people) who will inherit the account. Since the assets go to the named beneficiaries directly, probate is not required. The other advantage is that it does not require a lawyer so there is no cost.

Review your investment accounts, your IRA and retirement accounts and your estate planning documents on a regular basis. It can prevent a lot of problems later.

Tagged , ,

Who needs a financial advisor?

Investment Approach

Not everyone needs a financial advisor. But if you are not sure about how your financial assets should be invested, if you make major errors when you invest, you are a candidate for getting professional financial advice.

Fees are the main barrier that keeps people from getting the kind of advice that would improve their financial lives.

But just as doctors get paid for keeping us healthy and lawyers for protecting our interests, getting good financial guidance is worth every penny. Solving our financial problems has a huge impact on our lives. Making sure we don’t run out of money during retirement that can last decades is often people’s biggest fear in life.

People who are in good shape financially may not need assistance. But too many times people need guidance but are reluctant to pay for what they need. Instead, they search the internet, or ask friends or family who are often not knowledgeable. And even if they get good advice, friends and family are not going to create a plan and make sure that the plan is followed. That’s not their job.

That’s were a professional investment advisor comes in. He’s paid to create a plan, to design a portfolio for you, manage that portfolio and alert you in case the plan needs adjusting. Like a physician conducting a periodic physical, a financial professional keeps track of your progress and fixes it when things go wrong.

If you think you may need help, find an advisor in whom you have confidence, pay him a fair fee for his services and you’ll have the peace of mind knowing that your financial future is in good hands.

 

Tagged ,

A different tax saving strategy

Tax loss harvesting allows people to reduce their taxable income by selling securities that have gone down in value. Capital losses can be used to offset ordinary income or to offset realized capital gains.

But if an individual dies with a capital loss that they have not used, the person who inherits these securities may not be able to use these losses.  There is a way to use these capital losses if it’s done right.

For example, If Joe buys a stock for $200 and it declines to $100 and then gives it to daughter Sue, her cost basis is $100 (the value when he gifts the stock). If she then sells it for $100 she cannot claim a loss.

However, if Joe gave the stock to wife Mary who then sells it for $100 she can claim a loss of $100 (the original cost $200 – $100 = $100 loss).

This is a quirk written into the tax code -Section 1015(e) – specifically designed for gifting of depreciated assets to a spouse.

This example only works if the assets are gifted before death. If Fred dies with the depreciated stock the tax cost basis is its value as of the date of death.

Tagged , ,

Planning Makes a Difference

Five reasons why you should work with us to create a retirement plan.

  1. Helps you focus on your goals.
  2. Address your concerns.
  3. Identify threats to your retirement plans.
  4. Feel more confident about your future.
  5. Provides a roadmap to your retirement.

Click on the link for more: Planning Makes a Difference

 

Tagged , ,

5 Reasons why you should work with a professional to create a retirement plan

  1. Focus your goals in retirement and how you will pay for them.
  2. Address your concerns and expectations for retirement.
  3. Identify things that could pose a threat to your retirement and manage them.
  4. Feel more educated, confident and in control of your financial future.
  5. Help you navigate the complexity of financially moving into retirement.

Let us help you create the plan that will give you confidence to face decades in retirement.

Tagged ,

Financial Planning is the new employee benefit.

pile-of-hundred-dollar-bills-750_0

Some of the most progressive companies are introducing a new employee benefit: company-paid financial guidance.

Concerned about their employees’ retirement funds, and acknowledging the increasing scarcity of skilled employees, companies are looking for a benefit that is relatively inexpensive while making a big difference in employee satisfaction.

Financial insecurity troubles most people, from the entry-level employee to the highly compensated professional. Half of U.S. households are at risk of being unable to maintain their standard of living in retirement, according to one study. For most people, financial stress is a distraction from work and leads to lower productivity.

Money is the single largest source of stress for employees, ahead of work, relationships or health.
Employers are concerned about the impact employees’ financial problems are creating problems at work. Here’s what employers say they are most concerned about:
• Lack of retirement readiness 16%
• Paying down debt 15%
• Lack of emergency savings 13%
• Other 3%

Without professional guidance, most people take a seat-of-the pants approach. But that leaves them and their families wondering how they will survive the decades that they will spend after leaving the work force.

Many companies offer a retirement program, like a 401k, but are ill-equipped to do more than provide a menu of investment choices. To fill the information gap, more companies are offering financial-wellness programs. Others are considering such a move.

A program offered by Korving & Co. is a series of programs, provided by a CFP® (Certified Financial Planner™) professional. These are designed to educate participants about debt, investing, and retirement income planning.

Providing employees with professional education about these issues, on company time, in a relaxed setting is an economical way for companies to help their employees reduce stress. It also creates a great deal of good will and loyalty on the part of employees.

Tagged , , , , ,

Savers vs. Investors

The last two decades has been devastating for savers, especially retirees.

A Wall Street Journal article noted that retirees continue to get squeezed and are concerned about making their savings last. While the Dow Jones Industrial Average (DJIA) index has tripled since the trough of the financial crisis, the average one-year CD has not paid more than 1 percent since 2009.

The DJIA stood at 26,405 (as of 1/25/2018), a more than 20 percent increase since the 2016 election, and the value of the digital currency. As a result of a strong stock market performance, stocks may have become an outsized portion of investors’ portfolios, thereby necessitating some rebalancing.

This means that investors who have benefited from the stock markets rise may find themselves taking more risk than they realize.

If you are concerned about stock market risk, call us.

 

Tagged , , , , ,

The Great Wealth Transfer: Husband to Wife

Let’s face it, women outlive men. We’ve heard this before, but this presents a unique challenge for planners.

In the traditional family the husband is often responsible for investments. Many financial planners never talk to the wife until the husband dies. That’s when we find out how much or how little the wife knows about the family finances.

While the financial services industry focuses on the transfer of wealth from parents to children, the greatest wealth transfer is from husband to wife.

Approximately 76 million baby boomers are steamrolling toward retirement, and among them 58 percent of women of retirement age are going to need financial guidance. This is especially true of the do-it-yourself investor. In too many of these cases, the wife is just unaware of the husband’s investment strategy. She may not even know the value of the family investments or even where they are located.

Sometimes the situation is complicated by children still living at home, and by ageing parents who depend of the surviving spouse for care and support.

These are just some of the reasons we published a set of books: Before I Go, and the Before I Go Workbook.

Copies of these books are available at Amazon.com or you can contact us.

Tagged ,

Retirement: there’s good news and bad news.

First, the good news. According to a leading investment firm, current retirees are doing just fine. They studied a large group of retirees. They’re doing very well.  The group that retired about 20 years ago have about 80% of their retirement savings intact. In fact, one-third of these retirees have more money than when they retired.

But here’s the bad news. These retirees are different from those retiring today or those just beginning their careers. Their experiences are different and so are their resources.

If you have been retired for 20 years that makes you about 85 years old. These older retirees grew up during the “Great Depression” and that had a lifelong impact on them. Their experience made them lifelong savers. Many also worked for companies that provided their employees defined benefit pension plans.

This means is that many of these pensioners have two sources of income: a company pension and social security. Living within their means, they were able to leave their personal retirement assets untouched.

Some of the more affluent may have bought vacation homes which have appreciated in value. Others have begun gifting to their children and grandchildren.

We can’t infer from their success that newer retirees will do nearly as well. There are several reasons why. Except for government employees, few private sector employees have defined benefit pension plans. Social Security is under pressure and will simply not have enough in the Trust Fund to continue to pay retirees at the same rate as current retirees. Medicare is also running large deficits which will result in higher medical expenses for the elderly.

New and future retirees will not have private pensions, face lower social security income and higher medical expenses. Only saving and investing wisely will save them.

For more information contact us.

 

 

Tagged

Six Charitable Moves to Consider Before Year-End

The tax changes in the Tax Cuts and Jobs Act (TCJA) are extensive and far-reaching.  The standard deduction will be raised starting in 2018, which means that going forward taxpayers will need to provide more itemized deductions in order to receive the tax benefit of excess deductions.  If you are charitably inclined, you should to consider these six charitable planning moves before the end of the year given the impending changes to the tax code.

 

If you itemize your taxes:

  1. Donate highly appreciated stocks or mutual funds. The stock market has been on a terrific run, and you may have highly appreciated stocks or mutual funds that you are holding on to because you do not want to pay capital gains taxes.  By donating appreciated investments, you avoid paying the capital gains tax and can take a deduction for the fair market value of the investments.  If you are considering gifting mutual funds, do so before they declare their year-end dividends and capital gains and you will save on taxes by avoiding that income as well.  While your deduction is limited to 50% of your Adjusted Gross Income (AGI), you can carry the unused portion to future tax years.
  2. Consider bumping up this year’s contributions: essentially, make contributions that you would have made in 2018 before the end of 2017. The rationale here is that your tax rate is likely to be lower next year than it is this year due to the TCJA, so every additional dollar given this year is deducted against your higher current 2017 rate.
  3. If you want to create a legacy or are unsure of where to contribute, use a Community Foundation or Donor Advised Fund (DAF) to max out your contributions. For example, if you give $50,000 to a DAF, you can deduct the entire amount now but designate your gifts and charities over time.  You can invest the portion of your DAF that is not immediately donated to a specific charity, creating the potential for even greater giving in the future.
  4. If you are considering an even larger donation, or are interested in asset-protection, you may want to consider creating either a charitable lead or remainder trust. With a charitable remainder trust, you get a deduction for your gift now; generate an income stream for yourself for a determined period of time; and at the expiration of that term, the remainder of the donated assets is distributed to your favorite charity or charities.  A charitable lead trust is essentially the inverse of the remainder trust: you get a deduction for your gift now; generate an income stream for one or more charities of your choice for a determined period of time; and at the expiration of that term, you or your chosen beneficiaries receive the remaining principle.  The deduction you receive is based on an interest rate, and the low current rates makes the contribution value high.
  5. Donate your extra property, clothes, and household items to charity. Make time to clean out your closets, spare bedroom and garage, and donate those items to one of the many charitable organizations in our area.  CHKD, Salvation Army, Purple Heart, ForKids, Hope House are just a few organizations that will take old clothes, appliances, household items and furniture.  Some of them will even come to you to pick up items.  Make sure to ask the charity for a receipt and keep a thorough list of what you donated.  You can use garage sale or thrift store prices to assign fair market values to the donated items, or you can use online programs (such as itsdeductible.com) to figure out values.

 

If you are over age 70 ½:

  1. Make a Qualified Charitable Distribution (QCD).  Essentially a QCD allows you to donate all or a portion of your IRA Required Minimum Distribution to a qualifying charity.  The donated amount is not included in your taxable income and also helps to lower your income for certain “floors” like social security benefit taxation and Medicare Part B and Part D premiums.  QCDs are very tax-efficient ways to make charitable donations.
%d bloggers like this: