Articles for April 2017

Have a Plan, Not Just a Stock Portfolio

Diversification still matters.  One day this bull market will end.

In the first quarter of 2017, the bull market seemed unstoppable. The Dow Jones Industrial Average soared past 20,000 and closed at all-time highs on 12 consecutive trading days. The Nasdaq Composite gained almost 10% in three months.1

An eight-year-old bull market is rare. This current bull is the second longest since the end of World War II; only the 1990-2000 bull run surpasses it. Since 1945, the average bull market has lasted 57 months.2

Everyone knows this bull market will someday end – but who wants to acknowledge that fact when equities have performed so well?

Overly exuberant investors might want to pay attention to the words of Sam Stovall, a longtime, bullish investment strategist and market analyst. Stovall, who used to work for Standard & Poor’s and now works for the Center for Financial Research and Analysis (CFRA), has seen bull and bear markets come and go. As he recently noted to Fortune, epic bull markets usually end “with a bang and not a whimper. Like an incandescent light bulb, they tend to glow brightest just before they go out.”2

History is riddled with examples. Think of the dot-com bust of 2000, the credit crisis of 2008, and the skyrocketing inflation of 1974. These developments wiped out bull markets; this bull market could potentially end as dramatically as those three did.3

A 20% correction would take the Dow down into the 16,000s. Emotionally, that would feel like a much more significant market drop – after all, the last time the blue chips fell 4,000 points was during the 2007-09 bear market.4

Investors must prepare for the worst, even as they celebrate the best. A stock portfolio is not a retirement plan. A diversified investment mix of equity and fixed-income vehicles, augmented by a strong cash position, is wise in any market climate. Those entering retirement should have realistic assessments of the annual income they can withdraw from their savings and the potential returns from their invested assets.

Now is not the time to be greedy. With the markets near historic peaks, diversification still matters, and it can potentially provide a degree of financial insulation when stocks fall. Many investors are tempted to chase the return right now, but their real mission should be chasing their retirement objectives in line with the strategy defined in their retirement plans. In a sense, this record-setting bull market amounts to a distraction – a distraction worth celebrating, but a distraction, nonetheless.

Mike Moffitt may be reached at Phone# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Stock investing involves risk including loss of principal.

The economic forecasts set forth in this material may not develop as predicted.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – money.cnn.com/2017/03/31/investing/trump-rally-first-quarter-wall-street/index.html [3/31/17]

2 – fortune.com/2017/03/09/stock-market-bull-market-longest/ [3/9/17]

3 – kiplinger.com/article/investing/T052-C008-S002-5-reasons-bull-markets-end.html [4/3/14]

4 – thebalance.com/stock-market-crash-of-2008-3305535 [4/3/17]

Using an IRA Trust

What is it?  What kind of benefit could it provide?

Seemingly everyone has heard of an IRA, but few people know about IRA trusts. Perhaps more people should, for an IRA trust may provide a way to “stretch” IRA assets for decades to benefit multiple generations.

An IRA trust is simply a revocable living trust designed to hold IRA assets. It will continue to house them after your death, but that will not prevent you from distributing those assets to your heirs. This is because an IRA trust also contains one or more sub-trusts, which can be designated and customized for your beneficiaries.1

At your option, these sub-trusts can be made lifetime dynasty trusts (sometimes called generation-skipping trusts). Dynasty trusts are complex, but they can potentially allow your grandchildren and great-grandchildren to receive distributions of IRA assets. The distributions may occur decades from now. That may be exactly what you prefer; you may want to give your IRA assets to your grandkids when they are in their forties instead of their twenties.1,2

Alternately, you can draft the sub-trusts as accumulation trusts or conduit trusts. An accumulation trust accepts the Required Minimum Distributions (RMDs) from the IRA, and the trust may only distribute them to the beneficiary at the discretion of the trustee. A conduit trust can pay out IRA RMDs to the beneficiaries as soon as the trust receives them (and as the trustee permits).1

IRA trusts are designed to guard against two things happening to your IRA assets. If your children or grandchildren just inherit your IRA, they could ask the IRA custodian to pay out its entire balance to them in a lump-sum distribution. That would waste the chance to “stretch” the invested IRA assets. In an IRA trust, a trustee oversees the IRA assets, effectively serving as a barrier to such a decision. In addition, since the IRA assets are parked within a trust, they are out of the reach of “predators and creditors,” ex-spouses, and the courts.1,3

You can also set up an IRA trust sub-trust as a special needs trust to benefit a disabled adult. Funds from a special needs trust will not impact the government assistance that person receives.3

Since an IRA trust is a revocable living trust, you are free to revise its terms at any point before your death (at which time the trust becomes irrevocable).1

You need a competent estate planner to create an IRA trust. An attorney designing one should be well versed in the specific legal terminology pertaining to inherited IRAs. Omitting or misusing key phrases could make the trust invalid or break IRS rules. Sub-trusts created within the IRA trust need to be named as primary or secondary beneficiaries of the IRA assets. As an example, naming the IRA trust as the beneficiary of your IRA is inconsistent with the purpose of the sub-trusts.1,4

A properly structured IRA trust can potentially “stretch” IRA assets for decades. If you have a large IRA and want your IRA assets to be carefully distributed after you pass away, this estate planning vehicle is worth exploring.

Mike Moffitt may be reached at ph# 641-782-5577 or email:   rsmlbyer@mchsi.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.

1 – thebalance.com/ira-trust-a-special-type-of-revocable-trust-for-your-ira-3505399 [6/25/16]

2 – fool.com/investing/2016/08/17/do-you-need-a-generation-skipping-trust.aspx [8/17/16]

3 – thebalance.com/what-are-the-benefits-of-an-ira-trust-3505398 [6/29/16]

4 – bankrate.com/finance/retirement/naming-trust-ira-beneficiary.aspx [1/14/16]

 

When Someone Dies Without a Will

Where do things proceed from that point? 

Every day, people die intestate. In legalese, that means without a will. This opens the door for the courts to decide what happens with their estates.

When no valid will exists, state intestacy laws dictate how assets are distributed. These laws divide an estate evenly (or equitably) among heirs. Any assets held in joint tenancy go to the joint owner. Assets held in a trust transfer to the trust beneficiaries (with spouses getting a share of those assets in some states). Community property goes to a spouse or partner in community property states.1

Simple, right? Unfortunately, the way assets transfer under these laws may not correspond to the wishes of the deceased person. Did the decedent want some of his or her estate to go to a charity or a person close to them? These laws will not allow that. State law will also decide who the executor of the estate is, since the decedent never named one.2

If the deceased person designated beneficiaries for his or her retirement accounts and life insurance policy, those retirement accounts and insurance proceeds should transfer to those beneficiaries without dispute, even when no will exists. When life insurance policies and retirement accounts lack designated beneficiaries, then those assets are lumped into the decedent’s estate and subject to intestacy laws.2

Most people have specific ideas about who should inherit what from their estates. To articulate those ideas, they should write a will – or better yet, they should draft one with the help of an attorney. Anyone who cares about the destiny of his or her wealth should take this basic estate planning step.

For a last will & testament to be valid, it must meet three important tests. It must be created by a person of sound mind. It must express that person’s free will – that is, it cannot be written or drafted under coercion or duress. Lastly, it must be signed and dated in the presence of two or more unrelated people who stand to inherit nothing from that person’s estate.1

Many wills are signed in the presence of notaries; although, a will does not have to be notarized to be legally valid. Some wills are self-proving – they have an attached, notarized affidavit, which acknowledges that all three tests noted in the preceding paragraph have been met. When this affidavit accompanies a will, there is no need to track down the parties who witnessed the signing and dating of the document years before.1

A last will and testament should be formatted and printed using a computer and printer; at the very least, it should be typed. Handwritten wills may not pass muster in some probate courts.1

When an individual dies intestate, the future of his or her estate is largely up to the courts. A basic, valid will stating his or her wishes may prevent that fate.

Mike Moffitt may be reached at ph# 641-782-5577 or email rsmlbyer@mchsi.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.    

Citations.

1 – legalzoom.com/knowledge/last-will/topic/wills-intestate [3/20/17]

2 – money.cnn.com/2016/04/28/pf/dying-without-a-will-prince/ [4/28/16]

 

Your Travel Dollars May Take You Further

Exchange rates are favorable now.

Ever thought about going to Greece? How about Italy or Spain? With the dollar buying more euros than it has at any time in the past ten years, you might want to seize the day and plan a trip to Europe now. Or, head to the Far East. The greenback has such muscle, at the moment, against the Thai baht and the Cambodian riel, thrifty travelers can tour Thailand or Cambodia for less than $20 a day. In other words, you might be able to travel in high style in certain parts of the world next year – favorable currency ratios may allow you some nice hotel and airfare upgrades.

Now is a great time to buy foreign notes, since the exchange rates are so favorable. Be sure to go to a bank to swap dollars for the currency of the country you’re headed to – the fee for this can be minimal, and you may be able to do it for free. Exchanging currency at the airport could prove much more expensive. One thing to remember, no matter how much more of a trip your dollar buys you: overseas banks can charge comparatively exorbitant fees for basic services compared to our banks. A travel credit card that won’t incur foreign transaction fees may be the answer to that.3

Mike Moffitt may be reached at ph# 641-782-5577 or email:  mikem@cfgiowa.com

Website:  www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.    

Citations.

3 – thestreet.com/story/13590803/1/the-strong-dollar-can-give-your-summer-travel-plans-a-boost.html [5/31/16]