Articles tagged with: net worth

Making and Keeping Financial Resolutions

What you might do (or do differently) in the months ahead?
How will your money habits change in 2016? What decisions or behaviors might help your personal finances, your retirement prospects, or your net worth?

Each year presents a “clean slate,” so as one year ebbs into another, it is natural to think about what you might do (or do differently) in the 12 months ahead.

Financially speaking, what New Year’s resolutions might you want to make for 2016 – and what can you do to stick by such resolutions as 2016 unfolds?

Strive to maximize your 2016 retirement plan contributions. The 2016 limit on IRA contributions is $5,500, $6,500 if you will be 50 or older at some point in the year. Contribution limits are set at $18,000 for 401(k)s, 403(b)s, and most 457 plans; if you will be 50 or older in 2016, you can make an additional catch-up contribution of up to $6,000 to those accounts.1

If you want to retire in 2016, be mindful of the end of “file & suspend.” Social Security is closing the door on the file-and-suspend claiming strategy that married couples have used to try and optimize their Social Security benefits. If you are married and you will you be at least 66 years old by April 30, 2016, you and your spouse still have a chance to use the strategy. Starting May 1, that chance disappears forever for all married couples. (It will still be permitted on an individual basis.)2,3

Similarly, the opportunity to file a restricted application for spousal benefits has also gone away. This was another tactic retirees employed in pursuit of greater lifetime Social Security income.2

Can you review & reduce your debt? Look at your debts, one by one. You may be able to renegotiate the terms of loans and interest rates with lenders and credit card firms. See if you can cut down the number of debts you have – either attack the one with the highest interest rate first or the smallest balance first, then repeat with the remaining debts.

Rebalance your portfolio. If you have rebalanced recently, great. Many investors go years without rebalancing, which can be problematic if you own too much in a declining sector.

See if you can solidify some retirement variables. Accumulating assets for retirement is great; doing so with a planned retirement age and an estimated retirement budget is even better. The older you get, the less hazy those variables start to become. See if you can define the “when” of retirement this year – that may make the “how” and “how much” clearer as well.

The same applies to college planning. If your child has now reached his or her teens, see if you can get a ballpark figure on the cost of attending local and out-of-state colleges. Even better, inquire about their financial aid packages and any relevant scholarships and grants. If you have college savings built up, you can work with those numbers and determine how those savings need to grow in the next few years.

How do you keep New Year’s resolutions from faltering? Often, New Year’s resolutions fail because there is only an end in mind – a clear goal, but no concrete steps toward realizing it.

So, if your aim is to save $20,000 toward retirement this year, map out the month-by-month contribution to your retirement account(s) that will help you do it. Web tools like Level Money and Mint.com can help you examine your cash flow week-to-week and month-to-month – you can use them to keep track of your saving effort as well as other aspects of your finances.4

If you wish, you can let a loved one or a close friend in on your New Year’s financial resolutions. That loved one or friend may decide to adopt them. Even if he or she does not, sharing your resolution might increase your commitment to carrying it out. Dominican University of California did a study on this very subject and found that when people set near-term goals and kept those goals private, they achieved them about 35% of the time – but when they informed friends about them and sent weekly progress updates, the achievement rate surpassed 70%.4

Lastly, you may want to automate more of your financial life. If you have not set up monthly money transfers to a retirement or investment account, 2016 can be the year this happens.

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

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.

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.

Citations.
1 – money.usnews.com/money/retirement/articles/2015/10/26/how-401-k-s-and-iras-will-and-wont-change-in-2016 [10/26/15]
2 – money.usnews.com/money/retirement/articles/2015/12/04/say-goodbye-to-the-social-security-file-and-suspend-strategy [12/4/15]
3 – tinyurl.com/p3exq5s [12/18/15]
4 – forbes.com/sites/bethbraverman/2015/12/29/4-tricks-to-get-your-new-years-resolutions-to-actually-stick-this-year/print/ [12/29/15]

TOD or Living Trust?

A look at two basic methods for shielding assets from probate.

How do you keep assets out of probate? If that estate planning question is on your mind, you should know that there are two basic ways to accomplish that objective.

One, you could create a revocable living trust. You can serve as its trustee, and you can fund it by retitling certain accounts and assets into the name of the trust. A properly written and properly implemented revocable living trust allows you to have complete control over those retitled assets during your lifetime. At your death, the trust becomes irrevocable and the assets within it can pass to your heirs without being probated (but they will be counted in your taxable estate). In most states, assets within a revocable living trust transfer privately, i.e., the trust documents do not have to be publicly filed.1

If that sounds like too much bother, an even simpler way exists. Transfer-on-death (TOD) arrangements may be used to pass certain assets to designated beneficiaries. A beneficiary form states who will directly inherit the asset at your death. Under a TOD arrangement, you keep full control of the asset during your lifetime and pay taxes on any income the asset generates as you own it outright. TOD arrangements require minimal paperwork to establish.2

This is not an either/or decision; you can use both of these estate planning moves in pursuit of the same goal. The question becomes: which assets should transfer via a TOD arrangement versus a trust?

Many investment accounts can be made TOD accounts. Originally, that was not the case – for decades, only bank accounts and certain types of savings bonds could pass to beneficiaries through TOD arrangements. When the Uniform Transfer on Death Security Registration Act became law in the 1980s, the variety of assets that could be transferred through TOD language grew to include certificates of deposit and securities and brokerage accounts.2

Many investment & retirement savings accounts are TOD to begin with. Take IRAs and workplace retirement plans, for example. In the case of those assets, the beneficiary form legally precedes any bequest made in a will.3

The beauty of the TOD arrangement is that the beneficiary form establishes the simplest imaginable path for the asset as it transfers from one owner to another. The risk is that the instruction in the beneficiary form will contradict something you have stated in your will.

One common situation: a parent states in a will that her kids will receive equal percentages of her assets, but due to TOD language, the assets go to the kids not by equal percentage but by account, with the result that the heirs have slightly or even greatly unequal percentages of family wealth. Will they elect to redistribute the assets they have inherited this way, in fairness to one another? Perhaps, and perhaps not.

Placing valuable property items into a living trust makes sense. Real estate, ownership shares, precious metals, pricy collectibles such as fine art, classic cars, antiques, and rare stamps and coins – these are all worthy candidates for inclusion in a living trust. If your net worth happens to run well into the millions, these assets may constitute the bulk of it, and a trust offers a degree of protection for such assets that TOD language cannot. A trust also allows you to name a successor trustee, which TOD language cannot do for you.2

A “pour-over” will usually complements a revocable living trust. As your net worth will presumably keep growing after the trust is implemented, a “pour-over” will may be used to allow your executor to “pour over” assets not already in the trust at your death into the trust. That will mean added privacy for those assets in most states – but the downside is that these “poured-over” assets will be subject to probate.1

Of course, you can add and subtract from the original contents of a revocable living trust as you wish during your lifetime – you can remove assets retitled into it when it was originally created and retitle them again in your name, you can “pour in” new assets, and you can sell or give away specific assets in the trust.4

Is it ever wise to name a trust as the beneficiary of a retirement account? Under three circumstances, it might be worth doing. If you worry about your heirs rapidly spending down your IRA assets, for example, naming a trust as the IRA beneficiary more or less forces them to abide by a stretch IRA strategy. Are there “predators and creditors” who want some of your net worth? That is another reason to consider this move. If you want to leave your retirement account assets to someone who is currently a minor, this idea may be worthwhile as well.4

How complex should your estate planning be? A conversation with a trusted legal or financial professional may help you answer that question, and illuminate whether simple TOD language or a trust is right to keep certain assets away from probate.

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

Website: www.cfgiowa.com 

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.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

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.

Citations.

1 – individual.troweprice.com/public/Retail/Planning-&-Research/Estate-Planning/Considering-a-Trust/Revocable-Living-Trust [11/10/15]

2 – fdcpa.com/Tax/0807TaxNewsEstatePlanning.htm [11/10/15]

3 – forbes.com/sites/deborahljacobs/2014/01/03/how-to-leave-your-ira-to-those-you-love/ [1/3/14]

4 – nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter7-7.html [11/9/15]

An Estate Planning Checklist

Things to check & double-check as you prepare. 

Estate planning is a task that people tend to put off, as any discussion of “the end” tends to be off-putting. However, those who die without their financial affairs in good order risk leaving their heirs some significant problems along with their legacies.

No matter what your age, here are some things you may want to accomplish this year with regard to estate planning.

Create a will if you don’t have one. It is startling how many people never get around to this, even to the point of buying a will-in-a-box at a stationery store or setting one up online.

How many Americans lack wills? The budget legal service website RocketLawyer conducts an annual survey on this topic, and its 2014 survey determined that 51% of Americans aged 55-64 and 62% of Americans aged 45-54 don’t have them in place.1

A solid will drafted with the guidance of an estate planning attorney may cost you more than a will-in-a-box. It may prove to be some of the best money you ever spend. A valid will may save your heirs from some expensive headaches linked to probate and ambiguity.

Complement your will with related documents. Depending on your estate planning needs, this could include some kind of trust (or multiple trusts), durable financial and medical powers of attorney, a living will and other items.

You should know that a living will is not the same thing as a durable medical power of attorney. A living will makes your wishes known when it comes to life-prolonging medical treatments. A durable medical power of attorney authorizes another party to make medical decisions for you (including end-of-life decisions) if you become incapacitated or otherwise unable to make these decisions. Estate planning attorneys usually recommend that you have both on hand.2

Review your beneficiary designations. Who is the beneficiary of your IRA? How about your 401(k)? How about your annuity or life insurance policy? If your answer is along the lines of “It’s been a while,” then be sure to check the documents and verify who the designated beneficiary is.

You need to make sure that your beneficiary decisions agree with your will. Many people don’t know that beneficiary designations take priority over will bequests when it comes to retirement accounts, life insurance, and other “non-probate” assets. As an example, if you named a child now estranged from you as the beneficiary of your life insurance policy, he or she is in line to receive that death benefit when you die, even if your will requests that it go to someone else.3

Time has a way of altering our beneficiary decisions. This is why some estate planners recommend that you review your beneficiaries every two years.

In some states, you can authorize transfer-on-death or payable-on-death designations for certain assets or accounts. This is a tactic against probate: a TOD designation can arrange the transfer of ownership of an account or assets immediately to a designated beneficiary at your death.3

If you don’t want the beneficiary designation you have made to control the transfer of a particular non-probate asset, you can change the beneficiary designation or select one of two other options, neither of which may be wise from a tax standpoint.

One, you can remove the beneficiary designation on the account or asset. Then its disposition will be governed by your will, as it will pass to your estate when you die.3

Two, you can make your estate the beneficiary of the account or asset. If your estate inherits a tax-deferred retirement account, it will have to be probated, and if you pass away before age 70½, it will have to be emptied within five years. If you name your estate as the beneficiary of your life insurance policy, you open the door to “creditors and predators” – they have the opportunity to lay claim to the death benefit.3,4

Create asset and debt lists. Does this sound like a lot of work? It may not be. You should provide your heirs with an asset and debt “map” they can follow should you pass away, so that they will be aware of the little details of your wealth.

One list should detail your real property and personal property assets. It should list any real estate you own, and its worth; it should also list personal property items in your home, garage, backyard, warehouse, storage unit or small business that have notable monetary worth.

Another list should detail your bank and brokerage accounts, your retirement accounts, and any other forms of investment plus any insurance policies.

A third list should detail your credit card debts, your mortgage and/or HELOC, and any other outstanding consumer loans.

Consider gifting to reduce the size of your taxable estate. The lifetime individual federal gift, estate and generation-skipping tax exclusion amount is now unified and set at $5.34 million for 2014. This means an individual can transfer up to $5.34 million during or after his or her life tax-free (and that amount will rise as the years go by). For a married couple, the unified credit is currently set at $10.68 million.5

Think about consolidating your “stray” IRAs and bank accounts. This could make one of your lists a little shorter. Consolidation means fewer account statements, less paperwork for your heirs and fewer administrative fees to bear.

Let your heirs know the causes and charities that mean the most to you. Have you ever seen the phrase, “In lieu of flowers, donations may be made to…” Well, perhaps you would like to suggest donations to this or that charity when you pass. Write down the associations you belong to and the organizations you support. Some non-profits do offer accidental life insurance benefits to heirs of members.

Select a reliable executor. Who have you chosen to administer your estate when the time comes? The choice may seem obvious, but consider a few factors. Is there a stark possibility that your named executor might die before you do? How well does he or she comprehend financial matters or the basic principles of estate law? What if you change your mind about the way you want your assets distributed – can you easily communicate those wishes to that person?

Your executor should have copies of your will, forms of power of attorney, any kind of healthcare proxy or living will, and any trusts you create. In fact, any of your loved ones referenced in these documents should also receive copies of them.

Talk to the professionals. Do-it-yourself estate planning is not recommended, especially if your estate is complex enough to trigger financial, legal, and emotional issues among your heirs upon your passing.

Many people have the idea that they don’t need an estate plan because their net worth is less than the lifetime unified credit. Keep in mind, money isn’t the only reason for an estate plan. You may not be a multimillionaire yet, but if you own a business, have a blended family, have kids with special needs, worry about dementia, or can’t stand the thought of probate delays plus probate fees whittling away at assets you have amassed… well, these are all good reasons to create and maintain an estate planning strategy.

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

website:  www.cfgiowa.com

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.

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.

Citations.

1 – forbes.com/sites/nextavenue/2014/04/09/americans-ostrich-approach-to-estate-planning/ [4/9/14]

2 – ksbar.org/?living_wills [9/10/14]

3 – nj.com/business/index.ssf/2013/12/biz_brain_beneficiary_designat.html [12/9/13]

4 – nolo.com/legal-encyclopedia/naming-non-spouse-beneficiary-retirement-accounts.html [9/10/14]

5 – forbes.com/sites/deborahljacobs/2013/11/01/the-2013-limits-on-tax-free-gifts-what-you-need-to-know/ [11/1/13]

 

 

 

Legacy Planning for Women

Think about the eventual destiny of your Wealth.

 

Women often become guardians of family wealth. Many women outlive their spouses, and have the opportunity to have the “final say” (from an estate planning standpoint) about the wealth they have built or inherited. Legacy planning is essential for single women and couples, too, as one or two successful careers may leave a woman or a couple with a significant estate.

So how do you take steps to convey the bulk of your wealth to the next generation, or to your favorite causes or charities after you are gone? It all starts with a conversation today – a conversation with a legacy planning professional.

Analyze the risks to your net worth & strategize to alleviate them. You have years to go, perhaps many years, before you pass away. In those years or decades, you must manage portfolio risk, taxation, medical or long term care costs, and perhaps “predators and creditors” as well. What tax and risk management strategies can be put into place with an eye toward enhancing your net worth? Can you reduce the size of your taxable estate along the way?

How might trusts come into play? If you want to shrink your taxable estate, a well-crafted trust may provide a way to do it. There are many, many different kinds of trusts. A basic revocable living trust helps a family avoid probate, but it doesn’t do anything to reduce estate taxes. Other trusts do offer grantors and beneficiaries opportunities for substantial estate and/or income tax savings.1

For example, you can bequeath an amount of money up to the limit of the current estate tax exemption to a bypass trust; at your death, the remainder of your estate can therefore transfer to your spouse tax-free, or optionally your spouse can enjoy income from the trust while living with your heirs receiving the remaining principal tax-free at his or her death. Blended families sometimes choose to use a qualified terminable interest property trust (QTIP) plus a bypass trust to direct income derived from assets within an estate to a surviving spouse and then the bulk of the estate to their children and stepchildren. Grandparents sometimes use generation-skipping trusts (GSTs) to forward big chunks of money tax-free to grandchildren.2

Women business owners have employed irrevocable life insurance trusts (ILITs) to shrewdly remove their life insurance from their taxable estates. In an ILIT, the trust becomes the owner of the life insurance policy. When the business owner passes away, the beneficiaries receive tax-free policy proceeds, which can be used to sustain the family business and pay estate costs.
A qualified personal residence trust (QPRT) will permit you to gift your primary residence or vacation home to your children while you retain control of it for the term of the trust (typically 10 years). If your home seems poised to rise in value, the QPRT may lead to major estate and gift tax savings – it helps you transfer the home out of your taxable estate, thereby reducing its size. The hitch is that to validate the QPRT, you have to outlive the term of trust. Assuming you do, you can either a) move out of your house at that point or b) keep living in it while paying your heirs fair market rent as a tenant.2

How well can your legacy plan sustain your values? Can you design it to teach your adult children and grandchildren lessons in character, responsibility, ethics and social service? Philanthropically, what do you want to accomplish? If you want to direct wealth to charities or other non-profits, you will need to pick one or more vehicles with the help of a legacy planner – options may include a family foundation, a charitable remainder trust (CRT), a tax-deductible charitable gift of appreciated securities with a resulting income stream, or donor-advised funds. A conversation with a tax professional can inform you of the kinds of assets you do and don’t want to gift from a taxation perspective.

As you craft your legacy plan, can you do it at reasonable cost? There is truth in the old maxim “you get what you pay for”, but at the same time, you want to work with a legacy planner whose fees aren’t exorbitant. Even the fees for creating a simple living trust can vary widely. You definitely want the help of experienced professionals here; given that each legacy plan is on some level an agreement with the federal tax code, legacy planning is not a do-it-yourself project.

Your legacy plan can represent your final, thoughtful gift to your loved ones. When you think of it that way, it becomes easier to conceive and implement with the input of your spouse, your children and your grandchildren. Along the way, valuable money lessons can be taught and responsibilities shouldered.

Michael Moffitt may be reached at ph. 641-782-5577 or mikem@cfgiowa.com.
website: www.cfgiowa.com

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.

LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. 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.

Citations.
1 – kiplinger.com/article/retirement/T021-C000-S001-four-facts-of-living-trusts.html#iwrC4LSHbmjf9emt.99 [4/4/13]
2 – money.cnn.com/magazines/moneymag/money101/lesson21/index6.htm [9/17/13]

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