Painful estate planning questions you must answer to avoid disastrous estate planning mistakes

Many of my estate planning clients have put off their estate planning for months, and even years sometimes. Part of this is because death or disability is something we don’t want to think about, and part of it is because some of the questions are difficult to answer.  What my clients do not always understand is that (1) it’s my job to help them to make the decisions, and (2) if they don’t decide, then someone else – a stranger – will decide for them. Here are some questions you need to consider when thinking about estate planning:

  1. The guardian for your children. This is probably the most important decision you will make.  In case the unthinkable happens – you and your spouse are out together on date night and get into an accident and are both hospitalized or worse. What do you think will happen to your children, who are at home with the 19-year old neighbor babysitting? The police will likely take your children into protective custody – foster care – until a proper guardian is named.  If you have a formally-named guardian in your estate planning documents (and not some hastily-written page), then you can avoid this awful experience for your children.
  2. Who will get your stuff. If you don’t decide who gets your stuff, the state will. And perhaps more importantly than the couch and the jewelry is the estate itself.  Do you have minor children? Do you want them to inherit hundreds of thousands of dollars when they reach 18? Do you perhaps want to hold back some of the estate to pay for college, or at least to let them mature a little before coming into (and losing) a great deal of money right at 18? The only want to do this is through trusts.
  3. What do you want the doctors to do if you are in an irreversible coma? If you don’t decide how you want the doctors to treat you and what extraordinary measures will be taken to save your life, then the doctors will endeavor to keep you alive as long as they can.  Do you want to survive by machine alone? If not, then you need to tell someone!  Tell your parents and your children, and create a power of attorney that legally records your wishes.  If you don’t do this, you could cause your family to scramble to determine what YOU would have wanted.
  4. Who will help you to manage your assets and estate if you can’t? Most of us are more likely to experience a slow decline than go out with a bang.  Because of the advances in medical and health care, we are living longer and with better-quality lives. But as we slow down, there is a chance that we will start to lose our ability to pay our bills and manage our finances.  To avoid the painful, time-consuming and expensive process of conservatorship, each of us needs to designate someone to make decisions on our behalf if we become unable to.  This is relevant to individuals of all ages, as surviving traumatic brain injuries is getting more and more common.
  5. Where are your documents? Part of creating your estate plan in making sure everything is in one place: your will, trust(s), powers of attorney, bank/investment/life insurance/retirement statements, pre-need funeral planning documents, and passwords/keys/online account information.  There is nothing worse than making your grieving family rummage through your stuff to find what they need.

Estate planning is the last thing that you can do for your family to make your passing easier. Isn’t your family worth it?

Estate planning post-divorce: Why it’s critical to your future

Here is a video I did recently on estate planning after your divorce is completed.  All too often, once your divorce is final, the last thing you want to do is more work.  So, changing your beneficiaries, updating your retirements, 401Ks, powers of attorney, etc. gets lost in the shuffle.  But, ask yourself:  Do you want your ex to get the assets you worked your life to accumulate?  Do you want to leave your children with an uncertain financial future?  If you’ve gotten divorced, make sure you’ve taken these essential steps to properly protect your assets, family and future.

Protecting What May Be Your Most Valuable Asset

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville. Her bio and contact information are below.

If you are young and healthy, you might think your chances of becoming disabled are fairly slim. And you wouldn’t be alone in your belief: 64% of workers believe they have only a 2% (or less) risk of suffering a disability that could sideline them for three months or longer.1

But statistics tell a different story: 43% of 40-year-olds will suffer at least one long-term disability (90 days or longer) before age 65.2 Despite this risk, 38% of working Americans say they would be able to pay their living expenses for only three months or less if their incomes were interrupted; 65% would not be able to cover expenses for one year. These findings become all the more alarming when you consider that the average long-term disability lasts for two and a half years.3

If you wouldn’t think of going without insurance coverage for your home, health, or car, it doesn’t make much sense not to protect what may be your most valuable asset: your ability to earn an income.

A Policy That Can Protect

An individual disability income insurance policy can help replace a percentage of your salary, up to the policy limits, if you should suffer an illness or injury that makes it impossible for you to continue working. The benefits can continue until you recover or for a predetermined number of years, whichever comes first. If you pay the premiums yourself, the benefits usually are not taxable. Some policies will pay if you can’t perform your current occupation, whereas others will pay only if you cannot perform any type of job.

Many workers have some type of short-term group disability coverage through their employers. Group plans rarely cover as much as the 70% to 80% of income that individual policies typically offer, and the benefits from group plans are taxable to the extent that the employer pays the premiums.

Your Future Could Be at Stake

In the absence of an adequate, long-lasting source of disability income, you could be forced to use your retirement assets to pay living expenses and medical costs. If you have to withdraw assets from a tax-deferred retirement account, the withdrawals may be subject to a 10% federal income tax penalty if you are younger than 59½ (depending on the severity of the disability), as well as ordinary income taxes. Even worse, tapping your retirement assets could interfere with progress toward your retirement goals, creating the possibility that you might not be able to attain the retirement lifestyle you envisioned.

The appropriate disability income strategy may help reduce the financial consequences if you lose your income because of an illness or injury.

1, 3) Council for Disability Awareness, 2010
2) 2010 Field Guide, National Underwriter

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to their age, goals, and life circumstances.
4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506
phone: (925) 736-3024 / fax: (925) 736-3026
http://www.GirlsJustGottaHaveFunds.com

 

Beyond estate planning: Long-term care insurance

When I work with my clients to complete their estate plans, including their living trust, their powers of attorney, their wills, and other documents, I talk to them about other areas of their life where they should “get their affairs in order.”  One of these areas are long-term care insurance.  While this is not a service that I provide personally, I consider it part of my job to at least alert my clients to the other areas of their life that may need attention in preparation for retirement and beyond.  Many individuals just don’t have the correct information to be able to make informed decisions, so I try to bridge these gaps so my clients can make the best decisions for them.

Long-term care insurance is insurance that helps to pay for your care as you get older.  Very few of us are going to go from healthy and active one day to dead the next.  Most of us will decline more slowly as age starts to take its toll on our bodies.  Perhaps driving or climbing stairs will become difficult, and then perhaps we’ll need to use a cane or walker.  Medicare will not help you unless and until you are housebound and confined to your bed (generally).  During that phase of your life where you are slowing down, if you don’t have long-term care insurance, you have two options:  you can pay for it ($20,000/month or more) or depend on your family and friends to help take care of you.  Not many older individuals have an extra $20,000/month to spare, so paying for it is nearly impossible.  Depending on family can be an option for some, but I think many who have the ability to think about it ahead of time do not want to place this burden on their family.  Even those who cringe at the thought of having a stranger come into their home can understand the need for their caregiver family member to have a break from the care giving.  Long-term care insurance helps to pay for in-home care (or assisted living), can help to relieve family care givers, and help to save your finances when you can’t work anymore.  If you get it at a young age, it’s quite reasonable to pay for, and both you and your family will be grateful you had it.

Why You Want to Know How Much Your Business Is Worth

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

Business Valuation Can Be Valuable Even When No Sale Is Planned

If you have no plans to sell your business, an up-to-date valuation may seem like an unnecessary expense. But you might be surprised at how important the current value of your business can be to achieving your long-term goals. The current value of your business can affect how you approach everything from retirement to estate conservation and your succession strategy.

Your Retirement Lifestyle

The typical business owner has 50% to 70% of his or her net worth in the business.1 If you expect your business to help fund your retirement, a significant change in value might mean you need to adjust the amount of income you are investing for retirement. A shift in value might also affect the date at which you expect to retire, which could influence the timing of your decisions about the kinds of preparations you expect to make to get the business ready to sell or pass on.

Estate Conservation and Succession

It’s understandable if you would rather not spend too much time thinking about whether your business has lost value, but there could be an upside to knowing. If you are expecting to transfer ownership to the next generation, lower asset values may help you transfer a larger share of the business without tax consequences.

If your business has a buy-sell agreement that values the business too highly, a more reasonable valuation may help the survivors or successors take over without paying more than the business is actually worth.

If you discover that your business is responsible for more of your net worth than you realized, it could indicate that it’s time to diversify away from the business. It’s rarely a wise move to let your financial future hinge on the fate of a single asset — even if it is your own business.

Given the events of the past few years, you may be more inclined to focus on today’s problems than on what could happen years from now. But a precise valuation may provide you with valuable information that you didn’t realize you needed.

1) Financial Advisor, August 27, 2010

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone:                         (925) 736-3024             / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com

 

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson is a registered representative of and offers securities, investment advisory, and financial planning services through MML Investors Services, Inc. Member SIPC. (2121 N. California Blvd. #395, Walnut Creek, CA 94596 (925) 979-2300). CA Insurance License #OF43069.

 

Getting to know your beneficiaries

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

Thanks to a popular 2007 motion picture, many Americans now have a “bucket list” — an inventory of accomplishments they hope to achieve in their lifetimes.

Although many bucket list endeavors require courage or tenacity, such as traveling to faraway places or writing a book, there’s at least one task you can resolve to accomplish that is fairly simple but could have lasting benefits for your family, friends, and possibly a favorite charity.

Designate Your Beneficiaries

When you set up an IRA or participate in an employer-sponsored retirement plan, you are typically asked to fill out a beneficiary designation form. Although many people postpone the naming of a beneficiary, this can be a big mistake. IRAs and most retirement accounts are not subject to probate, and the assets will convey directly to your designated beneficiaries, regardless of different instructions in your will. Whoever is designated as your account beneficiary will inherit the proceeds directly, and it would be unlikely for a probate court to order a different result.

Failing to designate a beneficiary means your estate could inherit the money. Because your estate is not eligible for the same tax benefits that individual investors enjoy, your estate would be required to withdraw the assets over a shorter time period. By contrast, a correctly named beneficiary can preserve the tax-deferred status of the inherited funds and spread the tax liability over several years or even over his or her lifetime.

Life Insurance Policies, Too

Life insurance benefits also convey directly to beneficiaries, independent of the probate process. Although it would be unusual to purchase life insurance without designating a beneficiary, it’s not unusual for policy owners to fail to review their beneficiary designations on a regular basis.

The reasons you bought your life insurance policy and the people you want it to protect may change over time. But only you can change the designated beneficiaries on your life insurance policy. Major life events such as marriage, birth, divorce, or death may affect your choice of beneficiaries, and it’s important to update your designations to keep pace with any changes in your life.

Estate conservation issues may be uncomfortable to face, but there’s probably no other aspect that is as simple or inexpensive as designating beneficiaries. Keeping your beneficiary designations up to date can help ensure that your valuable assets go to the people you want to inherit them.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone:                         (925) 736-3024             / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com

 

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2011 Emerald Connect, Inc.

Sarah Tolson is a registered representative of and offers securities, investment advisory, and financial planning services through MML Investors Services, Inc. Member SIPC. (2121 N. California Blvd. #395, Walnut Creek, CA 94596 (925) 979-2300). CA Insurance License #OF43069.

 

Four Steps to Get Your Finances Ready for the New Year

Today’s repeat guest blogger is Sarah Tolson, a Certified Financial Planner with her office in Danville.  Her bio and contact information are below.

About one year ago, 63% of Americans told  pollsters they had resolved to improve their personal finances in 2010. In fact, saving money beat the usual self-improvements: exercising more, eating less, losing weight. The only resolution that rated higher than personal financial improvement was finding ways to relax and reduce stress.1
t’s not clear how well Americans fared with saving more money (the personal saving rate remained fairly level for the first half of the year).2 But these steps may help improve your financial situation and reduce stress before the new year arrives.

Rebalance and Reallocate

It’s likely that some of your investments have performed at different rates over the past year, possibly leaving your portfolio overexposed to one asset class and underexposed to another. The process of rebalancing involves buying and selling securities to restore your portfolio to your target asset allocation. And if its been a while since you reviewed your asset allocation, now might be a good time to determine whether you need to shift your strategy. Asset allocation does not guarantee against loss; it is a method to help manage investment risk.

Revisit Your Beneficiaries

Are the people you have designated as the beneficiaries on your life insurance policies and retirement accounts still the ones you would like to see inherit these assets? Reviewing your beneficiary designations can help ensure that your intended heirs receive these assets. It’s especially important to revisit your beneficiary designations after a marriage, birth, divorce, or death in the family.

Check Your Credit Report

Because identity theft is a growth industry, it’s wise to check your credit report for evidence of fraud or any inaccuracies that may affect your creditworthiness. The three major credit reporting agencies are required by law to provide you with a free credit report once a year. Log on to www.annualcreditreport.com.

Consider Your Taxes

Reductions in tax rates on income, capital gains, dividends, and inherited assets (adopted by Congress in 2001 and 2003) had a December 31, 2010, expiration date. Because of the ever-changing tax landscape, this is a good time to reconsider some of your financial decisions, such as whether to realize capital gains, reevaluate the role of dividend-paying stocks in your portfolio, boost your contributions to tax-deferred accounts, and alter the timing of bonuses and tax payments.

You may not be able to perform these tasks on your own. We can help.

1) U.S. News & World Report, December 24, 2009
2) Haver Analytics, 2010

The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2010 Emerald.

Sarah Tolson, Certified Financial Planner™ recipient, is passionate about building the next generation of her family’s legacy of personalized financial planning; and she is committed to helping professionals create wealth-building plans tailored to  their age, goals, and life circumstances.

Sarah joined her family’s wealth-building business to help the children of her family’s clients begin to start building their own wealth, with someone who understood their values and who would not be judgmental or lecture them like a parent.

Sarah has a Bachelor of Science in Business from the Kelley School of Business at Indiana University. She joined her family’s firm in 2006 after several years in a successful retail merchandising career with Target Corporation and Abercrombie & Fitch.

As an active member of the Junior League of the Oakland-East Bay and the Pleasanton North Rotary Club, Sarah participates in philanthropic work regularly. Sarah is on the Board of Directors for the Financial Women’s Association of San Francisco and helps to organize events especially for members who live in the East Bay. She is also the Vice President for the Founder’s of Success chapter of Business Network International (BNI) and a member of e-Women Network.

In addition to financial consulting, Sarah is an entertaining and captivating public speaker; and she is currently writing a book about financial planning for women with young families. In her spare time, Sarah enjoys playing tennis, cooking, and traveling.

4115 Blackhawk Plaza Circle, Suite 100, Danville, CA 94506

phone:             (925) 736-3024       / fax: (925) 736-3026

www.GirlsJustGottaHaveFunds.com