Atlantic Capital Management

Atlantic Capital Management (88)

Thursday, 15 September 2016 19:56

Updating Your Estate Plan

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When should you review it? What should you review?    

An estate plan has three objectives. The first goal is to preserve your accumulated wealth. The second goal is to express who will receive your assets after your death. The third goal is to state who will make medical and financial decisions on your behalf if you cannot.

Over time, your feelings about these objectives may change. You may want to name a new executor or health care agent. You may rethink how you want your wealth distributed.

This is why it is so vital to review your estate plan. Over ten or twenty years, your health, wealth, and outlook on life may change profoundly. The key is to recognize the life events that may call for an update.

Have you just married or divorced? If so, your estate plan will absolutely need revision. For that matter, some, or all, of your will may now be legally invalid. (Some state laws strike down existing wills when a person is married or divorced.) If your children or grandchildren marry or divorce, that also calls for an estate plan review.1

Has there been a loss or serious illness within your family? If so, your named executor or health care agent may have to be changed. If one family member has now become physically or financially dependent on you, that too may be an occasion for a second look at the plan.

Has your net worth risen or declined substantially since the plan was first implemented? If you have become much wealthier in the past five or ten years (or much less wealthy), that circumstance may have altered your vision of how you want your assets distributed at your death. Maybe you want to give more (or less) to charity or your heirs. A large inheritance can also prompt you to rethink your wealth protection and wealth transfer strategy.

Have you changed your mind about what your wealth should accomplish? Today, you may view your wealth differently than you did when you were younger. New purposes may have emerged for it – new roles that it can play. Following through on those thoughts may lead you to reconsider aspects of your estate plan.

Have your executors or trustees changed their mind about their roles? If they are no longer interested in shouldering those responsibilities, no longer alive, or no longer of sound mind or reputable character, it is revision time.

  

Have you retired, moved to another state, or bought or sold real estate? All of these events call for an estate plan check-up.

The first step in revising an estate plan is to update essential documents. Not just your will or your trust, but also your financial power of attorney and health care proxy. Review all the names: your executor; your trustee; your health care agent. Changes in your personal (and even your business) relationships may call for alterations to those choices.

The second step is to review your risk management. Does language in your will need revision? Does a trust created years ago need to be modified or replaced? Do new estate planning vehicles need to enter the picture in order to help you adequately transfer wealth, counter estate taxes, or endow charities?

What about your life insurance? Do beneficiary forms of life insurance policies need updating? Is corporate-owned life insurance coverage you once counted on now absent? Will policy payouts be sufficient enough to help your loved ones address financial issues after your death?

The third step is to make sure your assets are in sync with your plan. For example, if you have a revocable trust, have you transferred ownership of all the assets that are supposed to go into it? Have you acquired new assets that need to be “poured in?”

If you are married and it appears certain that your estate will be taxed, you may want to own some assets and have your spouse own others. Yes, the federal estate tax exemption is portable, so any unused estate tax and gift tax exemption is allowed to pass to a surviving spouse. At the state level, though, there are different rules. So if all assets are in your spouse’s name and your home state levies an estate tax, that scenario may mean higher estate taxes for your heirs than if those assets were alternately owned by either you or your spouse.2

  

Even if nothing major happens in your life, review your plan every five years or so. While your life may be uneventful over five years, tax law, the financial markets, and business climates may change significantly. Those kinds of shifts can impact your estate planning strategy.

        

  

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 - 360financialliteracy.org/Topics/Retirement-Planning/Estate-Planning-Basics/How-often-do-I-need-to-review-my-estate-plan [8/4/16]

2 - time.com/money/4187332/estate-planning-checkup-items-review/ [1/20/16]

Friday, 09 September 2016 14:36

Mid-Life Money Errors

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If you are between 40 & 60, beware of these financial blunders & assumptions.

Between the ages of 40 and 60, many people increase their commitment to investing and retirement saving. At the same time, many fall prey to some common money blunders and harbor financial assumptions that may be inaccurate.

These errors and suppositions are worth examining, as you do not want to succumb to them. See if you notice any of these behaviors or assumptions creeping into your financial life.

Do you think you need to invest with more risk? If you are behind on retirement saving, you may find yourself wishing for a “silver bullet” investment or wishing you could allocate more of your portfolio to today’s hottest sectors or asset classes so you can catch up. This impulse could backfire. The closer you get to retirement age, the fewer years you have to recoup investment losses. As you age, the argument for diversification and dialing down risk in your portfolio gets stronger and stronger. In the long run, the consistency of your retirement saving effort should help your nest egg grow more than any other factor.

Are you only focusing on building wealth rather than protecting it? Many people begin investing in their twenties or thirties with the idea of making money and a tendency to play the market in one direction – up. As taxes lurk and markets suffer occasional downturns, moving from mere investing to an actual strategy is crucial. At this point, you need to play defense as well as offense.

Have you made saving for retirement a secondary priority? It should be a top priority, even if it becomes secondary for a while due to fate or bad luck. Some families put saving for college first, saving for mom and dad’s retirement second. Remember that college students can apply for financial aid, but retirees cannot. Building college savings ahead of your own retirement savings may leave your young adult children well-funded for the near future, but they may end up taking you in later in life if you outlive your money.

Has paying off your home loan taken precedence over paying off other debts? Owning your home free and clear is a great goal, but if that is what being debt-free means to you, you may end up saddled with crippling consumer debt on the way toward that long-term objective. In June 2015, the average American household carried more than $15,000 in credit card debt alone. It is usually better to attack credit card debt first, thereby freeing up money you can use to invest, save for retirement, build a rainy day fund – and yes, pay the mortgage.1

Have you taken a loan from your workplace retirement plan? Hopefully not, for this is a bad idea for several reasons. One, you are drawing down your retirement savings – invested assets that would otherwise have the capability to grow and compound. Two, you will probably repay the loan via deductions from your paycheck, cutting into your take-home pay. Three, you will probably have to repay the full amount within five years – a term that may not be long as you would like. Four, if you are fired or quit the entire loan amount will likely have to be paid back within 90 days. Five, if you cannot pay the entire amount back and you are younger than 59½, the IRS will characterize the unsettled portion of the loan as a premature distribution from a qualified retirement plan – fully taxable income subject to early withdrawal penalties.2

Do you assume that your peak earning years are straight ahead? Conventional wisdom says that your yearly earnings reach a peak sometime in your mid-fifties or late fifties, but this is not always the case. Those who work in physically rigorous occupations may see their earnings plateau after age 50 – or even age 40. In addition, some industries are shrinking and offer middle-aged workers much less job security than other career fields.

Is your emergency fund now too small? It should be growing gradually to suit your household, and your household may need much greater cash reserves today in a crisis than it once did. If you have no real emergency fund, do what you can now to build one so you don’t have to turn to some predatory lender for expensive money.

Insurance could also give your household some financial stability in an emergency. Disability insurance can help you out if you find yourself unable to work. Life insurance – all the way from a simple final expense policy to a permanent policy that builds cash value – offers another form of financial support in trying times.

Watch out for these mid-life money errors & assumptions. Some are all too casually made. A review of your investment and retirement savings effort may help you recognize or steer clear of them.

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 - nerdwallet.com/blog/credit-card-data/average-credit-card-debt-household/ [6/25/15]

2 - tinyurl.com/oalk4fx [9/14/14]

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