This CFP Wishes for My Loved Ones

Dear Loved Ones,

There are many questions you have asked me over the years. Despite the fact I cannot give specific advice without knowing one’s full situation, many of your questions required one simple step. 

I never know if you did them or not. I care and am concerned that you are in good hands financially. I prefer you avoid a financial situation that could be fixed with a bit of pre-planning, rather than scrambling after the fact.  

I seldom hear the follow up. I care. And because we are friends first, I am not the professional you work with, I do not ask. 

Today I am wondering if:

Your Retirement Beneficiaries are Correct: 

Longtime partners told me, “Oh yeah, we never changed those from family members. But our families know who to give it to.” By law, the money goes to immediate legal family. If they chose to then pass it on to a partner, there are potential taxes that may diminish those funds. I hope you have designated your partner by now.  

Life Insurance Beneficiaries Updated:

A young recently married couple told me, “We were so busy with our wedding planning and honeymoon, we never updated our life insurance and company benefits. This will go to our spouse automatically now that we are married, right?” No, no, no. You need to make the changes on your policies and with your company. Easy enough to do today. Get on it.

You Have an Estate Plan to Match Your Current Life:

Our lives constantly change: we move, we have children, our assets grow, we have grandchildren, we marry. Too people many make major shifts and leave their former will in place. They often forget or do not understand that you need a recent Power of Attorney for your finances and Health Care Proxy. I do hope after you made the move out of state, you followed up with a new estate plan in your state of residence. 

You Have Assigned A Guardian for Your Children:

This is designated in your estate plan. Otherwise, their guardian many be your next of kin or appointed by the court. A legal guardian is responsible for the health and financial care of a child until “legal majority” in the state of residence. Be Kind to your children. Create a will with your wishes and a lawyer to carry them out.

You have Left a Paper Trail. Or Digital Trail:

Being in good financial shape with an estate plan and well organized records is great. If no one can find them when you fall ill or pass on, then they are of little use to the people who need them most. I hope by now you have told someone how to find your paper trail, making it easier on your loved ones at a dire time. 

Leave behind a legacy of love.

This CFP Wishes for My Loved Ones

My Valentine:

1. Have a Well Done Estate Plan, Have Peace of Mind

2. Have Cash to Offset Stress of Life Events

3. Review Your Investments Every year.  

Life changes. Have that balance of stocks, bonds, growth and value investments. Create an estate plan. Keep a cash account. Then you can weather any movements in life or the stock market

What are Annuities?

Question: “I just got an inheritance and a financial person suggested I purchase an annuity with $90,000. We were going to expand our home. I do want to be smart and do something wise for the long term with the money. What is an annuity? Is it a good investment?”

Christine’s Answer:

Good for you for wanting to learn about money.  

First, the annuity answer. An annuity is an insurance contract. There are many types and forms from fixed annuities to variable annuities which have an investment component. They are backed up the insurance company that sells them. If this financial person only suggested an annuity, then they may only sell annuities. Annuity is a product with a large commission for the sellers typically. If an investment person does not offer you more options, they may not be working in your best interests. 

Expanding your home sounds like an option, but do you have a financial plan? Use that inheritance wisely by consulting an objective financial professional first. You can meet with them on an hourly basis and they can evaluate if you have a safety account, how to manage any debt you may have and plan for your future. They can also further explain annuities and other options to best serve you. To contact one that does not sell products reach out to the Garrett Planning Network.

Once you are more educated you can decide your next steps.  

3 Things to Consider before a Prenup

Love is in the Air: 3 Things to Consider before a Prenup

“Do you know of a good lawyer to do a prenuptial-agreement?” the email from a young, engaged friend of mine seemed simple enough. However, the question lead me to discern that there are several essential discussions needed before they contact a lawyer for a prenup.  

Pre-nup agreements are all the talk in certain circles. You need to ascertain if it is for you – not because you both read it somewhere. (Or God forbid saw the advice from someone on Social Media who was not a financial or legal professional.) 

Discuss these questions together:

1. Do you need one? Why?

2. Have we communicated honestly about all our financial information?

3. Is a prenup recommended by a legal or financial professional who has both of our interests in mind?

Motto for the bride and groom:

We are a work in progress with a lifetime contract.
- Phyllis Koss

Step 1 – Understand Why You Want a Pre-nup

The typical reason is a disparaging state of life either financially or personally between a couple. One person has deep wealth, ownership in a family business or children, and the other doesn’t. Or one person was married before and feels uncomfortable without one as a result of that settlement. Consider your special circumstances as a couple to understand if you have a valid reason for a legal document.

Then, understand the laws of your state of residence. Most recognize that each person’s assets are their own coming into the marriage and even in the case of a divorce will be able to keep those assets. 

In addition, review the federal laws of marriage. The Government Accountability Office did a study in which they concluded over 1,100 rights were part of the marriage legal relationship. 

Step 2 – Sharing All Financial Information With Each Other

Before you commit to a lifetime of marriage, take these steps:

• Discuss how we are going to handle money, investments and planning for the future- and most of all financial on-going communication. (More on that later.) Put the plan in writing.

• Change beneficiaries on retirement plans, life insurance and unearth any joint property with someone else so you are both aware of the others financial situation. This also allows for true confessions on debts, savings and other financial commitments.

• Check credit reports and share with each other. These are the story of your potential spouse before you met. Start your search for the three main reporting agencies and free reports at: www.Annualcreditreport.com

With the expectations clearly laid out for your financial lives together, you will start to understand your pending spouses financial ideas and past. Plus, you will both understand each others financial life.

Step 3 – Consult an Objective Professional

A lawyer or CERTIFIED FINANCIAL PLANNER™ who is hired by both of you is the best resource before your marriage and to guide you through your years of life together. Having both types of expert as a resource will serve to ease your transitions in the coming years.

A CFP® who both have hired will discuss your concerns around a prenup agreement. They will want you to share the financial plans and goals you have together for an understanding of your situation. Having an objective opinion will allow you to decide how to proceed.

Even before you are married, meet with a lawyer to lay out what your estate plan will say post-marriage. The documents for your will, power of attorney, health care directive and trust if needed can be drafted. Then, you will have had many conversations to get to this point and feel confident about your next steps in marriage and life. (You cannot actually sign it with the lawyer until you are married. I am such a financial nerd, we had ours signed before we went on our honeymoon.)

Also, you may want to consult a pre-nup specialist who serves more as a mediator/consultant to counsel you both. They can draw up the pre-nup if necessary. Laurie Israel is one such specialist, whose book The Generous Prenup discusses what she calls “the prenup myth” – that they are necessary and make marriages better. www.laurieisrael.com

Once you understand your situation and more about prenups, decide what to do next. If you proceed, you will not need one lawyer but two lawyers for a pre-nuptial agreement. Each of you must have your own lawyer to make this a legal document. Essentially, you are two sides of the contract and you will both need to seek representation, which is different from the estate plan you will need to create together for your married life.

Have You Checked Your Estate Plan? Details Matter...

The teller handed me the paperwork and I left the bank with a smile.  Mission accomplished.  I was taking care of the details in life.

I felt great.  I was at the bank to set some money aside in a certificate of deposit.  They had a special interest rate.  The term was just about the time I would be buying a new car so this was a great opportunity for me. 

I had withdrawn funds right from my checking account to open the cd. So I was thinking it was more a transfer. Then, I signed the prepared paperwork and headed home.

Here is the thing.  None of us are perfect.  And certainly I include myself in that fact.  So it was not until an hour later when I was telling my husband what I did, that I pulled out the paperwork to look more closely.  The cd was opened in my name.  My name alone.  Oops!  That was wrong for two reasons.

First, no one but me could access it if I was to get injured, die or disabled and needed the money.  This was not a good plan for the realities of life which I discuss often.

Second and most important, if I did die, this money would go through probate court, delaying my estate settlement.  I can hear someone now saying: “Who cares? You will be dead.”  But I do care.  You see, my husband and I spent money and time making sure our estate plan and the documents were in order.  All of our bank accounts were either in joint name or the name of our irrevocable trusts.  Now, there was one outlier and I had caused the issue.  This Certified Financial Planner had goofed.  I signed documents without thinking it through and confirming the title of the new certificate of deposit.  I saw my name and signed.  I had also made an assumption that the new account would be in the same title since I just transferred the money in.  I know better.

Verify. Verify.  Verify.  I tell clients to do this every day.  And yet, here I was.  Luckily, I had done this mid-day and the bank was still open and I called. Ellen, the teller, was very helpful when I explained the name on the account was incorrect.  She offered to redo the paperwork and call me later in the day to sign it. 

I knew she had the trust documents – so important if a bank or investment company is to put your assets in a trust name.  So at least, I knew it could be simple from there.  Or so I thought. 

Remember, the bank consolidations that have been going on and on over the years since the Great Recession?  Well, this bank had merged five years or so ago.  So now, I got a call from Ellen, telling me the paperwork would take a few days because the system had to be updated at many stages to open the cd on every level.  I almost said I would take the money out and put it in my other bank!  But that was the impatient me speaking.  The part that also was mad at herself for doing wrong.  So I told her to keep me posted. 

That was Friday.  This is Monday.  My task is still not checked off as done.  I’m deflated but grateful to have this opportunity to remind you that if you have an estate plan, be sure you have all your financial business aligned with the estate plan.  If you do not have an estate plan with documents drawn up by a lawyer, get on it.  Sometimes we can all stray, just when we think we are on track. 

A Trip to the Actual Bank Anyone?