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Ask an Advisor: Common Estate Planning Mistakes

January 7, 2020 Tags: , , Jacob Sturgill

Transcript

Jacob Sturgill: 00:09

Welcome to Puckett and Sturgill Financial Group’s Ask An Advisor segment. I’m Jake Sturgill and today, I’m interviewing Deborah Williams about common estate planning mistakes we oftentimes see clients make.

Deborah Williams: 00:20

That’s right. We do, as partly because of what we, as advisors, what we help clients with. They will seek us out for help with estate planning. But I would say the first common mistake that I see a lot is not having any estate plan in place. There’s no will. There’s no living will, no power of attorney.

Jacob: 00:38

See that often.

Deborah: 00:39

Right. That’s easy for us to fix because we have relationships with attorneys, so we can put the client in touch with that attorney and then, they can draw up the legal documents that are needed and we can be involved in that plan and make sure that everything is coordinated so that assets will transfer as the decedent wishes.

Jacob: 00:59

Yeah, I think it’s really important to work as part of a team and utilize our network if clients don’t have existing relationships or if they have existing relationships, continue to work with their existing relationship and really integrate it as part of a holistic financial planning team.

Deborah: 01:15

Absolutely. That’s how we can avoid other mistakes. One of the easy things that we can do is make sure that beneficiaries are named on retirement plans or other accounts. Transfer on death beneficiaries are popular now. That’s another area that we see common mistakes happen, when there’s either a missing beneficiary or an out of date beneficiary, like an ex spouse.

Aaron: 01:12

Yeah. We want to see that they’re educated and that they are extremely competent.

Jacob: 01:39

Right?

Deborah: 01:40

That it was overlooked in the divorce and it was never removed.

Paul: 01:43

Sometimes the simplest things to fix can be pretty costly in the end. In the state of Maryland, if you don’t have a named beneficiary or don’t have your estate planning documents in order, it’s not you that is dictating, it’s the state of Maryland and other statutes.

Deborah: 02:00

Right. It’s the laws of the state that dictate where your assets go, which may not be what the decedent wished. If you have no beneficiary listed on your retirement plan, then your estate is assumed to be the beneficiary and if you have no will, then it would just be divvied up according to that state’s laws.

Jacob: 02:17

Exactly. Really great point. Thank you for going into more detail on that. If you have any questions, we’re here to help you. Please visit our website, send us an email or give us a call. We’re here to help.

It’s Your Turn to Ask

    Estate Planning 101

    November 29, 2019 Tags: , P&S

    Estate planning is an important cornerstone of your financial plan. While it may not be the most pleasant topic to think about, at some point or another you need to consider what will happen to your assets after you’re gone.

    For some, estate planning can seem like a mysterious part of the financial planning puzzle, but when you break estate planning into its individual parts, it’s not all that difficult to navigate. Read on to learn more about estate planning basics and how you can ensure that your legacy is carried out as you intend it.

    Take Stock of Your Assets

    Before you start planning where to allocate your assets, you need to know what you have. Gather information about your tangible assets — things like property and valuable — and intangible ones — such as bank accounts and investments — that will be passed down.

    This may take some time and careful research to ensure that you account for each and every asset that your family will need to work through later on. However, your diligence in tracking down these details now will save your family members big headaches later on.

    After you’ve gathered details regarding your inheritable assets, you need to value them. Some assets, like your home, can be professionally valued through an appraisal. Other assets may need to be valued in terms of how valuable they’ll be to those who inherit them. A financial advisor can help you to determine how to value your assets and give you some guidelines for making a realistic valuation of your assets.

    Build Your Team

    You probably don’t relish the idea of working through your estate plan alone. Even though it’s not the most complex task, there are plenty of places where you’ll have questions or want some guidance in choosing between alternatives.

    For this reason, it’s important to build an estate planning team that can give you the professional guidance you need to create a workable estate plan. Ideally, you’ll want to work with a lawyer to handle legal documents, such as your will and trust paperwork.

    You will also want to work closely with your financial advisor throughout the estate planning process. Your advisor can help you to determine your best course of action regarding asset allocation, valuation, and beneficiaries. They can also work with your family members to help them understand your plan and carry it out when the time comes.

    While your financial advisor and lawyer may never actually meet in the same room, you’ll want to keep lines of communication open with both parties, in case there are questions or concerns about some matter of your estate plan.

    You will also want to keep your family members looped into your estate planning activities. After all, they are the ones who will be responsible for enacting your plan later on. When your loved ones feel included in the estate planning process and know the key players in helping you to establish it, they will feel some level of peace when they work with your team in the future.

    Get Your Documents in Order

    There are a number of legal documents you need in place as you establish your estate plan. You may already have some of these, while others will need to be created during your estate planning process.

    You will want to gather information about your assets — things like bank account numbers, titles and deeds, investment information, and so forth — as you work through the asset and valuation process. You will also need documents like your will, life insurance information, and guardianship papers for you children (if applicable).

    Finally, you’ll work on items like trust paperwork, medical care directives, and financial power of attorney as you go through the financial planning process. You will want to carefully consider the individual(s) who you’ll use as your agent(s) in financial affairs, since they will have the authority to make important decisions, should you become medically unable to do so.

    Keep Track of Beneficiaries

    As you work through your estate planning, you will need to designate beneficiaries for all of your assets. Many items, like your life insurance and retirement accounts, will already have space for this information included in your paperwork when you create an account or make updates.

    It’s important to carefully consider your beneficiaries and to review them from time to time. There could be family changes that require you to assign new beneficiaries to some or all of your assets and you need to keep this in mind if you go through a major family event, like a remarriage. If you fail to update your beneficiaries, your assets could end up never going to the person(s) you intend.

    Additionally, it’s important to always provide beneficiary information for your accounts. You never want to leave this section of paperwork blank. In the event of your untimely passing, an account without a beneficiary is subject to state laws to determine its allocation. This may or may not work in favor of your loved ones’ best interests, so it’s best to make the designation yourself.

    Prepare to Make Adjustments

    Just as with your retirement planning, you need to go into estate planning with the understanding that your first plan will not be your only one. Times change. Family relationships go through ups and downs. Markets fluctuate. There’s simply no way to draw up a totally future-proofed estate plan.

    Your financial advisor can give you the guidance you need to establish your estate plan today and the foresight you need to stay on track for the future. Perhaps you’ll forget about some details, like updating beneficiaries as your family grows and you gain new grandchildren, but your advisor can provide timely reminders.

    Estate planning isn’t the most exciting activity, but it’s a necessary step for protecting your loved ones and your assets after you pass away. That’s why it’s a good idea to choose a trusted advisor who knows you personally and has your best interests at heart.

    Here at Puckett & Sturgill Financial Group, our team of experienced CERTIFIED FINANCIAL PLANNER™ professionals can handle your estate planning needs with compassion. If you are curious about the estate planning process or need to make updates to an existing plan, contact us today to learn more about our estate planning services!

      Investment Options for Building Your Retirement Portfolio

      July 26, 2019 Tags: , , P&S

      You probably already know the importance of setting money aside for retirement. But with so many investment options available, it can be tricky to determine which mix makes the most sense for your needs and goals.

      To make matters even more complicated, there’s no single investment strategy that is ideal for every investor. In fact, even when you’ve decided on a strategy, you may later find that it’s not as well-suited to your needs as you initially thought.

      While the best course of action for planning for retirement is to align yourself with a trusted financial professional who can help you sort through your retirement needs and investment choices, it’s good to know what options you have available to you. Here are some retirement investments you may consider:

      Retirement Income Funds

      A retirement income fund is, as the name implies, a managed investment that has the goal to produce income for use during retirement. Typically, these funds are comprised of a portfolio that features stocks, bonds, and other variable investments, in a similar fashion to a mutual fund, but are available exclusively to individuals of retirement age.

      Retirement income funds offer the option of a monthly payout, which is appealing to investors looking to budget for their anticipated retirement income needs. Funds are also available at any time, should the investor require a withdrawal at a certain point.

      Investors might consider retirement income funds if they anticipate that they will require a month-to-month income replacement at some point during their retirement years but don’t want to spend time continually keeping tabs on their investments. Of course, there’s no guarantee of a monthly payout from a retirement income fund, which is why it’s important to work with a financial professional who can understand the nuances of your investment fund, even if managing the details isn’t your specialty. There is risk, including possible loss of principal. You will need to make sure that the asset allocation is suitable.

      Annuities

      Annuities are another popular retirement planning vehicle because they, too, offer the benefit of a monthly payout. Many investors find the option to budget monthly around this type of income a boon to successful retirement planning.

      While annuities are insurance products, rather than actual investments in the technical sense, they are often considered part of the investment mix because the benefits they offer can be combined with a robust investment portfolio. There are a few different types of annuities out there and some are more appealing for retirement planning purposes.

      A popular choice for retirement is an immediate annuity, which begins paying out as soon as you contribute your initial investment. For investors already enjoying their retirement years, this type of annuity is appealing because the benefits are felt right away.

      Another option that some use to fill their retirement portfolio is the variable annuity, which allows you some freedom to customize the annuity mix. While this may seem like an appealing option, it’s important to scrutinize the details of any annuity you consider, in order to avoid incurring unnecessary fees or hidden charges.

      Fixed and Variable annuities are suitable for long-term investing, such as retirement investing. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply. Variable annuities are subject to market risk and may lose value.

      Bonds

      Bonds are somewhat lower-risk investments that offer payout in two ways: first, on monthly interest accrued, and second, on a return of investment at the end of the bond period. These investments are offered by the government and municipalities, so they’re particularly well-backed and should provide the expected payout amount throughout the agreed-upon terms.

      When considering bonds as a retirement investment, you may want to consider a “bond ladder” that contains multiple bond investments with varying maturity dates. This way, you’ll earn back investment dollars at different maturity dates throughout the years of your retirement.

      Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. Bond yields are subject to change. Certain call or special redemption features may exist which could impact yield.

      Real Estate Investment Trusts (REITs)

      For some, the idea of investing in tangible assets makes sense as part of the retirement investment mix. Real estate investments are a popular choice for investing, and with Real Estate Investment Trusts or REITs, you can have ownership in a basket of properties. Investing in Real Estate Investment Trusts (REITs) involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.

      Managed Funds

      Managed funds are another popular choice for retirement investing because they give you the flexibility to pick and choose your investment categories without the day-to-day need to oversee markets and performance. While we mentioned retirement income funds – a type of managed fund – above, it’s important to recognize that there are many other investment options for planning for your retirement.

      Depending on your age and asset availability, you may have a variety of managed funds from which to choose when establishing your retirement portfolio. There are a lot of different ways to narrow down which managed fund(s) may work for your situation, but trying to sift through options without missing important details or contrasts can be overwhelming.

      As with any type of investing activity, it’s always a good idea to consult your financial advisor when it comes to sorting through your options for managed funds. They have the experience and expertise to give you some ideas of what to look for and what to avoid when comparing and contrasting your investment options.

      Are You Ready to Start Your Retirement Planning Journey?

      If you’re inspired to start your retirement plans or review an existing retirement portfolio, it’s time to reach out and take that next step. Working with a CFP® professional can give you the boost you need to sort out your retirement goals and establish targets for your future spending needs.

      Additionally, working with a professional advisor can provide you with insight to investments that are better-suited to you (or you and your spouse) specifically, depending on your goals, values, and risk tolerance. Your retirement portfolio should be diverse, but not to the point of recklessness. With careful cultivation and portfolio management, you can stay on top of the various components that comprise your unique retirement portfolio.

      At Puckett & Sturgill Financial Group, we have plenty of experience in connecting investors with retirement planning tools and investment strategies that are customized to their needs specifically. We would love to meet with you and discuss your retirement needs and answer your questions. Connect today to get started on planning your retirement portfolio!

        The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

        Government bonds and Treasury bills are guaranteed by the US government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value.

        Municipal bonds are subject to availability and change in price. They are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise. Interest income may be subject to the alternative minimum tax. Municipal bonds are federally tax-free but other state and local taxes may apply. If sold prior to maturity, capital gains tax could apply.

        How Much Life Insurance Coverage do I Need?

        July 12, 2019 Tags: , , Jacob Sturgill

        Finding the right fit between a life insurance policy and your lifestyle can be an important part of preparing for your financial future. But trying to sift through policies by type, coverage, and monthly expense can be a challenge.

        If you’re in the market for life insurance or are looking to expand your personal coverage, ask yourself the following questions to get a better feel for the coverage may be a good fit for you.

        Do I Actually Need Life Insurance?

        Without looking at every factor, there is no way to definitively say whether life insurance is something you do or don’t need. But, as with most financial products, there are certain individuals for whom life insurance is more ideal.

        If you have dependents and want to ensure their financial protection in the event of your passing, you may wish to consider how a life insurance policy could benefit your financial plans. Life insurance can cover the expenses associated with a funeral and other arrangements, as well as cover family debts and provide a helpful payout for your dependents.

        On the other hand, if you don’t have dependents or are otherwise financially prepared to cover expenses in the event of your passing, you may not need to worry about adding life insurance coverage to your financial planning.

        What do I Need to Cover?

        To determine the value you need from your life insurance policy, you need to know what expenses you need to cover after your death. These may include:

        • Funeral expenses – Funeral expenses and other arrangements can easily top out in the tens of thousands of dollars. You don’t want to leave your family in the lurch with trying to cover these emotional expenses out of pocket.
        • Debt coverage – After your passing, you will want your life insurance coverage to cover your debts in full. Depending on your age and lifestyle, you may have tens to hundreds of thousands of dollars of debt to pay off. Take into account factors like your mortgage, auto loans, student loans, and credit card debt when you tally your debt coverage to achieve your minimum life insurance coverage figure.
        • Income replacement – If you are your family’s primary provider and have dependents to care for, it’s important to factor the loss of your income into your life insurance coverage figure. To achieve a ballpark figure for income replacement, multiply your yearly salary by ten years and use this number as a base for your income replacement. For example, if you make $50,000 yearly, you would want a minimum of $500,000 in life insurance coverage as income replacement.

        Finally, add these figures together to discover your minimum coverage needs. For the individual with $300,000 in debt, requiring a $500,000 income replacement, and a funeral expense cushion of $20,000, the minimum life insurance coverage they’d need would be $820,000.

        How Can I Determine which Plan is a Good Fit?

        Finding a life insurance policy, or combination of policies, that meets your future needs and stays within your budget will likely take some careful research. Depending on your age, health, and income, you may have certain limits on the coverage for which you qualify.

        Your financial advisor can help you put the pieces together to determine which life insurance policy(ies) make sense for your current lifestyle and future financial goals. To learn more about long-term financial planning, contact Jacob Sturgill for an initial consultation and personalized long-term planning roadmap.

          Handling the Hard Stuff: How Your Financial Advisor Can Help After a Loss

          May 8, 2019 Tags: P&S

          Working through loss is draining, both physically and emotionally. And while it’s hard to imagine how you might handle the passing of a loved one or another unexpected loss, it can bring some comfort to have provisions in place that’ll protect you or your loved ones when these hard times come along.

          An important aspect for working through troubling times is surrounding yourself with a community that will offer support and a helping hand. Your financial advisor can be an invaluable part of this team.

          From helping you work through important paperwork to ensuring that you have all of your ducks in a row when it comes to making adjustments to your own legacy planning, your financial advisor can play a critical role in helping you stay on track in the aftermath of a personal loss. And when you can trust your advisor to help you with the details, you have the confidence to work through everything else that comes along with this life event.

          Here are some of the roles that your financial advisor may play after a loss:

          A Balancing Voice

          Dealing with grief is different for every individual. After a loss, you may not have the desire or expertise to work through some of the necessary paperwork and decisions that now fall to you. Your financial advisor can provide a welcome balance to your internal feelings and can help you work through the required steps without getting mired down in emotion or indecision.

          If you’re newly handling joint finances on your own, your advisor can provide professional guidance in working through the decisions that you now face. Your advisor can also help you to prioritize decisions to give you clarity on which issues must be handled immediately and which can wait until a later time.

          You may be tempted to jump into making financial decisions by the dozen in the weeks and months following a loss, but if these decisions are emotionally motivated, they could be dangerous for your financial future. When you work with a trusted advisor, they can give you the balanced guidance you need to keep emotional thinking at bay and work through your issues holistically, with your entire lifestyle and values-system in mind.

          A Helping Hand

          Often after loss, there are mountains of papers to be signed and letters to be sent. Sometimes this work can seem daunting, even to the most ambitious family member.

          If you find yourself dealing with more paperwork than you can handle, talk to your financial advisor about whether they can help you sort through some of your financial paperwork to ensure that nothing is missed. With this task off of your plate, you can focus on other details and not worry whether you’re going to overlook an important document to file in the meantime.

          A Trusted Guide

          After loss, your financial status is likely to change to some degree. Whether you’re dealing with a change in income and expenses or want to adjust your retirement goals, you will want to have an in-depth discussion with your financial advisor regarding your financial status as you move forward.

          Your advisor will know the right questions to ask in order to help you sort through which changes you’ll need to make to your financial strategy. They can also help you to determine how your new status will impact your current holdings and provide advice on how to avoid tax penalties and other unwelcome impacts.

          Part of your financial advisor’s job is to help you work through life changes as they happen, and your advisor has likely worked with plenty of other clients in a similar situation to yours. They are familiar with the territory and can provide counsel on which steps you need to take in order for you to articulate and work toward your new financial future.

          Important Steps to Take Today

          Of course, it’s the relationship you build with your financial advisor during the good times that allows them to compassionately help you work through loss and other life events. You want your financial advisor to be someone that you can trust to look out for your best interest in the aftermath of loss.

          In order to establish that relationship, you need to have deep conversations with your advisor about concerns regarding your estate planning and long-term wealth goals.

          Here are some things to do in the short-term to help you establish confidence and a solid ongoing relationship with your financial advisor:

          Work through Estate Planning Documents

          When it comes to confidence in the aftermath of loss, you may be motivated to work through through as much of your own estate planning process as possible if you haven’t done so already. Your financial advisor can provide you with the documents you need to prepare your assets and can also provide valuable feedback as you work through the planning process.

          The earlier you start your estate planning, the more time you have to ensure that all of your documents are in place and to make adjustments as you go along. Since your future plans tie into your overall financial planning journey, it only makes sense to talk about how they impact one another and to make plans for your asset allocation in the event of you or your spouse’s passing.

          Work with an Advisor who Cultivates an Atmosphere of Openness

          Ideally, your financial advisor is a person who you trust and who has already helped you work through certain financial planning decisions. But if they’re not, or you don’t have a financial advisor that you feel you can trust, perhaps it’s time to find someone that you feel comfortable working with in both the good times and the bad.

          Your advisor should work with you to determine your financial goals and provide helpful, reasonable recommendations that balance your values and ideals. At Puckett & Sturgill Financial Group, we believe that all of our clients deserve personalized service that is built on a relationship of mutual trust.

          If you’d like to learn more about how working with a trusted financial advisor can pave the way for your future confidence, contact us to schedule a discovery meeting with one of our Certified Financial Planners!

            What Issues are Important to Consider if My Spouse Passes Away

            April 2, 2019 Tags: Jacob Sturgill

            Dealing with death is never easy and always comes too soon for those we love. Putting your estate in order can allow your loved ones to transfer your assets in an orderly, timely, and tax-efficient manner in order to minimize their burden after you pass and allow you disburse your assets as you intend. Here are some other factors to consider if your spouse passes away.

            Are Your Cash Flow Needs the Same?

            After a loss, your lifestyle needs, including income and spending, will probably change. It’s possible that your sources of income may change and important to consider how these factors might impact your budget and other aspects of your financial situation.

            You may need to look into ways to provide a continued cash flow to sustain your lifestyle, as well as issues pertaining to handling your spouse’s IRA, pension, and other benefits. Your income, personal budget, investments, and other financial decisions may all be impacted in the aftermath of a loss.

            Was Your Spouse Receiving Social Security Benefits or a Pension?

            If your spouse was receiving Social Security benefits or a pension from a previous employer, you may be eligible to collect survivor benefits, have payments that will stop, or payments that could be reduced.

            Depending on your spouse’s employer and career history, you may be eligible for certain benefits on their behalf. And if your spouse was a veteran, you may be eligible to receive death and burial benefits, as well as other survivor benefits.

            Are You Aware of All of Your Spouse’s Property and Assets?

            Your spouse’s employer may offer a life insurance policy that you can collect after your spouse’s passing. You may also be eligible to collect credit card points, airline miles, unclaimed property, safe boxes and other assets your spouse had accumulated throughout their life.

            How is Your Tax Situation Impacted?

            Taxation on your assets may look a little different after your spouse passes away. You home is one area where you need to research your tax benefit through selling (you can qualify for the $500,000 housing exclusion if you sell within two years of your spouse’s death). For property owned jointly with your spouse, expect to receive a step-up in basis adjustment for each joint property. Additionally, if you filed “married filing jointly”, you may continue to do so for the year your spouse passed away.

            Are Your Risk Tolerance and/or Investment Objectives Different?

            As a newly single investor, your investment needs may be different than they were when you and your spouse invested jointly. Perhaps your retirement figures require adjustment or your risk tolerance has changed. Regardless of your specific situation, it’s important to look for ways in which your future financial plans may be impacted by the loss and to strategize a plan for moving forward.

            Do Other Special Situations Apply?

            Sometimes, there are unique situations that further impact your estate planning needs. If your spouse was a business owner, you will need to make accommodation for their business assets and close or transfer accounts to the proper parties.

            You will also want to take a second look at assets and make proper accommodations for out-of-state properties and other accounts with unique needs. Lastly, you may wish to reduce the risk of identity theft by closing your spouse’s online accounts, canceling their driver’s license, and notifying official parties of their passing.

            We’re Here for You

            There is never a convenient time to deal with loss, but you don’t need to navigate these unknown waters alone. Contact Puckett & Sturgill Financial Group today to learn more about our estate planning services and how we can lend a helping hand during challenging times.

              Important Disclosures

              This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor.

              5 Realities You Don’t Want to Face in 2017

              November 30, 2016 Tags: , , , , , , , , , P&S

              David Hemler, CFP®

              Another year is quickly coming to a close and with it the opportunity to tackle some financial tasks you may be pretending do not need your immediate attention or you may be ignoring all together. While the New Year signifies the opportune time to tackle the things we don’t want to face, I challenge you NOT to wait. Seize the day so you aren’t faced with any of these realities in 2017, which are often the byproduct of denial and procrastination.

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