Category: Estate Planning

Sep

Women Have Different Financial Planning Worries

Unique health and caregiving worries and an industry that doesn’t listen well

Women have special concerns about financial security that financial advisors need to address. For one thing, they tend to live longer than men, so they need to worry about paying for an extended old age. For another, women of all ages are an increasingly dominant part of the economy.

Pick up any newspaper, turn on the TV or tune into any radio program and you will notice the clout of women in the marketplace, community affairs, business, politics and finance.

The data is remarkable and underscores the need for conversations that financial advisors should have with their female clients, recognizing that the challenges women face are myriad.

Women comprise 51% of the U.S. population and roughly 65% of the workforce.
They are the sole heads of 32% of American households.
60% of college students are female.
Women control 65% of global spending and more than 80% of U.S. spending.

Establishing Financial Security

A survey by Family Wealth Advisors Council indicates that 54% of women consider health a major risk to their financial future. They worry about their death and the death of their spouse as a major risk. So, is your disability insurance lacking or inadequate, and will your life insurance deliver sufficient financial horsepower if the breadwinner dies? Are you sure?

A surprising number of women, single and married, do not have wills and have not provided for their children. And the International Foundation for Retirement Education states that the number one retirement issue for women is the threat of poverty. Consider that of people age 85 and older:

71% are woman;
The median income for older women is $15,248; and
The median income for older women is only 53% of that of older men.

Did you know that of unpaid caregivers, 57% are caring for parents, and over 70% of caregivers are women? When women assume caregiver roles, they are 2.5 times as likely to end up in poverty as non-caregivers single caregivers are four times more likely to end up in poverty than married women.

Families should discuss financial security, for both the baby boomers and their parents. Understanding the ins and outs of long-term care insurance is important in the planning process.

Women & Financial Planners

Right now in 2021, women are under–served by the financial services industry, because there is still a huge disconnect between the women who have a financial planner and the women who want one. Consider this: the Center for Talent Innovations reported that 75% of women under the age of 40 do not have a financial advisor.

Why is it that so few women get the advice that they need? It could be that the disconnect lies in the fact that between 15–20% all financial advisors are female, according to Barron’s.

Now, this is not to say that women should only work with female advisors, but we all know that many men do not communicate with women effectively (of course it’s true the other way too). And a survey by Boston Consulting Group found that 70% of women that do have financial advisors felt that their advisors were patronizing or disrespectful toward them. The study showed that these advisors made assumptions about women’s risk tolerance and therefore limited their clients’ investment options.

These miscommunications may likely be the main reasons there is still a giant gap between the women who have a financial advisor and those who do not. This is especially surprising because Fortune recently reported that women control about $14 trillion in the United States, the equivalent of the combined gross domestic product of China and India.

The good news is that the financial industry realizes that it ignores women, who are responsible for most financial household decisions, at its own peril. We are seeing a huge movement of professionals that want to be more responsive to their female clients. The industry finally realizes how much power women truly hold.

Women have the power and ability to effect a lot of change in the world, especially since they now control so much of America’s wealth.

It’s About You

If you are among the 75% of women who don’t have a financial advisor, don’t let your fears about feeling judged and misunderstood stop you from getting advice to create the financial life of your dreams.

You can seek out someone who does understand where you’re coming from. You can find a financial planner you can relate to and feel comfortable.

Talk to your family, friends and colleagues. Get recommendations and then interview financial advisors until you find the right fit.

Your future-self will thank you

Jun

Inheritance Planning Can Help Avoid Headaches

An advisor can help ensure you leave your estate in the best possible way.

Families inherit money and sometimes make the right moves investing and spending. Inheritances can also ignite disruption, divorce and a host of bad behavior far from the hopes and plans of the benefactor.

What happens when you leave what’s probably one of your biggest investments: your individual retirement plan?

Did you know that Individual Retirement Accounts, including Roth IRAs, are not protected by the federal government under ERISA, except in the case of bankruptcy?

Hopefully, most of us don’t need to worry about such creditor protection, but still, your estate plan is your legacy and it needs to be structured to best serve those you intend to benefit from your assets, including your retirement money.

Plan for Future Changes

Perhaps most important, your estate plan must address potential disruptions: the U.S. tax code will almost certainly change, your heirs will experience life’s normal challenges and opportunities and something you never considered may befall those you leave behind. Early death, disability and divorce all happen every day.

Planning ahead of time is key. What if you leave your retirement money to your estate instead of to a person? What if your beneficiary dies before you?

You could use specialized trusts to help mitigate many risks, such as the danger of a family beneficiary blowing the inheritance. A number of vehicles exist for restricting a beneficiary’s (irresponsible) access to the money. For example: an incentive trust that pays out only if the beneficiary meets certain conditions and goals. A spendthrift trust also allows for monthly allowances or periodic payments for either the life of the beneficiary or until the funds are gone.

You worked hard to save for your golden years. When the inevitable day comes and you no longer need what money remains, make sure you leave it behind the best way.

Your Financial Advisor

Ensuring your financial house is in order and planning for the next generation are complicated issues that require expert advice.

Find a financial advisor who knows how to deal with these types of issues. Find a financial advisor who knows the ins and outs of various retirement accounts. Find a financial advisor who recognizes the various benefits of different trust vehicles. Find a financial advisor who understands how emotions can interfere with your inheritance plans. Find a financial advisor who understands your goals.

Oct

Just Married: Newlywed Estate Planning Cheat Sheet

You’re already sharing a life, now it’s time to share some important info to get your matrimonial journey off to a great start.

Congrats on your recent nuptials! Now that you’ve said the vows and enjoyed a relaxing honeymoon, it’s time to get down to business.

Friends with Beneficiaries

The following accounts need to be updated to reflect your spouse as the new beneficiary or transfer on death designation.

Existing Checking/Savings Account
Life Insurance: Employer-based and stand-alone policy if you already have one
Investments: Stocks, bonds, mutual funds, etc.
Retirement Accounts: 401(k), IRA, Roth IRA, 403(b)
Military Benefits
Pension: SEP / SARSEP
Trusts
Property, titles, and assets that might currently name someone else as the beneficiary (Example: You named a sibling to receive a benefit that your spouse should now be getting)

Two Hearts (And Accounts) Become One

Here are some accounts you might consider creating or consolidating now that you’re hitched.

Open Joint Banking Account/Credit Cards: Start off by filling it with the wedding gift money…if you didn’t spend it all on the honeymoon.
Health Insurance: Marriage qualifies as a special enrollment period so sign up as soon as you can.
Car Insurance: Look into getting a family (a.k.a. umbrella) plan for your household; if the rates are better than what you’re currently paying for stand-alone coverage, go for it.
Mobile Phone Plan: See “car insurance” above. If you don’t feel like moving your eyes a few inches up this page here’s the jist: If a family plan has a better rate, do it up.
Re-Title Property Ownership Documents: This applies to homes, cars, or other titled assets (usually these pass to your spouse if something happens to you, but better safe…)
Duplicate Accounts/Services: Do you need two Costco accounts? Two Netflix or Amazon Prime accounts? Consolidate these down so you’re not paying for the same thing twice.

Here Comes the Will

Compared to planning a wedding, getting a will in place is a piece of cake. If there will be babies in your future, or you already have kids, this is where you name the all-important guardian.

If you currently have a will, update it to account for your new better half. It’s best to meet with an estate attorney to make sure everything’s done right — most attorneys can also safely store the official, signed copy of the will as well. As an added benefit, by hiring a professional you can take care of the next thing on this list too.

Share the Power…Of Attorney

Your Power of Attorney (POA) has power over everything involving your finances. This includes paying bills, managing bank accounts, overseeing investments, signing contracts, and filing your taxes. We recommend meeting with an estate attorney, ideally when you’re creating your Will, to make sure it’s done right.

The Sweet Life (Insurance)

You might already have Life Insurance through your job, but is it enough to support your new family if something happens to you? Probably not. Consider term or permanent life insurance depending on your needs.

In Sickness & In Health

The last thing you want to think about right now are the medical decisions you might have to make if you or your spouse gets sick or is the victim of an accident. However, it’s best to make these decisions when you’re happy and healthy.

Creating an Advance Directive, which is comprised of your Living Will and naming a Health Care Proxy, is simple and painless. Not creating one can be difficult and painful should the situation arise. Find your state’s Advance Directive form, fill it out, sign it, keep it somewhere your spouse can easily access it, and rest easy knowing you just took a huge burden off your family’s shoulders.

Can We See Some ID?

We accumulate a lot of identification and official documentation throughout our lives. Now’s the time to get it all sorted and organized in case you need it to buy a house, get insurance, or do other adult things. Here’s a rundown:

Marriage Certificate
Birth Certificate
Social Security Card (or a place where you spouse can easily find your social security number)
Passport
Armed Forces ID / Discharge Papers
Citizenship Documentation
Prenuptial or Postnuptial Agreement
Divorce Decree (from previous marriages)
Documents related to any children you already have (example: adoption or legal guardianship papers)
Let’s Get Digital
Sharing passcodes and passwords to the following devices and systems is extremely helpful. It can also prevent lots of headaches if one of you can never seem to remember the Wifi password:
Mobile Phone(s)
Computer(s)
Tablet
Home Security System
Wifi

Along these lines, there are also a bunch of digital accounts and online services you’ll be sharing with your spouse to make sure the household runs smoothly. Here’s a quick rundown of such things:

Password Manager: If you use a password manager, and you probably should, your master password is the most important one to share.
Home Utilities: Power, cable, phone, etc.
Health / Medical: insurance provider, prescription services
Financial / Money Management: Auto-payments, budgeting
Entertainment: video, music, gaming
Food / Shopping / Delivery Services
Cloud Storage: Photos, media
Travel / Ticketing / Rewards: frequent flyer miles, reward points

And They Live Happily Ever After…

Jul

COVID-19, Nursing Homes and LTC Facilities

Determining the right living arrangement for your senior is much harder now

The decision to place your loved one in a nursing home or another long-term-care facility is a difficult one under any circumstances, especially since most adults would prefer to remain at home. Human nature is such that seniors tend to be in denial and their families tend to put off the decision as long as possible. The result often then limits your senior’s options for care.

As if that were not challenging enough, layering on an analysis that suggests that over 40% of COVID-19 deaths have occurred in nursing homes and assisted living facilities, it’s no wonder that families can easily become paralyzed into inaction.(Source: freopp.org, June 2020. Nursing Homes & Assisted Living Facilities Account for 43% of COVID-19 Deaths by Gregg Girvan and Avik Roy).

Nevertheless, being prepared for this decision – financially and emotionally – can help your loved one make this complicated transition in the smoothest manner possible.

The Choices Seem Endless

There are essentially five categories of care for our seniors, although each of these categories seems to also contain nuanced-care descriptions that requires a slightly different name.

But here are the five main categories:

Nursing homes are the largest category and offer 24-hour supervision. According to the Centers for Disease Control and Prevention, there are approximately 15,600 nursing homes in the U.S. with 1.7 million licensed beds, occupied by 1.4 million patients. The primary advantage to nursing home care is that patients have access to skilled care 24 hours a day, 7 days a week.
Assisted living facilities are similar to nursing homes but are for seniors who do not require full-time medical care or as much assistance with daily activities.
Adult day service centers are similar to assisted living facilities but are usually only open during business hours and are for seniors who require even less medical care and less assistance with daily activities. The CDC estimates that there are approximately 4,600 adult day services centers in the U.S.
Home health care could be considered similar to the care a senior would receive from a nursing home, but the differences are that the care is delivered by an agency in the senior’s home (or the home of a loved one). The CDC estimates that there are approximately 12,200 home health care agencies in the U.S.
Hospices are facilities for those with terminal illnesses, often with very few months left to live. The CDC estimates that there are approximately 4,300 hospice care agencies in the U.S.

(Source: Centers for Disease Control and Prevention, National Center for Health Statistics, June 2020).

No matter which category of care your senior needs, all of them can vary greatly in quality of care, so it takes considerable planning and research to ensure the right choice for your loved one. To start, it’s important to know that waiting lists can be very long for the best facilities – up to a year or more. Therefore, the time to arrange for your loved one’s care is before the need arises.

Discuss When Everyone is Healthy

A discussion for moving a parent (or anyone else) to a nursing home is best made when everyone is healthy. Once stricken by illness or frustrated by the loss of mobility and freedom, an older parent may not understand questions or state details of their wishes. In addition, lack of a plan often ignites family arguments without even knowing what the parent would really want.

These talks should go beyond just the money to include the parent’s future independence and decision-making regarding finances, health care and other subjects as well as basic preferences for day-to-day living.

Jumping directly into bank accounts, wills and powers of attorney usually stops the conversation cold. Instead, talk about health and lifestyle issues and then ask where important papers such as a will or power of attorney are kept, how to reach doctors, how household expenses get paid, what specific medicine is needed, etc.

None of these asks about dollars and cents, but instead focus on how your parent lives today and the answers will shape how much more planning is needed.

Your parents’ financial advisor is also a great place to start, as that person knows their situation and about any decisions already made. But make sure you get your parent’s permission first. Their financial advisor can also suggest legal documents to put in place and ways to make sure both parties can access accounts to pay medical and household bills.

Once you feel confident that you understand the current situation, plan a family caregiving strategy meeting.

The reality is that if you wait too long to plan, the likely result might be anger, fear, despair or worry. And you never want to be reactive in your planning, because then your options are limited and much more costly.

Senior Care During COVID-19

You might know that nursing homes and long-term care facilities are required to report all COVID-19 cases to state and local public health officials. But did you know that this mandate just took effect in mid-May? Now, every nursing home in the U.S. is required to:

Inform its residents and their families within 12 hours of a confirmed COVID-19 case;
Provide current and past COVID-19 information to the Centers for Disease Control and Prevention; and
Make the information public.

Remember that estimates by Girvan and Roy that suggest over 40% of COVID-19 deaths have occurred in nursing homes and assisted living facilities? Well, that study actually suggests three different estimates. Taken directly from their work:

“We estimate the national share of nursing and residential care home COVID-19 fatalities in three ways:

Estimate 1 (44.0%): Among states reporting nursing home fatalities, death from COVID-19 has struck 2.5% of U.S. residents of nursing homes and residential care facilities. We estimate that 2.1 million Americans over 65 live in nursing homes and residential care facilities; by extrapolating 2.5% across the entire U.S. nursing and residential care home population, we estimate that nursing homes account for 44.0% of COVID-19 fatalities.

Estimate 2 (43.2%): This is our most simplistic estimate. Among states reporting nursing and residential care home fatalities from COVID-19, nursing homes account for 43.2% of those deaths. If we simply assume that this share holds true in non-reporting states, we get to a national share of 43.2% (i.e., identical to the share in reporting states).

Estimate 3 (51.5%): This estimate excludes New York State, which is an outlier in terms of its reported share of COVID-19 deaths in nursing homes. A number of policymakers in New York have alleged that nursing home facilities in that state have been underreporting their COVID-19 fatality figures, possibly because New York State counts as hospital deaths those of nursing home residents who die in a hospital. It could also be that the high number of non-long-term care deaths in New York explain the lower percentage (i.e., a much larger denominator).”

Sadly, the work of Girvan and Roy is consistent with another study by researchers at the International Long Term Care Policy Network that found close to 41% of COVID-19 fatalities took place in nursing homes. And that study compiled data from facilities in Austria, Australia, Belgium, Canada, Denmark, France, Germany, Hong Kong, Hungary, Ireland, Israel, Norway, Portugal, Singapore, South Korea, Spain, Sweden, and the United Kingdom.

(Source: International Long-Term Care Policy Network, May 2020. Mortality associated with COVID-19 outbreaks in care homes: early international evidence by Adelina Comas-Herrera, Joseba Zalakaín, Charles Litwin, Amy T. Hsu, Natasha Lane and Jose-Luis Fernández).

What Should You Do?
The decision on which senor care facility is an agonizing one and requires online research, multiple site-visits, enormous patience and the willingness to ask a lot of probing questions.

Many facilities have on-staff nursing help with diverse experience in senior needs, as well as readily available medical equipment for specific conditions. Nursing homes are usually affiliated with hospitals, so that a doctor can visit a patient and assess changes in health before your senior needs to be sent to a hospital.

Many facilities offer a choice of living arrangements, such as apartments with kitchens. Services are delivered by a professional onsite staff and include prepared meals, emergency response systems, personal care, social activities, transportation, and housekeeping. And while there are lots of online tools that help you compare facilities (including one at www.medicare.gov), personal visits are essential to helping you make the right decision.

Even if a senior facility is part of a national chain, that doesn’t make their care consistent between sites. You need to visit and ask questions of the staff and residents about safety, customized care, activities, and meal variety. Take the time to find the right fit. Make sure that your loved one is completely comfortable with the environment before making a final decision.

Visiting During COVID-19

Right now and for the foreseeable futures, nursing homes and long-term-facilities are in lockdown, with access limited to essential staff. And federal guidelines suggest outside visitors can only visit during what is called a “compassionate care situation,” which means when a senior is very near death.

Further, when senior facilities do resume allowing visitors and tours, you can bet things will be very different. Right now, most facilities are offering virtual tours, but as everybody knows, virtual tours can be limiting. In other words, your due diligence is much harder today versus what it was in early 2020.

As such, it’s important that you talk to your financial advisor to help you with this decision. Your financial advisor can help connect you with experts, including elder law attorneys, social workers, health care professionals and others that have been through what you are going through.

As always, your financial advisor will provide you truly unbiased advice that has the best interests of you and your family front and center.

Determining appropriate living arrangements for your senior in need is never easy. However, advance preparation, research and your ongoing support will be essential to ensuring the comfort of your senior.

Sources: freopp.org, CDC.org, Itscovid.org, Medicare.gov

Oct

5 things to do if you win the lottery

Mega Millions is Now at $1.6 Billion

Five things to do if you win the lottery:

Fortunes can change overnight – especially because the winning ticket in Mega Millions is now worth a staggering $1.6 billion – the largest jackpot in U.S. lottery history.

Dealing with a dream financial windfall, though, can bring you new financial issues you might well find unexpectedly challenging.

If you’re planning to win Mega Millions, know that advanced planning can ease your transition, provide long-term stability and eventually calm your emotions. Here are five things to do if you win:

Get objective advice. Many people will want to give you advice, most well intended, some self-serving. You want to speak with a financial advisor who can provide unbiased recommendations. Choose a financial advisor like you choose other important professionals: reviewing qualifications and looking for a good match with your values and priorities. Financial advisors come with varying credentials, experience and expertise. Interview a few advisors before making a final decision. Ask each how he or she might approach working with you. Listen to your intuition and find someone who you feel listens to you and understands your needs and goals.
Give yourself permission to succeed. If managing wealth is new to you, you might feel intimidated or even guilty for having money. Emotional barriers may make wise decisions harder. Therapists even coined a term for your situation: “Sudden Wealth Syndrome.” Symptoms include feeling isolated from former friends, guilt over good fortune and an extreme fear of losing all the money. Trust yourself to be responsible and remember to take the long view. You haven’t changed – just your finances have.
Don’t be intimidated. Few people without specialized training can understand all the documents you see when considering your big-dollar investment options. Don’t hesitate to ask those you trust for advice or admit that you don’t understand everything. Don’t sign any paperwork you don’t understand. Make sure the financial advisor you choose will take time to help answer your questions.
Take inventory. Before you can set new goals and make long-term decisions, gather information. What do you own? What is it worth? Do you face new tax implications? Identify your real estate holdings, cash, bank accounts, stocks and bonds, retirement funds, insurance proceeds, automobiles, art, antiques and collections. This process can take months, so give yourself time to fully gather all of this important information.
Set goals. What does wealth mean to you? In an article titled “The Financial Psychology of Four Life Changing Events” in the Journal of Financial Planning, authors William L. Anthes and Shelly A. Lee wrote, “Money not only is a medium of exchange, it is also a substitute for love, a symbol of power, a benchmark of success, a tool for doing good deeds, a source of great anxiety, a scapegoat, a flashpoint in a marriage, and an emotional force of its own.”

Preparing and sticking with a well-managed financial plan can provide freedom from these intense emotions. Again, your financial advisor can help identify your risk tolerance, guide you on appropriate levels of debt, help you prepare for retirement, set up charitable contributions and direct you to a tax specialist.

Good advice and solid planning can take the anxiety out of managing a sudden mass of wealth and let you enjoy the benefits.

Jun

3 Questions Adult Children Need to Ask Aging Parents Now

As we work with clients, one of the biggest things we see is the lack of communication among generations about money. It’s not an easy subject to broach. Perhaps you had to pay your way through college. Or your parents didn’t help you as much as you expected. Maybe your parents thought you should have pursued a different career. Or you grew up in a household that never discussed money – it was always dealt with quietly.

Family dynamics can be difficult. It’s human nature. However, when there is at least an attempt at dialogue, you may be able to sidestep many of the hurdles that we’ve seen.

How are your parents supporting themselves financially? Is there a pension? A 401k? IRA? Is there insurance? Is the insurance the type you have to monitor annually – or a policy that requires annual premiums? Is there long term care insurance?
Do the parents have an advanced healthcare directive? We typically recommend clients in California go to the California Medical Association website (www.cmanet.org) and order a booklet or consult their attorney. See a sample here: Advanced Health Care Directive Kit . An advanced healthcare directive allows someone to appoint a person as the healthcare agent and indicate how you’d like to be treated medically.
Is there a will or trust? What advisor(s) or attorney has copies of this information? If it’s kept in a safe deposit box at a bank, where is the key stored?

Clients who have had the most success with planning conversations are typically those that start the conversation early. Usually the conversation goes something like this: “As you’re now in retirement, I wanted to understand a little more about your financial/health affairs.” Typical response: “I have everything under control — don’t worry about me/us.”

These types of conversations may need to be attempted multiple times before there is an opening. But, if you start the dialogue early, and try to broach it at a reasonable time consistently, we’ve seen success.

We understand that most people aren’t focused on the details of what is invested where or keeping track of insurance or health care forms. We have seen adult children have success asking a parent to put together a summary of their accounts so that someone other than themselves will have an idea of where things are located or the contact information for their advisor(s). This doesn’t mean that you have to have a full-blown conversation about your parent’s investment philosophy, how their will or trust is divided up, or how much they currently have in assets (if they don’t feel comfortable doing so). It means that you’ll be able to get this information when necessary. If you don’t have this information it may be very difficult to track down accounts, get banks to allow you to cash checks in parent’s accounts, and handle a parent’s finances when they are unable or unwilling to do so anymore. On the health care side, the failure to plan appropriately can have a dramatic impact.

Bob being from the Baby Boom Generation and myself from Gen-X, we’ve been able to “referee” a number of family generational conversations about money and planning. Please reach out if we can be of any assistance whatsoever.