12 Estate Planning Must-Dos

Many of you already have estate documents, probably executed many years ago. You need an estate attorney to look over your documents every 10 years or so. Here are a dozen points to review.

i. Do you have a will and powers of attorney for health care and property? These are part of every complete estate plan. With health-care power, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable power for property, you select an agent to act if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters.

Make sure your health-care power addresses the Heath Insurance Portability and Accountability Act (HIPPA). This Governs what medical information doctors can release to someone other than the patient.

ii. Do you need to change any beneficiaries, executors, trustees, guardians or others named in your documents? Are all still living? Can someone you recently found fill a role better?

iii. Any updates needed to addendums to your will that specify who gets what of your personal property? Often, I read wills that mention addendums for personal property and the addendums don’t even exist.

iv. Did you move to a different state since the execution of your estate documents? If so, seek out a local estate attorney to check any legal differences for planning between your old and new states.

v. Do you still need your trust documents, or can you decant, which allows you to change some provisions? Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting.

You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual.

This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security as the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the less capital gains tax your heirs pay when they sell the asset.

You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Now that thresholds are higher -individuals can leave $5.34 million and married couples $10.68 million tax-free – you may not need to move assets.

Also check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy

vi. Have your children passed the ages specified in a children’s trust (in which you designate money for such specific purposes as education, home down payments or weddings once the kids reach stipulated ages)? If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to delete that language if the kids are older than the specified ages.

vii. What happens if one of your kids gets divorced? A trust can help you protect assets for your child or grandchild.

viii. Do you have heirs with special needs? Don’t assume typical estate documents help such an heir. Seek out a financial advisor and attorney who specialize in this planning.

ix. Check beneficiary designations on brokerage accounts, insurance policies and retirement accounts. Anybody you don’t want there?

x. If you filled out a brokerage account application (or any beneficiary designation), understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by blood line – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will).

Otherwise, the remaining listed beneficiaries may simply divide the assets.

xi. Often a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your will dictates. The child splitting the money with someone else constitutes a gift, though one probably not subject to gift tax now that gifts of less than $5.34 million aren’t taxed. Still, think carefully so you keep the family peace.

xii. Do your heirs know where to find all your important information? Let someone know the password to the app where you keep all your passwords – you must remember digital assets now, too.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Should Investors Worry About Impeachment?

Tweets and speeches don’t drive the stock markets – numbers do

It’s now clear that the investigations into President Trump are likely to continue through the 2020 elections. What’s still uncertain is the impact that these investigations will have on the stock market.
After rallying since Trump’s election victory in November 2016, the S&P 500 Index has done pretty well, but it has stumbled at times too:

• Ending 2016 up 9.54%;
• Zooming up 19.42% in 2017;
• Dropping 6.24% in 2018; and
• Up more than 18% so far year-to-date at the end of the third-quarter in 2019.

Although stocks have rewarded investors with healthy returns, investors seem more nervous that Trump will be impeached because not only will his pro-business agenda be stalled, but the chaos could send the markets into a tailspin. At least that’s the worry.
And although no one has a crystal ball to tell us how the Trump investigations will end, investors would be smart to tune them out. Here are a few reasons why.

Economics Matter More than Tweets

Economics and numbers matter way more than politics to the stock market. Trump’s tweets and speeches get all the media attention, and while the market might seem to react a little bit at times, the reality is that boring economic numbers drive the markets one way or the other. And consider these numbers:

• Unemployment is at 3.7%, one-tenth of a percent from the lowest level in over 50 years.
• We have seen 107 consecutive months of job growth, the longest streak ever.
• Wages have risen 3.2% this year, the strongest year in over a decade.
• Inflation has run below the Fed’s intended longer-term 2% target for most of this 10-year expansion and core inflation has averaged 2.1% so far this year.
• Consumer spending came in much higher than expected with a 4.7% annualized growth number, the highest gain in 4 years.

Impeachment is Unlikely Anyway

Investors should remember that impeachment is very unlikely as no U.S. president has ever been impeached and kicked out of office.
Andrew Johnson and Bill Clinton were both impeached, but they were acquitted in the Senate, where a two-thirds majority is required for conviction. Richard Nixon avoided impeachment and conviction only by resigning office.

Earnings Drive Stock Prices

What should investors worry about? Numbers. Specifically, corporate earnings.

It’s an investing adage that earnings are the lifeblood of the stock market. Stocks move in response to real or perceived earnings changes. If you are thinking of owning individual stocks, the trick is to find those whose earnings growth is strong, and should remain strong.
In aggregate, however, investors should worry about the upcoming earnings season as we head into the fourth quarter of 2019. Because according to research firm FactSet, as of September 27, 2019, 113 of the S&P 500 companies have issued EPS (earnings-per-share) guidance for the quarter.

And of these 113 companies, 82 have issued negative EPS guidance and 31 companies have issued positive EPS guidance. For perspective, the number of companies issuing negative EPS is above the 5-year average of 74.

Ignore Tweets and Speeches

Again, Trump’s tweets and speeches will continue to get all the media attention. But if you intend to own publicly-traded companies, make sure you read annual reports and earnings releases, not tweets.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Retirement Planning – Redefined

Presented by John Teixeira and Nick McDevitt

On this inaugural episode of the Retirement Planning Redefined podcast, we’ll get to know your hosts a bit better. We’ll find out how they got involved in the industry, how their partnership formed, and what experiences have shaped their financial and investment philosophies.

The Asset Allocation Puzzle

Possessing a considerable amount of knowledge about stocks, bonds, and cash is only a small part of the investment planning process. Many investors are under the false notion that the greatest determinant of
portfolio performance is the specific investment choices they make. Actually, the biggest decision you will make is how much to allocate to different investment categories.

Asset allocation is all about finding the mix of investments that is right for your situation. Goals, time horizon, risk tolerance and risk capacity are some of the key factors that should be considered when allocating assets.

Goals

Determining what asset allocation is appropriate depends largely on the goals you seek to achieve. Are you saving for retirement, college education for your children, or a vacation home? Each goal must be considered in creating the appropriate asset mix.

Time horizon

Time horizon is the length of time a portfolio will remain invested before withdrawals are made. If your investment horizon is fairly short, you’d likely want a more conservative portfolio—one with returns that do not fluctuate much. If your investment horizon is longer, you could invest more aggressively.

Risk Tolerance

Everyone has a different emotional reaction to sudden changes in their portfolio value. Some people have trouble sleeping at night, while others are unfazed by fluctuations in the market. Risk tolerance is a personal preference and should be tailored to you specifically. However, when determining an appropriate asset allocation mix, it is important to consider not only one’s risk tolerance, but also one’s risk capacity.

Risk Capacity

An investor’s risk tolerance refers to his or her aversion to risk, while an investor’s risk capacity relates to his or her ability to assume risk. Sometimes, an investor’s risk capacity and risk tolerance do not match
up. If an investor’s capacity to take risk is low but the risk tolerance is high, then the portfolio should be reallocated more conservatively to prevent taking unnecessary risk. On the other hand, if an investor’s risk capacity is high but the risk tolerance is low, reallocating the portfolio more aggressively may be necessary to meet future return goals. In either
case, speaking with a financial advisor may help to determine if your risk tolerance and risk capacity are in sync.

Have questions or need a second opinion? Contact us today to learn more or to schedule a free consultation.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.