Simple Steps to Create an Estate Plan

Posted on May 6, 2020 in

Having spent the better part of two decades helping clients create, review, and assist with changes to their estate plans, I’ve seen and heard quite a few scenarios when dealing with estates. Below are a few tips to help you through the process of estate planning. Following these simple steps will be instrumental when visiting with your financial planner and estate attorney to draft, review or change your estate plan.

Making a Will
This may sound trivial to some, but not having a Will is like not brushing your teeth and then hoping your teeth look great for the rest of your life. It’s possible, but not likely. A Will can be a simple document that explains where you want your assets and valuables to be sent after you pass. Keep in mind that retirement accounts have their own beneficiaries, and these instructions may be different than who or where you want other items to be sent such as heirlooms or cash from bank accounts. A Will can also create trusts after your passing to protect assets and direct where and when they are to be distributed. This is especially important if you have minor children.

Life Events
Have you recently had a child? Been married or divorced? Are there children involved? Not only might you update everyday items like cell phone users or address changes when you move-for estate planning, some life events can make your current plan useless and require change. Consider the example of a second marriage with children. You marry someone with children, and you have your own. In some states, when you pass, your assets go straight to the spouse. The spouse may have a plan to leave their assets to their children thus leaving your children out of any inheritance. Having your own plan in place to ensure your children receive something is paramount and far too often overlooked.

Consider Health Care Decisions
Most Floridians remember a case in Tampa where a woman was on life support for years because the husband and her parents argued over the woman’s directives. The battle even ensued on national news. Having a Living Will and Healthcare Surrogate can stop those types of situations from occurring because the Living Will and the Healthcare Power of Attorney will know which decisions to make as well as end of life arrangements, including organ donation.

Business Succession
If you’re the sole proprietor or large shareholder of a business, you should have a plan on how to sell your shares or business. Do you have a buyout option in place? What about life insurance agreements? Many times, the spouse of the deceased isn’t involved in operations and may not want the burden to take over. The other owners would probably feel the same. A carefully crafted agreement would easily explain how the business would continue to run or how to sell those shares in the event of a death.

Understanding The SECURE Act
The SECURE Act, signed into law December of 2019, changed estate plans in a major way. If your estate plan was created before December of 2019, a review of the plan with your estate attorney is necessary to ensure your wishes can still be followed given the new rules on retirement assets. Keep in mind that certain laws are set to expire in 2025, which is why I recommend reviewing your estate plan every few years. Not only does life happen, but estate laws change too.

Organize Your Life
Finally, keep your estate documents in a safe place, maybe a cloud repository to keep copies of important documents to review when needed, but allow the attorney or bank via safe deposit box to hold originals. Also, if you are the only one with knowledge of your usernames and passwords to bank accounts, investment accounts, etc., provide your spouse or family the know how to obtain that information when necessary. When in doubt about any of the above steps, ask your financial planner or trusted fiduciary. We’re here to help.

Derek M Oxford | CFP®, AEP®
Financial Advisor

Grand Re-Opening

Across the globe, the pandemic situation seems to be improving. Many nations continue to struggle with the economic fallout, but case counts and mortality rates hint that things are getting better. In the United States, the first wave of COVID-19 is waning, and many states are looking toward reopening their economies. Public health authorities remain concerned that a second wave of the virus will emerge. Meanwhile, investors are contemplating the possible shape of the recovery. The shape of the economic recovery will depend on how willing and able consumers are to return to their old spending habits.

Employment and Consumer Spending

Prior to the COVID-19 crisis, unemployment was at 50-year lows. Widespread unemployment is an unfortunate effect of the public health measures used to contain the virus. Economic data shows that tens of millions of Americans have already filed for unemployment benefits. The unemployment rate is expected to peak at 20% or perhaps higher. Wise investors know that the employment situation is “old news” as far as the markets are concerned. It is very possible to see the market go up on news that is “less bad” than expected, even while the headlines are bleak.

In times of crisis, Americans have historically reacted by saving a bit more. Many retailers, restaurants, and most entertainment venues are now closed, increasing the savings effect dramatically. In March of 2020, the personal savings rate registered the largest one-month increase on record, and now sits at the highest level in nearly 40 years. The last time the personal savings rate was this high was November 1981. While it is possible this increase in savings is a “new normal”, it is much more likely Americans will rapidly return to their free-spending ways. Using some “walking around sense”, it is not hard to see that most places that people can shop, are full of people shopping. New Year’s Resolutions usually expire a few weeks into January. This new trend of saving will probably last about as long as it takes businesses to reopen, and then consumers will hit the stores with cash to spend.

This Recovery Brought to You by the Letters V, U, L, and W

Investors and the markets are now contemplating what shape the recovery will take. The four most likely possibilities are described as being in the shape of a V, a U, an L, or a W.

  • A V-shaped recovery is still possible, but rarely in history is an economic recovery as rapid as the decline.
  • A U-shaped recovery is also possible, if fear of the disease keeps consumers home and businesses closed even after restrictions are lifted.
  • For much of March, the markets were concerned the recovery would take the shape of an L, a sharp decline followed by a long period of stagnation. The swift public health response, and massive relief and stimulus, make this unlikely.
  • If a second wave of the virus emerges, the recovery might take the shape of a W, especially if parts of the economy need to be closed again.

The good news for investors is that government officials and businesses now have much more experience with containment than they did a few months ago. If a second wave emerges, this experience will make future containment efforts more effective and less expensive. In the meantime, sentiment among consumers and businesses alike hint that the recovery will most likely be somewhere between a V and a U.

It is too soon to tell what shape the recovery will take, but we do know that the economy and the markets will recover. We also know that old habits die hard, and US consumers are very likely to continue to spend as they have in the past. For investors in great American businesses, the future is still bright.

Matthew A Treskovich | CPA/PFS, CITP, CMA, CFP®, AEP®, MBA, CLU, ChFC, FLMI
Chief Investment Officer

As we settle into our 2nd month of social distancing, we have had time to reflect on what has occurred since the start of the crisis. As with all major economic and global events, we are constantly trying to understand how we got to this point and in turn, what does history provide as a roadmap of what to expect moving forward.

Let us be clear, we are in unprecedented waters and this sudden and immediate draw down of the global economy due to a pandemic is certainly a unique event that we have not encountered in our lifetime. From an economic standpoint, what makes this event so unique is that we are experiencing both a demand and supply shock to the global economy. But while the circumstances relating to the sudden shutdown due to a pandemic might be unchartered, we can turn to history to find a few other examples of when we had both a demand and supply side shock.

Over 100 years ago, the world was faced with another pandemic, the Spanish Flu. Some of the same measures that we are currently putting into place today were used back then as well. Social distancing, wearing masks, etc. In addition to the pandemic, America was also dealing with the end of WWI and the return of troops back from Europe. We saw a gradual return to normal following the control of the pandemic and consumer confidence took months to take hold where consumers were finally comfortable enough to go about their daily lives. The pandemic slowed down the post-war recovery but what followed from that pent-up demand and supply chain led to the roaring 20’s and a period of great economic prosperity.

In the early 1940’s this country was thrust into WWII. During the build up to the war and over the course of the conflict, over 11% of our population was sent off to fight. This turned consumers into soldiers and the focus of the country went toward the war effort. One of our responses to this crisis was to turn to a non-traditional workforce, women. Additionally, capitalists and manufacturing companies were forced to repurpose their efforts to making necessities like tanks, airplanes, and guns. Similarly today, we are seeing a major shift in the workforce. Through modern technology, alternative workforces are being created through virtual offices, curbside pickups, home delivery services, etc. And of course, we are once again seeing American ingenuity in repurposing some of our manufacturing efforts toward the production of medical equipment, personal protective equipment and sanitizing systems.

The third example in recent history was the 1973 oil crisis. The crisis exposed our dependence on foreign oil and its control on our society. It left Americans waiting hours in line for gas, disrupting productivity and severely slowing down the US economy. This crisis ultimately put us on a path toward securing energy independence and moving from an oil importer to an oil exporter. Similar to the oil crisis, this virus has put a spotlight back on our dependence of foreign manufacturing for critical goods, specifically in the area of healthcare supplies and medications. Look for a post-virus push toward bringing more manufacturing back to the US that will not only create more jobs post-virus but also help shore up our supply chains to ensure our national security.

We are certainly in the midst of what will hopefully be a once in a lifetime event. But what history tells us is that American capitalism, grit and ingenuity typically leads to advances and growth post-crisis.

Our CPS Team is committed to helping both our clients and community get through these uncertain times. If you, or someone you know, needs assistance, please be sure to reach out. Our advisors are working around the clock to answer all your money questions:

Michael A Riskin | CPA/PFS, CFP®, MST
Vice President | Treasurer | Partner

Considering my relatively young age of 31, it might surprise you that I have lived through not 1, not 2, not 3, but 4 “once in a lifetime” events that have affected the U.S. Stock Markets. While all four events were unique in their own right, they are a reminder that facing adversity is not necessarily unique, and may not be “once in a lifetime.”

When I was 1 years old, the “Oil Price Shock” was big news. The price for a barrel of oil spiked during this time period and created uncertainty that rippled through the U.S. Stock Markets. During the 1990’s we saw the first negative year in the S&P 500, -3.1%, after eight straight positive years!

When I was 10 years old, the “Dot-com Bubble” nailed the market. The enormous demand for anything with “.com” in the business name created a bubble around technology stocks. Unfortunately, we all know what happens to bubbles…they pop! When this happened, the U.S Markets declined for 3 years in a row! Between 2000–2002 the S&P 500 return was -9.1%, -11.9%, & -22.1% respectively. Ouch!

When I was 19 years old, the subprime mortgage crisis culminated in the “Great Recession.” We all remember this one! The imbalance between risk and reward created an environment where banks were lending money to anyone willing and able to sign papers. When this bubble popped, the S&P 500 recorded a -37% return in 2008. Again, ouch!

Now I’m 31 years old, and currently living through the “Coronavirus Crisis” from COVID-19. Luckily, I’m in a profession that can work from home, and work with a company willing and able to adapt during this crisis. Across the globe, schools, businesses, and social life have shut down while we witness history from the safety of our homes. At the time of writing this article, the S&P 500 has dipped roughly -14% for the year. If that number holds to the end of the year, that would make this only the third worst S&P 500 year since I was born.

While writing this article from home, I’m holding my nearly 1-year-old daughter in my lap. She is currently living through her first “once in a lifetime” market event just like I did when I was 1. Ironically, there is also an “Oil Price Shock” but this time, it is in the opposite direction. I don’t have a crystal ball, but if my 1-year-old daughter could understand me, I would tell her that this is not the first crisis to hit the U.S. markets, and it certainly won’t be her last “once in a lifetime” event. We have been through adversity before, and if history repeats itself, the U.S. economy will eventually rebound and continue to thrive.

Sterling J Searcy Jr | CPA
Senior Tax Advisor

Last week we urged all small businesses and some self-employed (Form 1099) individuals to continue to apply for the CARES Act programs, such as the Paycheck Protection Program (PPP), in preparation that more money could become available. The bill to add additional funds to the CARES Act programs passed the Senate this week, with speculation that it will pass the House on Thursday. The act as it is then expected to be signed by the President.

How Much are We Talking?
If passed, this bill would add $500 billion more in funds to the CARES Act, including, but not limited to, over $360 billion in additional PPP funding, another $10 billion in EIDL funds, and $100 billion for hospitals. Additionally, funds for ancillary health items & testing have been made available. On April 16th, the original $350 billion for the PPP loans ran out, leaving thousands of small businesses confused and frustrated. Some small business still haven’t heard back from their bank institutions at all, leaving some to speculate that they have been approved, but not yet notified.

So What Do I Need to Do Now?
Whether you’ve already filed and are waiting to hear back from your bank, or you haven’t filed just yet, it’s best to make sure your application is complete to ensure you have the best chance at getting these funds. A lot of banks are only working with their current clients, so now is the time to quickly build a relationship with your local branch, possibly your local community bank, to help increase your chances. It’s better to put in the work now in hopes these funds become available, than to scramble after they do. We’ve put together a checklist of documents your bank might request, so gather these before heading to your bank. And don’t forget to bring your completed application. If you believe your application has already been approved or submitted, be sure to call your banker and ask for an update.

What if I Already Received the PPP Loan? How Do I Track the Spending?
Great question! Just because you’ve received the loan, your work doesn’t end there. You’ll need to track the spending and prove you used the funds for its intended purpose which includes mostly payroll expenses. Use our PPP Reconciliation Schedule to perform a bank reconciliation at the end of the 8th week and tie your general ledger account to the bank statement.

What Other Resources are Available?
The Lakeland Chamber of Commerce has put together a robust list, but if you’re feeling overwhelmed by all the options, or are unsure of which programs you qualify for, don’t hesitate to contact us.

We’re Here to Help
The CPS Team is committed to helping everyone during these uncertain times. If you, or someone you know, needs assistance with the PPP loan application process, please reach out to one of our Financial Advisors:
Don’t go at this alone. We’re all in this together.

Michael Scott | MBA, CFA
Senior Portfolio Analyst

Making the Most of Your Stimulus Check

Posted on April 21, 2020 in

CARES Act stimulus payments started going out to millions of Americans this week. The IRS started sending direct deposits on April 9th to taxpayers whose information was already on file. Paper checks may take longer, but eventually, everyone will receive their stimulus payout. Stimulus payments start at $1,200 for individuals and $2,400 for married couples. Families with qualifying children will receive an extra $500 per qualifying child.

Now, before we talk about how to spend your stimulus money, let’s work on getting it.  Already have your stimulus money? Click Here to skip straight to what to do with it.

How to Get Your Payment
The IRS is using information from 2019 tax returns to determine who will receive a payment. If you haven’t filed your 2019 taxes, they will use the information from your 2018 return instead. Any stimulus funds that aren’t sent out now can be claimed as a credit next year when you file your 2020 tax return.
Some taxpayers will have higher income this year than they did last year. The IRS says that if you qualified for stimulus using your 2019 or 2018 tax return, you won’t have to give the payment back even if your income is over the limit in 2020.

The IRS has created a web page for taxpayers to check the status of their stimulus payment and update banking information. However, not all taxpayers are in the system yet. The IRS is updating information in this system once a day, so if it can’t find you, be patient and keep trying!

Many Americans were not required to file a tax return in 2018 or 2019. Non-filers who receive Social Security benefits, don’t need to do anything – the IRS will send your stimulus check by the same method. However, non-filers who receive one of these benefits and have a qualifying child under age 17, you can apply for an extra $500 per child stimulus payment. This page also allows those who are not required to file a tax return and do not receive Social Security benefits to provide the information needed to receive a stimulus payment.

Making the Most of Your Payment
Once you have received your stimulus payment, what now?

If your finances are hurting because of the pandemic, use your stimulus payment for whatever you need to make it through this crisis. This could mean catching up on bills or topping off your emergency fund. Many lenders are offering to adjust debt payments. If you are in a tough spot, look for help from your creditors first before you use your stimulus money.

If you don’t need to spend your stimulus money on immediate and urgent needs, the next thing to look at are your emergency fund and your debts. Top off your emergency fund and pay down any high-interest rate revolving debts. For most of us, the stimulus money won’t be enough to make a dent in our long- term debts like a mortgage. Paying down long-term debts with low-interest rates isn’t a terrible idea, but there are probably better ways to use your stimulus money.

Once your emergency fund is topped off and your debts are under control, you’ll be in a good spot financially. You should consider using some of your stimulus money for things you wouldn’t normally spend money on. The past two months have been very stressful for everyone. It’s okay to spend a little bit to improve your mental health and reduce stress. This could mean buying a luxury item, making a charitable donation, subscribing to a streaming service, or even buying some exercise equipment. You could also set aside some of your stimulus money toward a post-pandemic vacation.

As with everything financial, the key to success is having a plan and sticking with it. Make a plan for your stimulus money, and then use it!

Rick Bernard | MBA
Financial Advisor

Congratulations, Derek Oxford | CFP®, AEP®, named an ACCREDITED ESTATE PLANNER® Designee by the National Association of Estate Planners & Councils.

The Accredited Estate Planner® (AEP®) designation is a graduate level, multi-disciplinary specialization in estate planning, obtained in addition to already recognized professional credentials within the various disciplines of estate planning.

It is awarded by the National Association of Estate Planners & Councils to recognize estate planning professionals who meet stringent requirements of experience, knowledge, education, professional reputation, and character.

Get to know more about Derek.

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