It was late. The smell of smoke and ash in the air stirred everyone in the house awake. The bedroom felt warmer than normal. You remember setting the air conditioner to 73 before bed because it was a hot day earlier. Walking to the door, the handle was hot to the touch when you grabbed and swung it open. The house was on fire.
I hope this experience never happens to anyone, but it could. Homes can burn down or be badly damaged by fires or the water used to put them out. Similarly, wind and rain from a storm or hurricane can rip strong homes to shreds. When that happens, preservation of life or the lives of whom you are responsible for come first. After that, what will be removed from the house?
Many people keep important documents at home, and storing them in a place that could easily be removed or safe from catastrophe could make the difference between wealth and poverty. When considering how to store possessions or important documents, choose one that is most comfortable for you. Protecting your valuables by keeping them out of harm’s reach means you can focus on the safety of your family.
Home safes are steel lockboxes designed to store important documents or valuables. Home safes are typically part of a larger security system for the home, but a few general options stand out for understanding. Floor safes can be designed to be hidden as well as being bolted into the foundation but cannot be removed easily. Wall safes are designed to be kept out of reach of children or hidden behind clever pictures or TVs.
Protecting your valuables by keeping them out of harm’s reach means you can focus on the safety of your family.
Portable safes are small and compact, often weighing far less than the latter options. Most include handles or cables so they don’t “walk away” unnoticed. Different safes are designed to withstand water while others have fireproof ratings of 1800 degrees Fahrenheit for one or two hours.
Home safes have been a staple of the household since the medieval times when wooden boxes wrapped with iron were used to store titles, jewelry, and other keepsakes. Mass production of the modern home safe came about in the early Nineteenth century. Ranging from inexpensive and mobile to a multi-generational investment with complexities, home safes provide a great option for those looking to keep items close by.
Safety Deposit Boxes
Similar to home safes, these types of boxes are also made of metal, typically stored at a bank or credit union. Unlike home safes which are purchased by the homeowner, safety deposit boxes are rented for as long as necessary to keep valuables and documents stored in a vault. Rarely would a bank be blown away in a storm or burnt down. Banks will allow most anything to be kept in their boxes outside of passports, medical directives and living wills. These items should be easily accessible at home, protected in a different way.
Keep in mind that items inside of a safety deposit box are not insured by the bank or FDIC. The individual would have to purchase their own insurance (typically applied to a homeowner’s policy) to cover the contents inside the box, thus increasing the overall cost over time.
Finally, if the person owning the box passed away and no other individuals were given access to the box, it could be weeks or months before it’s able to be opened.
It’s so easy in our modern world to be able to access documents at a moment’s notice via digital cloud storage. Of course, a person won’t be able to store valuables this way, but digital storage keeps documents readily available and safe. It’s important to note that most cloud storage comes with a fee, which can be shared in the event that a server loses power and information needs to be backed up elsewhere. Attorney’s offices are able to store legal documents for you either physically or digitally with a retainer fee. Other professional offices may do the same. It’s also important to note that the State of Florida allows for most legal documents to be copies, but not all.
For planning purposes, it makes sense to have digital copies of legal documents to be able to read through and sort on a computer. Powers of attorney, living wills, advanced directives, and trust documents are able to used legally as copies. Last Will and Testaments should be original or at least certified copies of an original, and this document should be kept somewhere safe. If this document is not an original, probate court will usually require a hearing, witnesses, reporting, and could come with a hefty price point.
Having trusted advisors to walk you through this step of financial and estate planning can leaven the shoulders of the most astute client. Either way, seek guidance from a fiduciary whenever possible. We’re here to help.
Derek M Oxford | CFP®️, AEP®️
Gone are the days of brokers that would call randomly with a stock tip or buy request like movies we have seen with Charlie Sheen or Leonardo DiCaprio. “Advisory Services” has taken over as a foothold in the industry that is Finance.
What was once a transitionary relationship for the wealthy is now a long-term planning type of relationship for all walks of life. Designations are many and confusing. In fact, the financial services industry has more than 250 of them. Some credentials overlap; some are just plain “pay us and we’ll let you use the letters” type; and some actually mean something. Similarly, the type of advisor you may receive also depends on what laws govern their business and their actions.
So, how can an investor tell which type of advisor is right for them? Here are a few key questions one could ask to determine if the advisor is a good fit.
Are You a Fiduciary?
A fiduciary is one that must put your interest before their own when recommending securities or planning opportunities. The Securities & Exchange Commission has required new forms be distributed to prospects and clients alike detailing what conflicts of interest are present with any interaction. If either cannot be handed to you in writing, walk away.
How Are You Compensated?
Just how a fiduciary must put your interest before theirs, knowing how an advisor is compensated is paramount to understanding about any back-door dealings, side fees, hidden fees, or other forms of soft dollars. If the advisor is compensated any other way besides what they charge you directly, think twice about any recommendation they give.
What Is Your Investment Philosophy?
This one is a bit more difficult to grasp, but an advisor that has different philosophies for different clients and different from their own doesn’t have a clear understanding of what they do and may only receive knowledge from a strategy desk far, far away.
What Is Your Succession Plan?
When an investor places the outcome of their life-long savings in the hands of an advisor, they want to know that the advisor will be around for a while. And, if not, are they comfortable with a team they’ve set up to perpetuate them? Most estate plans are multi-generational. Having an advisory relationship that can follow the plan will be worth while.
What Are Your Qualifications?
As I stated earlier with the credential frenzy, look for advisors that are fiduciaries and carry credentials to back it up such as the CERTIFIED FINANCIAL PLANNER™ designation, advisors that are Certified Public Accountants (CPAs) but also carry the Personal Financial Specialist (PFS) designation to signify extra study on financial planning to complement their fiduciary position as a CPA, and finally the Certified Financial Analyst® designation proves a highly difficult and rigorous multi-year examination for expertise in the investment professional world. An advisor having one or many of these specific designations will mean that the investor is speaking with someone that has credibility, knowledge, and experience to help make a great financial plan.
Derek M Oxford | CFP®️, AEP®️
After a loved one dies, there are important – perhaps time-sensitive – decisions to make. Losing a family member or friend is one of the hardest life events to cope with. Survivors are the people who must make the decisions or carry out the directives of the person who died. The husband, wife, partner, or maybe even the child, parent, brother or sister, or close friend may have to step in to help with this process. Each person may have different tasks to handle, while some might not have any responsibilities after their loved one dies. In any situation, the best preparation is to have a plan. A valuable lesson, at any age, it to take time to organize your financial life and seek the assistance of a fiduciary to help with your planning needs.
As a financial advisor, some of the greatest joys are seeing my clients reach their version of financial independence. During our relationship, I watch my clients grow throughout their careers until that major milestone of retirement meets them face to face, then I fortunately get to watch them through retirement until that last milestone is upon them. But, along the way, we are always planning since there are many revisions to their personal plan as their family dynamics change and the investment landscape changes alongside them.
Being proactive, I have found, is the best way to help my clients in preparation of that last milestone. Whether it is a review of their beneficiary designations, a review of the charitable organizations dear to the client for philanthropic donations, or a review of their estate plan because they know they can’t take it with them but they can sure tell everyone how to spend it. We work together to create a plan then monitor the plan because “a goal without a plan is a wish,” was once said by a French writer. Having a plan is extremely important during this emotional time to help the survivors. In my experience, I have helped several clients through this last milestone and have collected a few best practices for what you may expect after losing a loved one.
Collect various documents and important paperwork.
This may include insurance policies, marriage license, birth certificates, revocable trusts, Last Will & Testament, Social Security information, etc. Keeping everything organized will help limit the search for some of them. Do not throw anything away until someone reviews it. You cannot be sure what might prove to be needed later, therefore, a good record keeping system is very important. At CPS Investment Advisors, we keep a secure electronic file for each client’s personal records. I, as the advisor, maintain that database for the client so when something happens, I can help immediately.
The death certificate of your loved one is generally needed every time you go to make a claim for benefits. Your funeral director or county health department can help you obtain certified copies of the death certificate. There will most likely be a cost associated with certified copies, but some companies you will deal with for a benefit claim will require one, so it is best practice to request about 8 to 12 initially. You may need more later, but this should get you through the bulk of your need.
A nice clean color copy, although this is clearly not a certified copy, may be used in some instances. Some companies just need to see the pertinent information from the death certificate while some require the certified certificate with the raised embossing.
Simplify your life.
When you lose a loved one, and you start to put together the pieces to their financial life, you may encounter assets that you never knew they owned. The first place to look is at the balance sheet. Make sure you know where everything is and have a plan for where everything is going. If you come across an asset you were not previously aware of, add it to the balance sheet so you know to come back to it later. If you are the surviving spouse, and you are set to inherit everything, simplification helps the transition process. Would you rather have same amount of assets in the same number of accounts or the same amount of assets in a fewer number of accounts? This is a best practice of where less is more. Bank accounts, investment accounts and retirement plans are some examples of assets that can be consolidated into your existing like-registered account(s) easily. After a death, you may need to change the title on property or transfer ownership. Automobiles, your house, credit cards and safe deposit box are some examples of assets that may require action on your part to change ownership or title. Getting assets out of the deceased name and into the names of the beneficiaries is an important part to the simplification process.
Note: You may need to open a bank account for the estate, if so, the estate will need its own tax identification number. The Internal Revenue Service website, irs.gov, is a great source of information or you can just stop by our CPS Group tax department and we can handle this for you.
Establishing a new normal.
As the survivor of a loved one, there are a few new normalcies that will take place over time. Try to focus on what needs to be done right away, less attention to what can be done tomorrow, or even less focus on what can be put off for some time into the future. The future may seem very far away, especially during this time of grieving. It is a natural feeling to seem overwhelmed by practical matters so try to take one step at a time. Allowing others to help is not always a bad thing, so consider the advice given to you from those you trust.
The most often asked question I usually get from a surviving spouse is, “Do I have enough money to cover my expenses for the rest of my life now that my spouse is gone?” My immediate response is, “How long are you going to live?” In my experience, the surviving spouse generally loses some income after the death of a spouse. In some instances, changes in social security, pensions, annuity payouts and required minimum distributions from retirement plans, your income may change.
But expenses do not go down by nearly as much as you may think they might. Therefore, it is best practice to keep an eye on your bank account balances. Look at the value at the beginning of the month, again at the end of the month, and do this for the next 3 to 6 months following the death of a spouse.
This may take you even longer but tracking those balances will keep a high-level overview of the income and expenses occurring within your various accounts without having to dig into the details. If balances go up, then your income is exceeding your expenses, all appears fine. If balances go down, then you might be spending more than you thought. At this time is when you will want to review the details or consider creating a budget.
Your financial plan likely changed after the death of your spouse, so it is important to know what your new plan looks like going forward and make any necessary changes as appropriate. If you, or someone you know, needs guidance after losing someone they love, feel free to reach out to one of our advisors. As fiduciaries, legally and ethically obligated to act in your best interest, we’re here to help create a plan based on your unique needs.
Tony Corrao | CFP®️
Over the next 25 years, 45 million households will be receiving an inheritance after the passing of a loved one, according to analytics firm Cerulli Associates. The transfer of assets from baby boomers to millennials and beyond will be in excess of $68 trillion.
According to a poll by the Ohio State University, most Americans will only save about half of their inheritance. That means most Americans will essentially use it for immediate gratification purchases. Firsthand, I’ve seen how some beneficiaries used their inheritance on special breed dogs, new cars, lavish vacations, and other items.
I won’t discount that some of these impulse purchases are due to a form of mourning after the loss of a loved one. However, if we can plan properly for when these inevitable wealth transfers occur, a person’s financial plan can allow the inheritance to flow nicely into it. Here are a few examples of what to do if you know that you’ll be receiving an inheritance either soon or in the future.
Follow the Wishes of the Deceased
If your loved one had wishes on how the money was to be spent or who it was to be spent on, hopefully they had those conversations with the beneficiaries already. If not, well-crafted estate documents should explain their wishes and instructions.
Take It Easy
It’s ok to think of some of this money as a windfall. Weigh the cost of the total inheritance against the price of what you want. Discuss the idea with your trusted financial advisor. Having a second opinion from a great advisor can be helpful, especially if they can calculate how it will affect any future compounding of your own pile.
Assemble the Team
If you don’t already have a trusted fiduciary advisor, now is the time to interview and acquire one. Similarly, find a trusted estate attorney because your finances may get a bit more complicated after you receive the inheritance. Now it’s time for you to make your own instructions for your wishes by drafting estate documents to surpass you. Hire a CPA to weigh in on the potential taxes of your decisions as well. A team approach will pay dividends in planning opportunities down the road.
Review Your Finances
If you don’t already have one, build an emergency fund with your new inheritance. Depending on your financial
situation, having three to six months’ worth of necessary expenses in an easily accessible high yield account will help you sleep at night knowing that you can cover an emergency purchase on a rainy day or help with expenses if you are furloughed or lose your job.
Other Items to Think About
Sometimes, people don’t just inherit cash or securities. Sometimes, they inherit houses, cars, or jewelry. The estate documents of the deceased may explain how to handle these other items. If not, this is another area where that team approach can help you. You may now be in the realm of capital gains tax, and items kept need to be added to your estate documents. Will a second home become a rental property where liability protection may become necessary?
Use your inheritance wisely, and do not try to handle it all on your own. For some, emotions can cloud financial judgement. Trusted professionals are here to guide you through it all, and most of them have extensive experience to provide insight. Remember to seek out true fiduciaries that will steer you in a direction that benefits you and not them. We are here to help!
Derek M Oxford | CFP®, AEP®
In normal years, the due date for filing individual federal income tax returns is April 15th. This year, the IRS moved the deadline to July 15th due to the coronavirus pandemic. Fortunately for taxpayers, this 90-day extension of the deadline will not cause any interest or penalties. This relief also applied automatically to all taxpayers. Unlike a normal extension, no additional forms were required.
Need more time? You can get an extension.
If you can’t file your return by the July 15th deadline, you can still get an automatic extension until October 15th by using IRS Form 4868. This form can also be filed electronically. Filing for an extension until October 15th will not prevent penalties and interest. The IRS encourages to pay in full with the extension request. If that isn’t possible, information on payment options are available on www.IRS.gov.
Always file a return, and pay what you owe.
One of the biggest tax mistakes you can make is to not file a return because you owe money to the IRS. If your return shows you owe tax, always file on time and pay by the due date if possible. If you can’t pay the entire amount, file your return, pay what you can, and make arrangements with the IRS to pay the difference. You may owe interest and penalties on the unpaid tax, but filing your return on time will help you avoid additional penalties. It will also give you the option to work with the IRS to pay the unpaid balance.
Having a few extra months for tax filings was a welcome bit of good news amid the pandemic. That extra time is almost over, and tax day is right around the corner. Be sure to file on time, pay on time, and don’t let taxes derail your financial plan.
Matthew A Treskovich | CPA/PFS, CITP, CMA, CFP®, AEP®, MBA, CLU, ChFC, FLMI
Chief Investment Officer
This year has been a rollercoaster ride. The COVID-19 crisis and the ensuing shock to the global financial markets have captured the headlines and changed the way we live. With everything that has occurred, it is not surprising that the SECURE (Setting Every Community Up for Retirement Enhancement) Act, which took effect January 1, 2020, has been nearly forgotten. The SECURE Act was drafted to help Americans save for retirement, and made several positive changes such as raising the age for required minimum distributions (RMD), as well as removing the age limit for making IRA contributions. This provided a great benefit to savers, but the SECURE Act also had some downsides, such as the demise of the “Stretch IRA”.
The SECURE Act and Inherited IRAs
For over 30 years, the “Stretch IRA” has been the cornerstone of estate planning as it relates to passing on wealth held in retirement plans. By handing down your retirement plan or IRA to a “designated beneficiary”, the required minimum distributions could be “stretched out” over the beneficiary’s life expectancy, providing a tax efficient means of passing on wealth. The SECURE Act changed all that by requiring most IRA beneficiaries to distribute the account completely within ten years beginning the year following the account owner’s death. There are exceptions for five special types of beneficiaries, now referred to as “eligible designated beneficiaries”, which includes the surviving spouse of the account owner, the minor child of the account owner, a disabled beneficiary, a chronically ill beneficiary, and a beneficiary less than 10 years younger than the account owner. These eligible designated beneficiaries can for the most part follow the old rules. Also, the changes primarily only apply to retirement accounts inherited beginning in 2020.
Those who have retirement plan beneficiaries that do not meet the definition of “eligible designated beneficiaries” should review their estate plan in light of these changes to determine if the current rules will require changes to their plan.
Other Estate Planning Implications
Trusts have long been used by estate planning attorneys as a valuable tool to distribute retirement accounts to beneficiaries while retaining some control over the distributions after the account owner’s death. As long as the trust was structured as a “see through” trust, meaning that there was a clearly identifiable person listed as beneficiary, then the retirement plan could be passed on to the trust and the required minimum distributions were based on the trust beneficiary’s life expectancy. But, the new rules create a problem – many trusts drafted prior to the SECURE Act no longer qualify for this special treatment, and the consequences can be significant. Instead of allowing the trust beneficiary to take distributions over their life expectancy, many of these trusts will now be forced to distribute the entire IRA account balance to the beneficiary within ten years following the account owner’s death. Some trusts, written as “conduit trusts”, will now prevent distributions until year ten, at which time the entire account balance must be distributed, resulting in a hefty tax bill.
Trusts are complex documents, and there are many different types which are each affected differently by the SECURE Act. If you have a retirement account or IRA with a trust listed as beneficiary, you should meet with your estate planning attorney and trusted financial advisor to determine how you are affected.
Rick Bernard | MBA
We have all been in a position, at least once in our lives, which required us to trust someone with something very important to us, sometimes by choice, sometimes by necessity. Over the years, I have met many individuals and families who have had that trust broken a time or two. When this happens with a Financial Advisor, skepticism and mistrust can, unfortunately, keep people from taking much needed action with their financial goals.
If you are at a point in your financial life where you are tired of stressing over market performance, are stressed about what current events mean for your portfolio, or simply have financial matters that keep you up at night, then consider working with a financial advisor. Do not let the need for a financial advisor go unmet, due to any of the following myths.
Myth #1: I Don’t Have Enough Money to Work with a Financial Advisor.
This is the most cited reason why many individuals or families do not seek the advice from a Financial Advisor. While it is true that many advisors will have a minimum amount of investable assets that they require from potential clients, it is also true that many do not. Regardless of how much you have or think you may have; it is important to reach out to different advisors and start a conversation. Not every advisor has a minimum and many are willing to work with you to help you grow. There’s an advisor out there for everyone.
Myth #2: Financial Advisors are too Expensive.
We have all seen the movies where stockbrokers drive expensive cars, fly in private jets and vacation on luxury boats, dare I say: Wolf of Wallstreet? No wonder some folks are afraid of them! One of the major considerations when working with a financial advisor is both how much and how an advisor should be paid. Historically, advisors were stockbrokers and were paid on commissions. As the industry evolved, some financial advisors switched to an asset under management fee, where advisors are paid a fee based on the amount of assets they manage. Now, some advisors are paid on a retainer basis, or even a combination of these methods. While there are pros and cons to each method of payment or compensation, often clients are unsure of how their advisor is being paid. Never be afraid to ask a potential advisor, or your current advisor, how they are being paid and if they are required to put your best interests before their own.
Myth #3: I Can Reach My Goal without a Financial Advisor.
Absolutely, it is possible for you to reach your goal without a financial advisor but having an advisor can make a huge difference. Why? The simplest answer is that we are all emotionally attached to our finances. Many of us work for years trying to accumulate wealth and it isn’t always so clear what to do with that wealth when you’re emotionally tied to it. Having a trusted, fiduciary advisor to guide you through decisions or make recommendations can be a massive help, especially during stressful times. Additionally, sometimes our financial situations are extremely technical and could use someone professionally trained to make the right decision.
Anthony Corrao | CFP®