I'm guessing only planners may think like this but I have always been fascinated after a celebrity passing, what type of planning they may have done to protect their estate and pass their successes on to the next generation. Recently we lost Debbie Reynolds and her daughter Carrie Fisher in the same week and I couldn't help but take a peak at what their various estates looked like and what level of planning may have been accomplished.
I must admit, I have always been fond of Debbie Reynolds and her daughter. Perhaps because there are so few of the old guard left, true Hollywood royalty, or maybe because of how they have both overcame challenges in their life. Bottom line, I just felt they were two of the good people walking this Earth.
Overall, I think both of their estates would have been rather simple to plan. There weren’t many heirs so likely the issues would be simple. For Carrie, her one daughter Billie Lourd would likely get the house and whatever money there may be. Did Carrie have a will? Was it updated? Same questions all of us need to answer but in her case the absence of one would likely not change much with only one daughter. Debbie on the other hand had a trust. Since this is obviously a more private way of distributing assets, we may never know the details unless it's released by her son Todd, where all the assets went. I would surmise however since this family was very close, Todd would be the largest benefactor, likely a smaller portion to Billie Lourd and if I were a betting man, Debbie listed several charities that would also share in the wealth. For both ladies, how much wealth are we talking about?
For Debbie, it was reported at $60 million. I doubt that very much. She may have made that in her career but some of her business endeavors did not fare very well including a casino that she filed for chapter 11 on in 1997 and a personal bankruptcy the same year. She was a fighter and survivor however and as many know, a huge collector of Hollywood memorabilia. Although some of it was used to pay off debt, the remaining sales along with her performing well into her eighties probably allowed her to rebuild a portion of her earlier wealth. She lived in a very modest $1,000.000 home in Beverly Hills so much of her work later in life was more so out of pleasure and to maintain her lifestyle.
As for Carrie, her estate was probably similar to her mom's. Perhaps in the $20-25 million range with much of that in her $14 million Beverly Hills home next door to Mom. No one certainly needs to feel sorry for her or Billie but it was dissappointing to me that she did not own the Princess Leia image or any piece of the merchandising which I guess was simply not done back in the day. I will be curious to see if the lawyers decide to go after Disney and essentially blackmail them to force additional payouts in a time of tragedy. Disney from my perspective owes her nothing. I'm sure they were insured against losing a star in their film, but that money belongs to them. Like all of us, it is our responsibility to plan and prepare for this eventuality.
In the end, Billie Lourd will be well taken care of and even get to carry the torch as she has a role in the next Star Wars film. Even though her Mom and grandmother were not ultra wealthy, they fought for what they accumulated and have started this young lady off very well. Hopefully their fight, persistence and goodness will also transfer to Billie which in reality are the most important things to pass along to the next generation.
Often, we have clients who are past age 70 1/2, who have started to take required minimum distributions and they simply don't want or need them. They don't want to pay taxes on monies that will simply go into their bank and in all likelihood, just sit there! Enter the qualified charitable distribution!
The qualified charitable distribution (QCD) is a way to move money out of their IRA's to a charity that qualifies, completely free of income taxes. To be eligible, you have to be age 70 1/2. Unlike required minimum distributions where your first distribution takes place in the year you turn 70 1/2, here you must actually be 70 1/2 to take advantage of it.
Most IRA accounts are eligible including Roth's. The only IRA's not eligible are Simple and SEP IRA's where contributions are still being made, otherwise they can be used as well. The limit for a QCD is capped at $100,000 per person, per year.
One of the nice features is that the distribution can be used to satisfy your required minimum distribution for the year. As an example, Mary has a required minimum distribution of $10,000 for 2016. She also wants to give $10,000 to her church. By transferring the funds from her IRA directly to her church, Mary satisfied the RMD and there are no taxes due!
Another critical piece of the maneuver is the custodian must make the check payable to the qualifying charity. If you take the funds in your name and send the check to the charity, the QCD provision will be lost and taxes will be due on the distribution.
Also, make sure the charity you donate to can accept charitable contributions under IRS rules. This is also key. Keep good records on the transfer as you will have to substantiate the QCD, so something from the charity showing the donation would be helpful.
Lastly, the custodian will not report that you performed a QCD so it will be up to you to let the IRS know about the charitable distribution on your tax return. The total distribution amount from the IRA will go on line 15A, if there were any additional amounts taken that were not a charitable distribution(taxable), they would be entered on 15b. You would then simply write "QCD" next to line 15b.
Interviewing financial advisors for this very vital role in your life can be daunting. Plus, the 21st century brings with it new threats to your finances, so your “toolbox” of questions needs to be updated as well. You are trying to achieve many objectives, such as help to plan for key life events and investing your hard earned assets in the most appropriate way. You not only need assistance in achieving your goals but you want to do so in a fashion that represents who you are. You also want peace of mind and time so you can go off and do the things that are most enjoyable to you, which encompasses the majority of your focus and attention.
Despite such a daunting and important task, I have been somewhat surprised over the years at how few questions are asked of me, and of the ones that are asked, how many of them are not relevant to whether I am up to the task to serve someone’s family. I’m a really nice guy, but this isn’t a popularity contest! You need to find someone who you think you can work with, hopefully enjoy working with and most importantly, is competent, trustworthy, transparent, open and honest!
With that, let me share with you the good stuff! The key points of information you will need to know in order to feel good about the financial advisor or financial planner you choose. I will even share a question that is always asked which you should remove from your tool box. My list starts from general qualifiers and gets more specific. If they don’t meet some of the first objectives, you can cut the meeting short and move on to the next candidate.
The above list covers the most important areas in finding a qualified candidate to help you reach your goals. While no way of doing business or credential guarantees honesty and ethics, it will go a long way to helping you weed out those who shouldn’t even be in the conversation.
In closing, I should mention that there is one question that an advisor doesn’t want to hear and may cause them to walk away if you place great importance on it. The main culprit is asking for their performance numbers or returns. While seemingly valid on the surface, if you think a great advisor beats or outperforms the market on a regular basis and that is why you are hiring them, you will be disappointed eventually 100% of the time. While no advisor wants to under-perform ever, your returns are typically going to mirror your risk level over time. Market returns are not a controllable event and all an advisor can do is offer a range of potential returns, especially if they use some of the newer risk software. Be aware that the advisor is interviewing you at the same time. If they see little focus on planning, the big picture and willingness to work with them on the areas they can control, they will likely not want to start a relationship that will be short term focused and market return based.
Roy Larsen, CFP®, AAMS® is a fee only Certified Financial Planner ™ practitioner and independent fiduciary. Roy in 2013, 2014 and 2015 was awarded Atlanta Magazine’s Top Wealth Managers in Atlanta, 5 Star Professional. Larsen Wealth Management, a registered investment advisory firm, provides comprehensive planning, investment management and tools which enables their clients to be better prepared while organizing and simplifying their entire financial life. Larsen Wealth Management is based outside of Atlanta, Georgia but serves clients throughout the United States. You may contact Roy with questions or comments at email@example.com, www.investinretirement.net, 678-456-8138 (O), 706-429-3388 (C)
Q: If I use the Roth backdoor technique when I'm less than 59 years old, do I have to pay a 10% penalty on the converted amount?
A: Great question! No, there is no penalty to convert as you aren't taking a distribution. To maximize the conversion, use outside assets to pay whatever tax may be due. If you take taxes from the traditional IRA, you may water down the effectiveness dramatically. It should be noted that if you withdraw funds from the converted Roth IRA within 5 years of the conversion, the 10% penalty will apply. There are no exceptions to this. Good luck!
Q: I just received a letter of reconsideration and my son was denied SSI. He has severe ADHD and is on medication.
A: Very sorry to hear families have to jump through so many hoops to get much needed help. Unfortunately, the reason why someone is denied is harder to ascertain. If this is your first attempt to get benefits, getting denied is very common. I would strongly suggest you appeal the decision immediately. You may also have to get an attorney to assist at some point. Often benefits will eventually be approved if cause is proven and justified and made retroactive so there is hope if you accept that this will be a longer process than anticipated. Here is more information that may help:http://www.disabilitysecrets.com/adhd-attention-deficit-social-security-disability.html
Good luck and don't give up!
Q: Can I receive my deceased mother's pension?
My mother just passed away at age 69. She was supposed to receive her pension starting at age 70 1/2. The company says it is only allowed to go to a surviving spouse (which there is none) and that I have no claim to her pension. That's not what my mother understood. Days before she passed away, she mentioned to her best friend that should anything happen to her, to make sure I got her pension.
A: First very sorry for your loss. I will try to offer some helpful information but without knowing the whole story, it is difficult to surmise what may have happened here. If this is a true defined benefit pension plan, every company will have their own rules for how it pays out funds. I would first suggest getting a copy of the company’s retiree benefit package to review their policies and procedures.
Next, I would try to get a copy of Mom’s beneficiary designation form. I am assuming your Mom was retired and if so, she would have completed how she wanted to receive her pension. Some common choices include Life only, Joint, Lump sum, Period Certain. Typically, the choice you request will determine if you want more now or a lesser amount for various guaranteed periods.
It is not uncommon to have a retiree not understand the options and their implications or remember which one was chosen. I’m not saying that happened here but it is possible when lump sum is not chosen, for benefits to cease at the death of an employee or spouse. There is typically not a fall back of “everything goes to the kids” if no one is left to get a check. That is often the trade off when choosing these defined payout options.
If you are able to gather the documents I recommended, and feel you still have a case, you may want to research and perhaps reach out to the Pension Benefit Guaranty Corporation. http://www.pbgc.gov/home.html They are a government agency that protects the rights of workers and provides tons of useful information in knowing what is permitted.
I wish you luck
Provided by Roy Larsen, CFP®, AAMS®
Beware those four little words. They are perhaps the most dangerous words an investor can believe in. If you believe “this time is different,” you are mentally positioning yourself to exit the stock market and make impulsive, short-sighted decisions with your money. This is the belief that has made too many investors miss out on the best market days and scramble to catch up with Wall Street recoveries.
Stock market investing is a long-term proposition – which is true for most forms of investing. Any form of long-range investing demands a certain temperament. You must be patient, you must be dedicated to realizing your objectives, and you can’t let short-term headlines deter you from your long-term quest.
If stocks correct or the bulls run away, keep some perspective and remember how things have played out through some of the roughest stretches in recent market history.
In 2008, many people believed the market would never recover. The Dow dropped 33.84% that year, the third-worst year in its history. That fall, it lost 500 points or more on seven different trading days. Some prominent talking heads and financial prognosticators saw the sky falling: they urged investors to pull every dollar out of stocks, and some said the only sensible move was to put all your money in gold. It wasn’t unusual to visit your favorite financial website and see a “Dow 3,000!” pay-per-click doomsday ad in the margin.1
The message being shouted was: “This time is different.” Forget a lost decade, it would be a lost generation – it would take the Dow 10 or maybe 20 years to get back to where it was again, the naysayers warned. Instead it took less than six: the index closed at 14,253.77 on March 5, 2013 to top the 2007 peak and went north from there. The bear market everyone thought was “the end” for Wall Street lasted but 17 months.2,3
Where is the Dow today compared to fall 2008? Where are the S&P 500, the Nasdaq, the Russell 2000 compared to back then? And how has gold fared in the last few years? While the Federal Reserve has played a significant role in this long bull run, record corporate profits have played a major role as well.
The stock market has seen remarkable ascents through the years. From 1982-87, the S&P 500 gained more than 300%. The 1990s brought a 9½-year stretch in which the S&P rose more than 500%.2
A recovery from a Wall Street downturn usually doesn’t take that long. The bear market of 1987 – the one that came with Black Monday, the worst trading day in modern Wall Street history – was over in three months. The bursting of the dot-com bubble set off another bear market in 2000 that lasted a comparatively long 30 months – definitely endurable for an investor focused on long-term goals.3
What happens when investors believe those four little words? They panic. They sell. If they are mostly or wholly out of equities when the bulls come storming back, they run the risk of missing the best market days.
We’re looking at a turbulent stock market right now. This is the time for patience. Withdrawing money from a retirement savings account (and the investment funds within it) might feel rational in the short term, but it can be hazardous for the long term – especially since many Americans haven’t saved enough for retirement to start with. A recession is a few quarters long, not the length of your retirement; a bear market may right itself faster than presumed, and you want to be invested in equities when it happens. If you have questions about your money when jitters hit the market, turn to the financial advisor you count on as a resource.
Roy Larsen may be reached at 678-456-8138 or firstname.lastname@example.org.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
1 - djaverages.com/?go=industrial-milestones [10/7/14]
2 - nj.com/business/index.ssf/2013/03/dow_hits_new_record_regaining.html [3/5/13]
3 - nbcnews.com/id/37740147/ns/business-stocks_and_economy/t/historic-bear-markets/#.VDSESBbgVUI [10/7/14]
By Roy Larsen, CFP®, AAMS®
What if’s are very rarely top of mind for most of us but with a little knowledge, time and most importantly execution, peace of mind for a possible incapacitation can be quickly addressed. In this article I hope to address the basic differences in Power of Attorneys’ and when this simple document simply isn’t enough. Lastly, what powers do you have if something happens to your adult children and grandchildren?
Did that last one get you thinking? Let’s start there:
Our adult children- Your child or grandchild comes to you saying, “Mom, Dad, now that I’m 18, I need to prepare a power of attorney so you can still act on my behalf in the event of an emergency”. Happens all the time right? OK…my unscientific research tells me this conversation has never happened in earth’s history! Quite likely, it isn’t something as parents we are likely thinking about either. The fact remains that if our children are legally an adult and they are in an accident or have another health event, you as a parent may just have to go to court to make decisions on their behalf! Don’t let it happen. As they probably don’t have finances to worry about yet, at least make sure they create a Healthcare Power of Attorney giving you the ability to act on their behalf.
General Power of Attorney versus a Durable Power of Attorney- First an ordinary or general POA can have various ranges of authority from very general to only a very specific purpose. The general POA is often used for those that can still legally act for themselves and that principle can revoke the POA at any time he or she is still capable to do so. Once that person is incapacitated, a general power of attorney is automatically revoked. The durable POA on the other hand continues to be valid even after incapacitation and very often is triggered by the incapacitation itself. A durable POA often requires specific language based on the state they are used in. Often Powers of Attorneys are used in conjunction with a living trust which can provide further instruction on asset management, income and distribution.
Does every entity recognize a General or Durable Power of Attorney? - No! It is not all encompassing. For instance, many banks and brokerage firms although they will request submission of your POA, will want documentation of their own. There have been far too many fraud cases involving the appointed representative so financial institutions now require additional hoops to jump through. This helps to protect their client as well as avoid being sued. It is best to update these documents frequently and keep them current as well as checking with financial institutions in advance to discover their requirements.
A second institution which will not recognize your POA is Social Security. You will need to use their specific forms in order to transact business on behalf of someone incapacitated. The form number is 2848 and they call the person acting on behalf of a beneficiaries funds, a “representative payee”.
Living Wills- Lastly a complement to any Health Care Power of Attorney is typically a living will. (Which is different from a Living Trust) While the Healthcare POA will cover major medical decisions when you are incapacitated, the Living Will addresses “End of Life” preferences in terms of pain relief and to what measures you would want to be kept alive depending on the condition it would potentially leave you in. Caringinfo.org is a great site with additional resources and up to date living will forms for the State you reside in.
Still have questions? Reach out to your financial advisor or feel free to contact our office on the steps necessary to create a comprehensive Estate Plan.
By Roy Larsen, CFP®, AAMS®
We have all gotten them in the mail. They arrive as slick, colorful, glossy and in depth reports on a ground floor investment, still trading at pennies for the next great technology. They have fancy insider names to them like “Wall Street Insider” or “The Underground Stock Report”. They often link the promoted stock to legitimate companies or common sense needs around the globe. The problem is although it always sounds promising, you are gently being stroked and entranced into participating in what is known as the “pump and dump.”
The anatomy of the scam involves these micro sized companies which typically trade on the Over the Counter Bulletin Board (OTCBB). They are also known as “Pink Sheets”. The OTCBB is not a part of the Nasdaq Exchange and typically involves extremely small start up companies with questionable stability. They usually pay a “stock promoter” a large sum of money and often they themselves are also part of the scam. Large blocks of stock are being accumulated and the mailer goes out.
The trap is now set as unwitting investors start to see the stock moving off the bottom and attempt to catch the wave. As investors pile in and drive the stock price higher the owners and stock promotes sell everything, “The Dump”, and leave you holding the bag. Often they will drive you to internet bulletin boards with carefully controlled messages as you patiently wait for the next great “thing” to rise from the ashes of a few pennies or micro pennies to .50 cents, a dollar, maybe the next Google! Hey, even if it went to .04 cents, I would double my money right?
Unfortunately, after the promoters and company insiders leave the building, although these companies will continue to trade for a while, they very rarely stick around for long. Need more evidence of a possible scam? Read the small print. The words we want to make believe aren't there because of all the great claims and pretty graphs that have us mesmerized with the potential riches of the world. The small print will actually tell you how much the promoter is being paid, whether they own shares and highlighting in numerous ways that this is in fact a very speculative high risk investment.
The reality is in my opinion, it isn’t an investment at all; it is a major scam that should be stopped. So this week when the next slick looking mailer arrives at your home and you think, hey, it’s only $5000, let’s take a shot! Throw it away!!! Potentially good and great companies do not start on the OTCBB as pink sheets. The stock market has its own inherent risks and if you treat it like a casino; you are very likely to have the same result as when you go to a casino.
Roy Larsen, CFP®, AAMS® is a CERTIFIED FINANCIAL PLANNER™ practitioner, financial advisor and wealth manager. Roy is President and CCO of Larsen Wealth Management, LLC, a Fee-Only Wealth Management firm in Cumming, Georgia. Roy is an expert in successful retirement living and specializes in holistically managing the multiple planning and investing issues surrounding the receipt of a large lump sum. Roy Larsen, CFP®, AAMS® is available in all 50 States. He can be reached for comment at 678-456-8138,email@example.com or www.investinretirement.net
In 1995, the Social Security Administration (SSA) began mailing out annual Social Security Statements to everyone age 25 and older. These statements were designed to help Americans plan for the future by providing a detailed record of their earnings and estimates of Social Security benefits. Last year, the SSA suspended mailing these statements because of budgetary concerns, but in March 2012, the SSA resumed mailing annual statements to workers age 60 and older. If you're age 60 or older, you should receive your statement every year, about three months before your birthday. The SSA is also resuming the mailing of one-time statements to workers who are age 25 to introduce them to Social Security programs and benefits.
The SSA has also unveiled an online version of the Social Security Statement, available at the SSA website,www.socialsecurity.gov. You'll have immediate access to your statement once you've signed up for a "My Social Security" account. Statement information includes a projection of your retirement benefits at age 62, at full retirement age, and at age 70; projections of disability and survivor's benefits; a detailed record of your earnings; and other information about the Social Security program. Individuals who are receiving paper statements in the mail will have the option to sign up for online statements instead. While workers are encouraged to use the online statement option, in some cases, the SSA will mail statements upon request to individuals under age 60, including domestic violence or identity theft victims who have blocked online access to their personal information.
There's also another way to estimate the amount of Social Security retirement benefits you will be eligible to receive in the future under current law. You can use the SSA's Retirement Estimator, which is also available at the SSA website. To use this calculator, you must have enough credits to qualify for benefits, and you must not already be receiving benefits or waiting for a decision on your benefit application. You can create various scenarios that will illustrate how different earnings amounts and retirement ages will affect your future retirement benefit.
Roy Larsen, CFP®, AAMS® is a CERTIFIED FINANCIAL PLANNER™ practitioner, financial advisor and wealth manager. Roy is President and CCO of Larsen Wealth Management, LLC, a Fee-Only Registered Investment Advisory firm in Cumming, Georgia. Roy is an expert in successful retirement living and specializes in holistically managing the multiple planning and investing issues surrounding the receipt of a large lump sum. Roy Larsen, CFP®, AAMS® is available in all 50 States. He can be reached for comment at 678-456-8138, firstname.lastname@example.org or www.investinretirement.net
Roy Larsen is a Certified Financial Planner™ practitioner and Fee Only Wealth Manager who resides outside of Atlanta, Georgia.
Roy's Financial Blog contains articles on multiple financial life events as well as his favorite questions from he receives from around the country as a an expert panel member for Investopedia's Advisor Insights.