Estate Planning In Michigan

Archive for the ‘Financial Planning’ Category

What to Ask Your Financial Planner in this Turbulent Market

Wathcing the news today and they quoted a Kiplingers article that offered some questions to ask your financial planner during these turbulent times.  Those questions were:

• How have your investments performed?
• How do your investments meet time horizons?
• What adjustments have been made due to the turbulent economy?
• How and when will the planner provided feedback and updates?

Warren Buffet; Buying American

Warren Buffet had an interesting op-ed piece in the New York Times today.  You can read it here.  Basically, he is saying that the time to buy American stocks is now.  He is buying them in his personal fund.

So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors. To be sure, investors are right to be wary of highly leveraged entities or businesses in weak competitive positions. But fears regarding the long-term prosperity of the nation’s many sound companies make no sense. These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.

Let me be clear on one point: I can’t predict the short-term movements of the stock market. I haven’t the faintest idea as to whether stocks will be higher or lower a month — or a year — from now. What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So if you wait for the robins, spring will be over.

It’s good to hear from one of the richest men in the world that our economy will not totattly self destruct and that there may be a light at the end of the tunnel.

Planning For Your Future is a Team Effort

Planning for clients at our firm is not done with a lone ranger approach.  We recommend to our clients that they should have a team of professionals to ensure that they meet their estate planning and financial goals.  So who should be your teammates?

As you go through your life, you may have an accountant, a banker, a financial planner, an insurance agent, as well as your family. Each of these people have a role to play in helping you make your estate planning decisions.

Your accountant or CPA will be aware of your tax situation and many of your decisions involving estate planning include issues of estate taxes. If you have a business, your accountant will be familiar with its structure and profitability, enabling you to make plans for exiting your business, either by selling it or leaving it to a family member. If living trusts are set up as part of the estate plan, your accountant will need to prepare the trust tax returns. If you give gifts to family members and others during your lifetime, your accountant may need to file gift tax returns, depending on the size of the gifts.

Your banker is familiar with the amount in your bank accounts, in whose name they are in, and whether any of the accounts have “pay on death” designations. All of this information is important when talking to your lawyer about your assets and which assets are part of your estate.

Your financial planner is the person who is informed about the rest of your monetary assets – your stocks, bonds, retirement accounts, and your children’s college funds. These assets, plus your bank accounts, are the core of the wealth that you wish to transfer to your family and loved ones.  Your financial planner needs to know what your plan will be and he/she will be the one changing the names on the accounts to your living trust or to your heirs.

Finally, if you have a spouse or children that you are supporting, then life insurance should be part of your estate plan. Life insurance provides immediate cash after you die, cash that will replace your income. If your spouse can work, and your children are grown up, then you may not need life insurance. But, if you do have life insurance, your insurance agent can be helpful in updating your beneficiary designations after you create your estate plan.

Our firm understands that each of these professionals plays an important role for your estate planning needs.  If any of these roles are not filled we can get you connected with a professional that will fit well on your team

EDIE the Estimator helps you with your FDIC

EDIE the Estimator

The FDIC has came out with a webpage that hels you calculate your FDIC coverage for you deposit accounts.  In this turbulent time, this type of information is key.  In addition to consulting EDIE, it is probably a good time to contact you financial adivsor, financial professional to make sure you have  a plan to weather this storm that is sending investment portfolios south.

To use EDIE, go here.

Estate Planning Mistake to Avoid!

Here is a quick tip and a common mistake I see many people make with regard to their estate planning.

Are your children on your bank accounts or deed to your house? If you are you could be doing a disservice to yourself and your children!

Holding any asset with anyone (other than a spouse) can be problematic and horrific when it’s your home.  Many well intentioned parents in an attempt to avoid probate add their children to title of their home as joint tenants.

When this happens, the question that needs to be asked is: “is it worth possibly having my house sold out from under me, while I still plan on living in it?”

By adding another person to your assets you are opening yourself up to the claims against the other, including creditors, predators and the IRS.  For example, say you child is involved in an car accident that maims another.  Well when your child is sued, YOUR house may be a countable asset if you added your child to the deed as joint tenant.

Quite the scary proposition!

Another important consideration is income tax.  Let’s look at an example.  Say parents own a $200k home.  Well, adding two children would be a $50k gift.  Years go by, the parents pass and laterthe house sells for $400k.  Well, those kids now have a basis of $50k instead of the $400k if they had inherited the property.  They are each on the hook for $150k worth of income tax owed to the IRS!  Because thay probably did not live in the house, they are also going to miss out on the $500k exemption that married couples receive for selling the home.

Estate planning is more than just preparing documents, it takes a holistic approach to an individual’s situation and an analysis of many factors.

FDIC Updates Revocable Trust Rules

Using a revocable living trust is a common estate planning tool. On September 26th, 2008 the Federal Deposit Insurance Corporation (FDIC) updated their deposit insurance regulations regarding revocable trust accounts. This interim rule can be summarized as follows:

The FDIC is adopting an interim rule to simplify and modernize its deposit insurance rules for revocable trust accounts. The FDIC’s main goal in implementing these revisions is to make the rules easier to understand and apply, without decreasing coverage currently available for revocable trust account owners. The FDIC believes that the interim rule will result in faster deposit insurance determinations after depository institution closings and will help improve public confidence in the banking system. The interim rule eliminates the concept of qualifying beneficiaries. Also, for account owners with revocable trust accounts totaling no more than $500,000, coverage will be determined without regard to the beneficial interest of each beneficiary in the trust.

If you have any questions on how this effects your accounts or estate planning documents, please contact our office at (248) 865-4700. For the rest of the update you can go here: http://www.fdic.gov/regulations/laws/federal/2008/08sep26rule.html

Five Legal Tips for Peace of Mind

A colleague of mine from Virginia, who is a member of one the associations I belong to was a guest blogger for the blog Zenhabits.  He wrote a great post entitled the 5 Legal Tips for Peace of Mind.  The first in his list was “Execute a Will.”  As an attorney who only focuses on estate & business planning, I would change that to “Execute a Will or Trust based Estate Plan.”  Still good information and a good quick read.

You can read his post here: http://zenhabits.net/2008/09/5-legal-tips-for-peace-of-mind/

Major Life Events; It’s Time To Review Your Estate Plan

Losing a job is a major life event. With the Big 3 making job cuts and Chrysler announcing today another 1,000 jobs will be lost (read here), it is important to remember that any major life events trigger a need to review your estate plan.

With job loss there can be changes in retirement accounts.  Any time there are changes in title to accounts, such as rolling a 401k from an old company into an IRA, there needs to be a review to make sure that with the new account any trusts are properly funded and any beneficiary forms are designating who they should designate. Failure to do so can lead to unintended consequences such as disinherited heirs.

Major life events (job loss, job changes, divorce) can be difficult to deal with, but it’s important to make sure that once the dust settles, everything is still in place the way it should.

Our firm has created a systematized process to review estate plans (called Foundations), similar to how you have dental check ups, to make sure your estate plan still achieves the goals you desired when you originally created it.

How to Avoid Michigan Probate

A common desire of our clients is to avoid the Michigan probate system. There are a few ways to do this, typically the most organized way is through a well funded living trust. However, there are other strategies, which are not mutually exclusive, and should be used in addition to a well funded revocable living trust. The other strategies are:

• Joint Tenancy Bank Accounts
• Pay on Death Beneficiary Designations on Bank Accounts
• Beneficiary Designations on Annuities
• Beneficiary Designations on Savings Bonds
• Beneficiary Designations on Life Insurance
• Beneficiary Designations on Pension Accounts

There are pitfalls to be wary of when using these strategies, for example you do not want to create a taxable event or open yourself up to liability of creditors and predators by sharing ownership of any accounts. These are issues we cover with our clients during our planning meetings.

Bank That Money?

I was having a discussion with a contact the other day regarding the failure and collapse of the IndyMac Bank. What I told him was that the FDIC insures up to $100,00 of an deposit account. Retirement accounts such as 401(k)s, IRAs, etc are typically insured up to $250,000 per person. However, it is the person’s aggregate deposits and not the individual account balances that are insured, therefore any amount over $100,00 deposited at a single bank will not be covered.