Sterling Thoughts Newsletter
Sterling Thoughts is our quarterly newsletter full of original content on everything related to financial planning. We hope you find it informative and educational.
Sterling Thoughts Fall 2017
The “Life” File – The Missing Piece of Your Estate Plan
Of all the areas of financial planning, the one that most people prefer not to deal with is estate planning and “end of life” decisions. No one wants to think about their mortality, so this uncomfortable (but very important) issue gets put off to the side in favor of less stressful planning items like the investment portfolio or the retirement income plan. It doesn’t seem to matter what age or stage of life you are in, people are just reluctant to deal with talking about their eventual death or incapacity. It is an unfortunate reality that families have been torn apart because of arguments over something as simple as who should get Grandma’s china dishes because this was never discussed or outlined while Grandma was alive.
As comprehensive financial advisors, our job is to make sure that this planning gets done, no matter how uncomfortable it may be. What we often find, is that once the planning is in place, that the client feels a huge sense of relief and now has greater piece of mind. Estate planning is more than just having a will or trust. While these are important documents, so are the health care power of attorney / living will and the financial power of attorney. Another important part of the process is making sure all beneficiary designations are up-to-date, as we often see that former spouses or deceased relatives that are listed as the beneficiary of a life insurance policy or retirement plan have never been changed. Since the beneficiary designation controls where the money goes (and not the will or trust), if not updated that ex-spouse may end up being the recipient of an unexpected inheritance.
Finally, besides having up-to-date estate documents and beneficiary designations, an important part of the overall estate plan is to have a “Life” file that your children or other heirs are not only aware of but also know where and how to access. The Life file is the document(s) that can give you greater control over many decisions that need to be made when you die or become incapacitated. Your heirs will also appreciate the fact that these decisions have been made for them ahead of time, as there are often disagreements between family members about these decisions. For example, letting people know who gets the family heirlooms (and why) in your will, trust or life file can often eliminate many of the family squabbles that occur after someone passes. If your disposition wishes are not included in the will or trust, at least having a legacy list of who receives which family heirlooms in the Life file can assist your executor and eliminate these issues from occurring.
In an increasingly digital world, another important item for the Life file is a list of all the accounts, logins and passwords for your digital life. This would include financial accounts but also social media and entertainment (think Netflix or Hulu). Finally, a critical part of the Life file is having a checklist in the file which outlines all your important financial accounts like credit cards, investment accounts, insurance policies, property deeds and Social security info. This will assist your executor with closing all your accounts and managing the estate without having things missed or falling through the cracks. So, at a minimum, the Life file should include: final wishes (funeral arrangements, pet care etc.), the Legacy list (who gets the heirlooms), the Life list (all the important financial accounts and documents) and the Digital World list (on-line passwords). Other things you may want to include in the Life file are an ethical will (this outlines your family values and what you want your heirs to know about your life), family recipes & photos, family tree & history, and any other information you think your family should know about you.
Once you have gathered all the information for the Life file, the next step is to make sure that the information is organized and easily accessible by your heirs. This can be a binder or file (no shoe boxes please), or it can be a digital solution like EverPlan where all this information is stored in a secure cloud based solution that is easily accessible by your heirs. Part of our service is to help you think about this issue and your legacy goals, gather the data and organize it using checklists and services like EverPlan. The final step, which is often not taken, is to communicate with your heirs about where the information is stored (at a minimum). A better option is to communicate your wishes and plans to your heirs while you are able, so everyone is on the same page. This can often be a difficult conversation to have so you might want to consider having a “family meeting” that we can facilitate where you review your plan and answer any questions your family may have.
Without communication about your final wishes, family members are simply left to guess at what their loved one would have wanted. This can lead to family turmoil and even a break-up of the family, not to mention potentially missed assets and increased expenses. Having the big picture legacy plan in place along with the detail of the Life file can give you confidence that your end of life wishes will be met. It can also make a time of grief and heartbreak for your heirs a little easier to deal with when the time comes. Please talk to us about legacy planning, creating your Life file or facilitating a family meeting.
Sterling Wealth Management Advisors are not attorneys. For specific estate planning advice, please consult with a qualified estate planning attorney.
It’s Fall – Time to “Harvest” Tax Savings
When we think of fall, our thoughts usually turn to football, cooler weather and back to school. But fall is also the time we start thinking about tax planning for the remainder of this year and into 2018. As we enter the 4th quarter of the year, it’s time to look at any potential tax savings opportunities for this year and what strategies we want to employ to reduce taxes for next year. There are plenty of opportunities to explore like:
· Harvesting capital losses in order reduce capital gains
· Doing Roth conversions if income is going to be lower
· Maximizing deductible retirement plan contributions if income is going to be higher
· Accelerating or deferring deductions depending on the tax outlook
· Using tax location strategies to minimize taxable income
· Evaluating charitable strategies
If you work with a CPA or other tax advisor, we generally will want to set a meeting with them to discuss your tax situation. If not, expect a call from our office to schedule your tax planning meeting.
Ø According to Fidelity’s 2017 Retiree Health Care study, the average 65-year-old couple can expect to spend roughly $265,000 on health care costs during their retirement years. This is up 5.5% from 2016. Visit our website www.sterlingwpartners.com for our latest blog posting with more information.
Ø There is a significant change to the deductible amount of health care expenses on your 2017 income tax return. For individuals under age 65, you are able to deduct an amount that exceeds 10% of your adjusted gross income. Last year, individuals age 65 and older had a lower threshold, only 7.5% of adjusted gross income. The rule that allowed for the lower threshold for those age 65 and older has expired. Consequently, everyone is subject to the higher 10% threshold in 2017. This will have a significant impact on the itemized deductions for older taxpayers
Securities and advisory services are offered through, USA Financial Securities Corp. (Member FINRA/SIPC). USA Financial Securities is a registered investment adviser located at 6020 E Fulton St., Ada, MI 49301. Sterling Wealth Partners, LLC is not affiliated with USA Financial Securities.