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Estate Planning: Some Living Trust Case Studies

Posted by Larry Jones on Feb 14, 2019 9:30:00 AM


The Tsunami of Death

When a parent dies, or even worse, both parents, a tsunami rolls toward the survivor(s). Along with the emotional strain comes financial concerns, and legal. All of this hits at the worst possible time, a time when the children are least emotionally prepared to take them on. It can be truly an awful experience.

In the last two blogs I've written a bit about revocable living trusts, and how they can be such great stress relievers. Now I'd like to present some practical case studies on their use. (to see the previous blogs see: blog 1, blog 2)

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Estate Planning Tips: Four Common Misconceptions About a Living Trust

Posted by Larry Jones on Feb 12, 2019 9:30:00 AM

A Matter of Trust

In my previous blog I spoke about the importance of having a revocable living trust in your estate planning toolkit.  This type of trust can do several things for you, such as reducing the amount of taxes and fees your estate will pay, shortening the amount of time that beneficiaries will have to wait to take ownership of assets, and removing all of the transactions from the public eye.

Trusts can be an invaluable tool in your estate plan. Irrevocable trusts are usually used by higher net-worth folks to escape the absolute pillage of their estate by the government. There are also some significant tax advantages found in gifting to these trusts, as well as to charities.

The immediate tax advantages with a revocable living trust are less dramatic. However, for the person with an estate of less than $5 million the living trust is much more commonly utilized. Sometimes people confuse the two types- revocable vs. irrevocable - and the benefits that each kind provides.

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Topics: Estate Planning

Should Your Estate Plan Include a Living Trust Arrangement?

Posted by Larry Jones on Feb 7, 2019 9:30:00 AM

Fins to the left, fins to the right

Everything in our world today seems to be expensive, doesn't it? When I was a child, which was, admittedly, a long, long, long time ago, my Mom used to drop me off at the local movie theatre to watch the latest Elvis film (...a long, long, long, time.....). She'd give me a dollar to spend. The price of admission was 50 cents and then I could get a large coke and popcorn for the rest of it. Have you tried taking your family to a movie lately? There's a good reason to come and see a financial planner, right there!

Well, we know how expensive everything in life can be, but have you considered dying? Kicking the bucket can be one of the most costly endeavors ever, especially if no estate planning has been done. Does the thought of giving away 30-60% of your children's inheritance give you a warm and fuzzy feeling? That's not the case for most.

There are lots of expenses that come into play when you die. Court costs, executors fees, attorney fees, taxes, filing costs, and the funeral costs are among the top. You might be interested to see how the estates of some of our most famous Americans have been plundered:

Individual Value at Death Value After Probate
John D. Rockefeller $26,905,182

$9,780,194

(-63.7%)

Elvis Pressley $10,165,434

$2,790,799

(-72.5%)

Walt Disney $23,004,851

$16,192,908

(-29.6%)

J.P. Morgan $17,121,480

$5,227,791

(-69.46%

Frederick Vanderbilt $76,838,530

$33,992,418

(-55.8%)

You can see from the chart above that not only does having a good estate plan makes sense, but not having one can be a very expensive mistake. One interesting note....you'll notice that one of the folks in the table above, J.P. Morgan, was a financial professional. Hmmm... 

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Topics: Estate Planning

Some Alternative Uses for Life Insurance

Posted by Larry Jones on Feb 5, 2019 9:30:00 AM

Are your life insurance benefits important to you?

Are you one of those people who has paid into a cash-value life insurance policy for many years? Do you remember why you originally bought the policy? Does that reason still exist?

Ann is a widow whose husband John just passed away. They had no children. Thirty years ago Ann purchased a whole life policy on herself, making John the beneficiary. The payments on the policy are still continuing, and run over $100 a month. Now that John is gone, with nobody to leave the money to, she's considering cancelling the policy. What should Ann do?

There are a number of alternatives available to Ann. She could take tax-free loans against the cash-value in the policy. She could stop making premium payments and accept some sort of reduced payment of the death benefit. She may even be able to use the cash-value as collateral for a bank loan. I'd like to discuss a couple of lesser-known settlement options of a life insurance policy: viatical agreements and life settlements.

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Topics: Life Insurance

You Can Make College Planning Easy

Posted by Larry Jones on Jan 31, 2019 9:30:00 AM

A Brain is a Terrible Thing to Waste

Should your child go to college?

My parents were part of the "greatest generation." Dad was a veteran of WWII (and not happy about it. He was on the verge of being called up from a minor league baseball team to play in the majors when Uncle Sam summoned him instead...) and came home in 1945 to a world finally at peace. In those days, a college education was considered a sure ticket to success. That's not so much the case today. It really depends on your field of study as to what your opportunities will be, and many college graduates come into the workforce only to discover that it's very difficult to find employment using their particular field of study. Many skilled trades pay as much or more as could be earned with a degree. I'm of the opinion that college isn't for everybody, and many are in college who shouldn't be.

Nevertheless, most parents have the hope that their little angel or angel-ette will one day discover the cure for cancer, bring about world peace, or colonize Mars, and to do that, they're going to need to attend college. 

And so the next question is: how are we going to pay for it?

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Topics: Case Studies, College Planning

Long Term Care and Your Way of Life

Posted by Larry Jones on Jan 29, 2019 9:30:00 AM

Risk Tolerance and Common Sense

My experience as a financial planner has brought me into contact with almost every type of personality. When it comes to the subject of risk tolerance, folks have many different ways of evaluating what they think risk exactly is. Some people don't consider putting their entire portfolio into third-world currencies risky, while others wouldn't go near Wall Street with a dime. If you've been around this blog long enough you've heard my rants on investment risk and not taking more than you need to in order to achieve your desired results. That's why I always attempt to quantify for my clients exactly how much risk they are being exposed to.

There seems to be one subject that is greatly ignored in the financial plans of many people. That subject is how a long term care event will affect your portfolio, and indeed, even your very lifestyle, as well as your family's. When that bubble breaks loose in your bloodstream it can very well rock everyone's world that you are close to. How is it that we give so much thought to the risk in our portfolio, which is internal, and so little to what is perhaps a much greater risk, which is external, and much more likely to happen? In my opinion, this subject needs to be discussed by any reputable planner with his client. Anything else, in my opinion, is gross negligence.

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Topics: Long Term Care

Investment Risk - How Much Should You Tolerate?

Posted by Larry Jones on Jan 24, 2019 9:30:00 AM

Are You a Risk-Taker?

Mr. Allen is the CEO of a large manufacturing firm, which has done very well over the last ten years. Lately, in considering expansion plans, it was brought to his attention that an attractive opportunity was available in another country for the location of the new plant. Labor costs would be much lower, and access to raw materials was also easier there, and he could count on a much higher return on investment.

On the other hand, this particular country has a history of political instability. In fact, powerful factions in this country were actively working toward political revolution and a committment to nationalizing all industry inside it's borders, effectively taking over all foreign investments.

Should he locate the new plant in this country? How will Mr. Allen decide?

How about you? What would you do?

The answer you'd give reveals a lot about your personal attitudes toward taking risk.

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Topics: investment risk

Don't Make These Estate Planning Mistakes !

Posted by Larry Jones on Jan 22, 2019 9:30:00 AM

Your Life, Your Death, and Your Legacy

If I were to ask you the name of your great great grandfather could you tell me? Not many folks can. But if your great great grandfather had set up a trust that was today paying you $50,000 a year tax-free I'll bet you could.

Death isn't something we like to think about, and I guess that's a good thing. After all, I believe that most people are optimistic by nature, and the subject of death isn't high on the optimist's list!

Yet, we cannot deny that this life will one day come to an end for us. We will then leave someone behind to pick up the pieces and carry on. Leaving a positive legacy is all about easing the strain on those who will have to do that. 

Have you given any thought to those who will be following in your footsteps?

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Topics: Estate Planning

Communication and Financial Services

Posted by Larry Jones on Jan 17, 2019 9:30:00 AM

Lessons from a "Minnow"

One of my favorite TV shows growing up was a silly tale of seven castaways shipwrecked on a lush tropical island in the Pacific. It was called "Gilligans' Island," and for those of you not old enough to remember great quality entertainment, the show was addictive. One of the more memorable episodes was when the castaways came across a Japanese soldier who had been left behind on the island by the Imperial forces in 1943, and being unaware that the war had been over for more than twenty years, was still fighting as he took all the castaways captive. This poor patriotic fellow was a victim of bad communication. 

When I think of how people impart information to one another, it's really quite amazing at how far we've come. Think about it, when the British forces surrendered to the American revolutionary forces, the folks back home in England didn't even know about it for weeks. How long did it take for Columbus to let his benefactors know that he had, in fact, discovered a New World? How many men died in battle after Grant surrendered to Lee in Appomattox because they didn't know the war was over?

In 1858 the first transatlantic cable was laid between North America and Europe, and for the first time messages could be sent across an ocean in minutes. In 1876 the telephone was invented, making instant communication available to the common man (it was necessary to learn Morse code before the telephone, and messages had to be slowly tapped out by hand. Today, in one of the greatest leaps in technology ever, we have collectively decided that "text messaging" is the way to go! Alexander Graham Bell must be turning over in his grave.), and after that technology began to take off. Today, information is shared instantaneously worldwide, and even communication across galaxies is now possible!

So why hasn't your stockbroker communicated with you?

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Topics: Communication

Investment Risk-> (Part 2) Are You Prepared for a Correction?

Posted by Larry Jones on Jan 15, 2019 9:30:00 AM

Market Moods and Why They Swing

In the last post I discussed the fact that the stock market is a paranoid schizophrenic! Most of the time changes in the market have absolutely nothing to do with the underlying value of the firm represented by that stock. Just because the value of Microsoft is $100 a share on Monday and $80 a week later does not necessarily mean that the product that Microsoft puts out has just become junk. No, more likely it's because investor sentiment has changed due to some report, causing the stock price to fall. (Caveat: sometimes prices DO fall because the company is struggling...the saavy investor needs to do his research). The true value of Microsoft is probably about what it was a week ago.

There is however, a school of thought, known by the way as Modern Portfolio theory, that states that the listed price of a stock on any given day accurately reflects a true valuation of that firm. The reason for this is that, due to technology and full disclosure rules, there is nothing that is unknown to the investor, if he does his research. Therefore, Mr. Market has correctly evaluated the price of the stock for you. In other words, there's no use in trying to beat the market because you cannot do it. And in fact, the vast majority of professional money managers do not beat the market! Think about it....you are quite likely paying your stockbroker 1-1.5% in fees to do something you could do yourself for next to nothing!

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What you don't know can hurt you!

As a fiduciary I am required to always act in your best interests, and as a professional planner, it's my job to be familiar with all types of possible solutions and financial vehicles. In short, I have no interest in selling any particular product or any affiliation with a particular company. I work for my clients.

Are you:

  • concerned that your tax bill is too high?
  • tired of watching your nest egg decline by significant amounts every 5-7 years?
  • wishing you could find more free time?
  • looking for ways to help protect yourself against litigation that could destroy all you have worked for?
  • worried that Uncle Sam is going to enjoy your retirement more than you are?

If any of the above describes you and you'd like to get a question answered then just click the button below and we'll be in touch.

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