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Tuesday, May 26, 2015

Where is Everything?

A family member recently had a health procedure done that made us all step back and think: “what would happen if that person was not around?” As part of the financial planning process we regularly run clients through “what if” scenarios. These “what if” scenarios create the demand for health insurance, disability insurance, life insurance, long term care insurance and regular beneficiary audits on all insurance policies and investment accounts. But what if we all took it a step further? We may have all of the necessary planning tools in place, but what if no family member knows where all of this information is? What if no other family member knows who the financial advisor is or how to contact him/her? What if no other family member has access to accounts? Here are a few things to remember and include as part of the financial planning process:

1. As previously mentioned, review beneficiaries on all accounts annually. Life happens and sometimes beneficiary changes can get lost in the shuffle.

2. Have all accounts written or typed on one sheet of paper and accessible to at least one other family member. The last thing people want is for family members to “go digging” for account information upon death. Have it all summarized in case of tragedy.

3. Keep all of the financial information in one spot. Whether it’s a safe or safety deposit box try and keep everything together.

4. Share with at least one more family member how to access this safe place. What’s the purpose of a safe place if no one else can access it in a time of need?

5. Keep your financial advisor’s contact information in this same safe place. Most experienced financial advisors have been through these difficult situations and can be a huge asset when tragedy strikes. They can help make phone calls and gather the necessary paperwork.

We may never be able to fully prepare for the unknown, but we can simplify the transition process by making sure our financial house is in order.

Monday, May 18, 2015

Keeping Good Records in a Digital/Email Age

In an effort to reduce paper waste by “going green” many people have gone to electronic statements for their bank accounts, investment accounts, and pension accounts. In fact, we have helped many clients go paperless with the accounts they maintain with us. In recent planning however, I have discovered an overlooked aspect with going paperless - It often seems that when the person who created an online accounts passes away, spouses or family members who don’t have access to their usernames and passwords, have no way to obtain information on their accounts. I recently met with a client who knew her deceased husband had a Roth IRA, but she could not produce any statements. While going through her piles of paperwork I noticed a document that indicated her husband had enrolled in electronic statements back in 2009. In this particular case we were able to call the company and find his account. To avoid these kinds of situations, my recommendation is to print out all your statements on an annual basis and add them to your tax file. Make sure that your family members know where that file is if something were to happen.

Tuesday, May 12, 2015

Children in Our Eyes Only

It’s their 18th birthday!  What an important life event.  They will soon make decisions about career and education.  Of course, they think they should come and go as they please.  As parents, we find it difficult to see them as adults.  It was only yesterday that we were reading them their favorite children’s book and covering their boo-boos with Barney band aids.

The State of Michigan sees it more clearly.  They are adults.  While they likely do not have any money, there are some wise steps that you should take so that you are able to help them in an emergency.  You want to be prepared to step back into “Mom and Dad mode” in case they are incapacitated due to accident or illness. You should consider having an estate planning attorney prepare two documents.  One is the Durable Power of Attorney.  This would allow you to handle financial transactions for them.  A second important document is the Designation of Patient Advocate.  This document would allow you to make medical decisions and discuss medical care with providers if necessary.  Without these documents, you may be required to seek these powers through the probate court. 

Even though they still seem like children to us, it is important to understand the new risks and responsibilities that they face as adults.  It is a good idea to consult your estate planning attorney to discuss this type of planning.

Friday, May 8, 2015

How Do I Teach My Kids about Money?

Having been in the financial services field for almost 15 years, in addition to having four children of my own, I get the following question multiple times a week: “How do I teach my kids about money?”

I wish I had the right answer.  My oldest is only 10 so I can only hope that my strategy will work in the long run.  I have adopted a few things though that I am confident will help the situation as my children mature.  First of all, I have an investment account for each of my kids that is their long term money.  Every time one of my children receives a financial gift, a portion of the gift goes to this account.  Second, each child has a small bank account where they park their more liquid money.  Again, a portion of each gift goes here.  Third, I encourage my kids to take 10% or so of each gift and tithe.  This usually goes to church, but I am more than willing to listen to their ideas of where they would like their money to go.  And last, I do want my kids to enjoy life a little, so they take a portion of their gift and buy a toy for themselves.  I also enjoy incorporating the math they are learning in school to real life experience so we typically will look at their quarterly investment statements together to see additions to the account and market gains or losses.

Again, it is difficult to have all of the answers when it comes to kids and money.  My strategy is to lead by example and have a process we follow each time there is income.  In the end, I hope this takes some of the emotion out of money decisions, which in turn, should lead to better financial decisions later in life.