Displaying items by tag: Sterling Manor Financial

Thursday, 08 April 2021 13:33

6 Questions to Ask a Financial Advisor

When you’re thinking about hiring a financial advisor, it’s important that you do your due diligence to help make sure you and your advisor are well matched. Ideally, you and your advisor are both looking to establish a very long-term relationship, and part of that involves being very open and honest about your expectations, and asking probing questions. It’s also very important that your advisor be forthcoming with their expectations. Here is a shortlist of questions to ask.

1. Are you a fiduciary? 
An advisor who is a fiduciary is legally required to put your interests ahead of their own, and ahead of the interests of their employer. 

2. Are you independent?
It’s important to consider whether the advisor works for a company with proprietary products to sell. Generally this will be common with insurance and mutual fund companies. Even with the best intentions, if your advisor is limited to, or incentivized for using, their employer’s products, you might not get the result you’re looking for. 

When the only tool in your toolbelt is a hammer, every problem starts to look like a nail. An independent advisor will generally have access to a universe of products, and be beholden only to you. 

3. How are you compensated?
There are a few compensation models in the industry, and it’s important for you to know how you will be paying for the services you will receive. 

Commission Based – This “eat what you kill” compensation model means that your advisor only gets paid when a transaction takes place, and it had been the traditional model for decades. 

It has fallen out of favor with both clients and advisors because of the inherent conflict of interest it presents. 

Fee Based – Most advisors now operate under a fee-based structure. What this means is that they charge a stated fee for providing advice, as opposed to earning a sales commission. This fee is often a percentage of the assets they manage, but could also be hourly depending on the scope of work. Since the fee is assessed as a percentage of your balance, it changes as your accounts grow or shrink, and you and your advisor now have the same goal; to be careful stewards of your assets over time. 

Because certain important products, like life insurance, are inherently commission-based, a fee-based advisor has the latitude to provide these solutions as well. Here, again, it is important to understand if the advisor is an independent fiduciary.

4. How much education can I expect from you?
The financial industry is full of jargon and acronyms. Every client has a different level of financial literacy, and a good advisor will act as an educator to make sure you understand their recommendations. Most advisors don’t intend to talk over your head, but if you find them using language you’re not familiar with, don’t be shy about asking for terms to be defined or strategies to be better explained. 

Good communication is the cornerstone of any relationship, and it’s crucial that you and your advisor are speaking the same language. 

5. How long have you been in practice?
There is no substitute for experience. Every advisor can look like a rock star during good times, but it’s important to know that they have been battle-tested and have the temperament to keep their head even if you’re losing yours, when volatility strikes.  In order to help shepherd you through the inevitable periods of uncertainty, they need to have been there before, and know the way through. 

6. Are you, or members of your team, a CFP®?
A Certified Financial Planner® professional is an advisor who has been through a rigorous education and examination process beyond the regular licensing requirements for the industry. A CFP® has demonstrated a level of proficiency across a wide range of planning topics, and has committed to a higher code of ethics. If your advisor is not a CFP® it could be beneficial to you that they are, at least, working directly with one in formulating their recommendations.

Depending on your needs, there are many other questions you should consider asking. The bottom line, though, is that you feel comfortable asking your advisor anything that you feel is important. Your advisor will be better suited to meet your expectations if you are clear about what they are, and you won’t be blindsided by any surprises down the line if you are thorough in your interview process. 

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

Published in Families Today

Seventy percent of people age 65 today will need long-term care at some point in their life.

The odds of at least one spouse needing care jumps to over ninety percent. Planning for the likelihood of needing long-term care should be an important consideration for most retirees. 

The default plan, when you haven’t planned, is that you will pay out of pocket until your assets have been depleted to the point that you qualify for Medicaid. In other words, you’ve become impoverished enough to quality for a social welfare program. 

For people who don’t have heirs, don’t have a spouse, and don’t mind receiving care in a nursing home, this may be a fine plan. For most people, however, other concerns make paying out of pocket an undesirable way to provide for their care.

If you pay out-of-pocket, you’re essentially self-insuring. You’re betting that the risk and cost of long-term care are something you’re willing and able to bear, and if they aren’t that you’re comfortable receiving care in a nursing home. For those who have heirs, a spouse, or who want to stay in their homes, long-term care insurance is the simplest solution for addressing this need. 

People typically purchase long-term care insurance for two reasons. 

Most people want to control the mode of care they receive. In other words, it’s generally desirable to receive care in-home, surrounded by your loved-ones, and in a familiar setting. This allows for a better quality of life than you might otherwise expect in a nursing home. Long-term care insurance allows you to receive care at home, in an assisted living facility, or in nursing home, as your needs demand. 

The second reason people purchase long-term care insurance is to protect their assets for use by a spouse, or to be passed to their heirs. How will your spouse maintain their standard of living after you’ve passed, if you’ve spent all of your assets on your care?

Many people wrongly think that Medicare pays for long-term care insurance, but it does not. Medicaid is the program that would pay for care. 

In order to qualify for Medicaid, you must first spend down your assets to the point that you (and likely, your spouse) are considered impoverished. When applying, you’ll need to show proof that you haven’t given any money away in the last five years, and if you have, it could affect your eligibility. In fact, you will be required to show five years’ worth of monthly statements for every account you’ve held during that period. 

A long-term care policy allows you to have a solution on the shelf for when you need it, and gives you the peace of mind of knowing that, not only will you be taken care of in the manner you desire, but your care won’t be a burden on family, and your assets can be protected. 

It’s best to apply for a long-term care policy in your late fifties or early sixties, when you are likely to still be healthy enough to qualify. Premiums may seem high to many, but when you consider the likelihood of needing care, and the fact that care can cost upward of $100,000 per year, the relative cost of the policies make sense. 

As you get older the risk to you and your family shift from the risks associated with premature death, to the risks associated with failing health. Once your working years have passed, the economic risk of your death often becomes minimal. In consideration of that, redirecting premium dollars away from life insurance and toward long-term care insurance might make sense. 

Long-term care insurance may not be appropriate for everyone, but too many are too quick to dismiss it before they’ve done their due diligence. You owe it to yourself, and your family, to explore your options and make an informed decision about how you wish to receive care in the future.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial in Saratoga Springs and Rhinebeck. Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

Published in Families Today
Thursday, 11 February 2021 15:02

It’s Tax Season!

2020 may be over but, for many of us, the books are not completely closed. Last year was an extremely difficult year for many, so it’s important to revisit some tax strategies that could help you keep more of your hard-earned money.

You may not realize but you may be able to make contributions to your Roth IRA for 2020 up until the earlier of your tax filing date, or April 15th.  If eligible, the contribution limit is $6,000 ($7,000 for those age 50+), but don’t be discouraged if you are not able to fully fund your account for the year. Every bit you can save will help provide for your lifestyle in retirement, so a partial contribution is better than no contribution at all. 

Just because one spouse may be a homemaker or already retired, doesn’t mean that they can’t take advantage of a Roth IRA.  IRS rules also allow for contributions to an account for a homemaker or retired spouse, as long as the working spouse has sufficient earned income, even if the spouse is older than 70 ½.

Since Roth IRAs can provide tax-free distributions and are not subject to Required Minimum Distributions at age 70 ½, they can be an extremely beneficial retirement funding option!

If you’re looking for a tax deduction today, consider contributing to a Traditional IRA instead. The limits are the same, and your contribution can be tax-free for 2020. 

Anyone whose earned income is reported to them on a form 1099, K1, or other similar non-employee form, may be eligible to establish and fund a retirement plan for 2020. The IRS rules allow this to be done up until the filing deadline (including extensions) for the previous year. Popular plan options include a SEP IRA and Individual 401k.

For those who are self-employed, and don’t have access to a retirement plan through an employer, you may think you’re being disadvantaged when it comes to saving for retirement. The opposite, however, may be true. As a self-employed person, you could have the options of contributing up to $57,000 to a retirement plan for 2020, and deducting the full contribution! 

A SEP IRA can allow you to contribute up to 25% of your income with a maximum contribution of $57,000, and can be appropriate for workers with high income and no employees. Because of the 25% limitation, your income would need to exceed $228,000 in order to fully contribute.

An Individual 401k has the same funding limit of $57,000 for 2020, however there is not a 25% limitation. In other words, a self-employed worker (with no employees) earning $57,000 may be eligible to contribute all of their income to an Individual 401k without being limited by the 25% cap. So, if you have a working spouse, or other means of making ends meet, an individual 401k may be a great option for supercharging your family’s retirement savings! Those over age 50 could contribute an additional $6,500.

Individual 401ks require more in the way of record keeping and compliance, so they can be more expensive and cumbersome than a SEP IRA. Remember, you don’t have to be able to fully fund a plan for it to still make sense. Don’t rule out an Individual 401k because you can “only” afford to contribute $30,000 to it.

The mail this year has been notoriously slow so, while you may be tempted to run out and file right away, be sure to double check that you’ve received all of your expected tax documents. Also be sure to check that none of the documents you’ve received are marked “DRAFT.” 

As a point of disclosure: Your circumstances are unique and tax regulations can be very complex. Before implementing any tax strategy, we recommend working closely with your independent financial advisor and tax preparer to determine eligibility and funding limits, and to ensure your retirement funding and tax strategies comply with all appropriate regulations. 

Stephen Kyne, CFP is a Partner at Sterling Manor Financial, LLC in Saratoga Springs, and Rhinebeck. 

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret Grant are separate entities.

Published in Families Today
Thursday, 14 January 2021 14:58

2021 Economic Outlook

There is an old curse that reads, “May you live in interesting times.”

I think we can all agree that we are certainly in interesting times. From the pandemic and the economy, to the political climate, 2020 (and so far, 2021) will long be remembered as a consequential year. The question now: where do we go from here?

2020 was a tale of two economies. Small businesses experienced a very different reality last year than large businesses. We all know local business owners who are struggling, or who have gone out of business, altogether. We know service sector workers whose financial lives are in complete collapse. Yet, on the other side, many large national businesses are booming. It’s a travesty, and our hearts go out to those suffering. 

Things will get better.

For investors who stayed invested during 2020, it turned out to be a surprisingly positive year, especially in the technology sector. 

This pandemic would have been untenable without recent technological innovations. Not only has technology allowed us to stay connected to loved ones during shutdowns, it has also allowed more people to work productively from home than ever before. As a result, non-tech companies, their employees and customers, have been direct beneficiaries since these companies have not had to shut down, could retain their employees, and consumers could still gain access to products and services which are essential to modern life. Imagine how much worse things would be if this had struck in the ‘90s!

What do we see for 2021?

For all of the relative insanity we’ve experienced so far this year, there are some reasons to be optimistic about the next twelve months. 

Technological innovations will continue to revolutionize the way we function in our everyday lives, and will do so at an ever-increasing pace. This is because we have all now been conditioned to accept new technologies when we otherwise might have been hesitant. We expect technology, as a sector, to continue to do well. 

Fun fact: The Moderna vaccine had already been designed by January 13, 2020, just two days after the Covid gene sequence had been made public! It will end up saving millions of lives – possibly yours - and we have technology to thank for it. 

As more become vaccinated, and shutdowns end, we expect the greater economy to begin to normalize. It may take well into the second quarter, but it is an eventuality. This, of course, bodes well for the private sector, but will also help the public sector as states and municipalities regain their financial footing. 

Some are worried about what a single-party-controlled Federal government means, so let’s address that. 

Markets typically like gridlock, because it is easier for businesses to plan if they know the rules are not going to change. Normally a sweep by either party would be cause for concern, but this year, markets are reacting positively. This is largely because there is only a technical majority in the Senate, with the Vice President acting as the tie-breaker. This will force compromise, which is ultimately beneficial.

One thing that will almost certainly pass in the next few weeks is additional stimulus and relief for the American public, which markets are applauding as well. Expect another round of direct payments (checks), as well as a delay in initiatives to raise taxes on anyone, rich or poor. In fact, we expect a repeal of the cap on state and local tax (SALT) deductions, which would actually, disproportionately, benefit the wealthy. 

It is also very conceivable that Congress extends provisions of the CARES act in 2021, including an elimination of early withdrawal penalties for hardship withdrawals, and another break on required minimum distributions. To that end, if you do not need your required minimum distributions in order to maintain your cash flow, you may want to wait to take them in case Congress eliminates them for 2021, as it did in 2020.

Here’s an interesting idea for any high school seniors graduating this year. Freshman applications and admissions are down more than 20% at some schools, leaving schools in a position to have to compete aggressively for students to fill their rolls. Couple that with the fact that most students don’t have SAT/ACT scores to report, and you may find that the dream school you thought was scholastically unattainable is suddenly an option!

In summary, as the pandemic comes under control and our lives are allowed to regain some semblance of normalcy, we expect the economy to continue to improve. With that, we expect the broader US stock indices to grow by 10-15% in 2021. We also believe that technology will again continue to be a driver of growth.

As always our forecast contains forward-looking statements which may be revised at any time. Stay focused on fundamentals in the coming year, and work closely with your financial advisor to help ensure your investments remain appropriate for your needs and market conditions. 

Stephen Kyne, CFP is a Partner at Sterling Manor Financial, LLC in Saratoga Springs, and Rhinebeck. Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret Grant are separate entities.

Published in Families Today
Friday, 13 November 2020 15:30

November is Long-Term Care Awareness Month

Seven-in-ten retirees will need some form of long-term care, which means that, for couples, there is a 91% chance of one spouse needing care. 

November is Long-Term Care Awareness Month. Let’s talk about how you can provide for your care, while protecting your family and assets from the risks associated with long-term care. This is an issue that will affect nearly everyone.

People generally plan for their long-term care for two reasons. First, they want to make sure that they receive the best care available, by qualified caregivers. Second, they want to make sure that their assets are protected so that their spouse will be able to continue his/her standard of living. The average widow outlives her husband by twelve years – what will those years look like if the couple’s nest egg was spent on her husband’s long-term care?

In this part of New York, long-term care can cost upwards of $10,000/month.  With an average nursing home stay of more than 2.5 years, you can see how quickly assets can be depleted. So, what is a person to do?

Some people are adamant that they will take care of their spouse in the event they need care. This strategy is well-intentioned, but generally not the best. Often care begins with one spouse providing it, but the needs can quickly outpace the spouse’s ability or skill level.  Could your spouse pull you out of a bathtub today? Could they do it twenty years from now? Are they the most qualified person to provide care?   What if your spouse pre-deceases you? Who will take care of your spouse after you die?

Gifting and trusts used to be a popular way to protect assets, however uncertainty in the legal landscape makes this a risky strategy. There is currently a five-year look back period for gifts, and it’s very possible that period could be extended. Will you know when you’re five years from needing care? What if the look back goes to ten years? Today, we see this type of planning used when a more effective strategy isn’t available. 

Bar-none, the most effective strategy for planning for the day your health changes is private long-term care insurance. Insurance can provide the flexibility of receiving care from a qualified professional caregiver in your home, an assisted living facility, or a nursing home, or in all three setting as your needs change. This means that you can still be surrounded by your loved-ones, without burdening them with your care.  We feel the prime age range for securing coverage is in your mid- to late-50s, while you’re still healthy enough to qualify, although your needs may differ.

Here’s what to look for in a long-term care policy:

1. A good insurance policy should include an inflation protection component, so that the policy’s benefit will increase as the cost of care increases. These inflation protection benefits are generally available with between 3% and 5% annual increases. 
2. A policy should allow you to receive care where and how you like: in your home, an assisted living facility, or a nursing home, as your needs demand.
3. Many policies will offer a cash benefit; a portion of your benefit paid directly to you rather than to your care provider. This benefit can be used for in-home modifications and other expenses related to your needs.
4. Your policy should provide a daily benefit large enough to cover the cost of care in the region you plan to receive it. Remember that any shortfall will have to be paid out-of-pocket.
5. Make sure your carrier has a high credit rating. Since any guarantees are based on the claims-paying ability of the carrier, you’ll want to be confident your carrier will still be around when it comes time to pay for your care. 

When you’re young and providing for a family, the risk to your family is that you’ll die prematurely. Once you’re retired, the risk is often no longer death, but the day your health changes.  Do you have a plan to provide for your care? Long-term care insurance is not the only way to plan for your care and associated expenses, but it is the most foolproof.  If you don’t qualify for insurance, then trust work or gifting may be necessary. 

At the very least, you should be discussing your needs with your family and your Certified Financial Planner® professional to ensure that you know your options, and are able to make an informed decision on a strategy.  Your advisor is the best person to educate you about the options, based on their understanding of your unique circumstances.

 Stephen Kyne, CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck.

Published in Families Today
Thursday, 10 December 2020 14:20

Year-End Financial Planning

The end of another year is rapidly approaching, and just as you cross items off your checklist and prepare your home for the winter, it’s also important to complete maintenance items to prepare your finances to close-out 2020.

The first piece of financial housekeeping will be to begin to gather documents you’ll be needing just after the new year to prepare your taxes. Compile receipts for medical bills, tuition payments, child care and charitable contributions, among others.

While many of us will no longer be able to itemize deductions due to recent tax law changes, there are credits for things like child care and education expenses which you may still be eligible for. For those with large medical bills, mortgage interest, or who have been particularly philanthropic this year, you may still be able to itemize, so it is important to have those receipts handy.

When it comes to planning for your retirement, this is the perfect time to evaluate your contribution levels to your retirement plans at work. If you have the ability, and you’re not yet contributing to the maximum levels allowed, consider topping these accounts off to take advantage of the possible tax deduction this year, as well as the ability to simply squirrel as much away for the future as possible. Even if you can’t contribute to the maximum, be sure to at least contribute enough to take advantage of any employer matching contributions. 

You may not be aware, but once you reach age 50, you are eligible for higher contribution levels than in prior years. So, if you’ve turned 50 this year, consider increasing your contributions. For 401(k) and 403(b) plans, you can contribute an additional $6,000 to a max of $25,500 from $19,500 for those under 50. For SIMPLE plans, you get to contribute an additional $3,000, up to a new max of $16,500. Take advantage of this opportunity to catch-up on contributions you may not have been able to make when you were younger. 

On the subject of milestone birthdays, if you turned 72 in 2020, you would normally have to start having to take withdrawals from IRAs and certain company sponsored retirement plans. These are called Required Minimum Distributions (RMDs). Your contributions to these accounts have been allowed to grow tax-deferred all this time, and now Uncle Sam wants his share. This age limit was increased from 70 ½ by the SECURE Act in late 2019. However, due to COVID and the resulting CARES Act, you won’t need to take an RMD for 2020. RMDs from inherited IRAs have also been suspended for this year, but you should expect both to resume in 2021.

Even if you can’t itemize charitable contributions on your taxes, you may still be able to make those contributions on a pre-tax basis! If you direct distributions to be paid directly from your IRA to your charity of choice, you won’t be taxed on that portion of the distribution. This is a great option if you are subject to the standard deduction.

The end of the year is a perfect time to review your various forms of insurance, including your home and auto. Take note of various coverage limits and deductibles. If you can, consider a higher deductible in order to save on premium expenses. 

Ensure that your homeowners coverage amounts reflect the value of your home. Your home has probably appreciated since you purchased it, but have you increased your coverage limits to keep pace? 

An often-overlooked task is to review your beneficiary declarations each year. Families grow, as new members are added, and shrink with death and divorce, which means that beneficiary and Transfer-on-Death declarations can easily become outdated and no longer reflect your true wishes. 

Since these declarations are a matter of contract, they will overrule what your Will may say. So, even if you’ve updated your will to exclude an ex-spouse, but you left them as beneficiary on your IRA, your new spouse won’t be able to inherit those assets, but the ex will, and it can’t be challenged in probate.

Your Certified Financial Planner® professional is perfectly suited to help you mark most of these items off your list. Review your beneficiaries, gather tax documents, maximize funding of your various retirement plans, take required distributions, and review your insurance coverage with your advisor each year, to help ensure that your financial plan is well-tuned as you prepare to turn the page on 2020.

Stephen Kyne CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck, NY.Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities.

Published in Families Today
Thursday, 08 October 2020 14:19

Eyeing Inflation: Election Season & Beyond

For most of this year the markets have been moved by only one thing: Covid. Now, though, as election day draws nearer, and rhetoric intensifies, markets will have to begin to contend with the potential outcomes of the election.

Regardless of your political inclinations, or ours, there are certain areas of the economy which will perform better under one or another outcome. There are also areas which will perform relatively well regardless of the outcome. You should be working with your advisor to objectively adjust your portfolios in such a way as to help capitalize on those pockets of opportunity while trying to remain defensive against possible pitfalls. 

In the short-term, it may make sense to make strategic changes to the proportion of portfolios allocated to stocks, as you watch the election season unfold. In the event of a contested election with a drawn-out legal battle, markets may experience greater than normal volatility. Having less exposure could help you weather that storm. It remains to be seen, for all of the talk, whether vote-by-mail is utilized as much as some expect. We don’t expect this volatility to be a long-term phenomenon at this point. 

Technology is still likely to remain a focus regardless of the outcome, as innovations in telecommuting, e-commerce, and entertainment continue to make our current semi-secluded lives possible and tolerable. 

Non-US companies may begin to show more promise as their fundamentals improve compared to US companies, post-Covid, and you may look to capitalize on this in portfolios.

Through election season and beyond, we are eyeing inflation. 

Currently worldwide production is still down, while consumption has increased substantially. Too many dollars chasing too few goods is the recipe for inflation, and you may want to consider making necessary adjustments in portfolios to account for this.

Used cars, for example, have experienced the highest rate of inflation in more than 51 years! Every year a percentage of the US fleet simply ages out and is scrapped. Add to that a general fear of public transportation, which has been forcing people into the car market who may not otherwise have owned one. In a year when very few new used cars have been produced, the demand for used cars has soared forcing prices into record territory. Expect other scarce items to follow suit.

The Fed has indicated that it is willing to allow inflation to run higher than normal, without taking action. While we are not expecting hyperinflation, we do think prices will increase at a greater than average rate. Even if the Fed doesn’t take action, there are steps you can take to help reduce the impact on your portfolio.

In the mid- to long-term, we expect taxes to increase. The government has been spending money at a record clip. The purchase of US debt by foreign holders has decreased this year, which means that the deficit must be funded either by increasing the purchase of debt by US holders, or from tax revenue. Regardless of who wins the election, we expect a tax increase, although it will likely not be shared by everyone.

It appears that this election will be a very close one. Emotions are running high on all sides. We urge you to try to tune out the noise as much as possible. Regardless of the outcome, there will be opportunities in the markets, you should be working side-by-side with your Certified Financial Planner® to help ensure your portfolio can weather the uncertainty, volatility, and inflation on the horizon. 

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret, Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities. This article contains opinion and forward-looking statements which are subject to change. Consult your investment advisor regarding your own investment needs.

Published in Families Today
Thursday, 10 September 2020 13:48

Estate Planning Basics

With the Federal estate tax exemption (the amount you can pass estate tax-free) at more than $11.5 million per person, or over $23 million for a married couple, many people may be inclined to believe that estate planning is simply not something they need to concern themselves with. While that may be true from an estate tax perspective, estate planning is a multifaceted concept with certain principles that apply to virtually everyone. 

At the end of the day estate planning is about making sure your assets go to whom you’d like them to, and in the most efficient way possible. One way to do this is to write a will which dictates the distribution of your estate, but a will, alone, can be a very inefficient tool due to a process called probate.

Probate is the public process of certifying your will and distributing your estate. During this process your will can be contested, making the process potentially very long and expensive. You could expect to spend up to four percent of your probatable estate in legal fees and, even after a years-long process, your estate may not be distributed as you would have wished. 

In order to help eliminate these concerns, it is usually recommended that your assets be titled in such a a way as to avoid probate altogether. 

Non-retirement funds can be titled as “Transfer-on-Death” accounts. If held jointly, these accounts can also be titled as having “Rights of Survivorship.” Upon your death, assets in these accounts would be easily transferred to your joint owner first, and then to the named beneficiaries upon the second death. 

Your retirement accounts, including IRAs and employer-sponsored plans can have named beneficiaries. Just as with a Transfer-on-Death account, upon your death your assets can be easily transferred into the names of your beneficiaries. 

Because these types of designations are contractual, they are excluded from probate, and cannot be contested. Avoiding probate means these funds are available to your heirs almost immediately, and privately. 

We recommend reviewing your beneficiary declarations annually, or upon a life event, to help ensure they accurately reflect your wishes.

This certainly isn’t to say that a will is unnecessary. Quite to the contrary. A will is an important estate planning tool for distributing assets which can’t be distributed in a more efficient way. 

Many people mistakenly believe that if they don’t have a will, and don’t utilize beneficiary declarations or joint ownership tools, then their spouse will simply inherit everything. They are often wrong. 

This is called dying “intestate.” In this instance these assets would still be subject to a probate process, but without any documents to dictate your wishes, the State determines who inherits your assets. 

If you die intestate in New York, with a spouse and descendants, then your spouse will receive the first $50,000 of the intestate estate, plus half of the remainder. Your descendants would receive the other half. Nobody will be more surprised than your spouse!

Work with your Certified Financial Planner ® and a qualified estate attorney to help determine the best way to help ensure your estate goals are met. You may not require an intricate estate plan with many moving parts, but you should certainly be aware of the basic steps and tools available to you to help simply the process for your heirs.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial, LLC in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, or Cadaret, Grant & Co., Inc., SEC registered investment advisors. Sterling Manor Financial and Cadaret, Grant are separate entities. This article contains opinion and forward-looking statements which are subject to change. Consult your investment advisor regarding your own investment needs.

Published in Families Today

As a Certified Financial Planner®, I find that many people are confused about what kind of life insurance they should have. 

While life insurance is an important component of nearly everyone’s financial plan, there are several types, which can cause quite a lot of confusion. At their core, however, insurance falls into two categories: permanent and term.

The type of insurance you have depends on your anticipated need. If you feel your need for insurance will be permanent, meaning you’ll need it whether you die today or at age 95, then permanent insurance should be considered. Most people, however, only need life insurance to cover a specific period of time, making term insurance a preferable option.

Let’s take a closer look:

Term insurance is intended to cover a basic need: to replace the economic loss resulting from a death during a specific period of time. It sounds clinical, but that’s all it is. For example, if I have a child today, I may want to purchase a 25-year term policy to ensure that, if I were to pass away during childrearing, there would be sufficient assets to provide for my child. Once they’re out of the house the need no longer exists and the insurance term expires. 

With term insurance, you’re only paying for what you need, when you need it. Because of that, the premiums are much lower, relative to many permanent forms of insurance. 

Permanent life insurance is intended to cover a permanent need. The two most frequent permanent needs I encounter are: 

1. Estate planning: In order to provide for liquidity at death, or to create a tax-free estate at death, permanent life insurance strategies can be utilized. 

2. Pension replacement: In the event one spouse elected a single-life only pension, a permanent insurance policy can be used to replace the pension in the event of the pensioner’s death. 

In both of these circumstances, a permanent insurance policy is used simply because the insurance need exists for an unknown period of time. It would be unwise to use a term policy in these instances. 

Many people have been sold permanent insurance policies who may not have had a permanent need, on the premise that permanent insurance can build cash value against which tax-free loans can be taken in the future. While this is technically true, in my sixteen years in private practice, I’ve very rarely encountered a person who funded their retirement using their life insurance cash value. 

This is true for a variety of reasons. 

In order to grow significant cash value, the policy premiums needed are significantly higher than just the cost of insurance (which is all you pay in a term policy). While many people are well-intentioned on the front-end, life happens, and very often people reduce the amount they pay into their policies, which dramatically affects the policy’s performance. 

Another reason these policies often don’t live up to expectations is that life insurance agents may use unrealistic assumptions when illustrating future policy performance. If you bought a policy in the ‘80s, illustrated using 1980s interest rates, then you know exactly what I mean. 

The only time I see permanent insurance work as a savings vehicle, is for a client whose cash flow is such that they have maximized contributions to every other retirement savings vehicle, and still have significant money they need to sock away. 

It should be noted that some people start out with a temporary need which evolves into a need that is more permanent. Luckily, most term insurance is convertible into a form of permanent insurance for just this reason. 

In the battle between term and permanent, as planners, we overwhelmingly favor term insurance. It is by far the most cost-effective way to solve for a need, while preserving the option to convert to permanent insurance if the need changes. 

Your Certified Financial Planner® will be the best person to help you assess your need by helping you to understand your overall financial circumstances, and can tailor a policy to provide proper coverage. If your advisor is independent, they will also have dozens of carriers to choose from, and can help get you the most competitive rates.

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

Published in Families Today

AS THE ECONOMY BEGINS THE LONG, SLOW TASK OF RECOVERING from the government-imposed economic shutdown, families must take stock of the damage, and formulate a plan to capitalize on the recovery, safeguard against future calamity, and repair their personal economies to the degree possible. 

One of the cardinal rules of financial planning is to keep between three- and six-months’ worth of expenses in a cash reserve. This is true for businesses and individuals, alike. 

Until now, many people might have difficulty imagining a time in which they might need that much liquidity. Disability, loss of work, and now, apparently, total economic shutdowns can completely upend your financial life and induce massive amounts of stress. 

The unthinkable happens and having enough cash-on-hand to safely get your family or business through these times protects your ability to maintain your standard of living and resume normal life when circumstances make that possible. 

Cash is king, and if you did not have an adequate reserve prior to the shutdown, consider making that a goal over the coming year or two.

In the past two months there have been numerous programs introduced to help you through these tough times. The CARES Act includes options for individuals and businesses to receive benefits. There are increased unemployment benefits for workers who have lost their jobs, and for the self-employed workers who are kept from their avocation by the lockdown. Navigating the system can be difficult but, remember, the system is being overloaded by the number of applicants, so be patient.

There are several programs available for small businesses as well. The Payroll Protection Program, EIDL Loan Advance, and SBA Express Bridge Loans are all available to small businesses to help them retain employees, maintain solvency, and continue or resume operations when possible. Small businesses are the heart and soul of the community, and these programs offer a lifeline. If your business has been affected, consider exploring these options.

Finally, a word on the investment markets. 

Positioning your assets for a recovery is vital to helping your account balances heal. Consider whether your portfolio is out of alignment and may need to be rebalanced. 

Let’s say that you intend to be invested in a portfolio that is 80% stocks and 20% bonds. When the markets pulled back dramatically, the value of your stocks may have decreased much more than the value of your bonds. If you look at your portfolio today, you may find that it is now 70% stocks and 30% bonds. In other words, it may be much more conservative than you intended and that could impede the ability for your balance to recover if the stock market increases substantially. 

The depth and duration of the market slump will be determined by the length of the shutdown, so it is impossible to say how long a recovery will take. While the past is not guarantee of the future, it can be a guide and we do know that every single time the US markets have receded, they have eventually rebounded and found new highs. 

We will probably enter a recession this quarter, but it is likely a recession in name only. Recessions typically occur due to some underlying fundamental flaw in the economy which needs time to work itself out. That is clearly not the case this time around. In fact, the economy was extremely strong prior to the government hitting the emergency brakes, so typical thinking around how long a recovery might take could be grossly inaccurate. In fact, if the economy is substantially reopened by the end of the quarter, you might be surprised to see very positive data as early as the third quarter. 

Remember that any forward-looking statements are subject to change as new information becomes available, so work closely with your Certified Financial Planner® to make sure that your plan accurately reflects your needs, goals, timeframe, and risk tolerance, and economic reality. 

Stephen Kyne, CFP® is a Partner at Sterling Manor Financial in Saratoga Springs and Rhinebeck.

Securities offered through Cadaret, Grant & Co., Inc. Member FINRA/SIPC. Advisory services offered through Sterling Manor Financial, LLC, an SEC registered investment advisor or Cadaret Grant & Co., Inc. Sterling Manor Financial and Cadaret, Grant are separate entities.

Published in Families Today
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