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Executing your estate plan: Selecting a Trustee

While minimizing taxes and planning for the eventual disposition of your assets are important aspects of estate planning, selecting the best people and/or organizations to carry out your wishes when you are no longer able is often one of the most difficult decisions. It is important to consider a number of factors including trust (will they honor your wishes), ability (do they have the knowledge and experience), and the willingness (proximity, time, desire, etc.) of those appointed in each role.

We are providing information over five weeks relating to the key roles that need to be filled.  This week’s article focuses on selecting a Trustee.

  1. Power of Attorney
  2. Executor
  3. Trustee
  4. Estate Planning Attorney
  5. Health Care Agent

Appointing the proper people in these roles (and reviewing this regularly) allows you the opportunity to put several layers of protection in place, especially as estate situations become more complex.

Buy or Lease Your Next Vehicle

When it’s time to get a new vehicle, it is worth considering whether buying or leasing is the best option. This flowchart may help guide you or someone you know through the buying versus leasing decision.

If you would like to discuss whether buying or leasing is more appropriate for your individual situation or have us assist with a break-even analysis, please let us know.

Bonus Pay for MN Frontline Workers

We recently received notice from the Minnesota Department of Labor and Industry (MN DLI) regarding bonus pay for COVID-19 frontline workers.  We thought it would be helpful to share and, although it may not apply directly to you, it may for your family members or friends.

The notice states “To thank those Minnesotans who worked on the frontlines during the COVID-19 peacetime emergency, Gov. Tim Walz signed Frontline Worker Payments into law April 29, 2022, enabling those workers to apply for Frontline Worker Pay.”

We received two information sheets provided by the MN DLI. The first contains information to help determine eligibility. The second provides details on the application process after determining eligibility.

The state is anticipating applications will be taken June 8 through July 22.  If you are interested in applying or would like more information, please visit frontlinepay.mn.gov.

 

Considerations when updating your estate plan

Creating an estate plan takes time and energy. It always feels good when the planning is done and the documents have been finalized.

Like almost everything related to financial planning, priorities, assumptions, expectations, and relationships tend to evolve over time making it important to review your estate plan on a regular basis to be sure it continues to reflect your desires.

Hopefully, this checklist will assist you in reviewing your documents and determining whether it is time for an update.  We will be happy to discuss your estate planning in more detail with you.

If you have family, friends, or colleagues you believe would find this resource helpful, please feel free to share it.

MILESTONES RELATED TO FINANCIAL PLANNING

Age is more than just a number when it comes to financial planning. Certain ages have implications for retirement plan distributions, while others are related to benefits you may qualify for.

The table below may be of interest illustrating important age-based milestones.

If you would like to discuss how any of these milestones will impact your current and/or future planning, we would be happy to do so.

 

 

 

AM I AT RISK FOR IDENTITY THEFT?

Cyber threats and identity theft are risks almost everyone faces.  Most of us use personal data in one form or another to perform a myriad of tasks including accessing financial accounts, email, social media sites, online shopping, and other password-protected websites/portals/software applications. Criminals are well aware of this and are working hard to exploit our use of these platforms.

The checklist below can help you assess your level of risk and provide a few pointers to reduce the likelihood of being a victim of cyber criminals, internet scams, identity theft, etc.

We hope the information is useful.  Please feel free to share this resource with others.

RETIREMENT INCOME PLANNING

Retirement income planning is one of the primary reasons people engage in financial planning. In most cases, retirement income planning is a two-step process: a long period of gradual asset accumulation leading up to retirement, followed by a long (hopefully) period of distribution during retirement.

There are numerous strategies that can be implemented and products that can be purchased in order to accumulate retirement assets as effectively as possible. In almost all cases, however, it is impossible to know what long-term rate of return will be realized and, therefore, the amount of savings necessary to accumulate adequate resources to retire comfortably.

Projecting asset growth based on fixed return assumptions is a common approach to determining the amount that should be saved in order to reach a retirement savings goal, and how much can be withdrawn during retirement. However, since long-term rates of return are the result of a series of shorter-term (monthly, quarterly, annual, etc.) variable returns, the sequence of returns realized plays a significant role in determining how much is accumulated at retirement and the sustainability of a given level of distributions.

For example, a period of negative returns just prior to retirement can push one’s planned retirement date well into the future. Likewise, a period of weak returns during the first part of retirement can have a significant impact on the sustainability of the desired distributions. These scenarios are not captured using fixed return assumptions.

In order to account for the impact of variable and unknown returns both pre- and post-retirement, we are now using software that projects the likelihood of a financially successful retirement by modeling a range of potential outcomes. By simulating thousands of return sequences using expected returns, volatilities and asset class correlations, we are able to more accurately calculate the probability of success for various savings and distribution scenarios (chart 1 below). The software also integrates social security benefits, health care costs and inflation expectations into the calculations. This allows us to explore a wide range of possible outcomes with our clients and describes the results in terms of probability of success (chart 2 below).

The results bring a new perspective to retirement income planning and help illustrate the likely impact of changes in savings rates and asset allocation strategies.

Chart 1

2016-rtmt-inc-graph-2

 

 

Chart 2

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A Question of Value

In 2016, we  surveyed a number of our clients on a variety of topics. One of the “questions” related to understanding the level of our clients’ perceived value in working with us was: “I receive good value for the fees I pay” – a question that seemed pretty straightforward as we were selecting from the alternatives our consulting firm provided.

However, upon further consideration, we have come to realize that the concept of perceived value is easy to define, but difficult to measure. In order to do so, we also need to know which benefits are being considered and how their value is being measured.

We constantly strive to provide the most value possible to our clients. Our strategy is simple: provide better, more comprehensive services to our clients at more competitive rates than other firms offer.

While the fees we charge are referred to as investment advisory fees in the majority of cases, they almost always cover all of our advisory and financial planning services. These include not only investment management, but many other areas such as long-term wealth accumulation planning, retirement income and distribution planning, insurance planning, estate planning and the coordination, integration and implementation of planning strategies – all of which we believe add significant value beyond investment management even though quantifying the potential economic impact is difficult.

From the perspective of cost, our investment advisory fees are low by industry standards. In fact, others in the industry often advise us to raise our fees. Below is a graph illustrating our fee schedule relative to other similar firms using data from the 2015 Schwab RIA Benchmarking Study for advisers with assets under management between $100 million and $250 million.

2015-benchmarking-graph-new

A simple definition of value is: a measure of the benefit gained from goods or services. We strive to be valuable to our clients by providing comprehensive, customized and integrated financial planning that covers a broad spectrum of topics. While it is a standard practice within our industry to use a single “investment advisory fee” as a means of charging for financial planning, we hope you agree that it understates the scope of the work we do (click diagram).

Three Reasons Everyone Needs an Estate Plan

Estate planning is important on so many levels. And it’s not just for the wealthy.  Having a basic estate plan in place is essential for everyone – from avoiding confusion to caring for the loved ones you leave behind to being sure they are the ones who receive your legacy, not Uncle Sam.  The following are three distinct reasons for planning:

  1. Beneficiary planning so that your assets to pass to who you want, when you want, and in the amounts you want. Having up-to-date Wills and/or Trusts can help avoid any confusion and ensure that your wishes are followed.

    Having up-to-date documents becomes even more important when a minor child(ren) is/are involved.  By creating the appropriate documents, you can name the guardian(s) you want for your child(ren) versus allowing the court to make the decision for you after it’s too late.  Also important to consider is the timing of distributions.  Staggering the ages that assets are received, such as 1/3 at age 25, ½ of the balance at 30, and the remainder at 35, will provide several opportunities for your child(ren) to learn to use the assets wisely.

  2. To avoid probate, which can create significant delays in distributions, be time consuming, and make your estate subject to additional costs.  It also makes your estate a matter of public record, removing any privacy for you and your family.

    For any assets that will pass directly with beneficiary designations, such as life insurance and retirement plans, you should be sure these designations are up-to-date.  You might also consider the creation of a Trust(s) to own assets, which can help to avoid probate.

  3. To provide for blended families in the case of divorce, death, and/or remarriage. With blended families, there are more opportunities for things to go awry and often times, spouses (or former spouses) may not see eye-to-eye on things.

Taking the time to be sure your loved ones are properly cared for is well worth your careful consideration – and the expense – to be sure your documents are structured appropriately. If you haven’t reviewed your estate plan recently and would like to, please contact us.  If changes should be made or documents have yet to be created, we are happy to provide you with sources for this.