Friday, July 24, 2015

3 Essential Retirement Planning Tips For Women

A number of gender barriers have been broken down over the years, but at least one still remains: Women continue to save less for retirement than men.

According to a 2013 report from Aon Hewitt, women contribute an average of 6.9 percent of their pay to retirement accounts, compared to 7.6 percent for men. Investment research firm Hearts & Wallets also reported that 80 percent of spouses who were not involved in retirement-related decision-making were women.

Historically, women may have taken a back seat when it comes to making investment decisions, but there’s more to the retirement savings gap than gender politics, said Ann Marie Etergino, a managing director and financial advisor with RBC Wealth Management.

Longer Lives

Longevity risk is a major factor, Etergino said. On average, women live about five years longer than men do, according to the Centers for Disease Control and Prevention. Naturally, their money has to last longer.

However, most women underestimate just how long they’ll live, said Jennifer Reynolds, president and CEO of Women in Capital Markets, a Toronto-based organization that advocates for women in the capital markets industry.

“Many women live into their 90s, but they only expected to live to their 70s,” she said. “They made their money decisions years and years ago, but it’s a different reality today.”

Getty_woman_retirement

More Caregiving On Less Income

As far as gender equality has come, women still make just 77 cents for every dollar a man earns, according to recent data from the White House. Of course, if you make less, you’ll save less, said Sarah Kaplan, associate professor of strategic management at Toronto’s Rotman School of Management.

Women also tend to stay home more than men—often to raise children and, increasingly, to care for aging parents—and that has an impact on how much they earn, said Maureen Kerrigan, senior vice president,  RBC financial advisor and president-elect of the company’s Women’s Association of Financial Advisors employee group.

According to the Family Caregiver Alliance, 66 percent of caregivers are women, and female caregivers spend 50 percent more time providing care than male caregivers.

“We may step off the work treadmill for a little bit,” Kerrigan said. “If we end up being caregivers and that requires them to take time off work, then we’ll earn even less.”

Risk-Averse Approach

Women are generally more risk-averse than men, said Etergino. Another Hearts & Wallets study found that female investors hold more cash than male investors. On average, they allocate 37 percent of their assets to bank savings, checking accounts or CDs—compared to men who allocate 25 percent. Men also have double the allocation to individual stock holdings compared to women.

“[Women] want stability of principal and there’s a cost that comes with a security like that,” said Etergino.

So what can women do to close the retirement savings gap?

1. Save Aggressively

Naturally, saving early is a good rule of thumb, but for many people it’s easier said than done. For women, there needs to be an increased sense of urgency, which can be hard to come by when you’re in your 20s, said Kerrigan.

That’s why she suggests using a company’s 401(k) plan. You simply set it up at work and never have to worry about it again. You don’t have to get worked up about retirement to spur saving since the payment is taken off your check automatically.

Those making a sizeable income will want to contribute as much as the company will match, said Kerrigan. Many high-earning women will reach the annual IRS limits on 401(k) contributions. When that happens, look at utilizing other savings accounts, such as a 457 plan, which is a company plan that has some additional tax benefits, she added.

It’s always a good idea for high-net-worth women with complicated financial needs to talk to an advisor, said Kerrigan. Ultimately, though, “women should explore all available retirement opportunities and seek advice to determine which is most advantageous,” she said.

2. Have A Long-Term Plan

It’s important to think long-term, said Etergino, and not just into the first few years of retirement. Women need to create a plan that extends well into their golden years.

Kaplan agreed. She knows it’s difficult for people in their 20s and 30s to think that far in advance, but people can’t rely on a spouse or even Social Security to get them through their longer lives. “We live in a society now where we have to think about these things,” she said.

Etergino has two suggestions for long-term saving. The first is that married women should keep an investment account in their own name. If a divorce should unfortunately occur, she will already have a nest egg built up.

This is important because studies show women experience a decline in wealth as they age. A study by Statistics Canada found that senior widowed women with the highest family incomes experienced a nearly 8 percent decline in their wealth five years after their spouse passed away.

The second is to never stop saving. “Women have to recognize that they’re going to live much longer than they anticipate,” Etergino said. “So the psyche early on has to be, ‘I’ll need to take care of this myself at some point, so I need to stay engaged both intellectually and through continuous contributions.’”

3. Don’t Forget Long-Term Care

Since women outlive men, many will have to manage their own long-term care. Those who don’t take this into account could derail an otherwise well-thought-out retirement saving plan.

Long-term care insurance is expensive and “it’s not getting any cheaper,” said Kerrigan. But it can be useful, especially if you can cover some health-related expenses yourself.

There are products you can buy over a three-to-five year time span, she said. If you pass away before using the long-term care insurance, then it may change into a life insurance policy that can get distributed to your beneficiaries.

Because of the costs of insurance, Etergino suggested that clients cover 50 percent of the health care costs themselves, and insure the other 50 percent.

While it will still take time before men and women are saving the same amount for retirement, it will happen, said Kerrigan. Why? Because women now have role models who save and invest.

“My mother never worked outside the home and when my father passed away, my mother didn’t know what to do,” said Kerrigan. “[Today], children see women earning money—and the impact that it has on their lives.”

Source: Forbes


Tuesday, July 21, 2015

5 Essential Life Documents For Common Law Couples

A trip down the aisle rewards couples with more than the glow of wedded bliss. They also enjoy a variety of legal and financial advantages that are not available to unmarried couples.

“There are roughly 1,100 benefits afforded to married couples involving all facets of life, from not having to testify against a spouse to various legal parental rules to estate-planning benefits,” said Cyndy Ranzau, associate wealth strategy consultant with RBC Wealth Management.

Because unmarried couples lack the financial and legal benefits of their married counterparts, they may want to be vigilant in ensuring the proper documentation is in place to protect their finances.

Commonlaw_couple


Here is a rundown of essential documents and tips for maximizing your wealth plan outside of marriage:

1. A Will And Living Trust

The marital deduction, allowing tax-free transfers of wealth to spouses, doesn’t apply to unmarried couples, so planning is essential.

A will can ensure assets don’t automatically go to your surviving family members, which is what would happen if you were to pass away intestate.

“There is no way to get your assets to anyone other than next of kin unless you have a will,” said Van Pate, wealth strategy consultant with RBC Wealth Management.

To make your intent even more solid, consider getting a living trust, Ranzau advised. “A living trust is harder to contest than a will, because typically once a will is signed, you never look at it again.”
A trust, on the other hand, requires some effort to transfer and retitle assets in the name of the trust, signifying deliberate intent, said Pate. “If you prepare a trust in 2015 and live with it 10 to 15 years, it’s harder for a relative to come in after your death and say you were off your rocker when you signed it.”

Even if you have a living trust, you need a will for certain assets that remain outside the trust and to name guardians for minor children. In both the will and a trust, you can make your wishes clear about the distribution of assets after your death.

2. Power Of Attorney

There are different types of designated authorities to consider when it comes to your financial life, depending on how much power you want your partner to have.

A general power of attorney allows the person holding the power to handle all legal matters—including financial transactions—on behalf of the person who grants it. There can be a specified time limit or it can “spring” into effect under specific circumstances. This is called a springing durable power of attorney.

A general power of attorney “is written to cover the waterfront and allow the power-holder to act in any number of situations,” Pate said.

A financial power of attorney limits the holder to financial transactions. This designation is not necessary if there is a general power of attorney in place.

A power of attorney can be written as durable, meaning that its duration will be extended in the event you become incapacitated. “If you think about it, that’s when you need it the most,” said Pate. “If a general power of attorney is not written as durable, then the authority [to act on behalf of the other] ceases at the worst possible time.”

3. Health Care Proxy And Living Will

Just as with a financial or general power of attorney, one written to cover health care allows a specified person to make decisions regarding care on your behalf if you are unable to make them yourself. Sometimes this is referred to as a health care proxy.

In addition, you may consider drafting a living will that directs medical professionals on any end-of-life treatment. In some states, both the health care power of attorney and living will are combined into one document called an advance health care directive.

Consider sharing these documents with loved ones so everyone who might be involved is aware of your wishes and the identity of your decision-maker.

Documents vary by state, so be sure to follow the requirements where you live, said Pate. “Generally, they require witnesses, but not necessarily a notarized signature,” he added. Finally, Pate recommended keeping a copy of the document handy for emergencies.

4. Insurance Policies And Retirement Accounts

It’s all about the named beneficiaries with these documents, because the people you designate on the document will be the ones who receive the benefit, regardless of what your will or living trust states.
Common assets with named beneficiaries include insurance policies and retirement accounts, including IRAs, 401(k)s and 403(b)s. Also, some people title bank accounts as “payable on death” or “transferable on death.” Those accounts will go directly to the designated person named on the account when you pass away.

Finally, don’t forget contingent beneficiaries. If the person you name as primary beneficiary dies before you and you have named a contingent beneficiary, the asset will pass to your estate and be distributed per the terms of the will. If there is no will, the assets will pass to the next of kin.

Try to make sure the named beneficiaries are in line with your overall estate plan, Pate advised.

5. Application For Federal And State Benefits

Civil or common-law marriages are not recognized by the federal government for any benefits, said Pate. State laws vary, so you may want to do research to find out if you’re able to file a joint state tax return.

Laws for same-sex marriages also vary by state, with 37 states recognizing them, Ranzau said, adding that in late June the Supreme Court is scheduled to rule on whether they will be legal in every state. That could change the picture for spousal benefits at the federal level.

In the meantime, partners in a same-sex marriage interested in Social Security spousal benefits can go on the Social Security website, said Pate, and click on the link for frequently asked questions for such unions. “In each of the answers, it basically says they are processing some applications and if you feel you qualify, you should apply. But it doesn’t guarantee anything.”

Couples may automatically receive more benefits when they tie the knot.

The bottom line for unmarried couples is they can maximize their control by drafting or signing the proper documents to ensure each partner is protected—both legally and financially.

Source: Forbes
 

Friday, July 17, 2015

Most Business Owners Do Not Have Up-To-Date Estate Plans, But They Should

As long as there are estate taxes, as long as there are intergenerational considerations, and as long as there are interconnected business interests, there will be a need for estate planning. Business owners are looking to achieve a certain agenda and do so in as tax-efficient a manner as possible. However, it’s important to keep in mind that taxes are not the tail that should wag the dog.

According to Anthony J. Carone, managing member of the specialty law firm Carone & Associates, “Basic estate planning employing such strategies and financial products as credit-shelter trusts and traditional life insurance is far from complicated and sufficient for many business owners. However, for more complicated situations there are many more sophisticated strategies available including self-canceling installment notes, granter retained annuity trusts, and remainder purchase marital trusts.”

Based on a survey of 513 business owners, a little more than seven out of ten business owners have an estate plan which is defined as having, at a minimum a will. Among the 138 business owners without an estate plan, half of them have not done the planning because the topic is very hard to deal with. “There are many reasons, “ explains Carone, “From facing the prospect of death to needing to make difficult decisions concerning the disposition of assets including the future fate of the business, estate planning can very well be arduous and emotionally nerve-wracking.”

About 30 percent of the business owners surveyed said they didn’t have an estate plan because there wasn’t a need. “Although there might not be estate tax concerns, it’s usually advisable that everyone have an estate plan, even if it’s only a will,” explains Carlo Scissura, president of the Brooklyn Chamber of Commerce and author of Maximizing Personal Wealth: An Advanced Planning Primer for Successful Business Owners, “This is especially the case for business owners as their company is often an integral and considerable part of their estate.”

For those business owners surveyed who had an estate plan, most of them are over five years old. Almost a quarter of the estate plans are two to five years old, with the remaining 12 percent less than two years old. Frank Seneco, president of Seneco & Associates, an advanced planning boutique says, “Because of changes in the tax laws, estate plans more than five years old – most probably more than a few years old – are likely to not be up-to-date and fail to take maximum advantage of available opportunities.”

What’s even more telling is that more than half of these business owners report that they’re wealthier since they created their estate plans. More importantly, nearly seven out of ten reported that since they created their estate plans they’ve experience life changing events. These events can be anything from divorce to the birth of children or grandchildren to the death of prospective guardians, and so forth.

What this tells us is that, from changes in the tax laws to changes in the lives and wealth of the business owners, their estate plans are likely outdated. In order to attain the greatest benefits from estate planning, business owners need to stay on top of the matter and revise your estate plans when appropriate.

Source: Forbes
 

Monday, July 13, 2015

6 Essential Estate Planning Steps For You And Your Parents

We’d been married for more than 30 years and were very close with Terrie’s mother “Jean,” spending every holiday and Sunday together (her name has been changed here for privacy reasons). But our happiness turned into a nightmare in the span of just a few weeks.

We think our story about protecting Jean from a financial predator is worth knowing for anyone with an elderly parent. And based on our harrowing ordeal, we recommend six steps (below) to keep yourself and your family safe and financially sound.

Here’s our story:

A Car Crash and Then a Financial Predator
First, Jean was in a car accident and suffered a severe traumatic brain injury, which severely impacted her short-term memory, leaving her frustrated and vulnerable. We then became her primary caregivers and nursed her through a difficult recovery.

In the months that followed, “Billy,” Jean’s long-time boyfriend who had avoided meeting us, took advantage of Jean’s disability and confusion to convince her that Terrie was stealing her money. He managed to also persuade a police officer (with no evidence) as well as a judge — who issued a restraining order without a shred of proof.

In addition, home care workers allegedly colluded with Billy, helping to make arrangements for a one-day visit to Las Vegas, so Billy and Jean could get married there.

As a result, our lives were turned into a roller coaster ride as we were thrust into a four-year legal battle to save Jean from a financial predator and a justice system gone wrong.

What Her Mom Did Right
Fortunately, Jean and her first husband had put their estate plans in place through a family trust, which made it possible for Terrie to successfully fight for a conservatorship for her mother. But not before Billy closed all of Jeans’ bank accounts, opened new joint accounts, cashed some bonds and took Jean’s name off one of the accounts.

Though still estranged from Jean, we have made certain that Billy can’t drain Jean’s financial assets through the trust — nor will he inherit them — assuring that Jean can live out her life being financially comfortable.

6 Estate Planning Steps for Families
Based on our experience, we think others should take these six steps to ensure their family knows their wishes and plans when they die or become mentally or physically incapacitated:

1. Organize your emergency information. This is more than a list of doctors and phone numbers. It should include specifics about your digital assets, bank accounts, storage rental, lawyers and financial advisers. Doing so will save your loved ones additional stress during an already stressful time and can be critical for quick decision-making.

2. Draw up a will and maybe trusts, too. Meet with an estate attorney who can give you guidance and create the proper documents. Make sure everything is as clear as possible and easily understood so there will be no questions about what you really meant.

3. Designate a durable power of attorney. This allows the person you designate to make legal decisions if you’re incapacitated. Provide as much detail as possible, including safe deposit boxes and passwords to online accounts. Without power of attorney, the courts or a third-party designated by the courts will wind up making legal decisions.

4. Prepare an advance medical directive. This document will save family members from having to make end-of-life decisions for you.

5. Open frank conversations with your parents about their financial affairs sooner rather than later. “Don’t wait until they have an injury, get sick or you notice that they shouldn’t be driving anymore,” says Terrie.

6. Tell your grown children your plans. They probably assume you have been smart with your money. Prove them right. Then teach them to put their affairs in order, too.

A Final Piece of Advice
Putting your affairs in order is not about death. It’s about making sure things get done your way and the right way. It is one of the most important financial and lifestyle decisions of your life. It’s about writing the last chapter of your amazing legacy.

Source: Forbes

Wednesday, July 8, 2015

What the Same-Sex Marriage Decision Means for Couples’ Rights and Benefits

Jessica, left, and Melissa Tincher live with their children in Ohio. Same-sex couples will now be on even ground with the rest of the married population in several significant ways.

The Supreme Court’s ruling that the Constitution guarantees a right to same-sex marriage means married gay couples can gain all the financial and legal rights and responsibilities of being married, regardless of which state they call home.

The highest court’s landmark decision in 2013, United States v. Windsor, already established that married same-sex couples were entitled to federal benefits. But two major federal agencies, Social Security and Veterans Affairs, look to the states to determine marital status, so couples living in nonrecognition states were generally cut off from receiving those benefits. Same-sex couples were not entitled to many state-conferred benefits either.

With Friday’s ruling, however, all of that changes. Same-sex couples will now be on even ground with the rest of the married population in several significant ways:

Taxes

 

Married same-sex couples will be able to file joint returns at both the federal and state levels. These couples are already required to file joint returns at the federal level, but now, couples living in states that did not recognize their unions no longer have to prepare two sets of tax returns: a joint one for the federal government and individual ones for states.

Estate Planning

 

Same-sex married people living in nonrecognition states will gain rights to administer a spouse’s estate, bring wrongful-death actions and prevent other relatives from contesting wills, according to Ron Meyers, an estate planning lawyer in New York. Individuals will also be able to inherit property from a spouse without paying any state estate or inheritance taxes.

Divorce

 

Getting a divorce will become possible for married couples who live in states that did not previously recognize same-sex marriages. Before the ruling, married same-sex couples living in nonrecognition states would typically have had to establish residency elsewhere to get a divorce in that state, said Susan Sommer, director of constitutional litigation for Lambda Legal.

Social Security

 

With national recognition, all married people, regardless of which state they live in, will be entitled to spousal, survivor and other benefits. But that does not solve everything. Couples must be married for nine months before they become eligible for survivor benefits, yet some couples did not have the ability to marry in their home states until recently — and their spouses died before they met the nine-month requirement. “That will remain an issue,” said Cathy Sakimura, family law director at the National Center for Lesbian Rights.

Veterans’ Benefits

 

National recognition will extend benefits to all same-sex married couples who would otherwise be eligible. Before the ruling, benefits were limited to couples whose marriages were recognized by the state where they lived at the time they were married or where they lived when they filed a claim for benefits.

Medical Decisions

 

In the absence of medical directives or power of attorney, states may designate who should make medical decisions for people who are incapacitated or unable to make decisions on their own. Spouses will be recognized in places where they currently are not.

Source: NYTimes