Most people would probably prefer to put off planning for their death. But if you own anything of value—and most people do—then you’ll want to add estate planning to your to-do list soon. An estate plan establishes what will happen to your assets, dependents, medical care and general private affairs if you become incapacitated or die. It’s a document you put together while you’re still healthy, and if executed correctly, it has authority over what any other party says, including a judge.

But estate planning isn’t as simple as it sounds. There are several mistakes to avoid, including these:

1. Leaving money to young beneficiaries. Think twice about how to leave a nest egg to your young beneficiary, who might be prone to making reckless financial decisions. Consider establishing a trust for them, managed by a trusted family member, until the beneficiary gets to be a bit older.
2. Not planning for the estate tax. Under current law, nine months after your death, estate taxes are due. The federal rate is 40% on estates valued at $5.45 million or more. Many states also have their own taxes with lower thresholds. Spouses and charitable organizations are exempt from estate taxes, but anyone else you leave part of your estate to will have to pay up. If you’re on the edge, it might be a good idea to donate a portion of your estate to push it below the threshold.
3. Forgetting about life insurance. Life insurance pay-outs are subject to estate tax, unless they’re owned by an insurance trust. If your estate is large enough, you may want to set one of these up to avoid estate and other taxes on your life insurance.
4.  Not making annual gifts. One way to minimize your tax exposure—and that of your beneficiaries—is to make annual tax-free gifts to them. The current allowance is $14,000 per recipient.
5. Creating it and forgetting it. An estate plan is not one and done. Until your death or incapacitation, it’s a living document that can evolve over time. To make sure it remains timely, review your estate plan with your attorney every three to five years.
6. Handing out power of attorney. It’s a shame, but the truth is a lot of elder financial abuse comes at the hands of close family members, relatives and friends. Don’t grant a power of attorney until you have to and make sure you only appoint someone you know well and absolutely trust. If no one comes to mind, consider establishing a revocable living trust, which will be managed by a trustee when the time comes.
7. Exposing yourself. If privacy is important to you, then you’ll want to weigh the options of a will versus a revocable trust. Both do the same thing, but one of them—the will— becomes a part of public record.

Creating an estate plan should be a collaborative process between you, your attorney and financial planner. Don’t delay this important step in preserving your wealth for generations to come.

When your child prepares to head off to college, putting a power of attorney in place for them is likely the last thing on your mind. After all, they’re just about to test the waters of adulthood, of true independence, and there’s so much ahead to look forward to. It’s an exciting and emotional time.

So why is a power of attorney important now? With newfound independence, comes unexpected risks. If your child is over the age of 18, you no longer have legal authority to act on their behalf if they become incapacitated in any way. By having your child put a parent power of attorney in place, you can continue to protect your children and ensure their health care and financial needs are in good hands just in case.

Starting the Conversation

While this isn’t a typical conversation between a parent and child at this age, it’s an important one nonetheless. Approach the topic by explaining what a power of attorney is and how it works. Learning the facts and implications from someone they love and trust helps to keep the topic from being too overwhelming. It’s also a key to having an open discussion about their wishes and concerns. While you can’t force your child to sign the document, assure them that you will always act in their best interests, as you always have.

What is Included in a Power of Attorney?

Power of attorney documents related to health can be broad and often include:

•       Access to medical records
•       Whether to discharge from a hospital
•       When to withdraw life support
•       Organ and tissue donation instructions
•       How to dispose of remains

You may also consider a financial power of attorney that would include access to any bank accounts, credit cards or leases in your child’s name as well as digital assets such as online financial accounts, social media and email.

A power of attorney can even extend to authorization to see grades and information from teachers. The bottom line is to customize the document in a manner in which both you and your child feel comfortable.

Creating a Power of Attorney

There are two options to create a power of attorney document. First, your state may provide a standard power of attorney form online that you can use to create the document yourself. The benefit of this approach is convenience, but keep in mind that your customization options may be limited. Here is a link to the ADVANCE HEALTH CARE DIRECTIVE FORM for the State of California. Check with your child’s college or university to confirm acceptability.

Second, you can work with a lawyer experienced in estate law. Seek out referrals and check to see if the lawyer will offer this as a standalone service. The cost and time involved may be more than with the do-it-yourself approach, but being able to rest assured that the document will cover your specific needs and will be executed properly is invaluable.

While you and your child are about to experience a new phase in life, adding a power of attorney to your college preparation list will offer peace of mind that will extend far beyond their time at school.

Nothing can prepare you for losing your spouse. If you have recently been widowed, the world seems to demand rapid response to weighty decisions at every turn. Among the hardships of losing a spouse are legal decisions, financial pressures, and memorial arrangements to deal with, leaving you little time to grieve the loss of your loved one.

If you’ve been widowed, here are some helpful tips to help get you through this difficult time. You may be surprised to find out that not all financial decisions are as urgent as they seem.

Initial Period of Grief

Give yourself time

Grief is a biological process that affects your ability to make rational decisions. Therefore, it is important to note that many decisions regarding you and your family’s financial welfare – both large and small — can wait. We advise that those in mourning put off any financial decisions that can wait.

Take care of essentials and dependents

While holding off on long-term financial decisions that can wait, take that time to handle the essentials, such as making funeral arrangements, managing immediate expenses, and taking care of yourself and your dependents. It is important to have enough cash to make daily purchases and pay basic bills on time, so they don’t become an additional burden down the road. Organize critical paperwork such as death certificates and pre-planned funeral arrangements and try to ensure healthcare coverage remains for you and your dependents.

Lean on others

You do not have to carry this burden alone. Not only should you turn to family and friends for practical and emotional support, but you should also get help with the financial and legal paperwork from professionals, such as your financial advisor, CPA, insurance agent or attorney. While it is important to enlist the assistance of professionals during periods of grief, take caution if you are forging new relationships, both emotionally and professionally, as some con artists prey on those most vulnerable during these times.

After Time Has Passed

Gather important resources

Slow and steady is the way to go. Gather and take stock of important paperwork and statements: wills and trusts, insurance policies, financial statements, personal identification, mortgages, retirement benefits, safety deposit box contents, business paperwork, military records, club memberships, and others. We have a created a Surviving Spouse Financial Checklist to help you with the many steps along the way.

Continue professional relationships

Continue to ask for help from professionals to address your evolving situation and firm up ongoing financial needs. Your financial advisor can assist with organizing investment accounts, changing account ownership, closing or consolidating accounts, and unraveling your spouse’s retirement plan benefits. Your attorney can help with settling estates and executing your spouse’s will. Insurance specialists can help clarify your healthcare coverage and life insurance policies. Accountants can work through necessary tax filings.

Get ready for life’s transitions

When you are ready to circle back to larger decisions you previously put on hold, don’t go it alone. Have your financial advisor take a fresh look at your finances and begin discussing your larger wealth interests and goals to fine-tune your financial plan. A few important topics to discuss include budgeting, investment interests and goals, and wills, trusts, and insurance coverages. These decisions are important to make deliberately and while you are clear-headed, not in haste.

It’s also important to accept that life has changed. Things will be different. A helpful book to learn more about the grief process in general is “Option B” by Sheryl Sandberg. Resist letting guilt prevent you from exploring the different paths this next chapter lays out for you. Something that might not have been a good fit for you as a couple might now make a lot of sense. It should be ok to go ahead and pursue that now.

Pre-Planning for Losses

Because losing a spouse can happen unexpectedly, it is important to pre-plan for when one or both of you pass away. Pre-planning saves your spouse and dependents from being forced to make difficult legal and financial decisions during periods of grief and stress. Pre-planning activities may include drafting or updating wills and trusts, naming powers of attorney, and pre-planning funeral arrangements.

Losing a spouse or any loved one is difficult, but advanced preparation, trustworthy professional help, and a methodical timeline to tackle necessary tasks can help ease the burden, leaving you more time to remember and memorialize your loved one.  

Before we proceed, let’s get two things straight: First, there is no such thing as a “correction”. When buyers and sellers agree on a price, that is the correct market price. However, there have been and will be large market price declines. Second, no one, ourselves included, has any reliable way of forecasting the next large decline. Predicting a large decline is a near-impossible feat that is further muddled by endless predictions among investors in the media about when the market will decline and what will cause it. The important question is: are you prepared to handle a large decline if and when it occurs?

Just as with any emotional experience the future may hold, it’s valuable to walk through the scenario in the calm of the present so you’re better prepared to behave properly in the emotional throes of the actual experience. This is true for everything from fire drills to wedding rehearsals. You have a far greater chance of sticking to the plan if you’ve practiced it a few times beforehand. Seems pretty logical, right?

Is Market Volatility on the Horizon?

Although no one can accurately predict precisely when a market will take a turn, market volatility is inevitable at one point or another.

According to the CBOE Volatility Index (VIX), which gauges how confident investors are in the market remaining stable, investors remain relatively calm about their prospects of a smooth market in the near-term. According to the most recent VIX, investors are 6 times more confident in the market’s stability than a decade ago.

Despite this confidence in the markets, investors are exposed to anecdotal stories and interpretations that provoke fear and concern about market volatility on a near daily basis. Sources of this fear range from geopolitical events to cyclical timing to other economic indicators – any of which can be interpreted in myriad ways.

What to Do During Periods of Market Volatility

In Warren Buffett’s recent letter to Berkshire Hathaway shareholders, the multi-billionaire investor gave advice to investors on how to react during market downturns and volatility. His core message to investors? Stay calm.

“During such scary periods, you should never forget two things,” he said. “First, widespread fear is your friend as an investor, because it serves up bargain purchases. Second, personal fear is your enemy.”

So, what does “staying calm” look like in action?

First, if you have implemented a balanced, long-term strategy for your portfolio, it is important to avoid the emotional trap of making sudden, reactionary shifts in response to near-term forecasts or perceived volatility. Instead, remain secure and steadfast in your long-term portfolio strategy. Market volatility can certainly provide you with an opportunity to revisit your portfolio allocation, but make sure any changes made to your portfolio are made with your long-term goals in mind.

Second, capitalize on market volatility. As Buffett claims, “widespread fear is your friend”. Buffett suggests that some of the best deals and returns are delivered in the immediate aftermath of a market downturn, but only if you remain calm and vigilant. Instead of panicking and fleeing the market, look for bargain buying opportunities during periods of unrest by following a disciplined rebalancing strategy.

Finally, revisit the key pillars of your portfolio in a holistic way. Once the storms have passed, re-assess these factors to determine if you were comfortable with your level of risk, balance of holdings, and felt that your portfolio continued to reflect your long-term financial goals should another period of volatility occur.

The greatest evidence to support a steadfast, long-term portfolio allocation is by reflecting on the financial crisis in 2008. Despite significant short-term losses during the crisis, those with balanced portfolios who remained disciplined and faithful to their long-term investment plan in 2007-2008 would have likely recouped their losses within just a few years. In fact, the S&P 500 Index is up 291% from the bottom of the crisis (March 1, 2009) through the end of last month (May 31, 2017).

To close, it’s imperative to stay focused on the goal of building and executing a plan to withstand market downturns and resist the siren song of trying to avoid them. Despite relatively smooth sailing for the time being, there is never a better time than today to ensure you are well-prepared, both functionally and emotionally, for tomorrow.

After a 60-day delay from its original schedule, the Department of Labor’s (DOL) fiduciary rule – an investor-protection law created under the Obama administration – is now set to go into effect on June 9, 2017. Many investors are wondering how, if at all, this rule will weigh on their portfolio as well as their relationship with their investment professionals. To answer this question, let’s take a closer look at the fiduciary rule, who it affects, and how it changes existing legislation.

What is the New Fiduciary Rule?

In 1974, the DOL issued the Employee Retirement Income Security Act (ERISA), which set forth rules and guidelines for all qualified retirement plans and defined the term “fiduciary”. Fiduciaries – those who exercise discretionary authority or control over a plan’s management or assets — are responsible for acting in the best interest of the clients whose assets they manage in accordance with a guideline known as the “prudent person standard of care”. This guideline requires fiduciaries to disclose all conflicts of interests and fees they collect that result from commissioned or third party transactions and act in the best interest of their clients, not their own self-interest.

Under current legislation, not all financial professionals who work with retirement plans or provide retirement planning advice are bound to the level and scrutiny of fiduciaries. Currently, financial advisors need only adhere to the “suitability” standard, which means they only had to determine if an investment recommendation met a client’s defined need and objective. Because of this lower standard, salespersons could profit by steering clients toward specific investments – such as ones with higher sales commissions – whether or not they are in the best interest of their client.

Who does this new rule affect the most?

The new fiduciary rule expands on the definition of a fiduciary and extends the fiduciary standard to include individual retirement accounts (IRA).  Under the expanded definition, all financial salespersons such as brokers, planners, and insurance agents who are normally compensated with sales commissions will now be deemed as fiduciaries who must adhere to a higher level of accountability and scrutiny when working with qualified or individual retirement accounts.  Under the new fiduciary rule, fees and commissions from the sale of specific investment products will be more transparent to clients and more heavily examined by regulators to ensure products are sold based on the best interest of the client. The new rule may eliminate many commission structures that are widespread in the industry.

Broker-dealers and insurance companies will be most affected by the new DOL rule because many of their salespeople are still compensated through commissions from investment products. These companies will now have to enter into new disclosure agreements with their clients known as Best Interest Contract Exemptions (BICE). The BICE exists in order to notify clients that there may be a potential conflict of interest regarding a salesperson’s investment recommendation, as well as disclose commissions made off of a sale.

FMB Wealth Management advisors are registered investment advisors (RIAs) who already adhere to this fiduciary standard in accordance with the U.S. Investment Advisors Act of 1940, which requires our advisors to eliminate or disclose all conflicts of interest when advising clients. We have always put our clients’ best interests ahead of our own profits and self-interest. With or without federal obligation, these commonsense ethics have always been a part of our practice. Our clients’ financial well-being is our highest priority, and we pride ourselves on always putting our clients’ best interests first.

Hello, I’m Susan Sherayko. As someone who has personally followed this road map, I’m thrilled to invite you to an interactive program where you will learn to obtain an understanding of how to:

• Get what you want to do, be or have
• Identify what’s stopping you
• Know the tools to use if you feel stuck
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• Build systems that yield persistent progress

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Since I write about how to identify and pursue one’s passion and purpose, it’s seems appropriate to let you know when I am taking new steps in pursuit of my own dreams. I know that I have been fairly quiet recently, but all for a good cause.

I’m so excited that my new course “Manifest Your Dreams: A Roadmap to Discover and Achieve Your Goals” is up and ready to launch.

I’ve taken the ideas that I first wrote about in my book, “Rainbows Over Ruins,” and the “Survivor’s Guide: 12 Tips to Gain Inner Peace” and translated them into a course designed to help you change your life for the better.

The new format enables you to do this for yourself in a self-paced program. “Manifest Your Dreams: A Roadmap to Discover and Achieve Your Goals” is an interactive course – complete with audio presentations, action guides, membership in a private online forum and scheduled group and private discussions.

If you are ready to make a change, you’ll be making progress toward achieving that dream in your heart that you know is there, but you haven’t been able to put your finger on it yet.

I spent several months writing the content and then, joined by supportive and like-minded friends, we recorded all the lessons. The resulting audio course is finished! And because Coffeytalk has been so supportive of my work, you are invited to sign up for the course at a very special rate.

That’s right. As part of my introductory celebration, I have arranged a very special offer for you. Head on over and check out the details. If you like what you see, the course is available at: https://coursecraft.net/courses/z9RSY. Enter the promo code: 1Dream! and receive the special offer.

How do you know if this course is for you? Take a look at your feelings.

When you don’t pursue what’s in your heart, life can feel disappointing. You may find yourself asking “is this all there is?” You may feel stuck, without any idea of how to get unstuck.

Without the right tools and techniques, you may feel as if you are moving through life rudderless, on an emotional roller coaster. Life can become a scary, frustrating experience. Traumas, disasters and negative life events can overwhelm you, leaving you feeling depressed and hopeless.

But you don’t have to feel that way. You don’t have to feel isolated and alone, or listen to endless loops of negative head trash. You can begin to find out how to get past the circumstances that led to your feeling this way. What would it mean for you to finally get unstuck?

Are there benefits to doing this? Absolutely.

You’ll get what you need to realize what you want; flip your thinking and start to listen to your dreams; build supportive relationships and master mind.

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It will be my pleasure to be your guide, leading you along the way and helping you learn what you need to know. Very little brings me as much joy as helping people rediscover the dream in their heart, and then guiding them to achieve their goals. You can pursue your dreams and feel the joy of accomplishment. To find out how, check out the new course.

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P.S. Together, let’s help more people reach their dreams. Just like and share this information with your friends and audience. Thank you.

“The market hates uncertainty” has been a common enough saying in recent years, but how logical is it? There are many different aspects to uncertainty, some that can be measured and some that cannot. Uncertainty is an unchangeable condition of existence. As individuals, we can feel more or less uncertain, but that is a distinctly human phenomenon. Rather than ebbing and flowing with investor sentiment, uncertainty is an inherent and ever-present part of investing in markets. Any investment that has an expected return above the prevailing “risk-free rate” (think T-Bills for US investors) involves trading off certainty for a potentially increased return.

Consider this concept through the lens of stock vs. bond investments. Stocks have higher expected returns than bonds largely because there is more uncertainty about the future state of the world for equity investors than bond investors. Bonds, for the most part, have fixed coupon payments and a maturity date at which principal is expected to be repaid. Stocks have neither. Bonds also sit higher in a company’s capital structure. In the event a firm goes bust, bondholders get paid before stockholders. So, do investors avoid stocks in favor of bonds as a result of this increased uncertainty? Quite the contrary, many investors end up allocating capital to stocks due to their higher expected return. In the end, many investors are often willing to make the tradeoff of bearing some increased uncertainty for potentially higher returns.

MANAGING EMOTIONS

While the statement “the market hates uncertainty” may not be totally logical, it doesn’t mean it lacks educational value. Thinking about what the statement is expressing allows us to gain insight into the mindset of individuals. The statement attempts to personify the market by ascribing the very real nervousness and fear felt by some investors when volatility increases. It is recognition of the fact that when markets go up and down, many investors struggle to separate their emotions from their investments. It ultimately tells us that for many an investor, regardless of whether markets are reaching new highs or declining, changes in market prices can be a source of anxiety. During these periods, it may not feel like a good time to invest.

Only with the benefit of hindsight do we feel as if we know whether any time period was a good one to be invested. Unfortunately, while the past may be prologue, the future will forever remain uncertain.

STAYING IN YOUR SEAT

In a recent interview, David Booth was asked about what it means to be a long-term investor:

“People often ask the question, ‘How long do I have to wait for an investment strategy to pay off? How long do I have to wait so I’m confident that stocks will have a higher return than money market funds, or have a positive return?’ And my answer is it’s at least one year longer than you’re willing to give. There is no magic number. Risk is always there.”

Part of being able to stay unemotional during periods when it feels like uncertainty has increased is having an appropriate asset allocation that is in line with an investor’s willingness and ability to bear risk. It also helps to remember that, during what feels like good times and bad, one wouldn’t expect to earn a higher return without taking on some form of risk. While a decline in markets may not feel good, having a portfolio you are comfortable with, understanding that uncertainty is part of investing, and sticking to a plan that is agreed upon in advance and reviewed on a regular basis can help keep investors from reacting emotionally. This may ultimately lead to a better investment experience.

Source: Dimensional Fund Advisors LP