Tag Archives: Gainesville

Social Security: Boost Benefits for Both Spouses

Social Security cardMy Comments: Helping potential clients with an analysis of coming Social Security benefits is big business across the country these days. And I’m doing my share of it. Thank you very much.

But in spite of my being closely aligned with this process for the past 15 months, I’m still confused by the myriad of ways to extract the most you can from the system. How are old are you now, have one of you started taking benefits already, how different are your ages, does one of you have a divorced spouse who has not yet started taking benefits and earned more than you did but you are not yet remarried?

The point is there is typically a lot more money on the table for you than appears at first glance. Just because you can start taking benefits based on YOUR history as soon as you reach age 62 is not necessarily the best decision. But it might be.

by Miriam Rozen AUG 12, 2014

Peg Eddy, a founder of San Diego-based Creative Capital Management, joins the ranks of others advisors who stress spouses should coordinate when they “trot down” to their local Social Security agency branch to make sure they’ve calculated a schedule accurately and most cost effectively.

Here’s the example, Eddy wants them to consider: Both spouses in a couple worked and earned Social Security credits, each in their own accounts. Both plan to defer seeking Social Security benefits until they reach 70 so they may each earn the 8% annual return the government promises to those who wait.

But nonetheless, that couple should not overlook the window of opportunity for spousal benefits for one spouse before full retirement age, Eddy warns. After after reaching full retirement, between ages 66 and 67, spousal benefits are available under the current rules for one spouse per couple, without jeopardizing maximized pay outs for both spouses at age 70.

Assuming the couple is the same age, or the higher earning spouse is older, at full retirment the higher earning spouse applies for Social Security retirement benefits but then requests to have the payments suspended so he or she can continue to earn delayed retirement credits (that 8%) until 70.

Meanwhile, the other spouse, when he or she reaches full retirement, applies for the spousal benefits without requesting his or her own work-earned benefits. The spouse requesting the spousal benefits may also continue working and still receive some benefits. But, as the government agency notes on its own website: “Only one member of a couple can apply for retirement benefits and have payments suspended so his or her current spouse can collect benefits.”

Financial advisors must factor in the age and pre-retirement income levels of each spouse before calculating who should apply for and then defer benefits and who should claim spousal benefits at full retirement between age 66 and 67. The higher the pre-retirement income, the higher the spousal benefit, but also significant are the ages of each spouse since that will determine the number of years he or she will earn spousal benefits before applying for his or her own earned Social Security benefits.

“It is legal and each spouse maximizes benefits,” says Eddy. She typically tells clients “make an appointment and visit the Social Security office in person” before they reach full retirement so they verify all the timing.

Miriam Rozen, a Financial Planning contributing writer, is a staff reporter at Texas Lawyer in Dallas.

Gauging The Stock Market With The Tocalino Index

bruegel-wedding-dance-ouMy Comments: Football season is about to start, Ukraine is still bothered by the Russians, and Ferguson, Missouri is still a mess. So here I am talking about the stock market and an index I have never heard of before. I suspect you haven’t either.

But there is reference here to the Misery Index, which I have heard of, though never followed. It’s the sum of the unemployment rate and rate of inflation. Right now it’s pretty low in historical terms and getting lower. That’s good.

My next question has to do with why so many of us think the world is coming to an end. Well, maybe it is, but I doubt it. A changed world, definitely, but one we must adapt to and stop with the constant message of doom.

By Sebastiao Buck Tocalino, August 12, 2014

Summary
• Here I’m gauging the performance of the Dow Jones Industrial Average with the Help of the Tocalino Index (applying demographics to a variation on Arthur Melvin Okun’s Misery Index).
• The point that stands out recently is the noticeable gap between the rapid rise of the Dow Jones index and the lagging behavior of my own indicator from 2009 onward.
• The market seems to be feeding more on some sort of paranoia or complacency from the lack of investment alternatives than any demographic, business and economic fundamentals could ever support.

Among the many indicators that track the health of the economy, two are very popular due to the obvious affliction they may inflict on all of us regular Joes and Janes. They are: the inflation rate and the unemployment rate. Between the two of them, inflation is often the most conspicuous. After all, we routinely have to reach for our wallets to pay for our daily needs and those of our children, including education and a variety of goods and services. But, if the unemployment rate is somewhat less followed by those who hold on to a steady job, it is still the most distressing for the less fortunate ones who are out of work!

Arthur Melvin Okun was a professor of economics at the famous Yale University, later he was also an important economic advisor to presidents John F. Kennedy and Lyndon B. Johnson. Besides “Okun’s Law,” another well-known contribution of his to the tracking of economic trends was the Misery Index. Its formulation could not be any simpler or more intuitive: it was just the sum of the unemployment rate and the inflation rate. Naturally, to be out of work and having to cope with an escalating cost of life is a sheer disastrous situation leading to social distress, therefore the obvious choice of name for this indicator: the Misery Index.

(Some economists may say that, with a delay of one year or so, this Misery Index, with its implicit social distress, would be a contributing factor to swings in the rate of crimes. I tend to believe that crime is still more related to cultural issues.)

Personally, I don’t usually pay much attention to this index and believe that few people actually do. Though we pay close attention to its two constituents separately. But for some time recently, I have been glancing at the Misery Index and its downward trajectory in the U.S. It is clear that, in spite of all the insane efforts in printing money and keeping real interest rates negative and punitive for the more cautious and conservative majority of savers, inflation is still modest and below the target aimed by the FOMC and the Federal Reserve. By the end of June, the twelve-month inflation climbed a tad higher at 2.07%. Data relative to the closing of July is scheduled to be released only on Aug. 19.

At the closing of June, to the cheers of everyone, the unemployment rate had also fallen to 6.1%. It did rise slightly to 6.2% in July, as reported on Aug. 1.

Trying to avoid much of the noise in inflation data, I will adopt from now on the 12-month core inflation rate, which excludes the more disruptive cost swings of food and energy (due to the villainy of oil prices). The core inflation for the 12 months ended last June was of 1.93%. By using that same month’s unemployment rate of 6.1%, the sum has resulted in an 8.03% Misery Index.
Misery Index

CONTINUE-READING

9 Reasons Consumers Need Advisors More Than Ever

My Comments: This is a self-serving blog post. While I should apologize for this, there are millions of Americans who will find themselves looking for financial freedom in the years to come and unless they have developed the necessary skill sets, they will find themselves behind the curve in a big way. Somebody has to step up and provide good advice. I like to think of myself as one of those with good advice.

The title says there are 9 reasons here but I didn’t count to see if it was true. I simply found some meaningful truths about us and how people in my profession can help others. Oh, and make a meaningful living for ourselves as the years pass. That’s always a good thing.

I don’t share the underlying gloom that motivates Van Mueller, but there are truths in what he says. As consumers, it’s what we do with information that will make the difference.

Aug 13, 2014 | By Paul Wilson

Van Mueller kicked off the 2014 Advisor Network Summit in Las Vegas.

“Right now we are in the middle of the greatest opportunity in the history of the industry. Every single institution we think we can depend on won’t be there in the future. We’re not in a recovery – the government is printing trillions of dollars. Soon, you’re going to see crashes in stocks, bonds and real estate markets.

The world just went $100 trillion in debt. The U.S. is $17 trillion in debt, but the rest of the world is $83 trillion in debt – there’s no one to borrow from. We’re so close to a calamity and the only people who can help are in this room.”

“The attention span of an average American is 12 seconds. No commercial is longer than 30 seconds now because people don’t pay attention that long.

Nobody cares about you; it’s about them. Customers tell me, ‘You’re the smartest advisor I know.’ But I don’t know anything other than how to ask what matters to people.”

“Don’t you think any politician would fix the economy if they could? But no one knows what’s coming next.

Ask your clients, ‘If nobody knows what’s going to happen, should you take a lot of risk and put your money in danger or develop a strategy that will keep your money safe and every time something bad happens, you take advantage of it?’

Politics isn’t going to fix this; it’s a math problem. It’s about taking responsibility for our own lives. Show people they can stay in control. We sell control.”

“45 percent of all working Americans have nothing saved for retirement. When you are talking with affluent prospects, ask them, ‘Do you think our government is going to let those people starve? No. How will they help them? They’re coming after those who have money.’ You’re running out of time to take control of your money and lives.”

“Half of Americans can’t afford their current home. One little downturn, and you’re talking about a house of cards. Tell your customers, ‘It doesn’t have to happen to you.’”

“Some people say, ‘This sounds like a lot of doom and gloom.’ Many people give up and say, ‘There’s nothing I can do.’ Tell them, ‘Have there ever been bad times before? During those bad times, did some people make money? Was it those who were prepared or those who winged it? Which do you want to be?‘”

“There was no such thing as the good old days. This is the greatest transfer of wealth in the history of the U.S. It’s the greatest time ever to be an agent. You are not each other’s enemies. Find fellow advisors and get better.”

How to Protect Inherited IRAs After the Clark v. Rameker Decision

will with clockMy Comments: If you have an IRA today, there is a chance there will still be money in it when the inevitable happens and you permanently leave the building. What then with this money?

If you have a spouse, and they are the named beneficiary, that money now belongs to them and it becomes their IRA. If your spouse has predeceased you, it becomes an Inherited IRA, benefiting someone else, perhaps one or more of your children.

Recently the Supreme Court declared that while YOUR IRA is protected against the claims of creditors, an Inherited IRA is not. Because it represents money earned by someone other that YOU. Before this decision, it was assumed from IRS regs that it would be protected.

If none of this applies to you, then read no further. I’d like to attribute this to the correct author but somehow that name went missing.

In a landmark, unanimous 9-0 decision handed down on June 12, 2014, the United States Supreme Court held that inherited IRAs are not “retirement funds” within the meaning of federal bankruptcy law. This means they are therefore available to satisfy creditors’ claims. (See Clark, et ux v. Rameker, 573 U.S. ______ (2014))

The Court reached its conclusion based on three factors that differentiate an inherited IRA from a participant-owned IRA:

1. The beneficiary of an inherited IRA cannot make additional contributions to the account, while an IRA owner can.

2. The beneficiary of an inherited IRA must take required minimum distributions from the account regardless of how far away the beneficiary is from actually retiring, while an IRA owner can defer distributions at least until age 70 1/2.

3. The beneficiary of an inherited IRA can withdraw all of the funds at any time and for any purpose without a penalty, while an IRA owner must generally wait until age 59 1/2 to take penalty-free distributions.

These factors characterize an inherited IRA as money that was set aside for the original owner’s retirement and not for the designated beneficiary’s retirement. This simple analysis has sent shock waves through the estate planning and financial advisory worlds, because its logic is also applicable to all inherited defined contribution retirement plan accounts, so inherited 401(k) and 403(b) accounts are also affected. What can be done to protect inherited IRAs from creditors? Could the Clark decision put IRAs inherited by spouses at risk? Could state law still protect inherited IRAs? In this issue we will answer these questions and provide guidelines for you and your team to follow when advising clients who or what to name as the beneficiaries of their IRAs.

What Can Be Done to Protect Inherited IRAs From Creditors?
In view of the Clark decision, clients must thoughtfully reconsider any outright beneficiary designations for their retirement accounts if they want to insure that the funds will remain protected for their beneficiaries after death. By far the best option for protecting an inherited IRA is to create a Standalone Retirement Trust for the benefit of all of the intended IRA beneficiaries. If properly drafted, this type of trust offers the following advantages:

• Protects the inherited IRA from each beneficiary’s creditors as well as predators and lawsuits
• Insures that the inherited IRA remains in the family bloodlines and out of the hands of a beneficiary’s spouse, or soon-to-be ex-spouse
• Allows for experienced investment management and oversight of the IRA assets by a professional trustee
• Prevents the beneficiary from gambling away the inherited IRA or blowing it all on exotic vacations, expensive jewelry, designer shoes and fast cars
• Enables proper planning for a special needs beneficiary
• Permits minor beneficiaries, such as grandchildren, to be immediate beneficiaries of the inherited IRA without the need for a court-supervised guardianship
• Facilitates generation-skipping transfer tax planning to insure that estate taxes are minimized or even eliminated at each generation
Downsides to tying up an IRA inside of a trust include compressed tax brackets which max out at $12,150 of income (in 2014), ongoing accounting and trustee fees, and the sheer complexity of administering the trust year after year. In addition, a well-drafted trust can be completely derailed by an uncoordinated IRA beneficiary designation. Therefore, all of the pros and cons of a Standalone Retirement Trust must be carefully considered before committing to this strategy.

Planning Tip: In most cases a standard revocable living trust agreement will not be well-suited to be named as the beneficiary of an IRA. This is because in order to provide all of the benefits listed above and avoid mandatory liquidation of the inherited IRA over a period as short as five years, the trust agreement must be carefully crafted as a “See Through Trust.” A See Through Trust insures that the required minimum distributions can either remain inside the trust (an “accumulation trust”), or be paid out over the oldest trust beneficiary’s life expectancy (a “conduit trust”).

Thus, a Standalone Retirement Trust that has specific provisions for administering retirement accounts, and that is separate and distinct from a client’s revocable living trust that has been drafted to address the entire gamut of the client’s non-retirement assets, is the preferable type of IRA trust beneficiary. If your clients have not considered a Standalone Retirement Trust before the Clark decision, then the time is now to educate them about its far-reaching consequences and how a Standalone Retirement Trust can benefit their IRA beneficiaries.

Could the Clark Decision Put IRAs Inherited by Spouses at Risk?
The Clark decision dealt with an IRA inherited by the daughter of the owner. What if the IRA was instead inherited by the spouse of the owner, would the decision have been different?

When a spouse inherits an IRA, he or she has three options for what to do with it:

1. The spouse can cash out the inherited IRA and pay the associated income tax.

2. The spouse can maintain the IRA as an inherited IRA.

3. The spouse can roll over the inherited IRA into his or her own IRA, after which it will be treated as the spouse’s own IRA.

In scenario 1 the cashed-out IRA will not have any creditor protection since the proceeds will become comingled with the spouse’s own assets. Extending the Supreme Court’s rationale to scenario 2, the inherited IRA will not be protected from the spouse’s creditors since the spouse is prohibited from making additional contributions to the account, may be required to take distributions prior to reaching age 70 1/2, and can withdraw all of it at any time without a penalty. In scenario 3, a rollover is not automatic, and even after a rollover is completed, the inherited funds were certainly not set aside by the spouse for his or her own retirement before the rollover was initiated.

As a result of the Clark decision, will an IRA inherited by a spouse lose its qualification as a “retirement fund” under federal bankruptcy law once it is actually inherited by the spouse? Could the rollover of an inherited IRA into the spouse’s own IRA now be considered a fraudulent transfer under applicable state law? Unfortunately the answers to these questions are not clear at this time.

Planning Tip: Provisions can be made in a Standalone Retirement Trust for the benefit of a spouse. This may be important for many reasons aside from creditor protection, including a second marriage with a blended family or, when coupled with disclaimer planning, for a spouse who eventually needs nursing home care and seeks to qualify for Medicaid. A layered IRA beneficiary designation which includes a Standalone Retirement Trust and disclaimer planning can offer a great deal of flexibility for clients who want to insure that their hard-saved retirement funds stay in their family’s hands and out of the hands of creditors and predators.

Could State Exemptions Still Protect Inherited IRAs?
In the wake of the Clark decision, a handful of states – including Alaska, Arizona, Florida, Idaho, Missouri, North Carolina, Ohio and Texas – have either passed laws or had favorable court decisions that specifically protect inherited IRAs under state bankruptcy exemptions for federal bankruptcy purposes. If the IRA beneficiary is lucky enough to live in one of these states, then the beneficiary may very well be able to protect their inherited retirement funds by claiming the state exemption instead of the federal exemption.

Planning Tip: Caution should be used in relying on state exemptions to protect a beneficiary’s inherited IRA. People are more mobile than ever and may need to move from state to state to find work, pursue educational goals, or be closer to elderly family members in need of assistance. Aside from this, federal bankruptcy laws now require a debtor to reside in a state for at least 730 days prior to filing a petition for bankruptcy in order to take advantage of the state’s bankruptcy exemptions. Therefore, long-term planning should not rely on a specific state’s laws but instead should take a broad approach.

The Bottom Line
Given the amount of wealth held inside retirement accounts, planners have got to become adept at helping their clients figure out who or what to name as the beneficiary of these special assets. The Clark decision has amplified the need to become knowledgeable about the pros and cons of all of the different beneficiary choices for retirement assets.

This is certainly not one-size-fits-all planning and can only be done on an individual, case by case basis. We are here to answer all of your questions about protecting beneficiaries of retirement accounts through Standalone Retirement Trusts, disclaimer planning, and layered beneficiary designations.

Vocational Training Is No Substitute For High School

Internet 1My Comments: Some of you are aware of my continued interest in the welfare of the magnet programs across Alachua County. I’ve been a member of the advisory board to the two programs at Buchholz High School since the mid 90’s. They are, respectively, the Academy of Finance and the Academy of Entrepreneurship.

The original intent in the early 90’s, from the perspective of the business community, was to encourage work related skills in these two generic disciplines, such that upon graduation, students who were unlikely to continue on to college, would graduate from high school with a skill set that would help them be more employable by members of the business community.

It didn’t work out that way. For one thing, the idea of “vocational education” went out of favor as “demeaning” to those less blessed with raw intelligence. Never mind that those students would likely benefit in later life had they had a high school education more suited to their intellectual capacity. Some of us are fast and athletic; some of us are slow and uncoordinated, which describes me. Same with our brains.

The other thing that happened, in large part thanks to the respective program directors, was due to something else that surfaced. Namely, that if a middle school student already had a reasonable idea which academic track they wanted to follow, there was now a high school program somewhere in the district that allowed that person to get a leg up on competition when it came to leaving high school and entering college. As a result, over time, the profile of the students in the respective academies became more and more advanced, to where today, virtually 100% of the participating students are going on to college as they are academically advanced. But they are not necessarily “employable” in the context of our original intent.

The dilemma for the business community, and Buchholz High School, is that we have identified the best and brightest with an interest in economics and marketing and finance, but we still don’t have a pool of students with high school diplomas and job related skills that we can add to our list of employees. They are moving on to college and will be overqualified for what we need today.

By Matthew Yglesias

A growing chorus of progressives, ranging from Rick Pearlstein to Dana Goldstein to Kevin Drum are suggesting that maybe Rick Santorum was right and instead of trying to give everyone a college prep education, we need a return to vocational schooling. After all, as Drum says “American high schools ought to be as good at turning out plumbers as they are at turning out future English majors.”

It’s true that we need plumbers, but I don’t think this has the implication that Drum thinks it has. For starters, as Kevin Carey notes it turns out that “most plumbers, pipefitters, and steamfitters get their training in jointly administered apprenticeships or in technical schools and community colleges.” This is similar to his point from a little while back that a large and growing fraction of auto mechanics have post-secondary training. In other words, while it’s true that we don’t necessarily need a large increase in people with traditional liberal arts degrees a large share of the career-focused education we need still has to occur at the post-secondary level. That’s for two reasons, the most fundamental of which is simply that as we grow more technologically sophisticated as a society all kinds of work becomes more complicated, technical, and specialized. The kinds of colleges that offer good training to be policy-focused journalists probably don’t offer great training to fix the automobiles of tomorrow, but that doesn’t mean car mechanics don’t need additional training.

The other issue is that if you look at countries that have successful high school level vocational training (Germany always seems to come up) you’ll note that kids go into the training with a solid grounding in the basics. Dana and I both visited a vocational training high school together in Finland, focused on teaching people hairstyle and makeup skills. What struck me is that the girls (and they were basically all girls) to the best I could tell were competent in algebra, literate in Finnish, and had an okay grasp of a foreign language.

The kind of low-achieving American 15 year-olds who’d be put on a “vocational track” generally don’t have those kind of skills. What they’re getting out of high school (ideally) isn’t so much college preparatory work as it is remedial work designed to put them on track to receive career training. That’s not an ideal function for high schools to be serving, and oftentimes they don’t do a good job of it, and arguably remediation could be better-integrated with vocational training but as is often the case in education it’s a problem with earlier roots. If the outputs of America’s K-8 education keep improving (which they do in fact seem to be doing) and we invest more in quality preschool, then we’ll have more latitude to talk about moving kids into job training sooner.

3 Essentials Missing From Many Retirement Plans

retirement-exit-2My Comments: One thing I’ve learned over the years is that people in my profession have a profound bias when it comes to trying to explain the dynamics of money. We include a lot of self promotion.

I’ve also learned that I’m not immune to this bias. Some of this is justified since probably 95% of the target population is misinformed about those same dynamics. While they should be willing to learn all they need to know so they can do it themselves, those same 95% will not or cannot apply the necessary time and energy. So the issue becomes, “To Whom Do We Turn for Help?”. If I’m going to survive, I have to focus on those who need help.

I’m doing the best I can to bring you stuff like this to help you better understand the background noise.

Erika Rawes / July 07, 2014

Work is a major part of our lives. From the moment we reach adulthood (and sometimes even before adulthood), most of us find a job and we work for the next 40 or 50 years until it’s time to retire. Retirement is thought to be a sort reward for working hard during all of those years. We accumulate savings so we can enjoy those final chapters in our lives without having to worry about money, as for the average person, money is a daily concern.

Perhaps, retirement savings should be as easy as putting away a percentage of our income into a savings fund and then collecting small increments of this savings once we retire — up the mountain and then back down. It’s not exactly that simple, however. Tax legislation, the various types of retirement accounts, contribution limits, Social Security laws, and pricey medical care make this simple concept — save now so we can enjoy retirement later — much more complicated.

Since we have so many factors to consider — all of which have a role in determining how well we save, the return we earn, and how well we maximize and preserve our money — we try to make the best decisions possible. Lincoln Financial Group conducted a study on the underrated impact of taxes on retirement. In the 2013 study, Lincoln examined the habits, knowledge, and behaviors of individuals between the ages of 62 and 75 with incomes in excess of $100,000.

Using data from the Lincoln Group study, we found a few common must-haves that appear to be missing from a high percentage of retirement plans.

1. Proper Tax Planning

Many future retirees think costs like discretionary expenses and home repairs are the highest costs during retirement. When Lincoln asked pre-retirees about what they thought their highest expenses would be during retirement, the top answers among survey respondents were home mortgages, healthcare, and travel and leisure.

In reality, around $1 out of every $3 spent by high-income retirees goes to taxes. Taxes are the largest source of spending for retirees in the above $100,000 earnings group, accounting for 31.38% of overall spending.

Retirement SurprisesWhen Lincoln asked retirees about their biggest surprise expenses, taxes were the again most common answer. The average marginal federal tax rate among the survey respondents was 26 percent, and the state rate was 7 percent. Forty percent of survey respondents stated taxes were higher than they expected and even with rates at these levels, 23 percent of respondents stated they were doing nothing to reduce their taxes.

2. A Financial Advisor
With the recent recession resulting in losses for millions and changing legislation impacting several facets of retirement planning, discussing a retirement plan with a financial advisor is a must. A good advisor compares every plausible scenario, and finds the most profitable plan for each individual. This, of course, is different for everyone.

For instance, people often hear about how converting to a Roth IRA is an effective tactic for minimizing tax liability. The Lincoln study found that only 30 percent of retirees were familiar with Roth IRA conversion rules. An advisor can help sort through the information as converting isn’t always best for everyone and even when it is an ideal choice, gradual conversion may be a more effective option.

Those who use a financial advisor have a higher level of confidence in their retirement plan than those who do not use an advisor. The study found that 75 percent of higher income pre-retirees who use an advisor had confidence in their retirement savings, compared to only 59 percent who do not use a financial advisor.

Most pre-retirees simply do not have the time to devote to learning every rule and regulation. Those with a good financial advisor have a resource available to answer their inquiries and educate them on general topics, like tax policy and withdrawal strategy, and also on investor-unique topics, like conversion and account choice.

3. Knowledge and Mindset
The income and spending habits of a retiree are different than those of a working individual. Bureau of Labor Statistics‘ spending data indicates housing is the largest expense for consumer units during their working years. During these years, transportation, personal insurance, and pension costs are also high. The primary source of income are wages and salaries, and investment and dividend incomes account for only a small percentage of annual income for the average worker.

During retirement, Social Security disbursements are the most common source of income as 81 percent of survey respondents cited SS as a primary income source. Sixty-five percent of those surveyed cited salaries as a main income source, indicating a large percentage of working retirees. Pension and retirement plan distributions and investment income were also among the most common sources of income for retirees.

As for spending during retirement, federal income tax is the highest expense for retirees, with the average person in the survey spending $16,625 annually. A mortgage was second on the list, followed by transportation, food, and then real estate taxes. The retirees surveyed spent more on vacationing than they did on healthcare.

When Lincoln compared the retirees’ anticipated spending to their actual spending, there were several large discrepancies. Actual spending on healthcare ended up being significantly higher than the retirees projected, as did spending on household repairs and expenses.

The transition from a mindset of wealth accumulation to wealth preservation is an adjustment. Since we spend our lives continually earning, living on a set amount is difficult for many and it requires strategic planning. A good plan, in addition to mapping out withdrawals and an exact budget, provides a cushion for the adjustment period, anticipating and allowing for a few mistakes along the way.

Essential Legal and Financial Documents to Have

My Comments: This article appeared as An emergency checklist for advisors and clients: essential legal and financial documents. It caught my eye since lists are always useful when it comes to writing a blog post that someone might read. After all, I read this one.

More than that, however, is the fact that getting older is a difficult process. It’s easy to be in denial and pretend our days are not increasingly numbered. And having clients who adamantly refuse to plan properly is a pain in the backside, especially for those family members left behind to figure out the mess.

So I encourage you to read this. If you need help, call me or call your attorney. If you need help finding someone who will focus on you, and you alone, I can give you some names.

by Ike Devji, JD on July 24, 2014

Finding key documents can be trying and laborious under the best circumstances, even with plenty of notice, like at tax time every year. Finding them under stress — or worse, having to have someone else sort through the entirety of the paperwork you have hoarded after an emergency, death or other crisis — is often impossible. This is the list of the most essential legal and financial paperwork that you should be able to lay hands on or instruct others to easily find.

Passports: Make sure they are current and useable. If your kid is off on a summer abroad and gets hurt, it will certainly be the wrong time to discover that your passport is expired (true story) and that you have to wait for the government to reopen and for your passport to be processed.

Copies of other identification:
Driver’s license, Social Security card or other legal forms of ID, including birth certificates, are often required to obtain other documents.

Insurance policies: Life, property, liability and health are four most basic key areas. I’d hate to go on what Allstate (or any carrier) felt like paying me on my homeowner’s policy on good faith alone if my home was damaged or lost in a flood or hurricane. Having a copy of these actual policies is key in demanding service, coverage, and in enforcing the actual contract if required. Similarly, health insurance cards are often kept in places that can be lost or stolen, like wallets and purses — if you’ve ever sat in an emergency room and seen who gets treated first and how well, you’ll get this.

Essential corporate and business documents, including bank statements: If you have corporate documents that control chain of command, ownership, title, account balances and succession, you better know where they are. I am continually amazed at how many doctors don’t have copies of their corporate documents, adding stress, delay and expense when those documents are needed, as in a lawsuit between partners in a medical practice. In that case, you may be stuck with copies that may or may not be accurate.

Mortgages and deeds: These are perhaps the most overlooked, lost and disrespected documents we come across — odd, since it is the single largest asset of many doctors.

Medical records and prescriptions:
This is the most subjective, but if you or a family member have a complex medical history or require prescription drugs to function at a basic level, having copies of the prescriptions at issue is essential, especially during emergencies.

Estate plan: We assume you have one, whether a basic will or a more sophisticated series of trust of various types and that you’ve updated it and you have avoided common mistakes. It does no good if we can’t find it and don’t know who’s in charge.

How and where should they be stored?

The conventional wisdom, and likely the safest bet, is that these documents should be stored at the bank in a safety deposit box. That said, it may be impractical or subject you to delays based on their hours and a variety of other conditions including the substantial limits on access by third-party agents you may want to have possession. Would the person you send be able to get into the box, including your own children?

Home and office storage

Invest in a safe that is both waterproof and fire-rated to withstand most common house fires. “Too big” or “too expensive” is not a valid excuse for almost anyone reading this. Costco, as one example, has large fire-rated safes that will hold guns, laptops, jewelry and documents for as little as $600, and small, entry-level safes are a fraction of that cost.

Consider which documents are sufficient if you have a copy, like an insurance policy, and which require originals, like a passport. Consider keeping the original paperwork for which copies are an acceptable substitute in the bank and the reproduced copies at home. The most prepared also have copies of documents they actually keep on hand at home (like passports) saved somewhere else, as most of us don’t have those details recorded or memorized. Do you know your passport number by heart?

All my personal clients from this month forward will receive electronic copies of their documents, instructions, filings and signature pages on an encrypted “key drive” to help in this process. That drive also allows other documents to be added to it and is encrypted to a high security level. Don’t make electronic copies the primary source; it limits you to times when you have power and computer/internet access, a significant variable for folks in a natural disaster, as one example.