When I was a young girl, my father had “the talk” with me. No, not about the birds and the bees but he discussed what I should do in the event that he passed away (even though there was no indication his end was near). He showed me exactly where his legal documents were placed and who we should contact to handle any legal matters. Throughout the years - and, especially closer to the end of his life - these conversations transformed to more specific topics ranging from funeral arrangements to making a list of every subscription service he was using. As you can imagine, these conversations can be challenging to have with your loved ones but it is necessary and significant for those making your life/death decisions.
Now, before jumping into “the talk”, I suggest preparing legal documents that express your wishes clearly in writing. A power of attorney (POA) allows you to designate an agent to handle your affairs during life and a Last Will and Testament offers specific instructions on how to distribute your assets after passing. Choosing agents and executors for these legal documents isn’t simply picking the person you are closest to. Instead, you should consider who will uphold your wishes best. Additionally, these documents guide you on the decisions that need to be made and provide discussion points for your end-of-life conversations - and, at the very least, examining these legal documents will get you to consider the decisions you and others will need to make for your end-of-life journey.
Once you have some direction on how you want things carried out, it is crucial that you discuss your plans with whoever will execute your wishes and anyone else you want involved. Even at ten-years-old, I knew the gravity of what my father was telling me and I understood his intention was to protect our family. The National Council for Palliative Care provides a helpful guide on subjects to talk about, how to start the talk, and tips to use during these conversations.
I know that it seems strange to prepare for death when it isn’t something you’re expecting to happen in the near future but studies indicate talking about your plan with loved ones helps to alleviate the fear of death and reduces stress during highly emotional times (i.e., incapacitation, death, etc.). People are often reluctant to talk about death due to its ominous nature; however, by the end of each discussion with my father, I felt more prepared and less anxious about the unknown.. We didn’t have all the answers and even learned some things along the way. We made difficult decisions but felt confident in our choices based on our previous end-of-life conversations. By discussing my dad’s wishes throughout his life, it gave us the freedom to cherish every last moment with him.
If you need assistance with end-of-life planning, book your appointment with KJ Dykema, MRFC® today.
The majority of people use their HSAs to pay for qualified medical expenses but don’t realize you can do so much more. For instance, did you know that most HSAs offer a way for you to invest your funds while you are not using them? How about the fact that your contributions and distributions are tax-free*? HSAs are more than just a way to pay for medical expenses, they are a great solution to help reach your financial goals.
In order to qualify for an HSA you must be covered under a high deductible health plan (HDHP), have no other health coverage**, must not be enrolled in Medicare, and can’t be claimed as a dependent on someone else’s tax return.
One of the best features of an HSA is that contributions can come from just about anyone - this includes you, your spouse, your employer, family members, and more. In fact, the funds contributed by your employer to your HSA are not included in your gross income - free money, yes please. Do keep in mind that there are contribution limits. The amount depends on the type of HDHP coverage you have, your age, the date you become an eligible individual, and the date you cease to be an eligible individual. For 2021, if you have self-only HDHP coverage, you can contribute up to $3,600. If you have a family HDHP coverage, you can contribute up to $7,200. For eligible individuals age 55 or older, contribution limits are increased by $1,000 at the end of your tax year.
You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. For more information on qualified medical expenses, review IRS Pub. 502, Medical and Dental Expenses. Did you know that you can’t pay for insurance premiums using an HSA but you can use it to pay for Long-term care insurance? Of course, there are some limitations based on age and the amount is adjusted annually but this can save you some money.
HSAs have a triple-tax advantage. First, many people contribute pre-tax dollars to HSAs through payroll deductions. If you have an HSA outside of your workplace, contributions can be used as a deduction from your taxes. Second, interest or other earnings on the assets are tax-free. Third, when you use the funds for qualified medical expenses the distributions are tax-free.
I could easily have an entire series of articles on the advantages of HSAs but everyone’s situation is different. Let’s talk specifics about how you can use an HSA to boost your financial wellbeing - book your appointment with KJ Dykema, MRFC® today.
* Some exceptions apply. Review IRS Publication 969 to learn more.
** Except what is permitted under IRS Publication 969, Other health coverage.
Publication 969 (2020), Health savings accounts and other tax-favored health plans. Internal Revenue Service. (2021, February 16). https://www.irs.gov/publications/p969.
An exchange traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock. ETFs can often be used by investors to diversify your portfolio as they hold multiple underlying assets, rather than only one asset (like stocks).
Like any investment, ETFs come with pros and cons. Some advantages include lower expense ratios, access to more stocks across various industries, and they manage risk through diversification. However, not all ETFs are what they seem. A rise in social media influence has many investors looking at the latest ETFs (often with catchy names) but it is important to truly understand where your money is going. The article “Do You Really Know What Is Inside Your ETF? Probably Not” by Matt Krantz takes a deeper dive into some of these trending ETFs.
The US Vegan Climate ETF (VEGN) is a perfect example of when you should ask yourself, “what am I really investing in?” While most people would believe that VEGN is about a plant-based food future, it is surprising to see 4.6% of its portfolio in Microsoft (MSFT) and 4.8% in chipmaker Nvidia (NVDA). In fact, more than half of VEGNs portfolio involves stock accounts connected to information technology. You could make an argument on why these are beneficial to have in an ETF but they seem like a bit of a far fetch when trying to relate it to a plant-based food future.
There are so many factors to consider when investing and there is an extensive selection of EFTs to choose from that it can become overwhelming. Well, we are here to help you! Let us do the research for you and help you reach your financial goals.
Take the next step today and book your appointment with KJ Dykema, MRFC®.
Chen, J. (2021, July 28). Exchange traded fund – etfs. Investopedia. https://www.investopedia.com/terms/e/etf.asp#advantages-and-disadvantages-of-etfs.
Krantz, M. (2021, July 16). Do you really know what's inside your etf? Probably not. Investor's Business Daily. https://www.investors.com/etfs-and-funds/etfs/best-etfs-do-you-really-know-whats-inside-your-etf-probably-not/.
Finance bloggers stick to the cardinal rule of "start with saving $1,000" but how can you do this when you feel like you are living paycheck to paycheck? I would like to introduce Lean February. It's is my favorite month! First, it gives you the opportunity to get your finances ahead of schedule and start saving. Second, I always choose February because it’s the shortest month and for most people who struggle with budgeting or savings it’s an easy way to move into the new year!
Quick rules for your lean month:
Let’s define these for a better understanding of how low you should go.
Groceries are a hot topic and some say it can’t be done but I know someone who shops for 3 people and has friends over 4-5 times a month on $250 of groceries. $150 should be more than plenty if you are buying for the month. Before going shopping inventory what you have in your fridge, freezer, and pantry. Identify which proteins 1-2 that you’d like to have for the month. Proteins are typically the most expensive groceries. I like to use Pinterest to create a meal plan that focuses on using those proteins and the items you currently have. Another best practice is to stick to meals with 10 ingredients or less. The more you can streamline the meals it hinders the need to purchase obscure items. When the major meals are taken care of, evaluate how much more you will have for snacks. Snacks are most commonly the impulse buys because they can be on sale. If you know how much you can spend you won’t feel like you are being restrained.
After you have paused some of your services and called to see if you can get better deals on your current expenses I have a feeling you might have some time on your hands. Keeping that in mind come up with a list of organization projects that you’d like to tackle. Clean space will lead to an overall better mindset.
Document your process so when you think about doing another lean process you can note what you’d like to do differently or keep the same. Now that your done reading leave a comment with a question of how to complete the process.
In the world of financial advisors, there has been a surge in publicly of the gold standard, the fee-only advisor. This is an individual who will charge a flat rate or a percent of assets under management, in industry terms, they are an investment advisor representative. These advisors are regulated by the State or SEC to document the needs of their clients and any changes in their risk tolerance, time horizon, and goals. When establishing these needs the advisor will fill out an extensive intake questionnaire to assess investable assets, liabilities, and tax planning.
Most people associate fee-only advisors to a Certified Financial Planner. Like the fee-only advisor, this is an investment advisor representative but they take another test and pays an annual fee to have this designation. In return, the CFP board creates campaigns to aware consumers of the benefits of working with a designated Certified Financial Planner. Like many designations, there is ongoing continued education to keep them current which can be purchased from their website at www.cfp.net.
Here’s the thing if the advisor sells insurance products they will not be able to call themselves fee-only advisor. When the advisor sells insurance their payment is called a commission, that commission is paid by the insurance company and the advisor is not acting as a representative of that company, but an agent who is filling out a suitability form instead of this extensive process. Since it’s paid by the company and not out of your pocket the agent is not required to disclose their commission.
Insurance instruments are tools for legacy planning, tax planning, and long term health care. In my opinion, to recommend these tools and understand how they fit into the big picture your agent should have an idea of the financial plan. If you outsource a portion of that plan if can allow weaknesses because there is not the careful vigilance of the financial advisor.
If you are looking for an advisor, make sure they are going to fit your needs and put together a comprehensive plan for your investments and insurance needs. Our firm is an independent insurance agency that will provide you with multiple carrier options and disclose all fees.
After my dad passed away at the end of August I was thankful that he had a plan in place and that we knew how execute it. October is “Estate Planning Awareness Month.” Here are some basics about estate planning that everyone should know.
Everyone should have a plan
Even if you think “you’re not rich enough” to have an “estate,” unless you’re homeless or destitute you should have an estate plan in place. Estate plans provide for the people you leave behind when you pass away, and help ensure that your final wishes get carried out. The last thing you want is your family members fighting over dishes or fishing poles when you’re gone, or having to sell the family home or take other drastic measures just to get by.
Often estate plans help reduce taxation to heirs. Even though the estate tax exemption doubled to $11.18 million for singles ($22.36 million for couples) as a result of the tax legislation passed last December, the exemption drops back down to 2017 levels after 2025, so it’s important to plan now to help take best advantage of estate tax laws for your particular situation.1
There are important differences between wills and trusts
1. Having a trust in place usually allows your estate to avoid probate court and keeps your finances private. Trust assets are usually distributed by the trust executor once a death certificate has been issued and funds are available immediately to your family.
If there are no estate planning documents, or if there is just a will in place, your family will have to go through probate court, which can take a very long time in some states, and can be very costly in terms of legal fees. Additionally probate court proceedings are generally published in the newspaper so that your financial situation and your assets become public knowledge. 2
2. A will is the document used to specify guardians for minor children. 2
3. It is often recommended that a will be used with a “pour-over” provision for all assets not specifically named in a trust; and/or that an exhibit or list of items be attached to a will to name individual gift recipients, be the items large or small, valuable or just sentimental.
Beneficiary designations take precedence
Beneficiaries you have named on life insurance policies, bank accounts and/or 401(k)s or IRA accounts take precedence over your estate planning documents. 3 This is extremely important to address, and all docs should match so that there are no conflicts or surprises later. Life changes such as divorces, deaths or birth of new children/grandchildren require that your documents and beneficiaries be updated. That’s why regular reviews are critical—we recommend annual reviews of all your documents, policies and accounts.
Attorneys may not know financial ramifications
Estate attorneys can create the documents you need, but they may not know about all the ins and outs of investments and insurance policies that can help expedite efficient wealth transfer, reduce potential problems and/or mitigate taxation as laws morph and change. Most experts agree that you need a team which includes your estate attorney, your CPA or tax preparer, and your financial advisor or wealth planner.
The importance of digital assets
Online assets are a new area of estate planning that need to be incorporated into your plan. The Uniform Fiduciary Access to Digital Assets Act, which has been passed in most states, provides that an owner of digital assets can specify who will be able to access and dispose of any digital assets after death so that email accounts, social media accounts, PayPal accounts, domain names, intellectual property stored on a computer and other things like virtual currency can be accessed by heirs. 4
Call us at 425-610-9226. Let’s work together to update or create the proper distributions of your funds.
1 “How the new tax law upends estate planning,” Financial-planning.com https://www.financial-planning.com/news/how-the-new-tax-law-changes-estate-planning-trusts-income-tax-planning (accessed October 18, 2018).
2 “Will vs Trust: Knowing The Difference,” Investopedia.com. https://www.investopedia.com/articles/personal-finance/051315/will-vs-trust-difference-between-two.asp (accessed October 18, 2018).
3 “Why Beneficiary Designations Override Your Will,” Thebalance.com. https://www.thebalance.com/why-beneficiary-designations-override-your-will-2388824 (accessed October 18, 2018).
4 “The Big Hole in Estate Plans: Digital Assets,” Thinkadvisor.com. https://www.thinkadvisor.com/2018/10/04/the-big-hole-in-estate-plans-digital-assets/ (accessed October 18, 2018).