Join Tom for a CE event on April 24!

On April 24, Financial Planning Advocate, LLC will be hosting a CE event with Tom Tillery as the presenter and will address the subject of Personal Financial Planning & Community Property.

Marital property law affects all aspects of the personal financial planning process including: business interests, debt, estate, risk management and tax.
Your clients do not have to reside in a community property state in order for the community property rules to apply to their personal financial planning. The presentation will illustrate the application of community property law to the personal financial planning process, survey the history of Common and Community Property law, review the types of marital property ownership systems, and discuss the concept of ‘once community property always community property’ – regardless of jurisdiction.

The Webcast will be held on Friday, April 24, 2015 at 1:30PM EDT. The course is approved for one hour of CPE and CE. To register for the class, please email us at hello@ttillery.com. Virtual Seating is limited.

Join Tom for a CE Event on July 25!

On July 25, Financial Planning Advocate, LLC will be hosting a CE event with Tom Tillery as the presenter and will address the subject of Updates in Estate Planning: A Review of 2014 Changes and Their Impact on Clients’ Estate Plans.

Topics to be addressed will be: an overview of the estate planning process: regulatory updates on the DOMA decision and it’s continuing impact on the personal financial planning process; standalone retirement trusts and asset protection; continued use of GRATs; the use of discounts for lack of marketability in estate planning. The Webcast will be held on Friday, July 25, 2014 at 1:30 PM EDT. The course is approved for one hour of CPE and CE. To register for the class, please email us at hello@ttillery.com. Virtual Seating is limited.

Pennies from Heaven & Inherited IRAs

Recently an adviser sent me the following email. The email had an attachment that indicated that a named beneficiary was to receive a taxable distribution as a result of the death of an IRA owner. The amount was small – relatively speaking – $38,000. The adviser’s question was:

“Tom, it looks like this company is going to give this guy a 1099-R on the death benefit.  Can that be avoided if he transfers the funds to another institution as an inherited IRA (option C) before year end?”

And the short answer, which I studiously avoid, is “Yes.” However, there is much more going on in the facts and circumstances which I do want to visit. The beneficiary has a singular opportunity which is now being offered to him, the waiver of the 10% early withdrawal penalty. A distribution made to a designated beneficiary of an IRA, after the death of the IRA owner, is not subject to the 10% premature withdrawal penalty, regardless of the age of your beneficiary: in this instance, a savings of $3,800. [Read more…]

Risk Management: Considering Statistics

The trouble ain’t that there is too many fools, but that the lightning ain’t distributed right.

This quote by Mark Twain is a wonderful starting point in a discussion about managing risk in a personal financial plan. One of the areas which needs to be addressed is the statistical odds of an event occurring. Fools (which I make it a point to never call anyone) and lightning provide a wonderful opportunity to discuss some math concepts and risk management.

Everyone has heard the statistical odds of being struck by lightning are approximately one in a million. This statistic is based on the average of reported lightning strikes in the U.S. The math works this way: 310,000,000 (U.S. Population) / 280 (Average annual lightning deaths and injuries) = 1 in 1,107,143. Which is approximately, give or take, one in a million (U.S. National Weather Service).

Now here is where an individual can play and have some fun with statistics. The state within which you live has a tremendous impact on one’s odds of being struck by lightning, which many mean that ‘fools’ are smarter than for which Mr. Twain gives them credit. Those who live in Montana (the Big Sky State!) have a greater statistical chance of being struck by lightning – roughly 1 in 249,550. On the other end of the continuum is California. Residents of that state have the lowest statistical odds of being struck by lightning. So the lesson for each of us is that risk can be managed. Fools do not live in Montana in order to increase their chances of ‘not’ being struck by lightning. [Read more…]

Family-focused advisors offer personal touch

Editor’s note: President and co-founder of Paraklete ® Financial, Inc., Susan Tillery CPA, PFS, CFP, was recently interviewed by Reuters concerning the rising demand for financial services.

(Reuters) – Baltimore financial adviser Lyle Benson describes his work as that of “Personal CFO” or chief financial officer.

His boutique financial planning firm manages money, but it also does everything from bill paying to estate planning, even assisting clients’ adult children negotiate terms for their first automobile purchase or mortgage.

“We coordinate and work with all of our clients’ advisers” including attorneys, accountants and insurance agents, says Benson. “We make sure everyone is on the same page and working together.”

The services necessary to quarterback a client’s complete financial life, often referred to as family office services, are not just for the ultra-rich. Benson says anyone with investable assets of more than $2 million can benefit from such comprehensive oversight. At his firm, those services are used by more than 30 percent of clients. Please click here to continue reading

Risk Transfer in the Financial Planning Process

No man is worth his salt who is not ready at all times to risk his well-being, to risk his body, to risk his life, in a great cause. —Teddy Roosevelt

I have been looking for an opportunity to use this wonderful quote by Teddy Roosevelt. It is from an article in the New York Times (12/08/1915). The article is a summary of his remarks for the Harvard Advocate in which he promotes the need for military curriculum at schools of higher learning.

The purpose of today’s posting is not to advocate for military curriculum, which I do support, but to discuss risk management in the personal financial planning process. It is human nature to seek security. Security may be defined as the absence of risk. Once the basic needs of food, clothing, and shelter are met, the next need on the list for most of us is a sense of safety/security. [Read more…]

Of elephants, blind men & financial planning —Part 1 in a 6 part series

The endless bickering over the regulation of financial planners is wearisome at best. It seems that every organization and entity is on this bandwagon: the Government Accountability Office, the Security and Exchange Commission, the Financial Industry Regulatory Authority, the National Association of Insurance Commissioners, the Federal Trade Commission and the Financial Planning Coalition. And the sum total of all their time, talent and treasure are the following findings: No single law governs providers of financial planning services. Therefore,

• Almost anyone can call themselves a financial planner.
• Financial planners may have an inherent conflict of interest in selling products from which they receive a commission or managing assets from which they will receive asset management fees
• Consumers are confused by the numerous titles and designations that financial planners may use.
These results are not new and are the same conclusions, which were made over 30 years ago! [Read more…]

Use credit wisely and build a strong reputation

Establishing credit is a great deal like establishing a reputation. Ben Franklin said “It takes many good deeds to build a good reputation, and only one bad one to lose it.”  Establishing credit, whether a consumer is just beginning, or starting over, can be daunting. However, I have seen that with a little knowledge and a few simple steps a consumer’s credit may be established in short order.

The first step in the consumer’s journey is to check their credit report. The credit report is the reputation that a consumer has built over time by those “many good deeds”: timely payments on credit cards, car loans, mortgages and student loans; payment of rent or utility bills; responsible management of a checking account. These items are all a point of reference for a credit report. [Read more…]

Debt & Moderation

I typically begin a posting with a quote. Today’s posting on the need for, and the responsible use of debt, provided several challenges in the quote department. One challenge is current popular opinion which states that all debt is Biblically and morally wrong. The second challenge, and perhaps very revealing, is that quotes on the responsible use of debt, outside of economic circles, is very limited.

In our practice we use debt with our clients in a variety of ways: asset protection, short term cash flow needs, and as an investment. The ‘true north’ in the application of debt in financial planning is moderation. Moderation as a quotable phrase provided a more substantial harvest. [Read more…]

Where to begin – Personal Financial Ratios Part 2

In my last posting I began a dialogue about personal financial ratios. I used “Habit 2, ‘Begin with the End in Mind’” from Stephen Covey’s book, The Seven Habits of Highly Successful People. I went on to say that like Habit 2, the “personal financial ratios are a goal to strive toward, a goal to be obtained.” The first step in working with personal financial ratios is to create a “spending plan.”

Unlike the term budget, a ‘spending plan’ emphasizes choice in spending decisions. It is a necessary building block for the future. Once the spending plan is completed it should be reviewed in light of the personal financial ratios. Objectively, if we give away 10 percent of gross income, save 10 percent of gross income, and pay taxes of 30 percent of gross income, then we should be creating our spending plans with a goal of living off of 50 percent of our gross income. [Read more…]