January 2022 - New Year, New Economy, Same Strategy?
“Plans are worthless, but planning is everything.”1 This iconic, and ironic, quote was from one of the very few 5-Star Generals in U.S. history, Dwight D. Eisenhower. It has been nearly four decades since the U.S. has had a General with this high of a rank. When General Eisenhower (also the 34th President of the United States) said this, it was not exactly in the context of estate and financial planning. Nonetheless, the meaning of this quote strongly applies to financial and estate plans.
Throughout life, changes and transitions are constant. In Eisenhower’s case, having an ever-changing battle plan was necessary for the Allies to be victorious in World War II. Like his plans, which became ‘worthless’ as variables of the war changed, our plans that we’ve made in the past must also change through the process of planning to adapt to current times and conditions. In the financial world, there are thousands of stories where estate plans have gone wrong, or worse did not even exist, thus causing chaos or harm.
Celebrities like Michael Jackson, Philip Seymour Hoffman, and Sonny Bono illustrate some examples of poor plans. 2&3 Each of these very wealthy individuals had a plan, but never followed through with the plan or updated the plan as needed.
In 2009, Michael Jackson passed away with a large estate worth over $100,000,000.3 It has taken over a decade for Michael Jackson’s estate to settle because of a poor and unclear plan. This lengthy process has undoubtedly cost Michael’s estate a significant amount. Unlike Michael, Philip Seymour Hoffman had a clear plan.
Phillip passed away in 2014, leaving behind his three young children and long-time girlfriend with an estate valued at around $35 million. Philip never updated his plan. Had he made a few tweaks and perhaps better life choices, his estate could have avoided paying $12 million to the IRS and legally could have left more of his assets to his family.2 & 3
Sonny Bono’s career originally started as a singer and songwriter. After his music career he was elected to Congress in 1994 as a representative from California. Unfortunately, Sonny had an untimely death in 1998 from a skiing accident. Sonny’s plan never created a will for his estate. His wife, Mary, had to go through probate court to become the executor of his estate. Had he planned better, and adjusted as necessary, his wife could have avoided all of the grief associated with the long court proceedings.4
Planning is everything. Continually checking your plan and updating it is necessary. Life is a series of changes and transitions. Simultaneously, circumstances, desires, regulations, and laws change, make every-thing more complicated.
We believe when these changes happen or are happening, it is always good to get a second opinion from a trusted adviser for your plan. Planning is a process that takes time, careful consideration, and knowledge of current rules and regulations. Often, a good plan will change from the original strategy because of new variables. From our perspective, plans can be worthless, but careful planning can prevent unwanted or less than desirable outcomes.
Let us know if you would like to start a conversation to review, create, or change your plan. We help hundreds of people with estate planning considerations, retirement planning, and income planning. It all starts with a simple, FREE conversation.
References
https://www.eisenhowerlibrary.gov/eisenhowers/quotes
https://www.thinkadvisor.com/2020/02/03/the-biggest-estate-planning-blunders-of-all-time/
https://www.biography.com/musician/sonny-bono
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New Year, New You!
This is a good time to assess your 2021 tax situation and decide if you want to make an IRA or Roth IRA contribution. You have until April 18, 2022 to make a contribution for tax year 2021. However, it is very important, if you send in an IRA contribution to your financial company, that you mark clearly whether you want the contribution to be for 2021 or 2022. Over-contributing for 2021 can result in unwanted penalties. If you are our client, we will happily assist you with this process. You also have until April 18, 2022 to make an HSA contribution for 2021. If you qualify for an HSA (health savings account) and do not have one in place, we can help you get started. If you are self-employed or a small business owner, you have options for retirement accounts that allow even greater contributions than regular IRAs/401ks. A SEP IRA, for example, can allow annual contributions up to $58,000 (for 2021). These can be set up and funded up until April 18 for tax year 2021. It is not too late to have a conversation with us about this.
Who should I turn to for help?
If the story above struck a nerve for you and you know that dying today would leave confusion or stress for your family members, you might be wondering who can help you. Do you need an attorney to write a will, do you go to the estate planning seminar you saw an ad for recently, do you talk to your financial adviser? Who understands your situation and can help? We specialize in coming alongside to help. It is what we do. If you want to begin estate planning to avoid some of the things that can and do go wrong, here is how we help:
- We would have you complete a simple questionnaire, gathering basic information together in place. This often brings a lot of clarity.
- We would meet with you, review your situation, hear your story and family dynamics (really anything that pertains to your estate plan), and then make some suggestions. We focus on education at this point. What a will does (and doesn’t do), setting up beneficiaries for various accounts, how to avoid unnecessary probate, etc. Sometimes, people have accounts “all over the place” and we can help clean up your overall situation by consolidating and simplifying.
- We then refer the legal aspects and tax aspects of your situation to either your trusted advisers or to trusted professionals that we recommend.
Give us the opportunity to help you get your affairs in order.
It isn’t painful
It can be hard to step into the “unknown” and call a financial adviser. Allow us to answer a few of these objections!
1) I don’t know what you’ll expect from me or if you will be too pushy. You are always in charge. Any time you want to hit the pause button or stop having a conversation with us, you can do that. Itis very important to us to NOT be pushy.
2) I don’t know the right questions to ask and I don’t want to look ‘stupid. ’None of us are experts in every area of life. Probably you’ve focused on living daily life vs studying finances. That’s ok!
3) I don’t think I have enough money saved up for retirement, so I’m not sure you will work with me. We don’t have account minimums or other barriers in place. We focus on helping people understand their situation. Knowledge is power and that’s true for everyone.
4) I have a lot of ‘loose ends’ and am embarrassed that I don’t know where to start. Organizing your information and researching to simplify things is part of our service. You don’t have to have everything all together before you talk with us.
5) I think my current adviser will be mad at me if I talk to someone else. We don’t want to interfere if your current adviser is meeting your needs. However, someone who has enrolled you in your employer plan isn’t necessarily focusing on your family’s financial future. They aren’t helping with estate planning or tax efficiency, college planning, income streams for when you retire, etc. If you are considering a conversation with us, we might be reaching areas of interest for you that your adviser hasn’t or won’t address.
6) My schedule is packed full and I don’t have time to prioritize for this right now. We will give you clear direction of what to do first, second, third, etc. We can’t make time in your day, but we can help guide you—if you’ll start the conversation!
CHECKLIST TO START THE CONVERSATION:
Which of these arrangements do you have in place at this point?
- Will
- Advanced health care directives (such as living wills, durable power of attorney for healthcare, etc.)
- Revocable trust
- Irrevocable trust
- Family LLC
- POD/TOD arrangements (‘payable on’ or ‘transferable on death’ arrangements to titled property)
- Beneficiaries on life insurance and/or retire-ment accounts
- Life insurance
- Disability insurance
- Long-term care insurance
These are not all necessary for everyone. Certain features are helpful in certain situations. We can help!
Plans are worthless,
but planning is everything.
-Dwight D. Eisenhower
Advisory services are provided through Creative Financial Designs, Inc., a Registered Investment Adviser. Securities are offered through cfd Investments, Inc., a Registered Broker/Dealer, Member FINRA & SIPC. Faith Investment Services is independently owned and is not affiliated with the CFD companies. Neither Faith Investment Services, LLC nor the CFD companies offer legal or tax advice.
