Back to Basics Series – Estate Planning – No Fears of Fancy Terminology
In our continued fun “Back To Basics” Series here we discuss Estate Planning…
From the post:
Rather than go into the complexities of all of the documents, keeping with our “Back to Basics” theme, we are going to go into what you need to think about to easily complete all of your Estate Documents. Don’t worry about the fancy legal and financial terms, if you can answer the following few questions, your Estate Documents can be easily completed …
The hardest part of doing an Estate Plan is just starting…. Go ahead and read this post if you have been procrastinating its not hare once you start!
Lump Sum Offer Reminder
After running into an unusual offer from a Pension Buy Out, we reminded ourselves these generally come in Waves….
Trust But Verify, offers can be wildly in accurate!
Capital Market Comments
Look Forward, Not Back
In this early month post here, we discuss Jerome Powell’s 180 turn from stimulus to brake and in particular as it relates to interest rates…
Then again in a similar post an update on Interest Rates….
While counter intuitive, as the FOMC/Jerome Powell raise interest rates, historically interest rates eventually fall as the Brake action kicks in and slows the economy
Form 5498 is headed to some of our mailboxes over the next weeks, here are some of the reasons why:
Rollover of a 401k or the like to an IRA – Most frequent
Contribution to an IRA
Contribution to a SEP
One of the most confusing parts of this form is that even though you may have made a qualified contribution for a prior year i.e. 2020, if you made that contribution in 2021, depending on the type of contribution the Form 5498 MAY show your contribution in year 2021.
Not to worry, the IRS knows there are frequently a seemingly miss match of years and accounts for this.
The extra speedy move of interest rates upward have put pressure on “Safe” assets, notably bonds or fixed income.
As reviewed here in great detail and with a special video on the subject, as rates rise, headwinds are created, BUT the opposite is true…. rates stabilize or even lower, big tailwinds…
Have Rates Peaked ?
Using the 10 year treasury as our marker for this review, after peaking 3.15% a few weeks ago, rates have come in and are now around 2.76% …. Progress and stability!
Here is a zoomed in chart….
Just like the change from Winter to Spring to Summer, it rarely occurs in a straight line…. remember also this longer term rate (10 years) is a measure of economic growth and will not be directly effected by the Federal Reserve overnight rate increases (thats our checking accounts)…
Over the last three years we have experienced a multitude of pension buyout offers both from in-force pension payments and lump sum offers for pensions not yet started.
Recently we have just experienced another, and knowing these frequently come in waves, wanted to put this note out to anyone who may be in a position to receive a pension buyout offer.
Trust but Absolutely Verify
In every situation that we have experienced over the last three years, the processing of the lump sum pension is quite different.
Also, the paperwork originally sent with the offer tends to vary slightly to dramatically from the actual offer.
We of course do a detailed breakeven analysis in order to find out if the offer is good, but in order to calculate the offer correctly, the appropriate information is needed.
If you are in a situation of receiving a lump sum buyout offer for a pension or even a lump sum buyout offer for an in-force pension, please trust but absolutely verify all of the details. What we are finding that frequently the original offer may have inaccurate information making for an impossible correct decision of acceptance or decline.
This is another subject that we ask you may share with other individuals that we may not know that might greatly appreciate or need this knowledge. So please share at your leisure.
Have a great “Trust but Absolutely Verify that Pension” day!
Long time friends and clients who we have communicated with for years, suddenly found some of our email in their spam folder in the last two weeks…. noted yahoo users were especially stricken…
We also have found the same in our folder here at the office and as you guys know we are very strict with our safety and cyber ware…
It’s likely there has been some type of major update due to a new spam or threat… no matter, be sure to check your spam folder for the next few weeks and “Trust” any friend emails that landed there,…
Ahhh…today is a Friday, and after breaking all kinds of records the last two weeks here in the south with temps approaching 100 very early in the season, we are looking at much more normal temps this weekend…
For those of you with a memory like an elephant, congratulations, you may recall that we have delightfully attended the Mauldin Strategic Investor Conference (SIC) virtually during lockdown for the past two years. As a side note, a conference that we had never attended before due to the duration and the timing … very near tax time!
Good news, once again this year the conference was virtual and we are happy to attend.
While there were 40+ speakers, more to come on others, we found the following expert and presentation very interesting, if not somewhat controversial.
Barry Habib, Mortgage and Residential Housing Expert
You may recognize Barry as he is a regular speaker on many of the financial channels among other and was a presenter at this year’s SIC conference.
Cutting to the chase, Barry expects a recession later this year or early 2023 and as such expects mortgage rates in particular to drop precipitously from their current 5 1/2% rate along with all rates of other asset types.
These expectations, (forecasts), are certainly more economic and financial market related, as such we will make note as predictions and check back sometimes next year.
Now, to Barry’s wheelhouse, what we are all interested in, the expectation of housing appreciation or depreciation!
Understanding that Barry comes from a residential and mortgage background, so let’s be transparent that there may be some innate biases, but his expectations are for mid to low single-digit housing appreciation for this year 2022.
This flies in the face of many forecasters due to the aforementioned slow down or R- word recession and more importantly the heightened interest rates of Mortgages currently.
In Barry’s defense, lack of supply and his expectations of a sharp reversal in mortgage rates will lend itself to this continued growth.
Heck if housing prices hold their values we would consider Barry’s prediction a win.
There will certainly be pockets of strength and weakness across the country…
We will be watching as it’s very easy to monitor and will let you know!
Barry …thanks very much for a fantastic presentation and for the information duly noted…
For the very small handful that receive paper statements, you will be unaffected by this post, however we highly encourage you to consider electronic statements .. as it is much greener and with today’s mail service many times much safer.
If you are on the fence, now is your chance as we are in the Electronic Set up Mode!
Takes less than three minutes to set up and change back to paper is very easy should you decide to do so!
For a Few that have not logged in under Main Social for Account
There is a small group that will be receiving a letter asking you to login to your electronic view here.…or as noted below, on our home page the “Account View” tab will get you there too! The slightly confusing part of this letter is a login, yep, just one is required per each main account Social Security number in order to keep from automatically reverting to paper statements.
As mentioned here last week, there are several travel extravaganzas in the coming weeks and a completed one just this past week ….
In an adjoining state just north of our Southern Texas … a regular meeting place garnered the following crowd….
Upon entrance a 45 minute wait was estimated…. Luckily it was not near that long, but we as a population are no doubt interested in getting out! Yay
For the record… after almost a decade of visits in this same location (creature of habit and avoidance of getting lost…haha) there has never been more than a 5 minute wait….
Ahhhh… Today is a Friday, heading into a nearing the end of School month- Wow… Talk Next Week!
We don’t want to get too heavy and pound you with market thoughts, we know you’re getting enough of that from the “Market in Turmoil” like headlines, but we did want to give some explanations and let you know we are watching carefully as we have been on notice since December for a possible slowdown.
Look forward, not back
Economic reports such as today’s CPI (consumer price index) report is very much rearview looking, as such it’s sometime easy to forget that what’s most important is looking forward to what is going to happen next rather than backwards to what has happened. Yes it is much harder, and you do not know exactly what is going to happen … but you sure do not drive a vehicle looking continually in the rear view mirror – some humor on a dry subject… stay with me!
This is even more evident at the recent quick rise in interest rates, creating the headwinds to bonds. As noted here and again here in our posts (the second with even a special video) it’s highly likely and the probability is most that the headwinds for our fixed income investments are behind us. Once again looking forward, a slow down usually garners lower interest rates, exactly opposite to our slightly current and mostly rearview looking higher rates.
FOMC chaired by Powell gave and now takes
Over the past 18 months to two years the FOMC (Federal Open Market Committee) headed by Jerome Powell have taken very aggressive measures to stimulate the economy. Much of a stimulation, once the book is written may have over stimulated not only the economy but various asset prices. Their goal at this time is to slow inflation thereby doing a complete turnaround from their prior stance and taking away stimulus. This most likely will continue until they see evidence of slower inflation or lower employment.
Higher rates are their main instrument of choice:
The FOMC waits for the reports such as the CPI to confirm their decisions, making for a lag in decision making and possibly longer decision-making, but they will eventually get there….
Finally, capital markets are certainly looking forward hence the sluggishness as they begin to price in a slowdown in full force. Eventually it’s very likely the FOMC will begin to see these clues as well!
As a reminder this is a high level Financial Planning Education like overview, starting with the basics of and we will continue into advanced topics in order of Planning Importance.
So who needs Estate Planning?
In a word, everyone should have an Estate Plan and Estate Documents.
As your family complexity increases, the need for Estate Planning documents rises. Young families just starting out with no dependents that may be moving to another state in the very near future can have a brief hall pass as each state has its own unique rules, but the clock is ticking.
Couples with a dependent, you need an Estate plan!
Even with simple family situations, as we get older, statistically we get closer to utilizing these documents, thereby increasing our need.
Any further complexities, as an example multiple assets, multiple dependents, some type of unique family situation, you absolutely must have a good Estate Plan and Estate Planning documents.
Why do we need estate plan documents?
Without them you are leaving your wishes recklessly in the hands of the public domain via the court system for a prolonged timeframe and an unfamiliar person, (a judge), to try and guesstimate what your wishes would have been, using the general rules of the state you reside! Not good.
OK enough lecturing on who needs them and why, let’s take the complexity out of Estate Planning and make it very easy for you to prepare and complete the documents.
Rather than go into the complexities of all of the documents, keeping with our “Back to Basics” theme, we are going to go into what you need to think about to easily complete all of your Estate Documents. Don’t worry about the fancy legal and financial terms, if you can answer the following few questions, your Estate Documents can be easily completed …
So here we go!
If something happens to one of the couple, the general rule is the other is the primary default, hence the following terminology for decisions.
If something happens to both you and your spouse at the same time, Who will be in charge of administrating your estate and who is the backup person? This is called your executor.
If something happens to both you and your spouse, who will take care of your minor children? This is called guardian.
Assuming you and your spouse once again are gone, who will take care of the financial stuff for your minor children? This is called your Trustee and you’ll need at least one back up.
At what age do you want you’re now grown children, once again assuming you and your spouse are gone, to distribute financial assets? This is the terminal clauses of your trust, a very common age is 1/3 at age 25, 30 and 35 but parameters can vary widely. Trusts cannot be perpetual and therefore must eventually end.
Lastly, a very unlikely scenario, but one that should be answered, if everyone in your immediate family… you, your spouse, and minor children should perish, think of where you would like your assets to be distributed i.e. beneficiaries.
Other Documents
There are a few simple peripheral documents such as Power of Attorney (POA) and healthcare power of attorney that will need decisions, but we find if you have answered the above questions you likely already have a person that fits each of these roles.
One planning tip: Try and match the personality of your person to the role, i.e. the caring family person may be best fit for guardian, a good financial person trustee, a close relative with a very pragmatic attitude and calm and nature, your executor… as this is the most emotional role and comes first.
That’s it, each of those answers fit into a fancy legal term and your legal professional will know exactly how to formulate the appropriate language for your specific state. With the aforementioned answers your Estate Planning documents can be easily created.
Over the years we found many people fearful of the complexity of the documents, when in reality the majority of the problems are simply answering the questions above.
You are now armed with how to easily complete your Estate Documents, why you need them, how to be ready and how to easily complete!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
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May 2022 Financial Planning and Capital Market Review – By John Kvale CFA, CFP
Hello and Welcome to our May 2022 … Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!
Newbies –
We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets thoughts and current events!
Hope you enjoy!
May 2022 Video
YouTube
Financial Planning Tip(s)
Back to Basics Series – Estate Planning – No Fears of Fancy Terminology
In our continued fun “Back To Basics” Series here we discuss Estate Planning…
From the post:
Rather than go into the complexities of all of the documents, keeping with our “Back to Basics” theme, we are going to go into what you need to think about to easily complete all of your Estate Documents. Don’t worry about the fancy legal and financial terms, if you can answer the following few questions, your Estate Documents can be easily completed …
The hardest part of doing an Estate Plan is just starting…. Go ahead and read this post if you have been procrastinating its not hare once you start!
Lump Sum Offer Reminder
After running into an unusual offer from a Pension Buy Out, we reminded ourselves these generally come in Waves….
In this Pension Buy Out Reminder post we discuss the most important items…
Trust But Verify, offers can be wildly in accurate!
Capital Market Comments
Look Forward, Not Back
In this early month post here, we discuss Jerome Powell’s 180 turn from stimulus to brake and in particular as it relates to interest rates…
Then again in a similar post an update on Interest Rates….
While counter intuitive, as the FOMC/Jerome Powell raise interest rates, historically interest rates eventually fall as the Brake action kicks in and slows the economy
Have a Great Day, Talk to You at the End of June!
John A. Kvale CFA, CFP
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Posted in Audio, Clients/Clients Only, Economy, General Financial Planning, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Video
Tagged Back to Basics, FOMC, Forward, Interest Rates