Welcome back to Part Six of our “Back to Basics” series .. we hope you’ve enjoyed the First Five which started with all about “The Emergency Fund” in Part 1 … Part 2 being “Protection Planning” and Part 3 discussing All about Debt Planning or “The Good the Bad and the Ugly of Debt”, Part 4 Retirement Planning … Part Five, Back to Basics Education Planning and now “Estate Planning!”
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!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
$treet-¢ents 
Capital Market thoughts, looking forward not back … FOMC chaired by Jerome Powell gave, now taking away, for the moment
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!
Have a Great “Forward Looking” Day!
John A. Kvale CFA, CFP
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Posted in Debt - Debt Management, Economy, FOMC, Interest Rates, Investing/Financial Planning, Market Comments
Tagged BLS, CPI, FOMC, Interest Rates, Jerome Powell, Recession