Q. If I have a revocable trust, do I still need a will or an advanced healthcare directive?

A. You will still need a will and advanced healthcare directive even if you choose to place your assets in a revocable trust. The will not only deals with your assets but addresses important decisions such as who will take care of your minor children or receive certain family heirlooms. The advanced healthcare directive simple communicates to doctors and loved ones your wishes in the event of a life-threatening medical situation.

Q. If I have a will and advanced directive, why consider a revocable living trust?

A revocable living trust is a legal document that places your assets in trust for you during your lifetime and specifies how the assets are distributed upon your death. Assets are placed in trust either by re-titling the asset or by giving the asset to the trustee. Examples of assets that can be placed in trust include but aren’t limited to real estate, bank accounts, personal property, vehicles and business interests. Because this is a “revocable” trust, you can move assets in and out over the course of a lifetime.

You and your spouse are named as co-trustees. You are also required to name a successor trustee who will be responsible for transferring the assets to your beneficiaries according to your wishes. The successor trustee has a significant amount of responsibility if you were to become incapacitated. In this situation, they would be responsible for managing your affairs, including property or business issues. All of this takes place without court involvement.

The two big benefits of a revocable living trust are privacy and avoidance of probate.

Privacy: A will is a public document and probate court documents are open for the public to view. In contrast, trust documents are private and not open for review by the public. Assets in a trust are transferred without the involvement of the probate court.

Avoidance of Probate: In many states, probate court costs can be as much as 5% to 10% of the value of the estate and the process can drag out from several months to over one year. Probate in the state of Georgia is not known to be terribly burdensome but this could change over time. The successor trustee of a revocable trust can settle the trust outside of court without supervision.

Drawbacks: The most frequently cited drawback to the revocable living trust structure is the cost. Many just decide to have a will and advanced healthcare directive instead. You should inquire as to the difference based on your specific situation, but in most cases the difference in upfront costs is minimal. After considering the difference in backend costs, it is break-even at worst. The relative ease on the heirs seems more than worth the upfront costs.

Finally, don’t forget to fund the trust. This is easily the most overlooked detail in the revocable living trust process. There is a fair amount of work required to place the assets into the trust; however, your financial or legal advisors should be willing to help with the execution.

A revocable living trust isn’t necessary, but it is an excellent option for many. Certain situations make it even more attractive for some. Making the decision based on consultation with trusted legal counsel or financial advisor is the best path to ensure success.

Filling out forms and keeping all the deadlines together can be as daunting as figuring out how to pay for college. I have collected a few tools that can help with both:

College Abacus is a new online financial aid calculator that helps students learn how much it will cost to attend specific institutions. This isn’t your standard online tool—it is extremely easy to use and the interface is focused on providing a seamless user experience. The site presents information in a way that students and their parents can easily understand. Overall, it’s a very useful tool that bridges the gap between open data-accessible online resources.

Applying for student aid can be frustrating and arduous. Luckily, Nerd Wallet has come up with a solution to help college students tackle the daunting FAFSA. Their guides give you advice on how to answer some of the tougher questions should you have a non-traditional family or an unusual immigration status. Then, Nerd Wallet walks you through the form step-by-step, offering clarification on where to find all the information you’ll need to finalize. Still have questions? Search through their FAQ or submit a question of your own, answered by Nerd Wallet’s experts.

It’s difficult to know what schools will be the right fit, especially if you don’t have the opportunity to visit them in person. According to their Twitter account, Admittedly has “gamified the role of high school counselors,” helping you choose the best college through fun personality quizzes based on location, professors, extracurriculars, etc. All the design choices are spot-on and the functionality is very fun.

I hope these three resources can help you navigate the labor-intensive and often baffling process of pre-college preparation. Let me know if I can be of help with this very important decision for your family. 

Rebalancing is the process of realigning (buying or selling) your assets in order to keep the allocation levels about the same. Each allocation level is “weighted,” which further aids the concept of balance.

Many investors are at least familiar with the concept of rebalancing. However, few could articulate the value of the process and even fewer implement it on a regular schedule. The basic concept is to execute that time-tested adage of investing: sell high and buy low. This way, you take the gains from high-performing investments and reinvest them in areas that have not yet experienced such growth. The following brings insight to this strategy and illustrates the benefits of its execution.

The period being studied: Jan. 1, 1970 to Dec, 31 2015.

The portfolios contains 7 asset classes: large-cap US stocks, small-cap US stocks, non-US developed stocks, real estate, commodities, US bonds and cash.

Each asset class is equally weighted (14.29%).

2 portfolios: one was never rebalanced, rebalanced annually at the end of the year.

$7K was invested in each portfolio at the beginning of every year

Taxes were not considered.

Did rebalancing produce a performance advantage? See chart for details. 

What was learned?

A rebalancing advantage was calculated in 78% of the 27 rolling 20-year periods. The average advantage was $13,722. Two of the 6 periods where rebalancing produced a disadvantage were periods that ended at the high point of the tech bubble. When an asset class is on a roll year after year, no rebalancing will produce the best result – for a time. Eventually, the portfolio allocation to that asset class becomes such a large % of the account, so that when the bubble bursts, the account is hit extremely hard. Since no one is clairvoyant, your best odds for successful portfolio management are to rebalance at least once a year.

Thanks to Craig Israelson for the research.

It was a contention election this year and one of the driving points was the economy. There has been a lot of speculation regarding tax policy changes under the Trump administration. The tax theme for his campaign was tax relief for middle class Americans. Based on what we have seen so far, here are a few points that you might expect to happen in the next four years. Because of their close similarities to the House Republican’s plan, many of these are likely to gain traction.

Let’s start with some changes that could impact individuals. The below are limited to taxes at the individual level. They are designed to simplify the tax code and lower your tax bill slightly.

- Simplify the tax code from 7 brackets to 3. They are likely to land around 12%, 25% and 33%.

- Increase the standard deduction

- Eliminate the marriage penalty

- Eliminate the NIIT (Net Investment Income Tax – also known as the Medicare Surcharge) and AMT (Alternative Minimum Tax)

- Exclude child care expenses from taxation

- Eliminate the “death tax” in favor or recognizing capital gains at death for estates worth over $10.0 M

Since President Trump is a business-minded individual, we should expect more policy changes related to businesses. These changes are designed to encourage more economic growth. Some of the potential changes include the following:

- Allowing businesses to expense immediately the costs related to new business investment

- Reducing the business tax rate to 15% or 20%

- Providing for a one-time repatriation of offshore earnings taxed at a 10% rate

- Repealing and replacing the Affordable Care Act which, would is designed to reduce business and family health care costs

With a Republican-led House and Senate eager to pass new tax policies designed to grow the economy, it is likely a new tax bill will be signed by the middle of next year. Something similar to the above outline is a strong possibility. Let’s hope it has the intended effect on the economy and on our wallets!

Most of us wouldn’t think about not having homeowner’s, health and auto insurance. They are everyday staples in today’s society. However, many overlook the advantages of what is known as a Personal Umbrella Policy (PUP). It is probably the most misunderstood and under-appreciated form of insurance available.

In short, a personal umbrella policy is extra liability insurance. It is designed to provide protection beyond the limits of your auto, home or boat policies. It also provides coverage for claims excluded by other policies such as libel, slander and lawsuits related to rental property that you own, none of which are generally covered by other types of insurance policies.

An umbrella policy, however, doesn’t cover everything.

While the name of the policy suggests it covers a broad range of events—seemingly everything—there are limits. It does not cover damages to personal property, contract disputes, business-related settlements or intentional or criminal acts.

So that leaves the question: Who is covered?

An umbrella policy is generally designed to protect you, your spouse, dependents and any relatives living with you. The caveat is that it isn’t likely to cover any who have auto or other policies in their name. For example, your mom living with you might not be covered under your PUP if she has an auto policy in her name. So it is a good idea to check into these things before you get an umbrella policy.

If you do get one, coverage typically extends beyond incidents at your home. For example, if you were traveling outside the country and damaged another vehicle, your PUP would likely cover the damages beyond your auto policy’s limits. And, since coverage tends to come in increments of $1 million, it is surprisingly reasonable in cost.

Unfortunately, we live in an increasingly litigious society. If you have an asset base worth protecting, you should seriously consider the merits of owning this type of protection. Feel free to consult your financial or insurance advisor for its applicability to your specific situation.

When it comes to your finances, being intentional in your actions will save you money. Thinking through decisions and having a strategy in place ensures that you are prepared for the future. One of the most effective ways to save is to adopt tax-wise financial practices. Every year, as the year end approaches, take the time to review your situation and take action to minimize your tax bill.

Here are 6 examples of how you can do that:

1 - Defer your income. Some self-employed individuals delay billings until late December to ensure that they won’t be paid until January. For employees, some firms will allow you to defer a year-end bonus until next year.

2 - Maximize your retirement plan contributions. Employer-based plans (ex. 401K, 403B, etc.) require contributions to be made by year end. However, IRA-based plans give you to April 15 to make contributions for 2016.

3 - Make charitable donations. Charitable donations must be submitted by year end to a qualified 501(c)3 tax exempt organization in order to count against your taxes.

4 - Realize losses to offset capital gains. If you have realized capital gains during the year, review your portfolio for losses that could be realized to offset those gains.

5 - Take the Required Minimum Distribution from your IRA. For those at least 70.5, the IRS requires you to take distributions from your traditional IRA and they tell you how much to take. You must do it by year end. It saves you in penalties because failure to do so can cost you as much as 50% of the amount under-withdrawn. This principle also applies to those of any age who have inherited IRAs.

6 - Review your flexible spending accounts. These accounts have a “use it or lose it” provision. If you have money in the account, either book a doctor’s appointment by year end, or at least by your plan’s grace period date. Many allow you until March 15 to spend the funds.

Tax collection happens every year so it is one of the things you can work into a regular schedule in order to maximize your savings and financial security. To learn more about these kinds of tactics talk to your financial advisor.

When a spouse passes and you are named the beneficiary of an IRA, you have a number of options. However there are some specifics to consider related to choosing a spousal rollover.

• If the deceased was 70 years & 6 months or older, they were required to take a Required Minimum Distribution (RMD). Assuming you are younger, selecting the spousal rollover option could delay or stop RMDs on the account. What this does for you is allow your account to continue to grow tax deferred until you reach the target age. Increasing its worth.

• If you are younger than 59 years & 6 months, taking distributions from a spousal rollover would subject you to taxes and a 10% early distribution penalty. Needless to say, if you are young and need the money, establishing an inherited IRA payable to you rather than your spouse is likely a better option.

• When you inherit a Roth IRA, choosing a spousal rollover will not trigger RMDs. However, an inherited Roth IRA that is already payable to the spouse will require RMDs.

• If you were to determine you don’t need some or all of the money in the first to die spouse’s IRA, you could disclaim a portion or all of it. When a spouse disclaims the IRA, the funds are directed to the deceased spouse’s contingent beneficiaries (usually children or grandchildren). What this decision does is it stretches the IRA by resetting the distributions based on the beneficiaries’ life expectancy which should be much longer than yours. More tax-deferred growth means larger IRA balances. This can be an especially wise decision if there are concerns your estate will be subject to estate taxes. This decision requires thought because once done it cannot be undone. The decision must be made within 9 months of your spouse’s death and before you take possession of the assets.

These are just three general rules to consider related to inherited IRAs. The issues surrounding inherited IRAs are complex and should be made after careful deliberation and ideally with the help of your tax or financial advisor.

Balancing Children's College Tuition & Retirement

Many parents struggle when it comes to deciding how to lay aside funds for both college and retirement.

Some questions to consider:

• How long until you retire?
• How financially prepared are you for retirement?
• How long until your children attend college?
• What is the projected total cost for college?

Points to consider:
• Parents should review their current budget. Are there adjustments that need to be made to free up funds for college savings?
• Few pay the full college list price. Most receive some form of scholarship. A 2015 study suggests 90% receive some form of financial aid reducing the cost on average 54%*
• The costs of a 4 year degree vary widely depending on the school your children plan to attend. Take a look at in-state, out-of-state, public and private options. Then set expectations with your student, based on your budget, well in advance of the time when he or she begins applying for acceptance.
• Parents don’t have to fund the full cost. Establish a percentage of the cost that you are comfortable with and stick to it.
• The conversation about funding college is a great way to teach your children lessons about wise financial decision-making. When both parties are allowed to share their expectations, a path can usually be found that satisfies all parties.

One last thing to remember: there is no financial aid for retirement ,so it takes precedence over funding college. Short-changing your retirement could lead to many regrets down the road.

* referred source http://www.thefiscaltimes.com/2015/10/27/Never-Pay-Full-Tuition-3-Ways-Reduce-Cost-College