Creating the Financial Plan for Those with Dementia

To help guide you through the process, researchers at the Massachusetts Institute of Technology AgeLab developed a five-topic framework to discuss financial planning and Alzheimer’s disease.

These five topics cover distinct financial-management issues and caregiving plans. Ideally, you will have these conversations with your loved one and that person’s financial advisor in the mild decline state of Alzheimer’s, or even before the diagnosis. If the disease has progressed beyond this period, you – or the designated power of attorney – may need to have these discussions solely with the advisor. It is important for your and the advisor to understand the source and destination of your loved one’s finances so you can help when the individual may no longer be able to communicate his or her wishes.

Assets
The first thing to do when meeting with a financial advisor is to ensure he or she has a complete view of your loved one’s assets and how they are managed. The advisor should also clearly understand your loved one’s real estate situation, especially with respect to home ownership.

Many older adults incorrectly believe Medicare will cover their long-term care expenses. In reality, Medicare covers care in a skilled nursing facility only for the first 100 days, so people often need Medicaid to cover long-term care costs.

Income and Insurance
After reviewing assets, the focus should shift to your loved one’s income status and insurance policies. You and the advisor should work with your loved one to identify all existing income sources, including benefits, where more income could be generated – such as disability payments, Social Security, annuities, and pensions – and how these payments could be affected by other changes in family circumstances such as the death of a spouse.

Also, review your loved one’s insurance plans to ensure they fit current and future needs and discuss whether additional policies should be considered to fill in coverage gaps.

Intentions
It is imperative to understand your loved one’s wishes and how to ensure they are fulfilled. This can involve legal arrangements that people with dementia can make with their families.

These arrangements include where your loved one wants to live as the disease progresses, how the person wants care to be managed and delivered, and how the individual wants to ensure his or her finances will be safe.

It is difficult for most people to think about disease progression, but talking about this early after diagnosis, in the mild stage of cognitive decline, can help you and other family members learn your loved one’s wishes and help reduce stress later.

Banking Administration
As your loved one’s financial skills erode, he or she will need more help managing day-to-day financial affairs, including tracking expenses and paying bills. Though you may have taken over these responsibilities, you should allow the financial advisor to help ensure your loved one’s banking and fiscal responsibilities are being met, both practically (e.g., bills are being paid on time) and legally.

Care Management
Finally, you and your loved one must discuss how to finance and facilitate care, especially when the disease progresses and caregiving demands intensify. You should talk with your loved one about his or her preference for long-term care (e.g., in-home care, nursing care, assisted living, etc.) and how to pay for it.

Your loved one may be involved in these decisions in the mild stage of cognitive decline; however, you may need to work directly with the advisor fi the disease has advanced to the point where the person can no longer participate in discussions.

Being a caregiver can be overwhelming, and the stress associated with this critical role can make it difficult to take action.

Transamerica’s Caregiver’s Guide to Financial Planning in the Shadow of Dementia, written in collaboration with the MIT AgeLab, was created to help you feel confident when making decisions for, or with, a loved one living with dementia. Work with your financial advisor before taking final action.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: You Can't Retire From Taxes

Your Income Will Affect The Outcome

At first (perhaps second and third) glance, everything about Social Security seems complicated. There are myriad ways to determine when to file and how in order to maximize your household benefits. Then you have to calculate what you’ll owe in federal income tax. Help from your advisor and a knowledgeable accountant will help with the specifics, but here are some guidelines to help you better understand your tax obligations in retirement.

The Conditions
You’ll generally have to pay your regular federal income tax rate on your Social Security benefits if you have other sources of income (e.g., wages, self-employment, interest, dividends and other taxable income that is reported on your tax return). This includes income from retirement accounts such as your 401(k) or pension, but doesn’t include Roth IRA’s because you’ve already paid taxes on that money. If Social Security is your only source of income, then it’s quite likely you won’t have to pay taxes or even file a tax return. The rest of us, though, will have to pay Uncle Sam something. The good news is that no one pays federal income tax on more than 85 percent of his or her benefits. That means everyone gets at least 15 percent of their benefits free of federal income tax. And if you’re under the threshold outlined below, your benefits won’t be taxed at all. The IRS uses something called combined income (sometimes called provisional income) to determine what amount is subject to taxation. Here’s the formula:

Adjusted Gross Income +Nontaxable Interest+1/2 Of Social Security Benefits = Combined Income
Here’s where it gets more complicated, and professional help comes in handy. You’ll note that the chart says “up to,” but what does that mean? If you’re in the 50 percent camp, the amount you include in your taxable income will be the lesser of either 1) half of your annual benefits or 2) half of the difference between your combined income and the IRS threshold. Things get more complex for those paying taxes on 85 percent of their benefits. The IRS offers both a worksheet in Publication 915 (irs.gov/pub/irs-pdf/p915.pdf) and specialized software to help retirees calculate their Social Security tax liability.

Bottom Line
Very few of us enjoy paying taxes, but when it comes to retirement, it’s a sign that you’re not entirely dependent on Social Security as your only source of income. Know, too, that if you owe, you can make estimated quarterly tax payments or choose to have federal taxes withheld using IRS Form W-4V. Talk to your advisor and accountant about how to pay your federal-and possibly state-income taxes without disrupting your financial plan.

Changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

 

Amy & Dan Smith's Planning for Life: Misconceptions about 529 Plans

Just like the kids you’re saving college funds for, 529 plans are often misunderstood. Read on to learn 529 plans are more flexible than you may think. They can be set up by anyone, for anyone, and used for a variety of education costs at all kinds of institutions, not just typical four-year colleges.

Myth: Only parents can establish a 529 account for a child
Reality: Anyone can open and contribute to an account for any beneficiary-no age limits or family connections necessary. Often, grandparents open 529 accounts to help fund college for grandchildren (with the added bonus that their assets won’t be factored into financial aid calculations and they may often benefit from reduced taxes on their estate).

Myth: Once the child is in college, he or she has control of the 529 account.
Reality: The account owner has-and maintains-control of the assets as long as the account exists.

Myth: Contributions to a 529 plan will limit financial aid opportunities.
Reality: While 529 assets can have an effect, it isn’t as significant as the impact of some other educational savings tools. Since 529 assets are under control of the account owner (not the beneficiary), they’re assessed at a maximum rate of 5.64 percent when determining expected family contribution (part of the financial aid formula). In comparison, investment assets in the student’s name, such as UTMA/UGMA accounts, are assessed at 20 percent.

Myth: I have to invest in the plan sponsored by the state where I live.
Reality: You can invest in any state’s 529 plan, but look at what your state’s plan offers first since some provide state tax breaks and other benefits to residents. Plans offered by other states may not provide these same benefits.

Myth: If I invest in a 529 plan, the beneficiary is limited to attending a public, four-year university.
Reality: Funds can be used for qualified expenses at eligible institutions in the U.S. and even some abroad, including private or public colleges, universities, and technical or vocational schools that qualify for federal financial aid. Check the department of education’s website (fafsa.ed.gov) and click School Code search to find qualifying institutions.

Myth: If it turns out the beneficiary doesn’t go to college or receives a scholarship, all the money I’ve invested is lost.
Reality: Since the owner – not the beneficiary- controls the account, you can change who receives the funds to any eligible family member. Another, although less attractive, option is to take a nonqualified withdrawal. Earnings are then subject to the usual taxes and a 10 percent penalty (penalty waived in the instance of a scholarship).

Myth: I can’t participate in a 529 plan because my income is too high.
Reality: Anyone can invest. There is actually no income limit to establish or contribute to a 529 plan.

Earnings in 529 plans are not subject to federal tax and in most case, state tax, so long as you use withdrawals for eligible college expenses, such as tuition, room and board. However, if you withdraw form a 529 plan and do not use it on an eligible college expenses, you generally will be subject to income tax and an additional 10 percent federal tax penalty on earnings. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. You should discuss any tax or legal matters with the appropriate professional. 

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Choosing a Fiduciary

The choice of an executor or trustee is very important and will likely have long range consequences. Family wounds can linger for years from a mistake or unwise conduct of the person in charge of the estate or trust.

An executor is appointed in the will. His/her job is to identify and the collect the assets of the estate, pay the expenses of administration and the debts of the decedent, and then distribute the balance of estate assets as directed in the will. In the course of his duties, he will normally provide two reports to the Commissioner of Accounts: An inventory of estate assets and an accounting showing what he did with the estate assets, including the final distribution to the estate beneficiaries. In Virginia, the executor takes an oath to perform faithfully the duties of his office and signs a pledge (bond) to that effect.

The job of the trustee will depend on the terms of the trust. In a typical living trust used to avoid probate, the trustee may perform a function similar to an executor. That is, after the death of grantor of the trust, he will identify and collect the assets of the trust, pay expenses and debts, and distribute the balance of trust assets to the beneficiaries designated in the trust. While he has a duty to report to the trust beneficiaries, he usually is not required to report to the court or to the Commissioner of Accounts. The job of the trustee in this case is similar to that of the executor: it is temporary and administrative in nature.

A trust, however, may involve more than administration of assets after the death of the grantor. For example, trusts may be established in a will or living trust for the benefit of the children of the decedent. Such trusts may last until the beneficiary reaches a certain age or the trust could be established for the life of the beneficiary. In such case the responsibilities of the trustee are for a period of years and often involve the exercise of discretion. If the trust authorizes the trustee to distribute for the “health, support, maintenance and education” (commonly used language) of the beneficiary, the trustee must decide whether the particular needs of the beneficiary rise to the level where a distribution would be appropriate.

The selection of a trustee for an on-going trust where discretion is required should be given careful consideration. Often grantors will look to one child to be trustee for the trusts of one or more of their other children. While family knowledge is an important factor in selecting a trustee, thought should be given to the impact on the relationship between siblings if one is in charge of the funds available to another.

If the trust is of some duration, a sequence of successor trustees should be established in the document if possible. If not, a mechanism should be provided for appointing successor trustees such as selection by the serving trustee; that is, the appointment can be done while the trustee is serving so that the successor is named in case of death or disability of the serving trustee. Also, the beneficiary(ies) can be authorized to select a successor.

In some cases, it is wise to have a “trust advisor.” This is a person whose role is passive but who monitors the actions of the trustee. For example, if the trust beneficiary is young or otherwise vulnerable, the trustee could be required to submit annual reports to the trust advisor.

An advantage of having family members serve in fiduciary capacities is that they will often waive their right to fees. This is especially important where the estate or trust account is relatively small. A fiduciary is entitled to pay from the estate or trust for professional investment advice, tax preparation and legal advice when needed.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Famous Estate Blunders and How To Avoid Them

These celebrities’ tales are a strong reminder to review your estate plan before it’s too late.

There’s a calm comfort that comes with estate planning: a sense that your family will be taken care of after you pass away (hopefully at a ripe old age). Sadly, it doesn’t always happen that way. Skipping regular estate plan reviews can lead to forgotten details, and these can create confusion and havoc for your family or suck them into a time-consuming court case to iron everything out. Unfortunately, that was the case for these high-profile individuals and their loved ones.

I Got You Babe (And Babe): Back in 1998, after Sonny Bono’s untimely death in a skiing accident, we learned he never wrote a will. And a man claiming to be an illegitimate son attempted to get part of the Bono estate, as did ex-wife Cher, with whom he shared royalties on music they made together. His blended family became a public spectacle at a time of grief and uncertainty.

Avoiding the Oops: Resolve to write a will as soon as possible, and keep your beneficiaries updated. In our opinion, everyone over 18 needs an estate plan that includes a comprehensive will (at the very least) and properly documents your wishes. Remember, life can be unpredictable, especially if you have a complex professional or personal life.

The Girl Without a Ring: Stieg Larson, author of The Girl with the Dragon Tattoo, was devoted to his girlfriend of 32 years. When the Swedish author died without a will, his entire estate was divided between his father and brother in accordance with Swedish law. His beloved was left out, legally speaking.

Avoiding the Oops: Resolve to learn how estate laws affect nontraditional relationships. Learn and understand the laws that govern transfer of property in your chosen state or country, so you can protect the interests of those you love. And don’t presume others will honor your wishes without a written directive. Beyond writing a will, asset titling is especially important when you’re in a “nontraditional” relationship. Legally, your partner may not have the same rights a spouse would.

The Injustice of It All: Former Supreme Court Justice Warren Burger presided over his own will, penning a brief 176-word declaration. But the poorly executed document left his family with more than $450,000 in estate taxes and court fees that could have been avoided.

Avoiding the Oops: Trust a qualified estate planning professional to help you write your will and other estate planning documents. To find one, ask for a referral or visit the American Academy of Estate Planning Attorneys or the National Network of Estate Planning Attorneys. Most of us have limited expertise when it comes to complicated tax and estate planning, and even though dedicated software can help you create the necessary documents, it’s still a good idea to have an estate planning attorney review what you have.

No Laughing Matter: Dark Knight actor Heath Ledger drafted a will naming his siblings and his parents as beneficiaries. Sadly, he didn’t update it after the birth of his daughter, Matilda. When he passed away unexpectedly, there was great confusion about who were the rightful heirs of his estate, and the difficulties played out publicly.

Avoiding the Oops: Resolve to review your plan any time your life changes. Remember that every life event –births, adoptions, disability, deaths, marriages, divorces, even moving-should trigger a review and update your estate documents. If any of these events occur in the life of a beloved beneficiary, take note. That requires another look, too.

Learning from these celebrities’ experiences can help you avoid estate blunders of your own. Resolve to review your documents regularly and put new ones in place when appropriate. Don’t forget to take into account any changes that could impact your plan, including changes in family, personal interests, wealth and tax law. And talk to your financial and estate planning professionals – you may not recognize a change, but your advisors might.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Five Key Retirement Questions

Beyond asking yourself where you see yourself and even what your lifelong goals are, effective retirement and longevity planning begs some very big questions. Review the points below and consider how housing, transportation and health considerations all play a role in planning for your future.

Where Will You Live?
Whether you’re bound for a dream home or planning to stay put, housing likely will be your biggest expense in retirement. While aging in the comfort of your own home would be ideal, modifications to the home-or your plan-could be necessary as mobility and transportation challenges arise. Points to consider:
Do you want to stay in your home? Will it need to be modified?
What housing options are available to you, and what will they cost?
Would you want to downsize? Relocate to a pedestrian friendly neighborhood?
87 percent of adults age 65+ want to stay in their current home and community as they age. (AARP PPI, “What is Livable? Community preferences of Older Adults,” April 2014)

How Will You Get Around?
It may come as a surprise, but transportation is the second largest expense for individuals older than 65 and accounts for about 15 percent of their annual expenditures, according to the bureau of Labor Statistics. That’s why we make sure to account for it as a part of your long-term financial plan. Points to consider:
How will you get to your favorite places in retirement?
Who will assist you if you can’t drive yourself somewhere?
What transportation options are available in your area?

How Will You Safeguard Your Health?
Your health and your finances are intertwined in complex ways. Most expect Medicare to pay for their healthcare expenses in retirement. But, in reality, Medicare pays only 60 percent of healthcare costs* you will have premiums, copays and deductibles. As you age, healthcare costs can add up. Points to consider:
Do you have an existing condition? What will treatment cost over the long term?
Do you know what costs Medicare will cover?
How will you pay for what Medicare doesn’t?
Have you considered Medigap?

Will You Have Enough?
Giving yourself every opportunity to save enough for a long, fulfilling life requires careful, detailed longevity planning-strategies for saving, investing and taking withdrawals. Making the right Social Security claiming decisions is vital to optimizing your retirement income strategy. Points to consider:
When are you planning to retire?
What sources of income will you have in retirement?
How much income will you need in retirement?

Who Will Take Care of You?
As we all live longer, chances are you may, at some point, provide care for a loved one or receive care yourself. Becoming a caregiver can be not only stressful, but also can have financial consequences if it requires taking time away from work. And long-term care is not covered by Medicare. Points to consider:
Do you understand the full impact of being a caregiver?
How will you get the care you need as you age?
Should you consider long-term care insurance?
70 percent of Americans age 65 in 2014 will need some form of long-term care.
(Department of Health and Human Services)

As you continue planning for your future, your financial advisor can serve as your center point, helping you consider every facet of a long and happy retirement – from healthcare and caregiving to transportation and housing.
*Employee Benefit Research Institute, 2015

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: It's Time to Review Your Estate Plan

Beginners and billionaires alike should refresh their knowledge of these basic estate planning terms and concepts.

The word “estate” tends to conjure up images of billionaires and aristocrats, but estate planning is not just for the wealthy. It’s widely believed that estate planning in one form or another is needed by everyone, and it doesn’t need to be sophisticated, complex or costly to help fulfill final wishes and protect assets. Whether you are a prince or a pauper, refreshing on estate planning basics can help make sure your legacy is left the way you intended.

Keep It Simple
An estate is the net worth of a person at any point, including all land, possessions and other assets. A good estate plan passes on your assets to intended recipients in a manner and timing that reflects your wishes.

A will is not sufficient to protect your assets. Wills are outdated as a form of comprehensive estate planning because they only take effect at death- and with life expectancies higher than ever, the challenge of protecting your assets begins much earlier. An estate plan should ensure that the cost of long-term care for a disability won’t devour your assets, which could occur well before a will would come into play.

Your estate plan should protect your assets from nursing homes. This can be achieved by purchasing a long-term care insurance policy. The IRS considers the insurance premiums for “qualified long-term care plans” to be medical expenses, which means it’s possible to deduct them from federal taxes. Many states offer tax breaks as well. And because benefits paid under long-term care insurance policies generally aren’t taxable, long-term care insurance can help avoid a nursing home laying claim to all your assets until Medicaid kicks in. Check with a tax advisor to be sure.

Power of attorney specifies who will represent you in the event that you’re unable to make or communicate decisions about all aspects of your healthcare. Assigning joint power of attorney to two parties allows one to keep the other in check. The “two heads are better than one” approach acts as a safeguard in case one individual becomes unable or unwilling to make important decisions. Common options include selecting two family members, a family member and a lawyer, or a bank or trust company.

A durable power of attorney differs from a traditional power of attorney in that it continues the agency relationship beyond the incapacity of the principal.

The laws for creating a power of attorney vary from state to state, but there are certain general guidelines to follow. If no power of attorney is appointed, the state appoints guardians, conservators or committees, depending upon local state law. Before you or your loved ones sign any documents, however, consult with an attorney concerning all applicable laws and regulations.

While most of us will never have huge fortunes to worry about, we should still pay attention to our own legacies, how we’ll protect them, and how they’ll affect our loved ones. A legacy is not just about leaving what you earned- it’s about leaving what you’ve learned.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Investing in the Family Stock

Family relationships are usually not considered under the rubric of “investments”.  Yet, the personal gain and loss from family relationships is much more significant than economic return from stocks and bonds.

Taking time out to relate to a person without a self-promoting agenda is counter-cultural, yet such an investment of time in the younger generation can demonstrate an alternative to the current social paradigm, and create a rich, personal reward.  Think of an aunt, uncle or grandparent who stands out in your memory.  I bet the image is not one of a super-producer who accomplished great feats in the marketplace.  Rather, those who touch us most deeply are those who take time to care for us on a personal level.

Consider the grandparent who has some time and a little money to invest.  What would be the return on the investment of bringing family together for a few days at a retreat facility or beach house?  Or taking a grandchild or two for a weekend in D.C. or N.Y.?

Which creates greater value in the long term: A few thousand dollars contributed to a 529 Plan, or the same amount spent for a special outing with parent/grandparent and child? Investing in a memory bank can produce a lifelong return.

As one who has practiced law for four decades, dealing with families and estate planning, I can say without hesitation that the richest clients who come through our offices are those who have invested wisely in developing close personal relationships, especially within the family. Such folks have more wealth than those with huge financial net worth figures.  A legacy of treasured memories is a rich heritage.

As we begin a new year, it might be wise to consider how we might maximize our family ties. Time, energy and even money invested can produce great dividends in the long term.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Early Returns - How U. S. Markets Reacted to the Presidential Election

On November 8, 2016, Republican candidate Donald J. Trump won a closely contested election for president of the United States.  Late on election night, when it became evident that Trump was likely to win, despite consistently trailing in the polls, foreign markets went into a deep dive. (fn. 1.) Many observers expected a similar reaction when the U.S. stock market opened on November 9, but after an initial drop, the S & P 500, Dow Jones Industrial Average, and NASDAQ rose throughout the day; and all three indexes closed up more than one percent. (fn. 2.) Although this was unexpected after the late-night surprise, it actually continued a two-day surge that began when Democratic Hillary Clinton was expected to win the election. (fn. 3.)

The market was mixed but steady the following day, November 10, with the Dow again up more than one percent, a small increase in the broader S & P 500, and a moderate decline in the NASDAQ which tends to be more volatile due to its inclusion of smaller, technology-driven companies. On November 11, the NASDAQ recovered its loss, the Dow was slightly higher, and the S&P 500 was slightly lower – not unusual after a week of rising stock prices. (fn.4.)

On the other hand, bond prices fell steeply the day after the election, and the yield on the benchmark 10-year Treasury note, which rises as prices fall, jumped more than two percent for the day. This, too, was a surprise, because Treasuries are generally seen as a safe haven in times of uncertainty. But on the day after the election, investors were more interested in selling Treasuries than buying them. (fn. 5.) The Treasury sell-off continued on November 10. (fn. 6.) (Bond markets were closed on Nov. 11 in honor of Veterans Day.)

The conciliatory tone of Trump’s acceptance speech, Clinton’s concession speech, and remarks by President Obama all indicate there will be an orderly transfer of power, which may have helped calm the markets.

Here are some additional implications that might be drawn from the initial market reaction:
First, although the Trump presidency was unexpected and his economic policies are untested, rising stock prices suggest that investors may be optimistic that his promised pro-business agenda could help the upward market trend of the last few years. Investors like clarity and consistency; and the fact that the same party will control the White House and Congress might create a more productive and predictable working relationship. (fn. 7.)  At the same time, fundamental differences between the president-elect and the Republican Congress suggest that any changes may be more measured than originally anticipated. (fn. 8.)

Second, in this initial transition stage, money flowing out of Treasuries suggests that bond investors may see a Trump presidency as leading to higher inflation and higher interest rates, due to a combination of more protective trade policies and heavier government borrowing to fund infrastructure spending, and reduced taxes for individuals and corporations. Declining bond prices might also reflect a belief that the Federal Reserve may raise interest rates at its December meeting, despite the political surprise. (fn. 9.)

Is the U.S. Economy strong enough to withstand any headwinds that arise from a changing administration? That remains to be seen, but fundamental economic indicators have been solid, and overreacting to political events is unwise. The most stable approach in changing times is generally to maintain a well-diversified portfolio using a strategy appropriate for your time frame, personal goals and risk tolerance.

1) CNN Money, Nov. 9, 2016. 2), 5), and 7) MarketWatch, Nov. 9, 2016. 3) and 4) Yahoo! Finance, Nov. 11, 2016. 6) Marketwatch, Nov. 10, 2016. 8) New York Times, Nov. 9, 2016. 9) CNBC.com, Nov. 9, 2016. 

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

 

Amy & Dan Smith's Planning for Life: Guns and Estate Planning "Gun Trusts"

Due to the growth of gun ownership in the United States, there is the increased likelihood that estates will include guns. A thorough discussion of the application of federal and state gun laws is not possible in this article. However, responsible estate administrators can unknowingly violate gun laws, leading to “accidental felonies.” Thus, some information may be helpful.

There are two categories of weapons as to which different restrictions apply. The highly regulated category is referred to as “NFA Weapons.” These include short-barreled rifles and shot guns, fully automatic machine guns, silencers and components to build them, any other weapon (eg, pen and cane guns), and destructive devices (eg, grenades and missiles). All transfers of an NFA weapon must be approved by the ATF (Bureau of Alcohol, Tobacco, Firearms and Explosives). Thus, if an executor innocently delivers an NFA weapon (or even loans such a weapon) without ATF approval, he/she has committed a felony which carries possible imprisonment and significant fines.

All NFA weapons must be registered. An unregistered NFA weapon (eg, a German machine gun grandfather brought back from WWII) is contraband and cannot be registered by the estate. The local ATF office should be contacted to arrange for abandonment.

Virtually all household guns, such as hunting rifles, sporting shotguns, revolvers and semi-automatic pistols, are non-NFA weapons. However, regulations still apply and can be traps for the unwary. For example, it is unlawful for certain persons, known collectively as “prohibited persons,” to possess firearms, and it is a felony to transfer a firearm to a person who the transferor knows or “has reasonable cause to believe” is a “prohibited person.” The prohibited person list includes anyone who has ever been convicted of a crime punishable for more than a year; is an unlawful user of or addicted to any controlled substance; has been adjudicated as a mental defective or committed to any mental institution; has ever renounced his/her US citizenship; is subject to a court order restraining the person from harassing, stalking or threatening an intimate partner or child of the intimate partner; or who has been convicted of a misdemeanor crime of domestic violence.

As an example, assume that Dad’s estate contains some non-NFA shotguns which Dad used for hunting. The transfer of these shotguns does not need to be registered with the ATF because they are not NFA weapons. However, the estate administrator, one of Dad’s sons, gives one of the guns to his brother who the administrator has reason to believe is abusing a controlled substance. In such case, the administrator is guilty of a felony.

The Gun Trust is a trust created to purchase and hold firearms. Usually a Gun Trust is used for NFA weapons, although it can hold non-NFA weapons as well. The Gun Trust is designed to prevent inadvertent violation of gun laws. It will include requirements for Trustee conduct, specifically to conform to existing state and federal laws, and will contain directions for the transfer of weapons following the death of the grantor of the trust.

An ATF official stated to your writer recently that, in his estimation, it is likely that only 4-6 percent of all weapons privately possessed in the US are NFA weapons. The vast majority of guns are of the household type. Accordingly, the need for Gun Trusts is rather limited. He also stated that there is a proliferation of Gun Trust forms being downloaded and submitted with applications for transfers of NFA weapons. The forms are the same, even to the point of having the same fictitious beneficiaries. (See this column, Do It Yourself Legal Products – Bargain or Trap, June 1, 2016).

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.