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Your Estate Plan and Picking Powers of Attorney

An estate plan doesn’t speak to only your after-death wishes; it helps determine how you’ll be taken care of during your life if you’re incapacitated. Estate plans include powers of attorney who step in to take care of you in the event you’re incapacitated, a will and sometimes trusts. If you haven’t chosen a healthcare power of attorney, these considerations might be helpful:

Choose somebody who’s going to be the best person, geographically, to help you. While oftentimes that could be your spouse, if you’re single or childfree, you might choose a sibling or close friend.
Before you make anything final, you need to talk to this person to ask if they’re comfortable with this responsibility.
Identify your wishes for your care. Healthcare power of attorney gives power, but not instruction. You’ll want to establish a living will to specify what your end-of-life choices are – for example you don’t want to be on a ventilator or feeding tube.
Share the power of attorney with your doctor. You want your medical professionals to be in the know as well.

It’s always a good idea to revisit your choices every few years to ensure you still have the right people in place. Approach financial powers of attorney in a similar way:

Choose somebody who can be there to take care of your bills and finances and ensure they’re on board and ready for the responsibility.
Pick a trustworthy person. Unfortunately, that isn’t always your children or family. Give hard thought to your kids’ situations and whether they might make good choices. Unfortunately, I’ve seen way too many abuses and oftentimes it’s close family members. The National Council on Aging reports that 60% of elder abuse cases¹ are close family members or spouses.

Putting those powers of attorney in place is critical. If you don’t plan proactively and become incapacitated, your loved ones will have to go through the courts to get conservatorship or guardianship to be able to help you.

Crafting and Communicating Your Estate Plan in The Family Meeting

Estate planning and communicating it to your family happens on a spectrum. On one side is the logistics – here are where the documents are, here are the passwords. On the other side is legacy planning – here are my values and here’s how I want you to continue my legacy. Wherever you fall on that spectrum, it’s your responsibility to communicate that to your family. And that’s where having a series of regular family meetings comes in. You don’t have to run these meetings yourself – you can utilize a facilitator. You also don’t have to dive into specific numbers or amounts you’re leaving to specific people. A facilitator is especially helpful if you anticipate there might be some conflict or concern over the way you're setting up your estate. A good facilitator would be your financial advisor, but if they’re not comfortable with the task, ask them to recommend somebody. The goal of these meetings is to give your family enough information to minimize chaos if something happens to you. The first thing to do is to set an agenda that outlines what you’re going to talk about. You don’t want your family to be confused. Be clear: “This meeting is to talk about my estate plan.” At the minimum, share:

Where your estate planning documents are located
Passwords
Information for your financial advisor, estate planning attorney and CPA

Contact information for any other professionals to call
Powers of attorney

Some people are very open and want to share all the details, whereas others decide they want to share the bare minimum. But keep in mind that the more you share, the better off your family will be. After that initial meeting, set a cadence of regular meetings. These don’t have to dive into estate planning specifically, but you can tackle other topics while also weaving in estate planning. These meetings have the potential to bring your family closer together. It also can reduce feelings of overwhelm – this is difficult information and takes time to sink in. The meetings can move toward preparing your heirs for their inheritance. First, talk to your children about wealth – how you expect them to manage it, how you make your financial decisions so your heirs can learn from you. One idea is to start having them work with you to manage some of their inheritance. For example, in his book “A Spectrum of Legacies,” Mark Weber wrote about one family who gave each adult child three $5,000 gifts. The first $5,000 could be used for anything, the second $5,000 would be invested, and the final $5,000 would be contributed to a donor-advised fund with the child’s name on it. To keep the process engaging, they added an incentive: The child who managed the investment account the best won an additional $5,000 at the end of a three-year period. The children had to share how they were investing and what they were learning on a regular basis. In addition, each child had to share how they were spending the donor-advised funds – to what organizations and how their gift might make an impact. Each child “owned” one of the categories and led that part of the family meeting. The parents felt this was a great way to teach their children about managing wealth, and it also gave them a platform to talk about other topics, such as estate planning. While that might not be a feasible competition for every family, it’s just an idea to spark some creativity of your own. You can make these meetings interesting. Since life changes or new policy could impact your estate plan, communicating your plan is never one-and-done.

What About Your Parents’ Estate Plan?

You’ve done everything you need to do, but realize you have no idea what’s in your parents' estate plan. The best way to approach this is to simply say: “Tell me about your estate plan.” If you find out they don’t have an estate plan, ask them if you can introduce them to an estate planning attorney who can help them identify their goals and start the process. Explain the risks of not having an estate plan – emphasize that as their child, you don’t want to have to go to the courts to get guardianship or conservatorship to be able to take care of them. Explain to them that without an estate plan, the state is going to decide how their assets will transfer. If you have siblings, include them in the conversation. You don’t want to be seen as trying to get information they’re not privy to and create a negative situation.

The Last Word: Communication is Key to Estate Planning

Communication is the key to estate planning. The more we communicate, the better the transition will be. It’s up to you to make that happen but know there are resources and great people to guide you throughout that process. Your financial professionals can help you do that. Reach out today to schedule a consultation. “Get the Facts on Elder Abuse” National Council on Aging, 23 Feb 2021. https://www.ncoa.org/article/get-the-facts-on-elder-abuse [post_title] => How to Talk to Your Family About Your Estate Plan and Avoid Complicating Their Grief [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => how-to-talk-to-your-family-about-your-estate-plan-and-avoid-complicating-their-grief [to_ping] => [pinged] => [post_modified] => 2022-06-29 09:57:14 [post_modified_gmt] => 2022-06-29 14:57:14 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=65019 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [1] => WP_Post Object ( [ID] => 65498 [post_author] => 182109 [post_date] => 2022-06-15 09:39:02 [post_date_gmt] => 2022-06-15 14:39:02 [post_content] => It's almost impossible not to feel anxious at the dips and dives the stock market has been taking recently, compounded by relentless inflation-focused headlines. That's why you might be surprised to learn there's a lot of positive news to be had, despite the market uncertainty. Read on for three encouraging themes that illustrate the long-term benefits of the stock market and why now is the time to recommit to your financial plan.

Let History Be Your Guide

We'll start with the bad news, because it would be naïve to ignore certain realities. Yes, the market has just endured the worst start to the calendar year in decades. And yes, it's the first time in 60 years both stocks and bonds have declined simultaneously. With that out of the way, let's turn to the favorable news. Although market pullbacks may continue for the foreseeable future, it's vital to keep in mind that these short spurts don't define the market over the long haul. When viewed daily, markets advance approximately six out of every 10 days, and if you take a calendar-year perspective, the stock market has gone up far more often than it has gone down. It's reassuring to realize that fluctuations occur regularly, yet these slumps are usually overcome in short order. In fact, while drawdowns are common, so are recoveries.

Dig Deeper into What’s Causing Inflation

While inflation itself isn't positive, its story is far more than just higher gas prices and food costs. Some of today's rising inflation is caused by an array of factors that may otherwise constitute a strong economy. Again, we'll dispense with the bad news first. There are indeed some negatives propelling inflation, including the lingering effects of COVID-19, continued supply chain disruptions, the Russia/Ukraine conflict and the downstream impact of the stimulus payments during the depths of the pandemic that flooded the economy with money. And while those are all hurdles to overcome, what many miss is that inflationary pressures also stem from beneficial market forces. Here are five less talked about positive contributors to today's inflation:

Surging retail activity – As the pandemic wanes and the world reopens, consumers are eager to get back out there and spend, whether it's planning a well-earned vacation or enjoying an evening out with friends. Pent-up demand for goods and services – by all of us, at the same time – allows companies to raise prices. While that ultimately creates inflation, the root cause is a positive one: strong consumer spending.

Increased home values – Skyrocketing housing prices are burdensome to those aiming to buy their first home or relocate to a highly desirable area. But they are music to the ears of the current lucky homeowners who have seen their equity swell. Along the way, many have refinanced at historically low interest rates, which means their net worth has also increased as home values rose.

Higher net worth – Those soaring home values are just one part of our prosperity.  2021 saw the biggest increase in Americans' net worth in history thanks to elevated asset prices and rising stock prices. Although we’ve given a bit back as the market dipped, it still represents bigger gains than any other year.

Rising business spending – All that pent-up demand is fueling a commensurate ramp up for businesses as they aim to meet market interest. That leads to investments in new machinery, factories, inventory and, of course, talent. This creates demand for goods and thus pressure on inflation.

Fastest-ever labor recovery – One sign of the health of the economy is how long it takes for the job market to recover – and the pace today is blistering. For comparison, it took at least six years after the most recent recession for jobs to become plentiful, and today the market has almost fully recovered in the two years since shutdowns were prevalent. Currently, there are approximately two available jobs for every unemployed American, which is the best ratio on record. By contrast, in 2010, there were four unemployed workers for every one available job.

All these factors are intertwined. Consumers are confident about their net worth and good jobs. Which means businesses need to ramp up production. Which leads to more great jobs that offer higher wages as businesses compete for staff. The result: We're spending our money quickly, which is leading to inflation. And while accelerating rents and surging gas prices are a real burden for Americans, there are also some potentially positive aspects that are materializing alongside these higher prices.

Remember, You're in It for the Long Haul

Looking at the market day by day can incite elation, then despair. That's why it's important to note that it doesn't matter what happens on one day – it matters what happens on all the days.

The longer your time horizon – that is, the time until you need to tap your accounts in retirement – the less likely you are to experience a negative return. Consider this perspective: Since 1970, the average rolling annual period saw advancement from stocks around 80% of the time. However, over rolling 10-year holding periods, stocks are up over 92% of the time, and they're higher 100% of the time for all rolling 15-year periods. That means those with a greater than 10-year investing time horizon have an excellent chance of possibly achieving positive returns. But here's a caveat: The cliché that it's not about timing the market, but time in the market is true. Since 1988, just missing a few of the best days in the market has resulted in significant lost opportunity in long-term returns. And over time, many of these best-performing days occur around and after a bout of market volatility, which underscores the importance of remaining committed to your investment plan. Finally, remember that progress happens too slowly to notice, but setbacks happen too quickly to ignore. Here's what we mean: In 2008, the market quickly lost 38%. And it was a huge deal. Books were written about it, and Congressional hearings were held. The market then slowly tripled from 2009 to 2015, and hardly anyone noticed. The lesson is that sticking with your investment plan is the key to a solid financial future. The market is built to recover, which is why investors should keep a long-term mindset. Stay focused and determined and always keep the big picture in mind. Slow and steady wins the race. Your financial advisor is here for you.   Always remember: Your financial advisor is here for you in good times and bad. They can answer your questions and provide objective guidance to keep your mindset fixed on the longer term. If you’re not working with an advisor, now is a great time to get support. Let us help you connect with a professional who will tailor your plan to your existing needs and long-term goals.  The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results. All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. [post_title] => Tips to Help You Stay Strong During Market Volatility [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => tips-to-help-you-stay-strong-during-market-volatility [to_ping] => [pinged] => [post_modified] => 2022-06-21 11:34:22 [post_modified_gmt] => 2022-06-21 16:34:22 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64991 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [2] => WP_Post Object ( [ID] => 65484 [post_author] => 182131 [post_date] => 2022-06-14 07:50:41 [post_date_gmt] => 2022-06-14 12:50:41 [post_content] =>

Craig Lemoine, Director of Consumer Investment Research I often find college savings at the top of my pile of financial stressors. Unless I find a money tree in my backyard, my oldest child is going to turn 18 well before I retire. We all have different values surrounding the education of our children or grandchildren. Some of us want to pay as much of our children’s college costs as we can. Others may believe in the power of being self-made, while some families fall in between. I proudly fall in the middle. College costs continued to rise for the 2021/2022 academic year. The average annual tuition and fee cost for a public in-state university is $10,740, rising to $27,560 for an out-of-state school and cresting at $38,070 for private schools. These costs do not include living expenses, housing or optional fees. Fold in the extras of everyday living, and college costs grow to around $30,000 annually per in-state student. These numbers quickly scale, compound and backflip into being overwhelming. Using time value of money techniques helps provide a path to clarity. Assuming the costs mentioned above, the ability to earn slightly more than inflationary pressure (3.45%) while providing four years of college costs would require just over $110,300 set aside for a student beginning college next year. These costs increase for students going out of state, attending private schools or in higher-cost-of-living areas. Americans tend to pay for college through a combination of parents pitching in from their income (40%), college savings plan distributions (11%), scholarships and grants (25%), student loans (11%), children utilizing their income and assets (8%) and other resources (5%). Every student and their support network will find a unique path to paying for college. These percentages help provide a framework of developing your own college savings plan. Developing a college plan is the launching pad to determine how much to save and what types of accounts to use. My personal goal is to save enough to provide for each of my children’s first two years at a public, in-state university. Beginning their junior year, my kiddos will need to pay their own housing and living expenses. This goal reflects my values and income and strikes a balance with completing long-term goals. Everyone is going to have a different perspective and starting point for college planning. The most common tool used for reaching college savings goals is a 529 plan – 37% of American families reported using a 529 plan to pay college costs in the prior academic year, with average account distributions of just under $8,000. Usage of 529 plans was more common among parents using retirement accounts or other investment vehicles, and they have quickly become America’s preferred method of saving for college, with Morningstar reporting $363 billion dollars held across 61 state plans in 2020. Why do we love 529 plans? They provide investors with immediate diversification, age-weighted portfolios and low costs. These plans often come with a state-income tax deduction on contributions, provide tax-deferred growth and state oversight, and allow owners to change plan beneficiaries to family members tax-free. Plans can be opened by an adult (referred to as the account owner), who names a beneficiary. The owner of the account (generally a parent or grandparent) controls investment options and can name and change the plan beneficiary (generally a child). The plan beneficiary receives tax-favored distributions based on their educational expenses. There are two varieties of 529 plans: college savings plans and prepaid tuition plans. While every state offers the college savings plan option, not all states offer a prepaid tuition plan. Prepaid tuition plans provide the option of paying for future college credit hours at a fixed cost. The cost is often hefty, but the plan invests dollars with the goal of paying future college costs. Prepaid tuition plans are attractive to conservative investors with a nest egg to invest. College savings plans allow owners to choose investment options from a slate provided by the plan administrator. These plans feature age-weighted mutual fund portfolios that grow more conservative as a beneficiary approaches traditional college age. Owners can also choose traditional mutual fund options based on plan offerings. If the account is used to provide qualified education expenses for a beneficiary, distributions are income tax-free. Qualified expenses include:

College tuition
College fees
Required supplies and equipment
Computer and internet access
K-12 tuition and fees (up to $10,000)

College savings plans wilt when proceeds are used to provide non-qualified expenses. Non-qualified expense gains are taxed as ordinary income and, with little exception (exceptions include offsetting beneficiary scholarships, military service, disability or death), assessed a 10% penalty. Non-qualified 529 expenses include:

Travel expenses to and from college
Car payments and upkeep
Car insurance costs
Expenses associated with a cellphone
Fraternity, sorority or other club dues
An allowance, gifts or other support

Committing entirely to 529 accounts for your college savings plan guarantees you will be paying some costs out of your cash flow while children are in school, or will find yourself making tax-heavy distributions from the account. Taxable distributions raise owner income, which will possibly lower financial aid eligibility, creating a ripple of pain. A better approach may be a core and satellite strategy. The core of a college savings strategy remains a 529 plan, but the satellite can take many forms.

A rocky satellite is a Uniform Gift to Minors Act (UGMA) or Uniform Trust to Minors Act (UTMA) account. These accounts allow minors to begin investing along with a custodian. Custodians can purchase individual equities, bonds, cryptocurrency, mutual funds or real estate. The custodian rolls off the account at the child’s age of majority (18 or 21, based on state of residence), leaving the child as the sole owner of account assets. UTMA and UGMA accounts are great at passing wealth to children, but they do not make a strong satellite in a college savings plan. UTMA/UGMA accounts can reduce financial aid more than other options, though they may be subject to parent income tax rates, and a child will control account assets once they turn 18 or 21.
If your child works part-time, a Roth IRA in the child’s name is an outstanding college savings satellite. As long as children have earned income, they can make after-tax contributions to a Roth IRA up to $6,000 annually. The Roth IRA will grow tax-free and account basis (initial contributions) can be used at any time. Roth IRAs are not considered in a financial aid calculation. Roth accounts can be invested in a range of investment options, including individual equities, bonds, mutual funds and cryptocurrency. Roth IRAs pair as an extraordinary satellite to 529 accounts. Consider the following example:

Victoria, 14, spent her summer mowing yards, house sitting and dog walking. She recorded her income and expenses and earned $5,500 over the summer. Victoria’s parents then opened a Roth IRA for her and bought two shares of Stock A at $2,750 a share. Assuming Victoria continues working through high school and her parents continue contributing, then by the time she begins college, her Roth IRA would have eight shares of Stock A and her account would have a cost basis of $22,000 ($5,500 multiplied by 4 summers). Victoria can sell shares as needed to provide supplemental expenses, and can take up to $22,000 out of the account without incurring any penalty. Shares will (hopefully) continue to appreciate in value, and Victoria can make additional contributions to the account if she continues working.

If your child does not have any earned income, consider opening a parent-owned non-qualified brokerage account to help save for non-529 expenses. The account will be subject to tax on dividends, interest and gains, but there are no asset or usage restrictions. Consider growth equities to limit income tax exposure, and choose positions not offered by the larger 529 college savings plan. Non-qualified brokerage accounts make strong satellites when orbiting with a 529 account.
Exotic satellites include cash value life insurance policies, rental properties and other real estate. They may have higher costs and require a time commitment, but can pair nicely with a core 529 account balance.

Add the moon to your college savings plan. A financial adviser can help you personalize a core/satellite approach. Meeting with a financial planner can also help you set a course of action, decide on weekly savings targets and develop an asset allocation built around your college savings needs. Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives. These examples are hypothetical only, and do not represent the actual performance of any particular investments. Investments in securities do not offer a fixed rate of return. Principal, yield and/or share price will fluctuate with changes in market conditions and when sold or redeemed, you may receive more or less than originally invested. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes. Before investing, the investor should consider whether the investor's or beneficiary's home state offers any state tax or other benefits available only from that state's 529 Plan. [post_title] => 529s, Roth IRAs and Other Strategies for Your College Savings Plan [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => 529s-roth-iras-and-other-strategies-for-your-college-savings-plan [to_ping] => [pinged] => [post_modified] => 2022-06-21 09:11:04 [post_modified_gmt] => 2022-06-21 14:11:04 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64988 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [3] => WP_Post Object ( [ID] => 65451 [post_author] => 182131 [post_date] => 2022-06-07 08:18:50 [post_date_gmt] => 2022-06-07 13:18:50 [post_content] => Craig Lemoine, Director of Consumer Investment Research

Ask kids what they think money is, and you get some interesting responses. Over the last month, I asked my friends, family and neighbors if I could pose a question to their children about money. Their answers covered it all – insightful, surprisingly robust and hysterical. Ellie (4): “Cash. It can pay for stuff, like Pop Tarts.” Kate (6): “It’s how you pay for what you want.” Lily (6): “Money is something that you can use. It can really help you get something important or things you really wanted. If you have a friend over, ask them what they want. You have to agree on what you both buy.” JJ (8): “Money is paper, it has writing on it to tell you how much you have on it. And you should spend it wisely.” Brady (10): “Money provides opportunities and the ability to explore something new.” Amelia (12): “Green paper that’s backed by the government.” Kellen (13): “Money is a waste of time, but it can bring happiness sometimes.” Elizabeth (14): “Something you earn so you can spend.” Chloe (15): “Money is a piece of valuable paper, backed by the government. You get paid by working.” Spencer (16): “Money is a form of currency.” Ryan (18): “The means by which you purchase goods and services. If someone asked me what to do with money, I’d tell them to save half and spend half on something you want.” Two years ago, I realized that we had not done well teaching our children about money. Within one month, both an iPad and a Kindle Fire were left outside in the rain. The wet electronics are not my failure; my stinging failure was the quote that followed: “Daddy, you can just buy us new ones.” I promptly took my girls outside to find the Money Tree. My youngest ran from tree to tree with hope and anticipation. Money is not natural to kids. They don’t learn how to budget along with crawling, though I wish they would. Parents are the primary source of financial literacy for children. While some schools are better than others at teaching financial literacy, parents remain the cornerstone of educating children about personal finances. Some of us genuinely struggle talking about money. But teenagers who are educated about personal finance are more likely to have lower levels of credit card debt, experience less negative stress and are more likely to succeed in college than those with lower levels of financial literacy. Money is ingrained in our everyday lives. Talking about money means talking about compassion, diversity, charity, privilege and so much more.

Get Started Teaching Your Kids Money Management

Fantastic nonprofit organizations such as Jumpstart, Junior Achievement, The National Foundation for Financial Education and Money Savvy Kids have thousands of templates and resources to help you start conversations about money with your kids. Consider the Million Bazillion and the Planet Money Podcast as repositories of entertaining personal finance content.

Budget in the Open

Budget in front of the kids. Talk about spending and savings openly. They may not participate in the process, but talking in the open takes away the taboo of not discussing money. As children become older, let them help make some family budgeting decisions. Making safe choices around money builds the confidence and discipline to make wise independent choices about money as they get older.

Practice Choices in the Moment

The next time you make a gift purchase, set a budget and let the kids choose. If my plan is to spend $20 on a birthday gift, I’ll hand cash to my girls and let them pick. As a result, we have some fantastic conversations about math, budgeting and priorities in the middle of Target.

Demonstrate Work Ethic and Hustle

I don’t pay an allowance for daily chores, but I am open to giving the girls opportunities for making money by going above and beyond. In financial services, we often hear, “You can’t teach hustle.” But making hustle fun when children are young goes a long way to carrying that work ethic as they are adults.

Have Conversations with Kids About Money Priorities

On my birthday, I received a card from a family member with a $100 bill in it. I showed the girls what $100 looked like and didn’t think much more about it. A few weeks later, one of them saw a commercial for a Barbie Dream House and, despite my best objections, stated “Daddy, you have enough money to buy it, don’t you remember?” We had a wonderful conversation about the house, Happy Meals, the dogs and dance class. The same money must pay for all our costs, and maybe they could begin saving for this two-story bungalow on their own.

Teach Kids to Budget with Give, Spend, and Save

I’ve seen envelopes, mason jars or piggy banks work toward instilling a greater financial understanding. Provide each child with three places they can store money.

The first jar for giving is money kids can use to enhance the world around them. Use money from the jar regularly to provide an offering to a place of worship, gift to a food pantry or donation homeless shelter, museum or charity meaningful to your family.

Label the second jar spending and give your children discretion over how to use it. Providing control helps instill the power of choices, small lessons in missing out and scarcity.
The saving jar is for mutually agreed upon goals between parents and children. As they get older, saving might mean a down payment toward a vehicle or offsetting college costs.

Talk About Credit Cards

I almost always pay with my credit card while shopping with my kids. I try to be very clear about what a credit card is: I’m borrowing money from the bank to pay the grocery store, and I will have to pay the bank back later from my paycheck. We pass a bank on the way to school, and every now and then the girls initiate a conversation to ask if I have paid the bank back yet. Six may be young age to instill the lesson that credit cards are for convenience and not credit, but some progress is better than no progress.

Talk About Bank Accounts, Venmo, PayPal and Whatever Comes Next

Open bank accounts with your minor children. Teach them how to check the balance and reconcile receipts. Share about overdraft fees and learn about the tools they are using. Most of my students use Venmo. While instant cashless transaction apps are new, they also require budgeting, goal setting and conversations.

Teach Kids Responsible Investing

Find companies, toys, shoes or amusement park empires your children enjoy. Most public companies have the ability to open dividend purchase plans (DPPs) or dividend reinvestment plans (DRPs) directly through their websites. As children evolve past putting money in a savings jar, encourage them to buy individual shares. DPP and DRP programs generally allow parents to open accounts alongside their children (Uniform Gift to Minors Accounts or Uniform Trusts to Minors Accounts). Dividends paid by these stocks will accumulate, building excitement about stocks and investing and helping children develop a critical eye. Setting our children up with realistic expectations about investing can help shield them from taking huge risks on trading apps and crypto platforms when they hit college.

You Are Going to Mess Up – and That’s OK

Parents get to be imperfect. We get tired, overwhelmed and stressed out about money. There isn’t one perfect money script to use with kids. While we all come from different backgrounds and experiences, we all have stories to share with our children about money. Talk about money and invite children to participate in household discussions. The part of the Money Tree story I often leave out is the true conclusion. After taking my girls outside to find the Money Tree, I waited a few minutes, lifted my arms in the shape of a tree and shouted, “The Money Tree is right here!” It was possibly the most “Dad” moment of my life, but not one that expresses my values. Sometimes even adults can use some help with understanding money. Learn how financial planning can help! Craig is not affiliated or registered with Cetera Advisor Networks LLC. Any information provided by Craig is in no way related to Cetera Advisor Networks LLC or its registered representatives. [post_title] => Where is the Money Tree? How to Teach Kids About Money, Credit Cards, Saving, Investing, Venmo and More [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => where-is-the-money-tree-how-to-teach-kids-about-money-credit-cards-saving-investing-venmo-and-more [to_ping] => [pinged] => [post_modified] => 2022-06-07 08:28:00 [post_modified_gmt] => 2022-06-07 13:28:00 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64964 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) [4] => WP_Post Object ( [ID] => 65409 [post_author] => 181953 [post_date] => 2022-06-02 10:07:35 [post_date_gmt] => 2022-06-02 15:07:35 [post_content] => Tom Fridrich, Senior Wealth Planner You’re in a good position in your life. You’ve built up your wealth, perhaps from a successful business or working in corporate America. You might feel it’s time to start winding down and that you’re in a place where you’re figuring out whether to transfer some of those assets to the next generation. The question then becomes whether you want to gift to your heirs during your lifetime, or to leave an inheritance to them after your death. There are several elements of this decision to consider that vary based on your circumstances. Perhaps you have a large estate that will expose you to estate taxes. Maybe you own multiple pieces of real estate that you rent out and use for personal use that have appreciated in value over the years. Or perhaps you own investments and stocks that you want to offload. You might even have a family business you are looking to retire from and exit or sell. In all those cases, does it make sense to transfer some of those interests to the next generation now or after death? We’ll explore that decision in this article and the tax implications of both choices – for both you and your heirs.

Exploring the Decision

Just because you have a certain asset that might make sense in theory to consider transitioning, does it make sense economically to do it now? Can you afford to give it away? Should you give it away or sell it? If you do decide to give it away, do you want to gift large amounts or make smaller annual gifts? The decision to give now or later depends on whether it makes economic sense for you to do so. If it does, then it’s a good idea to explore. The economics of it are a big factor. If you need to keep those assets in your estate to cover your own expenses, then it’s likely not a good idea. For example, if you have a family business or asset that comprises a high percentage of your family’s net worth and it’s the sole thing providing your family income or much of your estate, it might not be a good idea to give ownership stakes to your heirs just yet. In that case, it might make more sense to keep that wealth in your estate – whether it be investments, stocks, land, a vacation home or real estate – so that the net worth of the estate can continue to grow, which can lead to more future giving.

Gifting to Heirs During Life

If you deem it a good economic decision to gift during your life, the second thing you need to explore is control. If you’re thinking about gifting during your lifetime, you have to be comfortable with relinquishing control. That can be the most challenging aspect – whether it’s a business or real estate that’s been in the family, are you willing to give up control of that asset? The reason this is difficult is that we enjoy having control over our assets, and we might not be ready to give up that control. In theory, you might think, "Why not give assets away? The kids are getting older." While we might have good reasons to gift during our lifetime, our heirs might not be ready, gifting might cause conflict or you might not see a good solution. If you hold onto the asset, then you can avoid these potential issues. Gifting a business is perhaps the most complicated asset to consider giving away. Who should receive it – a family member, or a nonfamily member who has worked in the business for years? Should it even be a gift, or do you need some consideration to help fund your retirement? If you give it to the kids, which one should receive it – or should it go to all of them equally? These questions are not easily answered but should be considered, among other things, when deciding how to transfer a business. However, if you are just trying to decide if general gifting is a good idea for your family, there is a way to evaluate your heirs to see if they are ready to handle the gifts. You can first establish a goal for what you want to see them use the money for – charitable causes, self-improvement, entrepreneurship – and then communicate that to them. Be clear that you want to see them do something specific with the money, and then evaluate how they do. If you feel they did well with the first round of giving, you can decide whether to continue the giving or to help them improve.

Gift and Estate Taxes

Both sides of the decision come with taxes – whether it be gift taxes or estate taxes. The IRS has the Uniform Estate and Gift Tax Exemption amount, which in 2022 is $12.06 million, up from $11.7 million in 2021. This means you could give away $12.06 million in your lifetime tax-free; however, anything you give above that amount, even at death, is going to be subject to estate taxes. You could also hold on to that $12.06 million and give it as a bequest when you die. Essentially, the IRS doesn’t care when you give your assets away, but you’ve got $12.06 million you can give away gift tax- and estate tax-free. With that in mind, one ideal situation for giving assets away during your lifetime is a highly appreciating asset that you could continue to grow outside your estate. For example, if you give $10 million away and it grows, that growth is now part of somebody else’s estate. Whereas if you keep it and its value increases to $30 million, that growth is now part of your estate, and it will be subject to gift taxes if you gift it later and estate taxes if you bequeath it at death.

Income Taxes and Basis

Another example is the case of giving a child or grandchild who is in a lower tax bracket your assets such that the income will be taxed at their lower rate, instead of your higher rate. Let’s look at real estate as an example. Maybe you own an office building and are leasing it out. It might be in a part of the country where commercial real estate is increasing in value quickly. You could transfer it to your daughter so she can own and manage it and receive the monthly lease payments. Your daughter would manage the leases and everything that comes with that, and then the income would go to her. That income is going to be lower, but it is no longer being reported by you and she receives your basis in the property as well. When you gift or pass down an asset during life to reduce estate and income taxes, the downside is carryover basis, which means the basis remains the same as when it was held by you. For example, say that same commercial real estate we talked about earlier was valued at $8 million, and at the time it was transferred, your basis is $2 million. You’ve gifted $8 million, effectively using up $8 million in your gift tax exemption. Now it’s part of your daughter’s estate. Let’s say it appreciated to $18 million – her basis is only $2 million, and when she sells that real estate, she’s now got a $16 million gain she has to report. If she pays capital gains taxes on that gain, which is currently 23.6%, that is $3.8 million in taxes. If you give assets away, ideally you would identify assets that are appreciating quickly to get that growth out of your estate. However, the downside is if you gift that asset to a child, the growth occurs out of your estate, but the basis carries over to the child. The positive of holding on is the step-up in basis, which is the fair market value of the asset at the time of the owner’s death. The step-up in basis is a great way to avoid paying taxes when the recipient of the asset decides to sell. If the recipient sells shortly after receiving the asset at death, then there may be little or no growth in the value of the asset. For example, let’s say that instead of gifting the commercial real estate from the previous example, you decide to hold onto it until death. It is valued at $18 million and included in your estate, so you are likely to owe estate taxes with that kind of wealth and the exemption at $12.06 million. So, you would pay 40% on the amount above $12 million, which comes to $2.4 million. However, if the daughter inherits the building at death, her basis in the property is no longer $2 million, but the fair market value of the property, which is $18 million. If she decides to sell the property right away for $18 million, then her gain is $0 because her basis was $18 million, and the sale price was $18 million. So, with the gifting strategy, she owed $3.8 million, but with this strategy, she owes nothing. A nice win for her, but you paid $2.4 million in estate taxes. You could also identify assets where you have a high basis in relation to the value of the property, because that basis carries over. Let’s say I have stock that hasn’t appreciated. I bought it for $100,000 and it’s currently valued at $110,000. I want to transfer that stock because the value is close to my basis. I transfer it over to my daughter, and she gets it and says, “That stock is great, but I don’t see the value in it, and since I’m in a lower tax bracket I am going to sell it, realize some gain and put it elsewhere.” If I were to hold onto that stock until I die, the step-up in basis isn’t going to get me very far, nor will it get my daughter very far at that point. Therefore, in this case, it might be an asset that you gift away to allow the next generation to better position themselves to build wealth.

Gifting and the Annual Gift Tax Exclusion

The annual gift tax exclusion stipulates that you can give anyone up to $16,000 a year that’s exempt from taxes, up from $15,000 in 2021. If you are married, your spouse can also give $16,000, for a total of $32,000. This allows individuals to give $16,000 (or $32,000 for couples) away to anyone without paying any federal gift taxes. It’s a great way to lower the amount of your estate if you think you might have an estate tax problem, as well as to watch your loved ones benefit from your giving, instead of waiting until death. One of the benefits of lifetime giving is you can see what your kids and grandkids do with those assets. How do they manage them? Are they investing? Or are they wasting them? Does it make sense to transfer greater wealth? By giving in your lifetime, you can get a feel for who does a better job with the opportunity and to see how they manage those gifts. There are also some gifts that don’t count toward the annual gift tax exclusion. Some of those include paying for a child’s or grandchild’s tuition or paying for medical bills. You must pay the tuition straight to the school or the bills straight to the medical facility, and you don’t have to report those for gift taxes.

A Professional Can Help

This is a complicated decision and one that is best made with the help of a trusted financial professional. Each person’s situation is unique, and exploring what would be the best course for you is key. Get in touch with your financial professional today to help ensure you’re making the right choice for you. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice. [post_title] => To Give Now or Give Later? [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => to-give-now-or-give-later [to_ping] => [pinged] => [post_modified] => 2022-06-02 10:15:51 [post_modified_gmt] => 2022-06-02 15:15:51 [post_content_filtered] => [post_parent] => 0 [guid] => https://carsonhub.wpengine.com/?p=64956 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) ) [post_count] => 5 [current_post] => -1 [in_the_loop] => [post] => WP_Post Object ( [ID] => 65541 [post_author] => 100869 [post_date] => 2022-06-29 09:47:15 [post_date_gmt] => 2022-06-29 14:47:15 [post_content] => Sarah Duey I once had clients with only one daughter. They created a trust for only their grandchild without ever telling their daughter why. As the trustees, we worked with this daughter, because her child was still a minor. There were hard feelings — a lot of wondering why her parents had skipped her in their estate planning. Grieving our loved ones is hard enough without adding extra emotions. Not talking to your family about your estate plan has the potential to create chaos and make your family feel unprepared. You want to be sure your family is aware of your estate plan and what roles they’re going to play in the events of your incapacity or death. In this article, we’re going to discuss some of the basics of estate planning, what types of things you should communicate to your family, and how to go about updating your family on a regular basis.

Your Estate Plan and Picking Powers of Attorney

Choose somebody who’s going to be the best person, geographically, to help you. While oftentimes that could be your spouse, if you’re single or childfree, you might choose a sibling or close friend.
Before you make anything final, you need to talk to this person to ask if they’re comfortable with this responsibility.
Identify your wishes for your care. Healthcare power of attorney gives power, but not instruction. You’ll want to establish a living will to specify what your end-of-life choices are – for example you don’t want to be on a ventilator or feeding tube.
Share the power of attorney with your doctor. You want your medical professionals to be in the know as well.

It’s always a good idea to revisit your choices every few years to ensure you still have the right people in place. Approach financial powers of attorney in a similar way:

Choose somebody who can be there to take care of your bills and finances and ensure they’re on board and ready for the responsibility.
Pick a trustworthy person. Unfortunately, that isn’t always your children or family. Give hard thought to your kids’ situations and whether they might make good choices. Unfortunately, I’ve seen way too many abuses and oftentimes it’s close family members. The National Council on Aging reports that 60% of elder abuse cases¹ are close family members or spouses.

Crafting and Communicating Your Estate Plan in The Family Meeting

Where your estate planning documents are located
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Information for your financial advisor, estate planning attorney and CPA

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What About Your Parents’ Estate Plan?

The Last Word: Communication is Key to Estate Planning

How to Talk to Your Family About Your Estate Plan and Avoid Complicating Their Grief

By Sarah Duey

Sarah Duey I once had clients with only one daughter. They created a trust for only their grandchild without ever telling their daughter why. As the trustees, we worked with this daughter, because her child was still a minor. There were hard feelings — a lot of wondering why her parents …

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Blog

Your Estate Plan and Picking Powers of Attorney

Crafting and Communicating Your Estate Plan in The Family Meeting

What About Your Parents’ Estate Plan?

The Last Word: Communication is Key to Estate Planning

Let History Be Your Guide

Dig Deeper into What’s Causing Inflation

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Practice Choices in the Moment

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Talk About Bank Accounts, Venmo, PayPal and Whatever Comes Next

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You Are Going to Mess Up – and That’s OK

Exploring the Decision

Gifting to Heirs During Life

Gift and Estate Taxes

Income Taxes and Basis

Gifting and the Annual Gift Tax Exclusion

A Professional Can Help

Your Estate Plan and Picking Powers of Attorney

Crafting and Communicating Your Estate Plan in The Family Meeting

What About Your Parents’ Estate Plan?

The Last Word: Communication is Key to Estate Planning

Resources

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Market Commentary

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Videos

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