“Getting Your Financial House in Order”

In the Spring, we eagerly expect the soft, green resurrection of the land from the harsh bleakness of winter. It is the time of preparing and planning, as we pour over gardening catalogs and plan vacations. It is the traditional time for spring cleaning, of setting our houses in order. This makes Spring an ideal time to set our financial houses in order, too. Spring is an excellent time to evaluate and plan your financial future. Consider these ten areas, and ask yourself:

1. Do I have a will? Is it up to date? Have I named a guardian for my minor children?  Does my will adequately distribute my property? Should I have  a trust?   Do I have confidence in my executor and my trustee? Might the terms of my will cause conflict in my family? Have  I taken steps to protect my loved ones from predators and creditors? Do I want to include charitable giving in my estate plan?
2. Do I have other estate planning documents such as a durable power of attorney, a living will, and an advance directive? Are they up to date? Does my family know of my funeral wishes? Have I made an essential financial information file for my family?
3. Do I have enough life insurance to adequately take care of my loved ones? Is my health insurance adequate? Do I need critical illness insurance? Do I have long term care insurance to keep me out of a nursing home? Do I have adequate disability income insurance? Does my homeowners and auto insurance cover ALL my property? Should I get an umbrella policy? Do I have a comprehensive list of my property and a videotape in my safe deposit box?
4. Am I contributing the maximum amount to my 401(k) or other retirement plan? Can I contribute to an IRA? Should I convert my IRA to a Roth IRA? Do I have enough future income for a comfortable retirement?
5. Do I have copies of all the beneficiary designations for my IRAs, retirement plans, life insurance and annuities? Are they up to date? Am I certain of this?
6. Am I adequately saving for the education of my children or grandchildren?
7. Am I satisfied with my income tax return? Am I having too much or too little tax withheld each year? Am I needlessly paying tax on my Social Security? How can I lower my tax bill? Did I claim all the deductions and credits I am entitled to? Do I need tax-free income?
8. Do my finances adequately reflect my  tolerance for risk? Do they reflect my  time horizon, goals, and expectations? Are my finances adequately diversified? Do I understand my money personality? Do I save regularly?
9. Should I refinance my home mortgage? Can I eliminate or reduce credit card debt? Is the interest on my debt tax deductible?
10. If I have a business, should I change the type of organization, such as form a corporation  or limited liability company? Can I deduct an office in my home? Should I obtain office overhead insurance?

Bless yourself and  your loved ones by giving serious consideration to the above questions. Remember that “no one plans to fail, but many fail to plan.’’ Don’t put off preparing for a secure financial future. When should you begin? Right now!

“If Something Happens to Me……………”

 “Come now, you who say, “Today or tomorrow we will go to such and such a town , spend a year there, doing business and making money.”Yet you do not even know what tomorrow will bring. What is your life? For you are a mist that appears for a little while and then vanishes away.” ~James 4:13-14, NRSV.

So many of us go through life from day to day,  confidently planning for our futures.  We make plans for our next vacation,   purchase a new car or remodel our homes,  we  plan  to expand our businesses,  we plan to spend more time with our loved ones, etc. We plan  to “get ‘er done.” The fact, however, is that not all of us will be granted time to get it ALL done. 

Ten is a special number.  It really grabs your attention to read in the newspaper that someone ten years younger than you has just died unexpectantly . Or perhaps you read that someone just ten years older than you recently died suddenly .  After all, it is only ten years. The word for this feeling is “frightening.” Recently, I had both these experiences on the same day. This caused me to ponder “what would my family do if I died suddenly?”

Wait a minute!  I am an estate planner by profession! For over thirty years, I have counseled clients to make wills and powers of attorney, set up trusts, purchase life insurance, have a business succession plan, etc.  I personally have done these things for my family’s security. Still, I asked myself, “What would my family do in the first 48 hours if I died without warning?” Like all families, they would be in a state of shock, denial, pain and confusion. Is there anything that can be done to help? Yes, indeed there is.

Plan your funeral. The disposition of a person’s physical remains is one of the least planned of his or her affairs. If you wish to spare your family unnecessary grief, stress, confusion, and expense, then plan your funeral. Put it in writing, and make sure that your family understands and knows where to immediately find the plan of your funeral wishes. Fears about discussing death understandably make all family members very reluctant to discuss or plan funeral arrangements in advance of actual need. Nonetheless, the kindest, most loving thing you can do for your family is to insist that they join you in planning your funeral and theirs as well. Decisions made in haste and under extreme emotional pressure are never desirable. Whether a loved one dies suddenly or not, consider the many decisions that must be made in a very short period of time:  burial or cremation, grave or mausoleum, location of visitation and service (church, funeral home, graveside, etc,), type and length of service,   time and day of service, choice of cemetery, selection  of casket, pall bearers, clothing, music, flowers, officiant (clergy, family members, friends, funeral director), etc.   All these difficult  decisions must be made at a time of maximum stress!  My father died 22 years ago after a lengthy illness. I well remember my family and I  sitting around the dining room table with the funeral director and my father’s attorney to make the  arrangements. Several months later, one of my father’s closest friends told me that he had been so hurt that we had not included him as a pallbearer. How could we have forgotten him? We certainly did not mean to leave him out, but in the stress of the moment, we did. It happened because we did not plan ahead.

The biggest decision is of course the funeral. It is  expensive,  and there are many options available.  The average funeral in West Tennessee now runs about $14,000. The choice of casket and extent of service are the major determinates of cost.  The important thing to remember is this: Your own wishes probably will NOT be fulfilled unless you make them clearly known and unless you review with your family the options that are available for the particular type of service that you want.  For example, my family has been made well aware that my personal wishes are for cremation,  a non-traditional service led by my closest  friends,  a Scots bagpiper , and followed by a party with lots of good food and refreshments. I want my passing to be a celebration, a feast, rather than a time of mourning. Will my wishes be carried out? Well, I won’t have a vote when that time comes, but at least I’ve planned and clearly expressed my wishes!

The next question, is “how is the funeral paid for? “  You can spare your loved ones much confusion, stress, and pressure by arranging for a pre-need funeral contract or by purchasing burial insurance.  It will be a great kindness to your family if you will arrange to pay for your funeral in advance. Yes, you may have plenty of life insurance, but it often takes a  month or more to get a claim processed. In our area, we are increasingly seeing some funeral homes refusing to proceed with the services until all fees are paid in advance.  Purchasing a pre-need funeral is actually a wise financial move as you save your family money by locking in the current price for future funeral goods and services. Federal law requires funeral directors to provide an itemized list of the costs of all services materials such as caskets.  If a casket is used, you do not have to purchase it from the funeral home.

Finally, we ask: “will those responsible for handling my affairs have access to money to pay bills?”It is certainly advisable to have an easily accessible source of funds your heirs can use to pay burial or cremation costs. This is often accomplished by using joint accounts or “payable on death” (POD) or “transfer on death” (TOD) accounts at a bank or other financial custodian.  Alternatively, you can have a power of attorney  (POA) to give someone authority to access your accounts if you become ill. Please note that the authority granted under a POA terminates at death. POAs are serious legal documents with far reaching consequences, and should always be prepared by an attorney.

Your thoughtful preparation for dealing with life’s uncertainties can be a blessing to your family and a demonstration of your love for them.  At my office, we have  available materials that will guide you in getting your affairs in order. If you would like to request a copy of Because I Love My Family, send me an e-mail at robertcbfin@bellsouth.net, or call my office at (731)668-5665.

“Teach Your Children to Fish”

“Teach Your  Children to Fish” 

Robert A. Caldwell, CPA 

Fishing is surely one of life’s greatest pastimes! While polo is called the sport of kings, fishing is a sport for everyone, for it is said, “All men (and women) are equal before fish.”  Fishing can teach us many valuable life lessons, the chief ones probably being patience and humility. The ritual of fishing is as old as cold water, so what can we learn from it? Well, the following quotation comes to mind:  “If you want to feed someone for a day, give them a fish. If you want to feed someone for their lifetime, teach them to fish.”

We talk all the time about “raising children,” but  we are really raising  adults. Childhood lasts only 20% of our lives, so your children will spend most of their time as adults. One of the greatest gifts you can give your children is financial independence. Teaching your children to fish is what financial independence is all about.
More and more parents are continuing to regularly financially support or subsidize their grown children. Sometimes the support comes from grandparents. As a financial advisor and money counselor, this trend disturbs me deeply. It indicates that we are training a generation of adult children in financial dependence rather than independence.  Now please understand me. I am  most certainly NOT saying that you shouldn’t help your grown children or grandchildren from time to time. We all need help in time of need. This is especially true of struggling single parents, the unemployed, and those households experiencing illness or extraordinary financial pressures.  However, our society is seeing a growing trend of adult children depending on monthly parental financial support. Often they are well educated, with good paying jobs. I recall the instance of one client, a widow whose income was less than $25,000 a year. She was paying the monthly utility, telephone, cell phone, and cable bills for her college graduate daughter whose annual salary was over $60,000. What message is this sending younger generations? What problems can this cause?

First of all, it teaches adult children to live above their means. This creates a false sense of security, and can lead to serious financial troubles if the parental support suddenly ends.  In order to meet continuing financial obligations, many people will feel forced to borrow, often using credit cards and paying ruinous interest rates.
Secondly, when adult children continue to be supported by parents, they remain dependent and can never reach their full potential. There is a great personal satisfaction  that comes from fully paying one’s own way. The financial shift from dependence to independence is also crucial if parents are to accept  their offspring  as “real” adults.

Third, when a married couple receives regular financial support from one or more sets of parents, there is a definite barrier to emotional intimacy. Money issues cause more problems in marriage than any other issues. Dependence on parents affects how spouses see themselves and their mates. The stream of monetary payments remain as an invisible “umbilical cord” that continues to connect parents to child.  In order for a couple to have a healthy marriage, that cord must be firmly cut.
So what are parents to do? We love our children and want to help them! Nothing could be more natural. In the Gospel of  Luke, we read: “If a son asks for bread from any father among you, will he give him a stone?  Or if he asks for a fish , will he give him a serpent instead of a fish? Or if  he asks for an  egg, will he offer him a scorpion?”(Luke 11:11, 12, NKJV).  In spite of our very best intentions, financial support that creates dependency in our children can turn out to be a serpent that poisons their lives and relationships. Surely there is a better way!

A healthy way to render financial assistance to adult children focuses on what I call “safety net” issues. Rather than making payments for current living expenses, consider making investments in your adult children’s financial future. This could include contributions to retirement plans and IRAs, educational savings plans (529 plans), life and disability insurance premiums, etc. Another way to help with safety net issues is paying for educational expenses. Throughout my childhood and adolescence, my father drilled into my hard little head that “An education is something that no one can ever take away from you.” That wise counsel brings to mind a prominent and successful businessman in our city. He is an acknowledged leader in his profession and very successful. What many don’t know is that before achieving his present great success, he went bankrupt in two other businesses. His education, along with his drive and character, enabled him to recover and prosper.
Begin early guiding your children on the path of financial independence. It may very well be one of the most valuable gifts that you can give them.