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Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions

Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions Top 10 Estate Planning Mistakes November 15, 2011 7 Hotel Street Warrenton, VA 20186 www.handfordfinancial.com. Macro Economic Strife.

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Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions

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  1. Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions Top 10 Estate Planning Mistakes November 15, 2011 7 Hotel Street Warrenton, VA 20186 www.handfordfinancial.com

  2. Macro Economic Strife

  3. Board of Certified Financial Planners

  4. A Clear Path

  5. Choices, Wrong Turns, Indecision

  6. Healthy Habits

  7. Unhealthy Habits

  8. Board of Certified Financial Planners

  9. Emotional v. Rational

  10. A Solid Plan

  11. Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions

  12. Name That Feeling

  13. The Emotional Reality • You are not alone. • Fear and anxiety have become commonplace as the market continues to experience periods of fluctuation. • The reality is that your investments have likely declined along with theoverall market performance. • An emotional response is a natural response. • We’re humans, not machines! Emotions will always play a role in howwe deal with challenging situations. • But how can we acknowledge our emotions and still manage our finances? • Take some time to verbalize how you feel. • Sometimes simply stating how you feel or writing it down can help release the tension. • Once you’ve respected the emotion, you may be able to focus on action.

  14. 666

  15. S&P 5001565 October 9, 2007666 March 6, 2009 (57.44%)1250 November 8, 2011 87%

  16. What’s the Secret to Worrying Less? • No magic bullet • Empowerment through action • The benefits of financial planning • Results of a recent study* by the Financial Planning Association and a leading financial institution

  17. Study Statistics Worth Noting • 50% of the planning participants feel that they are incontrol of their financial future. • 9 out of 10 planning participants (88%) feel that they have clear financial direction, which is about 50% higher than those who don’t have professional support.

  18. Study Statistics Worth Noting continued • Planning participants are 50% more likely to say their goalsand dreams are financially secure. • 42% of planning participants feel extremely or very prepared for retirement (vs. 16% of those without an advisor).

  19. What’s Most Important to You? • One benefit of planning is that it gets you thinking about whatis really most important to you. • Your concerns over your finances are likely more specific than“I want more money.” • What is the “why?” behind your goals? • What is meaningful to you may not always be quantified in dollarsand cents.

  20. Important, Intangible Goals • We already mentioned that some of the items that are important to you are going to be less tangible, like: • Family • Community service • Leaving a legacy • These intangible items can be reframed in terms of quantifiable financial planning goals, like: • Protecting your family by having adequate insurance • Leaving behind a legacy with a properly structured estate plan • Giving back to your community with a charitable trust

  21. A Methodical Approach to What-If Worries • It’s normal to question how things would look for you if differentvariables changed. • How will adjusting certain goals for time and cost impact your ability to attain them? • What if you were to save more and spend less? • What if you had to save less? • What if your investments declined more or less over time? • A Monte Carlo simulation can provide perspective • Takes into account the bad years (kind of like what we’re seeing now) and shuffles the cards in order to convey a realistic expectation of what could happen based on different scenarios.

  22. A Written Financial Plan • Road map to your goals • Includes probability of reaching goals based on testing • Living, breathing document • A good plan is updated regularly—typically annually—to ensure that it still matches your current situation and accounts for any changes. • A financial professional monitors the plan and keeps you on track with your goals. • Just like no two clients are alike, no two plans are alike!

  23. The Planning Process

  24. You Don’t Have to Go It Alone • Taking control does not mean you have to uncover all of the solutions on your own. • A financial professional can assist you with: • Goal definition • A written financial plan • Financial planning for • Estate plan coordination • Retirement income planning • Charitable giving • Risk management • And . . . everything else! • Proactive planning = Less anxiety

  25. Top 10 Estate Planning Mistakes

  26. We Hear About Celebrities’ Problems . . .

  27. Estates of Famous People Estates that made use of the marital deduction Estates where the marital deduction was not used or unavailable Source: Public Probate Records. Under current laws the costs would be different.

  28. Could That Happen to Us?

  29. 1. Failure to Plan • State intestacy laws determine whom will inherit what.

  30. 1. Failure to Plan continued Other considerations: • Court-appointed guardians and executors • Additional expense and time required to distribute property • Missed opportunity to minimize taxes • State may become beneficiary

  31. 2. Failure to Implement • Misconception: once documents are executed, process is done • Reviewing and re-titling assets and reviewing beneficiary designations • No implementation may result in ineffective plan (see #1)

  32. 3. Failure to Update Triggering life events: • Marriage • Divorce • Birth • Death

  33. 3. Failure to Update continued Other triggers: • Change in law • Change in asset value • Change in goals

  34. 4. Failure to Review Beneficiary Designations • Easiest way to derail a plan • Perform an audit: • Life insurance • Retirement accounts • Nonqualified annuities • Transfer-on-death accounts • Trusts • Wills • Special needs

  35. 5. Failure to Understand the Plan • Allocation of assets between spouses • Portability provision • Structure of policies and titling of assets • Joint tenancy with right of survivorship • Community property vs. separate property • Contractual agreements

  36. 6. Failure to Make Lifetime Gifts • Leveraging gift tax exemptions: a simple and cost-effective way to reduce estate value • Irrevocable life insurance trusts (ILITs) • 529 plans

  37. 7. Choosing the Wrong Fiduciary • Inexperienced, unqualified, or self-serving • The “bad guy” • Family conflict

  38. 8. A Plan That’s Too Simple • All-to-spouse or joint ownership arrangements • Unintended beneficiaries • Lack of efficiency • Effort to save hundreds costs thousands

  39. 9. A Plan That’s Too Complex • What are the goals? • Asset protection • Liquidity • Efficiency • Control • GRAT, CLAT, FLP, CRUT . . . • Administrative duties

  40. 10. A Plan with No Flexibility • Must be able to change in light of circumstances • What does irrevocable mean? • Trustee discretion

  41. Planning Vs. Reacting A Proactive Approach to Challenging Economic Conditions Top 10 Estate Planning Mistakes November 15, 2011 7 Hotel Street Warrenton, VA 20186 www.handfordfinancial.com

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