How to Help Aging Parents Showing Signs of Cognitive Decline

Contributed by: Logan Dimitrie, CFP®

The holidays are a wonderful time for family and friends to come together; Some enjoy hot cocoa by the fire, search for the pickle ornament on the Christmas tree, savor delicious latkes during Hanukkah, or celebrate one of the many other cherished traditions.

Unfortunately, for many, this season can also be when they first notice signs of cognitive decline in aging parents. While there are plenty of resources to help identify these signs, communicate concerns, and take steps from a health perspective, one area often overlooked is financial and estate planning.

We frequently hear from families who feel unprepared when financial questions arise. Some don’t even know what needs to be done to keep bills paid or protect assets. To help, we’ve outlined key questions you should be able to answer before a crisis occurs:

Important Questions to Ask

• Do you know who is authorized to manage finances if Mom or Dad needs support?

• Who is listed as the attorney-in-fact on your parents’ Financial Power of Attorney (POA)?

• Is the POA springing, meaning it requires additional documentation from a doctor before you can act?

• Do your parents have a trust? If so, who is named as trustee in the event they need assistance?

• Do you know where these documents are located?

• Would you know which accounts bills are paid from? Or how to ensure payments continue?

• Are their Individual Retirement Accounts set up for Automatic Required Minimum Distributions to avoid penalties if missed?

• Do you have contact information for their attorney, CPA, and CFP®?

Next Steps

If you can’t confidently answer these questions, consider scheduling a Proactive Family Meeting. If your parents don’t already have an organized record system, download our Personal Financial Record System—a simple tool to keep track of essential information in case someone else needs to step in.

And don’t forget about yourself! Cognitive decline isn’t the only reason someone might need help managing finances. Having your own system in place is equally important.

Additional Resources

For guidance on approaching memory concerns, check out the Alzheimer’s Association article:
https://www.alz.org/help-support/i-have-alz/10-steps-to-approach-memory-concerns-in-others

If you have questions or would like to discuss this further, please don’t hesitate to reach out.

Logan Dimitrie, CFP® is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® Logan specializes in Financial Independence, Early Retirement, Financial Planning for caregivers and Longevity Planning. Logan has been featured on the Caffeinated Conversations podcast.

Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Generally, if you take a distribution from a 401k prior to age 59 ½, you may be subject to ordinary income tax and a 10% penalty on the amount that you withdraw, in addition to any relevant state income tax. Contributions to a Donor Advised Fund are irrevocable. Changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Monitor Your Savings Bonds Through Treasury Direct

Contributed by: Jeanette LoPiccolo, CFP®, RICP®

Throughout the years, savings bonds have been popular gifts. Before college savings accounts became so popular, grandparents sometimes gave bonds for birthdays, encouraging their grandchildren to save for the future. Could you have any savings bonds lying around in files or locked up in a safety deposit box?

If you have bonds that you have not looked at in years, now may be the right time to bring them into the digital age with Treasury Direct.

Recently, the U.S. Treasury stopped issuing paper bonds to save costs. Instead, you can create an online account and monitor your bonds as you would an investment account. If you use Raymond James Client Access, you can create an external link to your savings bonds account. Then, you and your financial planner can track your bonds.

In addition to preventing your bonds from being forgotten (or tossed away in a Marie Kondo cleaning frenzy), here are a few good reasons to try the online account:

• You can cash your electronic bonds, in full or in part, at any time – 24 hours a day, seven days a week – and move the funds to a savings or checking account that you specify. You don’t need to go to a financial institution, and there are no restrictions on the number of bonds or the value that can be cashed, once minimum requirements are met.

• Online holdings and their current values can be viewed at any time.

• When electronic bonds reach final maturity and are no longer earning interest, they will be automatically paid to a non-interest bearing account.

The process is fairly simple. Step 1 is to locate your savings bonds. Then visit https://www.treasurydirect.gov/indiv/research/indepth/smartexchangeinfo.htm and scroll down to “How Do You Use SmartExchange?”. Follow the prompts and get started!

Jeanette LoPiccolo, CFP®, RICP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She is a 2018 Raymond James Outstanding Branch Professional, one of three recognized nationwide.

Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

The Importance of Reviewing Account Beneficiaries and Account Titling Annually in Your Estate Plan

Contributed by: Sandra Adams, CFP®

When most clients think about their estate planning, they think about the actual drafting of the documents — their Wills, Durable Powers of Attorney, maybe their Trust. While the documents themselves are crucial components of a comprehensive plan, one often-overlooked step is the annual review of account beneficiaries and account titling to make sure they are consistent with the estate documents. Together, these two parts of the plan can significantly impact how your assets are distributed after you pass away, so it is vital to ensure they align with your overall estate planning goals.

Why Review Beneficiaries?

Beneficiary designations on accounts such as retirement plans, life insurance policies, individual investment accounts (Transfer On Death designations), and bank accounts (Payable On Death designations) supersede what is written in your will. This means that if your beneficiary information is outdated, your assets could go to someone you no longer intend to receive your assets or even unintentionally create tax liabilities or complications for your loved ones.

For instance, you might have named your ex-spouse as a beneficiary years ago. If you have forgotten to update your beneficiary designation, this could lead to a distribution that contradicts your current wishes (unless, of course, you still wish to leave money to your ex-spouse!). Annual reviews of these designations ensure that beneficiaries reflect your present intentions and changing life circumstances — whether it is marriage, the birth of a child, or the passing of a loved one.

The Role of Account Titling

Equally important is ensuring your account titling is consistent with your estate planning goals. Joint accounts, for example, can pass directly to the surviving account holder, potentially bypassing your will’s instructions. If your accounts are titled improperly, your assets may not flow according to your plan, leading to unintended tax consequences or family disputes.

By reviewing your account titling annually, you can confirm that your assets are positioned in the most effective way to meet your estate planning goals and minimize the risk of probate court or conflict.

Work with your financial planner to make sure regular reviews of both beneficiaries and account titling are a part of your annual estate planning review process to give you peace of mind and ensure your wishes are honored when the time comes. If you or someone you know needs assistance with an estate planning review, feel free to reach out — we are always happy to help. Sandy.Adams@CenterFinPlan.com

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Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandy Adams, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

If You’re a Single Woman, These Are the Top 5 Things to Plan for Prior to Retirement!

Contributed by: Kali Hassinger, CFP®, CSRIC™

Retirement planning comes with its own unique set of opportunities and challenges. When you're a single woman, deciding to retire and the many subsequent decisions surrounding that life change can feel like it presents even more anxiety. Focusing on a few key areas to optimize your financial future can help ease these doubts and ensure you make the right financial choices. Here are the top five items to plan for as you consider retirement:

1. Build and maintain a Diversified Investment Portfolio

Throughout your career, you've successfully built your retirement savings pool. When you're working and living off of your income, it can be easier to weather the market's ups and downs. When your portfolio is needed to provide income for your lifestyle and well-being, the stakes are a bit higher. Building a balanced portfolio that aligns with your risk tolerance, time horizon, and retirement goals is extremely important. With those guidelines in mind, your investment portfolio should be well-diversified across various asset classes, sectors, and geographical regions.

2. Understand your Budget, Expenses, and Lifestyle Needs

At all stages of our lives, having a budget and understanding of spending is important. When making the decision to retire, you'll want to plan for both current and future expenses. Women often have longer life expectancies than men, meaning their savings need to last longer in retirement. A detailed budget and retirement spending projection can help you determine if you've saved enough to have a financially confident retirement.

3. Create a Comprehensive Withdrawal Strategy

A well-thought-out withdrawal strategy can help preserve your portfolio and ensure it lasts throughout your lifetime. One common approach is the "bucket strategy," where you segment your savings and portfolio into different buckets or investments based on when you will need to use the money. When working with clients, we recommend keeping approximately 12 months of your portfolio income need in cash or low-risk, cash-like positions that are not subject to market volatility. Beyond that 12-month need, your ability to handle risk can vary.

Your withdrawal strategy should also incorporate and consider the tax implications of your withdrawals to avoid unforeseen tax burdens.  Strategic tax planning can also help to extend the life of your portfolio.

4. Develop an Estate Plan

Estate planning is often overlooked, but it's one of the most critical steps in helping to ensure that your assets are distributed according to your wishes. Whether you choose family or charitable causes, deciding how your savings and possessions are handled can avoid unnecessary stress for your loved ones.

Without a spouse who would be the default decision-maker in a situation where you cannot make them yourself, it's extremely important to ensure that you've appointed a power of attorney for financial or healthcare decisions.

5. Understand your Social Security Benefits

For many, Social Security is the only fixed source of income in retirement, and the decisions are often irrevocable. As a single person, you'll want to optimize the Social Security benefits available to you. Although you can collect as early as age 62, your benefit will be higher if you collect at your full retirement age or even as late as age 70. A financial planner can help you determine the best strategy for you based on your assets, life expectancy, and retirement goals.

As retirement approaches, it's natural to feel overwhelmed by the decisions that need to be made. Working with a financial planner can provide you with the expertise and personalized advice to feel confident in your financial future. It can also provide a partner you can trust with any of life's financial decisions.

Kali Hassinger, CFP®, CSRIC® is a Financial Planning Manager and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Kali Hassinger, CFP®, CSRIC™ and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial adviser about your individual situation. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc®. Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Three Financial Planning To-Dos for New Parents

Contributed by: Lauren Adams, CFA®, CFP®

If you’ve recently become a new parent, maybe your first thoughts when meeting your new child were like mine: feelings of overwhelming joy and gratitude, but also immense responsibility for this new life. Not only do you need to feed, clothe, and shelter this child, but you are also responsible for providing for their health, mental, and financial well-being for the next 18+ years. Talk about a commitment!

Hopefully, you have some trusted people in your life to help you with the health and mental well-being part, but we want you to know we’re here to help you with the financial part of the equation. In addition to stocking up on diapers and assembling the crib, we want you to add three very important to-dos to your New Parent Checklist:

1. Review Your Life Insurance Coverage

First, ensure you have enough life insurance to care for your loved ones if something happens to you. Many of us are fortunate to receive some life insurance benefits from our employer through what is called “group term life insurance.” Often, this is equal to a certain dollar amount (for instance, one times your annual salary) and is available at little to no cost to you. The plus side of group term life insurance is that it is cost-effective and usually doesn’t require medical underwriting. The downside of group term life insurance is that it typically does not provide enough coverage that your family would need if you were gone, and it usually does not stay with you if you were to leave your employer.

That is why we frequently recommend that our clients consider getting their own term life insurance through an independent insurance agent. In most cases, term life insurance (as opposed to other kinds of permanent insurance) that provides financial coverage for a certain period of time is the best way to get the most death benefit for the least amount of premium dollars. The length of that term and the dollar amount of coverage can be dictated by financial needs as well as what is important to each client. For instance, some clients want to be able to pay off a mortgage, fund college costs, allow their spouse to hire childcare, and so on. Depending on the dollar amount, you may be required to go through medical underwriting to be approved for the death benefit you want. Your financial advisor can help you determine what time and dollar amount is right for you.

2. Meet with an Estate Planning Attorney

Everyone should have an estate plan in place, which is especially important for parents. An estate plan – that usually includes a Last Will & Testament, Durable Power of Attorney for Finances, Durable Power of Attorney for Healthcare/Advanced Medical Directive, and sometimes a Revocable Living Trust – can make sure all your wishes are correctly carried out in the event of your incapacity or death. This could include everything from who you want to make healthcare decisions on your behalf to at what ages your children should receive any inheritances you leave them. One of the most important things you specify in an estate plan is the guardian for minor children if something happens to you.

When choosing a guardian, parents should discuss who is the best person to care for their children’s needs. The guardian is often a relative or close friend near the same age. The guardian does not have to be the person who manages investments on the children’s behalf (in that case, parents may want to name a separate conservator—someone who handles money on behalf of their minor children). Many times, the guardian and conservator are the same people, but there are situations when the duties are best split (usually depending on the skills and strengths of the friends or family that they choose). In that case, the guardian and conservator work together to determine an appropriate monthly stipend for the guardian to care for their children.

3. Review Your Beneficiaries

Meeting with an estate planning attorney and drafting documents is only one piece of the puzzle. You’d be surprised to learn how often we meet with married couples, help them review their financial statements, and discover that their parents are still named as the primary beneficiaries on their accounts. It is surprising but understandable; between checking and savings accounts, workplace retirement accounts like 401(k)s, Individual Retirement Accounts, and a myriad of other investment account options, there is a lot to keep track of!

When this happens, beneficiaries could be required to go through probate court to obtain inheritances, resulting in additional expenses to settle the estate. Once a client is deceased, their account could be frozen, which delays accessing funds for family members who might rely on the assets (namely, spouses and minor children). Because of this, we regularly help clients keep track of their beneficiaries and account titling.

Now, I know life insurance, estate planning, and beneficiary designations are not the most exciting things to think about after you bring your new bundle of joy home. But knowing that you have a plan in place to care for your child regardless of what happens to you can be one of the greatest gifts you give them. Reach out to discuss your personal situation and let us help you through this process!

Lauren Adams, CFA®, CFP®, is a Partner, CERTIFIED FINANCIAL PLANNER™ professional, and Director of Operations at Center for Financial Planning, Inc.® She works with clients and their families to achieve their financial planning goals.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Lauren Adams, CFA®, CFP® and not necessarily those of Raymond James. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.

Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC. Investment advisory services are offered through Center for Financial Planning, Inc.

Center for Financial Planning, Inc. is not a registered broker/dealer and is independent of Raymond James Financial Services.

Financially Preparing to Become a Pet Parent

Contributed by: Kelsey Arvai, CFP®, MBA

Contributed by: Nick Errer and Ryan O'Neal

Typically, we celebrate National Pet Month in May and Pet Appreciation Week in the first week of June. Year-round, we acknowledge the love, joy, and companionship our furry, feathered, or shelled friends bring into our lives. We reflect on the importance of responsible pet ownership and acknowledge the profound impact that pets have on our well-being. 

To say that our pets make us happy is selling short the real physical and mental health benefits of pet ownership. The National Institute of Health (NIH) found that pet owners are encouraged by the motivation and social support provided by their pets and are more likely to adopt a physical exercise routine. Furthermore, pet ownership has been associated with lowered blood and cholesterol levels while increasing our levels of serotonin and dopamine. Although it is easy to focus on the positive effects our pets have on us, it is equally important to acknowledge the caretaking commitment and financial burden we are taking on. 

Be honest: Does your lifestyle allow room for a pet? Consider your lifestyle, work, family, financial, and housing situation. Does your situation support a healthy and happy environment for a pet?

According to the American Society for the Prevention of Cruelty to Animals, the average annual cost for dog and cat ownership lies at $1,391 and $1,149, respectively. This doesn't factor in other financial planning aspects, such as pet insurance and estate planning for your pets. Pet insurance can help cover the cost of medical care for your animals. Typical policies can cost around $60 per month for dogs and $30 per month for cats. Premiums will vary depending on your pet's age, breed, cost of services, where you live, and the policy you choose. Pet insurance isn't right for everyone, but it is helpful if you are struck with an unexpected medical expense which can cost over $1,000. Since most plans won't cover pre-existing conditions, starting as soon as possible is important. The alternative is to "self-insure" by paying out-of-pocket expenses that arise. As a guideline, an average pet insurance policy with a $5,000 annual coverage, a $250 deductible, and an 80% reimbursement level will cost about $50 per month in 2024, according to Forbes Advisor.

I always recommend that everyone have enough cash on hand in an emergency fund to cover a minimum of three to six months of living costs. Once you are a pet owner, you'll need to consider increasing the amount to include expenses for your pets. While pet ownership is a choice, once you have a pet, taking care of it is not.

According to a USA Today Blueprint Survey, some dog owners spend up to $376 per month on their dogs, or $4,512 per year. This includes all day-to-day expenses like food, supplies, grooming, routine vet care, insurance, training, and dog walking, but it also includes occasional costs such as boarding and vet care in case of illness.

Research breed characteristics – explore the unique needs of your potential pet and assess how it could impact your budget. Consider home insurance and rental fees (some home insurers may increase your premiums or choose not to cover you if you own certain dog breeds). If you become a dog owner, you may want to consider additional liability coverage in case of dog bites. If you rent, some landlords require additional "pet deposits" or "pet rent".

In support of National Pet Month, The Center partnered with two local nonprofits this past May to support rescue and caretaking efforts. As part of our commitment, we donated $1,000 each to Happy Paws Haven Co. and Almost Home Animal Rescue. These organizations provide care, comfort, and compassion to animals in need. We hope our contribution helps further their mission and brings comfort to our furry friends in search of forever homes.  

Kelsey Arvai, MBA, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® She facilitates back office functions for clients.

Opinions expressed in the attached article are those of the authors and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Avoid Common Inheritance Mistakes with These Tips

Contributed by: Sandra Adams, CFP®

If you are like most of our clients, anticipating an inheritance likely means something is happening or has happened to someone you love. This often means dealing with the pain of grief and loss in addition to the potential stress of additional financial opportunities and responsibilities. Combining your past money experience and your relationship with the person you are losing or have lost can cause varying degrees of stress.

Approximately 15% of American adults expect to receive an inheritance in the next decade, according to the New York Life Wealth Watch survey — a shift of wealth being called the "Great Wealth Transfer." The adults who anticipate receiving an inheritance expect it from a parent, spouse, family member, or another individual. On average, adults expecting an inheritance anticipate receiving over $700,000. Only 42% of adults who expect to receive an inheritance feel very comfortable financially handling the new wealth that will be passed down to them - and nearly twice as many women who expect to receive an inheritance (23%) feel uncomfortable managing their inheritance than men who expect to receive an inheritance (12%).

The statistics are not kind. Studies show that roughly 33% of all inheritors have a negative savings balance within two years of receiving an inheritance. After five years, that number jumps to over 70%. Sadly, only about 30% of inheritors take their inheritance seriously and use it to plan for their future. It is important to be aware of and understand the typical habits of inheritors to avoid the risks.

Navigating grief, discomfort with handling finances, and family dynamics can make it hard to know what to do when it comes to anticipating an inheritance. What steps can you take to ensure that you avoid the potential risks that lie ahead and use your possible inheritance to help you make the best use of any funds for your current and future financial goals?

1. Don't Rush to Make Any Big Decisions. Often, when one receives an inheritance, it is hard to resist the urge to splurge on big purchases that you haven't been able to afford in the past (a fancy new car, an exotic international vacation, etc.). A best practice is to avoid major purchases until you can take the time to do some intentional planning. We recommend taking a proactive time out from decision making (we call this a "Decision Free Zone") to process the reality of having a new financial situation and to determine how you would like that to impact your current and future financial plans, including retirement and other financial goals.

This purposeful time-out can help you avoid making promises to do things for others with the new funds. It is important that you inform others who may be expecting your financial help that you will not be ready to make those decisions for some time. This takes the stress and pressure off you and allows you time to plan what you will do with the money at your own pace. You may eventually decide to help others, including family members or charities, with some of the money if it fits in your financial plan, but by avoiding making promises right away, you don't make and/or break commitments that may lead to hurt feelings and broken relationships that could impact future relationships.

2. Set Reasonable Expectations About Timing. Once you have been informed about your inheritance, you may wonder when you will receive it. It is important to find out what types of accounts and assets you might be inheriting to set a clear expectation of how long it takes to get them.

You shouldn't expect to receive funds from an inheritance for at least one to two months following the death of a loved one (if you get them sooner, it is a pleasant surprise!) It could take longer if the assets are not liquid. In some cases, the estate is held up longer for final expenses and/or if legal issues need to be resolved. 

3. Be Aware of Taxes. It is also important to be aware of the types of assets you are inheriting so that you are aware if you might owe taxes on any of the dollars you are receiving. For instance, if you are receiving funds from an IRA or an annuity contract that might have a taxable portion, and you don't have taxes withheld at the time of distribution, you might need to plan to have extra funds at tax time to pay the bill.

Setting aside a portion of the inherited dollars for any possible taxes due is a good idea so you don't get caught blindsided at tax time.

4. Consider the Details. Once you receive the assets, many other questions (besides taxes) will be answered, such as: How should I hold the assets (i.e., in what registration?) Should I hold my inherited assets separately from other assets held with my spouse? Should I hold the same investments as my grandfather/father/etc. held, or should I change the investments? If I inherited IRA assets, how long do I have to distribute the account? Getting the help of a financial adviser to answer these questions is highly recommended.

5. Work with an Advisor. Working with a financial advisor to determine what has changed or could change with your financial picture with the new inheritance is highly advisable. This could include things like:

• Income

• Savings/Emergency Funds

• Spending

• Investments

• Debts/Liabilities

• Health Care

• Home

• Insurance

• Estate/Legal

• Self-Care

• Family/Children

• Gifting/Charity

When your changes have been identified, it makes sense to determine how they can help you identify and meet your financial goals. With the help of your financial advisor, you can design a plan for how to meet your financial goals with your new inheritance. Because it can be overwhelming, we recommend determining what goals must be tackled first and what can wait until later based on a "Now…Soon…Later" schedule. Then, meet regularly with your financial advisor to begin checking off the tasks it takes to meet your goals and make the most of your inheritance.

For many, receiving an inheritance means the loss of a loved one. And the fear of failing with the big responsibility that comes with handling what is being left financially (especially if you don't feel confident handling money) might leave you feeling overwhelmed. By taking your time and using the guidance of a financial advisor who will provide you with education and guidance, you can set yourself up for success to use your inheritance to make the most of your current and future financial goals.

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Sandra D. Adams, CFP® and not necessarily those of Raymond James.

Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Preparing an Emergency Action Plan

Contributed by: Sandra Adams, CFP®

Unknowns are a part of all of our lives, and the potential for the big "unknowns" becomes more significant as we age.

It is a best practice to have a full aging plan in place as we go into our retirement years. This includes:

• Where we might consider living as we age;

• Where, how, and whom we would consider having care for us as we age if we need care;

• How we will use our money, and whom it will go to once we are gone; and

• Who will help us with all of this if we cannot manage things as we age

An aging plan should also include an Emergency Action Plan. What is this, you may ask? It is the minimum provisions you should have in place in case an unexpected event occurs. Even if you don't have a full aging plan in place, an Emergency Action Plan is crucial. So, what should be part of an Emergency Action Plan?

• Name Advocates. By this, we mean having your Durable Power of Attorney in place for your financial affairs and your Patient Advocate Designation. If you have no one to name or if your family/friends' advocates need assistance, there are ways to have professional advocates in place to serve or assist (talk to your financial planner to discuss these options).

• Document Your Important Information in Advance. This includes your financial and health information so that your advocates are prepared to serve on your behalf without missing a beat. Our Personal Record Keeping Document is an excellent place to start this process.

• Communicate to Your Advocates that they have been named and verbally communicate your wishes. Your advocates can only make the best decisions for you and carry out your wishes if they (1) know they have been named your advocate and (2) are aware of the decisions you'd like to have made on your behalf.

Planning ahead is the best gift you can give yourself and your family. Having a full aging plan in place, but at a minimum, an Emergency Action Plan can put the pieces in place to allow for decisions to be made on your behalf in the way that you want them to. It can also provide resources for your best interests in your most critical time of need. If you need to put an Emergency Action Plan in place, ask your planner for assistance!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Opinions expressed in the attached article are those of Sandra D. Adams and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Advanced Estate Strategies for Surviving Spouses

Contributed by: Matt Trujillo, CFP®

You will need to consider the disposition of your assets at your death and any tax implications. Statistically speaking, women live longer than men. Wives will likely have the last word about the final disposition of all the assets accumulated during marriage. You'll want to consider whether these concepts and strategies apply to your specific circumstances.

Transfer Taxes

When you transfer your property during your lifetime or at your death, your transfers may be subject to federal gift tax, federal estate tax, and federal generation-skipping transfer (GST) tax. (The top estate and gift tax rate is 40%, and the GST tax rate is 40%.) Your transfers may also be subject to state taxes.

Federal Gift Tax

Gifts you make during your lifetime may be subject to federal gift tax. Not all gifts are subject to the tax, however. You can make annual tax-free gifts of up to $17,000 (in 2023) per recipient. Married couples can effectively make annual tax-free gifts of up to $34,000 (in 2023) per recipient. You can also make tax-free gifts for qualifying expenses paid directly to educational or medical services providers. And you can also make deductible transfers to your spouse and charity. Individuals can transfer $12,920,000 free of estate, gift, and GST tax during their lives or at death in 2023.  

Federal Estate Tax

Property you own at death is subject to federal estate tax. As with the gift tax, you can make deductible transfers to your spouse and charity. Again, up to $12,920,000 (in 2023) is protected from taxation.

Portability

The estate of someone who dies in 2011 or later can elect to transfer any unused applicable exclusion amount to their surviving spouse; this is called "portability". The surviving spouse can use this deceased spousal unused exclusion amount (DSUEA) and their own basic exclusion amount for federal gift and estate tax purposes. For example, if someone died in 2011 and the estate elected to transfer $5,000,000 of the unused exclusion to the surviving spouse, the surviving spouse effectively has an applicable exclusion amount of about $17,920,000 ($12,920,000 basic exclusion amount plus $5,000,000 DSUEA) to shelter transfers from federal gift or estate tax in 2023.

Federal Generation-Skipping Transfer (GST) Tax

The federal GST tax generally applies if you transfer property to someone two or more generations younger than you (for example, a grandchild). The GST tax may apply in addition to any gift or estate tax. Similar to the gift tax provisions above, annual exclusions and exclusions for qualifying educational and medical expenses are available for GST tax. You can protect up to $12,920,000 (in 2023) with the GST tax exemption.

Indexing for Inflation

The annual gift tax exclusion, the gift tax and estate tax basic exclusion amount, and the GST tax exemption are all indexed for inflation and may increase in future years.

Income Tax Basis

Generally, if you give property during your life, your basis (generally, what you paid for the property, with certain up or down adjustments) in the property for federal income tax purposes is carried over to the person who receives the gift. So, if you give your $1 million home (purchased for $50,000) to your brother, your $50,000 basis carries over to your brother — if he sells the house immediately, income tax will be due on the resulting gain.

In contrast, if you leave property to your heirs at death, they get a "stepped-up" (or "stepped-down") basis in the property equal to the property's fair market value at the time of your death. So, if the home you purchased for $50,000 is worth $1 million when you die, your heirs get the property with a basis of $1 million. If they sell the home for $1 million, they pay no federal income tax.

Lifetime Giving

Making gifts is a common estate planning strategy that can minimize transfer taxes. One way to do this is to take advantage of the annual gift tax exclusion, which lets you give up to $17,000 (in 2023) to as many individuals as you want, gift tax-free. As noted above, you can take advantage of several gift tax exclusions and deductions. In addition, when you gift property expected to appreciate, you remove the future appreciation from your taxable estate. In some cases, it may be beneficial to make taxable gifts to remove the gift tax from your taxable estate.

Trusts

There are a number of trusts used in estate planning. Here is a quick look at a few of them.

• Revocable trust: You retain the right to change or revoke a revocable trust. A revocable trust can allow you to try out a trust, provide for management of your property in case of your incapacity, and avoid probate at your death.

• Marital trusts: A marital trust is designed to qualify for the marital deduction. Typically, one spouse gives the other spouse an income interest for life, the right to access principal in certain circumstances, and the right to designate who receives the trust property at their death. In a QTIP variation, the spouse who created the trust can retain the right to control who ultimately receives the trust property when the other spouse dies. A marital trust is included in the spouse's gross estate with the income interest for life.

• Credit shelter bypass trust: The first spouse to die creates a trust sheltered by their applicable exclusion amount. The surviving spouse may be given interests in the trust, but the interests are limited enough that the trust is not included in their gross estate.

• Grantor retained annuity trust (GRAT): You have rights to a fixed stream of annuity payments for a number of years, after which the remainder passes to your beneficiaries, such as your children. Your gift of a remainder interest is discounted for gift tax purposes.

• Charitable remainder unitrust (CRUT): You retain a stream of payments for a number of years (or for life), after which the remainder passes to charity. You receive a current charitable deduction for the gift of the remainder interest.

• Charitable lead annuity trust (CLAT): A fixed stream of annuity payments benefits a charity for a number of years, after which the remainder passes to your noncharitable beneficiaries, such as your children. Your gift of a remainder interest is discounted for gift tax purposes.

Life Insurance

Life insurance plays a part in many estate plans. Life insurance may create the estate in a small estate and be the primary financial resource for your surviving family members. Life insurance can also provide liquidity for your estate, for example, by providing the cash to pay final expenses, outstanding debts, and taxes, so that other assets don't have to be liquidated to pay these expenses. Life insurance proceeds can generally be received income tax-free.

Life insurance you own on yourself will generally be included in your gross estate for federal estate tax purposes. However, it is possible to use an irrevocable life insurance trust (ILIT) to keep the life insurance proceeds out of your gross estate.

With an ILIT, you create an irrevocable trust that buys and owns the life insurance policy. You make cash gifts to the trust, which the trust uses to pay the policy premiums. (The trust beneficiaries are offered a limited period to withdraw the cash gifts.) If structured properly, the trust receives the life insurance proceeds when you die, is tax-free, and distributes the funds according to the terms of the trust.

As you can see, this area can get very complicated very quickly, and in many cases, the various approaches have pros and cons. If you are considering employing one of these strategies or want more information on how they work, I encourage you to contact a qualified estate planning attorney for further guidance.

Matthew Trujillo, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® A frequent blog contributor on topics related to financial planning and investment, he has more than a decade of industry experience.

Opinions expressed in the attached article are those of Matt Trujillo, CFP®, and are not necessarily those of Raymond James. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc.® Center for Financial Planning, Inc.® is not a registered broker/dealer and is independent of Raymond James Financial Services.

Have You Prepared Your Advocates?

Contributed by: Sandra Adams, CFP®

Going through the process of completing your estate planning documents is not an easy process. Working with an attorney to determine what documents you need, how you want the language written so that your assets are handled and decisions are made the way YOU want them, and choosing the best advocates to carry out those instructions can be very involved. No wonder it is a task that many people put off doing – it can be overwhelming!

Common Documents With Named Advocates

The most common estate planning documents that individuals have drafted (and that will require advocates to be named) are the following:

Most clients are so relieved when their documents have been drafted; it is a huge weight off their shoulders to have so many important decisions made and in place. It feels satisfying to have the binder of documents drafted by the attorney in hand and completed. 

Perhaps if you are even more “on the ball,” you follow through and get copies of your documents to your financial advisor and update your asset titling and beneficiaries according to the funding instructions provided by the attorney. If you have done that, you are ahead of the majority of clients, most of whom take the big binder home and file it away in a safe place and consider their estate planning completed! But is it?

Have you taken the final step and communicated to those you have chosen as your advocates that you have named them in your documents? 

The Importance of Communicating With Your Advocates

It is not uncommon for people to name others as future advocates for them in their legal documents, but not to communicate to them that they have been named. If you’ve ever been in the shoes of being that named advocate, and getting that “surprise” call that you suddenly need to make a life and death decision about someone’s health treatment when you had no idea you were named as their health care advocate and had not had conversations with them regarding their wishes around end of life treatment, you might think differently about having those proactive conversations.

It is extremely important to take this last step, and not only communicate with your advocates that they have been named in your documents but also give them the key information that they will need to fulfill your wishes.

Here is the key information you need to share:

Patient Advocate/Health Care Advocate:

• Drug allergies

• Current medications (or where to find your medications list)

• Your primary providers, your wishes on Code Status (i.e. DNR or full Code), and where your estate planning documents are located

• Your past surgical history

• Whether or not there is metal anywhere on your body

• What your wishes are for end-of-life care and treatments (i.e. aggressive vs. comfort treatment)

• Plans for future care and any professional relationships and resources that can be used to assist the advocate in their role (social workers, Geriatric Care Managers, etc.)

Durable Power of Attorney/Successor Trustee:

• Contact information for your professional advisors and, if possible, an introduction to those professionals.

• Instructions on where to find an “open me first” document (ex. Personal Financial Record System) that details your financial life (bank accounts, investment accounts, insurance policies, government benefits, employer benefits, etc.)

• Where to find your estate planning documents and a review of your Trust (especially for your successor Trustee, so they have a heads-up on how they might be managing your assets)

• An overview/general conversation about your wishes regarding handling your assets for future care and your values around money.

Executor/Advocate:

• Contact information for your professional advisors and, if possible, an introduction to those professionals.

• Instructions on where to find an “open me first” document (ex. Personal Financial Record System) that details your financial life (bank accounts, investment accounts, insurance policies, government benefits, employer benefits, etc.)

• Instructions on where to find your Letter of Last Instruction document outlining your wishes for after death.

• Where to find your estate planning documents, especially your Last Will & Testament, which will be the guiding document for your Executor.

• An overview/general conversation about your wishes regarding after-death arrangements, about your Will, and how you would like your assets handled post-death, especially if there is no Trust for assets to flow to.

The more information you can share with your future advocates, the better prepared they will be to make the decisions you would want them to make on your behalf should they ever need to serve. An advocate’s job is to be your fiduciary, which means to make decisions in your best interest; without the benefit of having full information on you and your situation, you make it almost impossible for them to do their job to the best of their ability.

If you have taken the time to draft your estate planning documents, our best advice is to complete the process by fully preparing your advocates to serve in your best interest – they’ll be glad you did!

Sandra Adams, CFP®, is a Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® and holds a CeFT™ designation. She specializes in Elder Care Financial Planning and serves as a trusted source for national publications, including The Wall Street Journal, Research Magazine, and Journal of Financial Planning.

Opinions expressed in the attached article are those of Sandra D. Adams, CFP® and are not necessarily those of Raymond James. Securities Offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Center for Financial Planning, Inc. Center for Financial Planning, Inc., is not a registered broker/dealer and is independent of Raymond James Financial Services.