Steps to Prepare Heirs for Successful Transfer of Family Wealth

 Roy Williams and Vic Preisser have been studying wealth transition for some time.  Their research of 3,500 families’s duplicated the 70% failure rate of wealth transfers from one generation to the next as cited from previous studies.  In their book, Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values, the authors outline steps to achieve a successful transition. Whether you have a family business, millions to pass on, or more modest amounts, you will likely find some of the suggestions may meet your needs. The first step, Assessing a Wealth Transition Plan, the authors develop a wealth transition checklist which includes:  Heirs understanding their future roles, heirs reviewing the family estate plans and documents, and creating a family mission with incentives and opportunities for heirs.

And if you are interested in avoiding falling into the 70% trap, the research on wealth transition failures will be of interest. Three factors emerged as to why successful transitions failed.  The first is a breakdown of communication in the family—often coming from a lack of trust within the family.  The second is a lack of preparation of the heirs---particularly if one person was to be the dominant manager and was not ready to take on that role; and the third factor is a lack of clarity of roles of family members in the management of family assets.

Passing on wealth from one generation to the next doesn’t work on autopilot. If you don’t want to go from “shirtsleeves to shirtsleeves in three generations”, take the time to make sure your children and grandchildren are involved in the transfer of wealth from the beginning.

The information contained in this report 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.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  The services and  opinions of Roy Williams and Vic Preisser are independent of Raymond James. You should discuss any legal matters with the appropriate professional.

Tips for Protecting Your Identity While Traveling This Summer

 The heat is on, and you may be hitting the road for summertime fund to an exotic vacation destination.  Whether your definition of an exotic trip means travel to Weeki Wachee Springs, Graceland, or Traverse City here are a few practical tips for protecting yourself from identity theft while away.

Avoid Virtual Danger

  • Secure Electronic Devices.  Computers, tablets and smartphones may contain large amounts of private data.  Keep a close eye on electronic devices.  These are easy targets for identity thieves.          Note:  According to Credent Technologies, a data protection company, 11,000 mobile devices were lost at the busiest U.S. airports in 2011.  Over 75% of those were taptops, tablets or smartphones.
  • Password Protect Devices:  Make sure all devices are password protected and that any sensitive data is encrypted.
  • Be Wary of Unsecured, Public Wireless Networks:  Hackers can use unsecured networks to easily access your computer.  Be sure to update anti-virus software.
  • Alert Your Bank:  Let your bank and credit card companies know when and where you will be traveling.  Financial institutions have become more vigilant about monitoring accounts for unusual activity.  Alerting your bank to your travel plans will prevent them from freezing your account while you are away from home and help them monitor for unauthorized transactions in other locations.

When on the Road

  • Use Hotel Safes:  Don’t leave personal information out in your hotel room.  Keep credit cards and documents containing personal information and electronic devices in a hotel safe or with you.
  • Take Mailbox Measure:  Don’t let mail pile up in your home mailbox.  Arrange for someone you trust to pick up your mail while you are away, or have the postal service hold your mail while you are gone. 
  • Clean Out Your Wallet:  Tourist destinations are often frequented by pickpockets.  Before you head out the door, take any unneeded credit cards or personal information out of your wallet.  Do not keep your social security card in your wallet.

The Center team wishes you safe travel this summer!

Information provided by:  Raymond James Operational Risk & Privacy Office and the Information Security Office.

How to Transfer Family Assets Through Successful Family Meetings

 Research has show that 70%* of wealth transfers fail from one generation to the next.  Family meetings are one vehicle that can be used to help all members of the family gain a greater understanding of family assets and values.  But despite the usefulness, family meetings are seldom held.  Parents may be reluctant to share knowledge of family resources because they are concerned about stifling individual initiative and because their children may have different economic situations and temperaments. There is also the divorce issue, which leaves some parents reluctant to have in-law children know of the wealth situation. Second and third generation children are often scattered through the country and beyond which make meetings difficult.  However, the consequences of not helping the next generation understand wealth management may cause family friction, jealousy, business failures and frivolous use of resources.

There are many ways to begin family meetings.  Designating specific times at holidays or vacations when the family is together is one possibility.  Technology is another.  The use of a family web site, blogs, and social media for the family can be an innovative mechanism to celebrate successes and discuss more serious issues.

Meetings do not have to start out will full blown disclosure. 

Some techniques you can use to assess family values & engage in learning experiences:

  • If the family is charitably inclined, have younger members choose a charity of choice, find out about its programs, fund raising activities, financials and success.  Designate a sum of money to go to one or more charities after the research project; reevaluate the following year.
  • Game playing.  What would you do with your life if you won the 5 million dollar lottery; what would you do if you knew you only had ten more years to live?
  • Pick  investment vehicles such as real estate, stocks and bonds to research
  • Discuss alternatives for educational funding
  • If you have a family business, discuss the process for getting family members involved. Discuss what educational needs are critical to success of them in the business.

Eventually, a meeting with the family advisors, financial planner, attorney and CPA should take place.  This will help the family know the advisors and gain greater understanding of the net worth of family, the tax situation, estate planning situation and an opportunity to discuss short and long range goals.

Successful family meetings are intended to engage family members, not be a set of rules handed from one generation to the next.  Healthy communication among family members builds trust; trust builds understanding and is more likely to achieve acceptance and enthusiasm in achieving individual and family goals.

Coming up in the third part of this blog series, a step-by-step resource for anyone hoping to keep the legacy they leave behind from evaporating.

*Sources:  1983 MIT Study reported in the Economists;  Roy Williams and Vic Preisser from the Williams Group  research study.

The information contained in this report 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.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  The services and  opinions of Roy Williams and Vic Preisser are independent of Raymond James. You should discuss any legal matters with the appropriate professional.

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Welcome to our New Summer Intern

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At the Center, we value developing the next generation of financial service professionals.  For the last six years our Summer Internship Program has provided an opportunity for college students to gain first-hand experience working in a financial planning firm.  This year we welcome Zachary Gould as our newest summer intern.  Zach is a Senior at the University of South Carolina and is double majoring in Finance and International Business.  He will primarily be supporting the Investment and Financial Planning Departments. In addition Zach will have opportunities to participate in unique education, training and staff shadowing to round out his experience at The Center.  Zach says, “I am thankful for the opportunity to intern at The Center this summer and look forward to learning the art of financial planning from such a passionate and knowledgeable group of people.” 

Some fun facts:

  • Zach just finished a studying abroad in Paris at the America Business School
  • He enjoys playing ice hockey and basketball
  • Member of Soundcheck, an all-male a cappella group, and Alpha Lambda Delta Honors Society

Welcome, Zach! 

Passing on Wealth to the Next Generation

 You may have heard the saying, “Shirtsleeves to shirtsleeves in three generations.” In a family, it refers to the phenomenon of a generation building wealth, passing it to a second generation, and by the time the third generation rolls around, the wealth has disappeared.  Unfortunately, many research studies indicate it is true. In fact, 70%* of wealth transitions fail. Whether you are passing on a family business or family investment assets, most parents have the same desires.  They would like the money to enrich the lives of their children and grandchildren and to be neither frivolously spent nor a burden.  Parents would like their children to know the family values and participate in the formation of a value orientation for multiple generations.

There is the catch. Successful transitions do not just happen when the elders die and assets are distributed.

Successful transitions begin long before elders are gone. One way to begin is the family meeting where adult children are involved in knowing about and understanding the family wealth situation.  Passing on family values is an everyday experience.  Family meetings give members the opportunity to express their views, take responsibility and acknowledge where they may need additional help in accepting responsibilities. Family meetings also give members the opportunity to understand how family resources can benefit several generations.  These family meetings should involve members in the decision making process.

There are many ways family meetings can be conducted but they all center on the same objectives of trust, communication and understanding.  Parents teach their children to ride bicycles, play baseball and drive cars.  Family meetings help the next generations to use one of their most valuable resources, family wealth, to attain personal satisfaction and growth in an environment of family values.

Coming up in my next blog, more on avoiding the shirtsleeves to shirtsleeves trap. I’ll discuss how to use a family meeting to begin transferring assets.

**Sources:  1983 MIT Study reported in the Economists;  Roy Williams and Vic Preisser from the Williams Group  research study.

The information contained in this report 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.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  The services and  opinions of Roy Williams and Vic Preisser are independent of Raymond James. You should discuss any legal matters with the appropriate professional.

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Pretty in Pink!

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 We’re happy to spread the word that It’s A Girl! Center Client Service Manager Jennie Bauder and her husband Kelly announced the arrival of their new, darling daughter, Emma.  Jennie and Kelly tell us they are having the “time of their lives” welcoming their first child into this world.  She’s a sweet little treasure that looks like her daddy except for the adorable dimples she got from mom.

Emma Bauder was born on May 30, 2013 at 9:25 a.m.  She weighed in at 9 lbs. 5 oz. and measured 21 ¼ inches long.   Baby Emma, mom, dad and Maggie (the family pet dog) are all doing well. 

Congratulations Jennie!

Black Monday? How about Ruby Tuesday?

 Most investors are familiar with the infamous “Black Monday” stock market crash.   The Dow Jones Industrial Average (DJIA) dropped by a whopping 22.61% in one day on Monday October 19, 1987.  Many may not be as familiar with records that are being set right now for Tuesdays.  May 28th marked the 20th Tuesday in a row where the Dow Jones Industrial Average ended on an up note.  This is a record breaking streak of gains for any specific day of the week in the history of the DJIA.  The previous high count was 13 days in a row and has occurred on 3 separate occasions for Monday, Wednesday and Friday with the most recent streak occurring in 1900! 

This Tuesday winning streak that began on January 15th has included 1,573 points for the Dow or 83% of the years gains for the index as of May 28th.  The picture below is a total of Year to date points made or lost cumulatively on the particular day of the week for the DJIA. 

http://buzz.money.cnn.com/2013/06/04/dow-tuesday-streak/

There has been much speculation as to why Tuesday has been so great? 

Here are some of the arguments.

  • The federal reserve is buying bonds through their open market operations on Tuesday and Friday’s
  • Retail investors placing mutual fund buy orders on Monday, after looking at their accounts over the weekend, and then the managers are putting that money to work on Tuesday.
  • Automated trading programs that seek out trends have noticed this trend and started to buy in anticipation, and as such, perpetuating the trend.
  • Or it could just be random

While the debate of why this phenomenon has occurred may not be over, unfortunately, the winning streak itself is over as of Tuesday June 4th.

http://www.bespokeinvest.com/thinkbig/2013/5/28/20-for-tuesday.html

Angela Palacios, CFP®is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to Money Centered as well asinvestment updates at The Center.

The information contained in this report 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. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock of companies maintained and reviewed by the editors of the Wall Street Journal. Keep in mind that individuals cannot invest directly in any index, and index performance does not include transaction costs or other fees, which will affect actual investment performance. Individual investor's results will vary. Past performance does not guarantee future results.

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How to Get Started with Your Savings Goals

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 Whether you are young and starting your own life as an adult or in mid-life and realizing that you are behind in getting started towards your financial planning savings goals, it may be hard to know how to begin.  No matter where you are now, it’s time to take steps towards setting and achieving your financial goals. 

Ready.

Determine your top financial goals.  Maybe you need to start saving, period.  Then there is college for the kids and retirement someday (?)

Set.

Prioritize your main goals.  Top priority is building emergency reserves – at least 3 – 6 months of monthly expense needs is recommended.  Next, balance retirement and education savings, keeping in mind that loans are available for education costs, but there are no loans for retirement.

Go.

  • Begin your saving by paying yourself first.  Budget an amount to set aside in savings, as if your savings account is someone you owe, until your savings reserve is built up to your goal.
  • Next, begin contributing at least a minimal amount to your employer retirement plan.  Start by contributing enough to receive any employer match that might be available, and then slowly increase your contribution percentage over time.  
  • Education saving can begin by investing monetary gifts received for birthdays and other holidays into 529 college education accounts for your children.  As cash flow allows, budget in a set amount monthly to add to the 529 accounts.

No matter what your current place in life, it’s the right time to start saving to meet your financial planning goals.  Contact a Certified Financial Planner™ to help you come up with a plan to get you to the starting line and off to the races!

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

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Serving our community and profession

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 At the Center we are dedicated to sharing and spreading financial literacy. Melissa Joy, CFP® and Julie Hall, CFP® recently took their professional expertise to the community by volunteering for the Financial Planning Association of Michigan. Each presented workshops for the Detroit Parent Network. 

Julie led a risk management workshop speaking to parents of school aged children that live in Detroit, Hamtramck and Highland Park. Her message included ways to incorporate life insurance, disability insurance and property and casualty insurance into an overall risk management plan.  Julie said, “It was great to be able share my financial planning knowledge with a group of parents in Detroit who have not had the opportunity to meet with someone to discuss financial planning concerns before."

Also reaching out to parents, Melissa visited the parent support center at Marcus Garvey in Detroit Public Schools where she shared what she calls a personal Financial Fire Drill. “I visited on field day so the whole school was full of excitement and energy and the parents had been volunteering their time with their kids throughout the day," Melissa said. "It was great to meet so many moms and dads and the program instructors at Marcus Garvey. The financial literacy discussion was wide-ranging and real-world, just as financial planning should be. I’ll look forward to volunteering with this program again in the future.”

Social Security Planning for Divorcees

 Today’s longer life expectancies, especially for women have increased the importance and complexity of retirement income planning.  What used to be a 20-year retirement period has progressed to 30+ years for many baby boomers.  One common concern I hear expressed from women thinking about leaving the workforce and transitioning into retirement is "can I enjoy my desired lifestyle and have enough money to last through my retirement years."  Discussing retirement income and what part Social Security will play often leads to this question, “If I continue working, can I draw on my ex-husband's earning record at my full retirement age and defer my own Social Security benefit until age 70?"

The answer is “yes” and “it depends!”  In a special rule that applies only to divorced spouses, you can claim benefits on your ex even if he has not yet filed for retirement benefits.  The key is he must be at least 62 years old with sufficient Social Security credits.

Here is how this strategy works:

  • At your Full Retirement Age (FRA) file a restricted claim for spousal benefits only
  • You begin to collect 50% of your ex-husbands FRA benefit from age 66 to 70
  • The Social Security benefit based on your earnings record increases by 8% per year with the delayed benefit credit from age 66 to age 70

Additional requirements:

  • You are single and were married for more than 10 years
  • You have been divorced more than 2 years (If divorced less than 2 and your ex-spouse is not collecting you must wait for the 2 year mark to receive benefit) 

Crunching the numbers:

  • If you are less than FRA, drawing an ex-spouse benefit to delay yours may not be allowed because the decision is impacted by the amount of your own benefit.  If your benefit is greater (prior to reaching FRA) than ex-spouse you must take your own benefit.
  • This strategy makes sense if your retirement benefit at full retirement age, plus a 32% increase due to delayed retirement credits would be worth more than the spousal benefit.

Settling on a Social Security strategy is one piece of the retirement income puzzle.  This strategy is not meant to be a one size fits all solution; rather an example of how Social Security planning can be customized to meet your individual income needs.

Laurie Renchik, CFP®, MBA is a Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

The information contained in this report 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.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

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