Quick Social Security Tips

 There are many ins and outs of Social Security and I want to help you stay on top of them (without boring you with a pile of information). Here are easy explanations of two topics that can help you make the most of your benefits:

Where’s my social security statement?  

Remember when you used to get a statement each year a few months before your birthday from the Social Security Administration (SSA)?  Well if you haven’t seen it in a while that’s because the SSA stopped mailing to most folks back in 2011 (at a savings of $70M). 

The SSA will begin mailing benefit statements every 5 years to those who haven’t signed up for online statements (those already receiving benefits get an annual statement).  The statements will be sent out at age 25, 30, 35, 40, 45, 55 and 60.  If you haven’t checked out the SSA web site, I suggest doing so: www.ssa.gov.  You may receive your statement, project future benefit amounts, as well as learn more about one of the nation’s largest expenditures.

Widowed? Research suggest that you might not be getting your fair share

According to a recent report from the Social Security Administration Office of the Inspector General, as many as one third of spouses age 70 and older are not getting the maximum social security benefit. The issue arises when a spouse initially receives “widow” benefits as early as age 60 (benefits based on your spouse’s earnings) and then later is eligible based on their own earnings record for a higher amount. As an example, Jan’s husband Paul passed away and Jan decided to begin receiving a widow’s benefit at age 60.  At age 62-70 Jan may switch to benefits based on her earnings record if they are higher.  Jan will need to be proactive as the SSA will not inform Jan if she is eligible for a higher amount.  When in doubt – call the SSA and give them your social security number and the social security number of your spouse to learn about all of your options.

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.

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The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. C14-011440

Joint Planning Doesn’t Replace Individual Financial Planning

Are you a casual observer or a committed participant when it comes to mapping out a strategy for your financial future?    Maybe you are already a planner and organizer, or perhaps a visionary that lives in the future, or maybe you are happy to be working on one thing at a time.  Regardless of your starting point managing your finances is like managing your health --- you have to be involved. 

A question that women often ask me is, “Should I be thinking about my financial future separately from my spouse or partner?”  My answer is an unequivocal yes.  This doesn’t mean to disregard your partner or forego joint financial planning.  What it does mean is this:

1. You will be better prepared if you are on your own at some point in your life

2. Financial health and well-being is not a “one-size-fits-all” prescription

3. Involvement provides the opportunity to step back and really ask yourself, “Are we on the right track?”

4. Looking at individual planning and then coordinating with your spouse can be a way to ensure you both are planning for financial independence when partners handle money matters differently. 

It would be simple if we could decide exactly where we want to go and chart a course accordingly, but remember, life is no ordinary journey. It all starts with the commitment to pull together the different aspects of your individual financial picture and collaborate with a spouse or partner.  Ultimately, the goal is to commit to a game plan because standing on the sidelines is for spectators.

Laurie Renchik, CFP®, MBA is a Partner and 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. C14-011216

Sharing Your Tax Documents with Your Financial Planner

Dear Diary,

In 2013, I worked hard and got that raise I was hoping for. But when it came to filing taxes …

I like to refer to a tax return as a “financial diary”.It contains so much valuable and personal financial information – how much you made last year working, capital gains/loss, interest, dividends, IRA distributions, Social Security benefits, pension benefits, taxable income, your marginal vs. effective tax rate, just to name a few.All of these items help guide us throughout the year to make strategic investment and planning recommendations, based on your current and projected tax situation.As financial planners, we look at your return as a “diary” of what happened in your financial life last year that could help us take advantage of planning opportunities in the future. We do not let taxes be the sole driver in any investment or financial planning decision, however, as comprehensive advisors; tax planning is an integral part of our process of determining what financial choices will benefit you the most.

A team approach adds value for clients

We partner with many tax professionals to keep us all on the same page.By coordinating with other experts, we work as a team to better serve you, our clients.For example, if we are considering completing a Roth IRA conversion for a client, we will contact the client’s tax advisor to get his or her opinion on the conversion and estimate any tax liability or other ramifications.With so many moving parts in financial planning, being able to speak to other experts is key to providing great service and value to clients.

Sharing your “diary” made simple

Because taxes are such an important part of financial planning, we request that clients send us their most recent return once completed each year.Typically, this is something most clients will send to us prior to their annual meeting, however, the sooner we can get them, the better.This allows us to spend more time taking a closer look at the return to see if there are any potential planning opportunities that we can help uncover.We also now have the option for clients to sign a form that authorizes us to contact your CPA or tax advisor directly to have them send us your return once filed to save you any time and hassle it may create.Our goal is to take as much off your plate as possible to make life easier on you.

If you ever have questions on your tax situation or would like to speak to us in greater detail about financial planning, please don’t hesitate to contact us. We are here to help!

Nick Defenthaler, CFP® is a Support Associate at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

You should discuss any tax or legal matters with the appropriate professional.

Real Estate Rebound: Time to Buy a Home?

As the real estate market starts to climb out of the doldrums and consumer demand begins to increase, you may be thinking of buying. Before you start a house hunt, let’s take a look at some general financial planning rules with regards to what could be the biggest purchase of your life.

Picking Your Price Point

Probably the most important rule to keep in mind when you are deciding which house is right for you is determining what you can afford.   The general rule of thumb is that your principal, interest, taxes, and insurance (commonly referred to as PITI) should not exceed 28% of your gross income.  So to put that into perspective, if your total household income is $100,000 ($8,333/month), you should try to keep the PITI to no greater then $2,333 (28% of $8,333).   Please keep in mind this is a general rule and not an absolute truth.  To make a truly responsible financial decision, you should have a good understanding of your monthly cash flow and determine how much of that $2,333 you can take on without being “house poor”. 

Unless It’s Long Term, Rent

Length of time you plan to be in the home is also a big consideration.  In fact, if you plan on being in the home less then 5 years it’s probably better just to rent. The reason for this is in the first 5 years of a typical amortization schedule, you hardly pay down the principal.  The majority of your monthly payment is going to interest and, unless there is substantial appreciation in the real estate market over that 5-year period, you probably won’t have much equity in the home when you try to sell it.

Prepare for PMI

If you aren’t putting 20% down, then you’re probably going to be subject to private mortgage insurance (PMI), which will increase your monthly payment.  Once you have 20% equity in the home, and a period of two years has passed since the initial purchase date, you can apply to have PMI removed from the loan.  Until that time, you need to be prepared for the additional burden on cash flow.

Moving isn’t cheap! 

The average moving company charges between $1,000 and $5,000 for transporting all your precious possessions from one house to the next so plan on setting aside a little cash for this expense.

Most Common Questions

Purchasing a new home can be fun, but it can also be very stressful. Some common questions that we get a lot from our clients at The Center are:

• Where do I take the money from for the down payment?

• Should I do a 15 or 30-year loan?

• How much should I put down on this house?

Whether this is your first house or your tenth, take a deep breath and be sure to consult with trusted advisors. When you talk through all of these issues, it’s easier to decide if it really is your time to start shopping for a new home sweet home.

Matthew Trujillo is a Registered Support Associate at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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 Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-009197

The Investment Pulse: What we’ve heard in the First Quarter

At The Center each of us spends a substantial amount of time reading, listening to speakers and attending conferences. The goal is to provide our clients with the best possible advice. Here’s a brief summary of the high points the Investment Department has heard this year so far.

Municipal Bonds

In January, Melissa Joy and Angela Palacios spoke with a Municipal bond specialist from T. Rowe Price. We discussed the current environment and what may affect municipal bonds looking ahead.

• Distressing news from Detroit and Puerto Rico last year caused retail investors to flee from municipal bonds in general, creating what many believed to be an excellent investment opportunity.

• This caused unusual cross-over buying which means that investors that typically only invest in taxable bonds were compelled by valuations and yield to purchase tax free bonds for portions of their portfolios. Banks are even utilizing municipal bonds as part of their liquid investment buckets. These are rare events.

• Tax filing time creates buying opportunities for municipal bond investors as taxes are top of mind in the March/April time frame when checks are being written to pay for taxes due.

Stock Market Valuations

There has been much heated debate as to whether the stock market is over or under valued on the fifth anniversary of the bull market. We attempt to review varying arguments in order to make educated decisions on the allocation of our portfolios. One extreme yet interesting view-point comes from Eric Cinnamond, Portfolio Manager for an Aston/River Road fund. Eric has strict valuation guidelines as to what he will and will not pay for small companies and is willing to hold cash in absence of opportunities.

• He has more cash than he ever thought he would have, currently 70% of his allocation. He feels valuations are very bloated and that for valuations to continue to expand, the U.S. economy will have to continue running at peak profits with no recession indefinitely (he did state that these valuations can continue for quite some time before correcting).

• When we get to these points in the market cycle, you start to hear the question, “Is it different this time?” Cinnamond says he is getting this question a lot lately because of his contrarian viewpoint.

• He will continue to hold cash as dry powder to deploy in the event of a market pull back and stands by his process.

Bond Giant Woes

In mid-January, PIMCO announced that Mohamed El-Erian resigned his role as co-Chief Investment Officer and Chief Executive Officer for PIMCO funds. While he had only an indirect impact on our PIMCO holdings we are continuing to watch further developments at PIMCO. Bill Gross & Rob Arnott remain the key managers to the PIMCO strategies we utilized for clients. While it currently appears Bill Gross is a difficult personality to work with he continues to provide excellent returns compared to the bond market in general.

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. Any opinions are those of Angela Palacios and not necessarily those of RJFS or Raymond James. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Income from taxable municipal bonds is subject to federal income taxation; and it may be subject to state and local taxes. Municipal securities typically provide a lower yield than comparably rated taxable investments in consideration of their tax-advantaged status. Investments in municipal securities may not be appropriate for all investors, particularly those who do not stand to benefit from the tax status of the investment. Please consult an income tax professional to assess the impact of holding such securities on your tax liability.

Avoiding Double Taxation of IRA Contributions

In my previous blogI described some of the rules surrounding making and deducting IRA contributions.   If you are over the IRS income thresholds, you can still make the IRA contribution, you just won’t be able to deduct it on your taxes – the contribution would be made with after-tax dollars.  This is where tax form 8606 comes into play. 

What is Tax Form 8606?

You are required to file Form 8606 when you make a non-deductible IRA contribution; this tax form will document the contribution amount for the current year.  It must also be filed with your taxes when you withdraw funds from an IRA in which non-deductible contributions were made.  If you don’t file this important tax form, when you go to withdraw funds you’ll face tax consequences. Any amount you contributed that did not receive a tax deduction (after-tax dollar contributions) will be treated as if it did, in fact, receive a tax-deduction and you will be taxed AGAIN on the money.  If you do file form 8606 properly, when you go to take a distribution, a portion will be taxable (any earnings) and a portion will not (return of original after-tax contribution). 

Is your head spinning yet?  Things get confusing quickly and mistakes can happen VERY easily when making non-deductible IRA contributions. Those mistakes could potentially result in double taxation of contributions that could cost investors substantial amounts of money over the course of their retirement.   Not many people want to deal with tracking contributions over the course of a career and will elect to not make non-deductible IRA contributions because of the potential administrative nightmare it can create.  

Non-deductible IRA Alternatives

So what else is there if you have additional funds to invest beyond maxing out a company retirement plan?  If your income is within the IRS limits, you could consider contributing to a Roth IRA.  As with a non-deductible IRA, contributions are made with after-tax dollars. However, all withdrawals, including earnings are not taxable if a qualified distribution occurs.  If income is too high for Roth contributions, you still might be able to contribute by utilizing the “back door” conversion strategy.  If you are phased out from the Roth because of your high income (a good problem to have!) and you don’t fit the mold for a Roth conversion, you could consider opening a taxable brokerage account. Those funds would not grow tax-deferred, but withdrawals would not be included in ordinary income like an IRA because you never received a tax deduction on the contributions.   

As you can see, there are many subtle nuances of different types of retirement and investment accounts.  Your planner can help you identify which accounts make the most sense for you based on your current and projected financial situation.  Working with someone you trust thoroughly to help you make these decisions is imperative and is something we deeply care about at The Center.

Nick Defenthaler, CFP® is a Support Associate at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

The 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 Center for Financial Planning, Inc. and not necessarily those of Raymond James. Unless certain criteria are met, Roth IRA owners must be 59 ½ or older and have held the IRA for five years before tax-free withdrawals are permitted. Converting a traditional IRA into a Roth IRA has tax implications. Changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. As Financial Advisors of RJFS, we are not qualified to render advice on tax matters. You should discuss tax matters with the appropriate professional. C14-009867

Tactical Asset Allocation Dashboard

The below chart reflects the Center for Financial Planning’s Investment Committee current positioning relative to our longer-term strategic models.

• Maintain a modest equity overweight as Leading indicators suggest better global growth ahead

• Expect equities to outperform bonds and cash and fixed income to underperform

• Continue to favor tactical allocation strategies

• Underweight U.S. equity allocations given relative valuations and we see potentially better opportunities in select international equities.

Asset Class Definitions

Core Bonds: Securities with primary exposure to bonds with historically low default risk and high correlation to Barclay’s U.S. Aggregate Bond Index.  This includes Investment Grade bonds with Intermediate Maturities.  This index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities.  These major sectors are subdivided into more specific indexes that are calculated and reported on a regular basis.  Municipal Bonds are also included.

Strategic Income: Securities with primary exposure to bonds with less interest rate risk and types of bonds that are less correlated to the Barclay’s U.S. Aggregate Bond Index.  This covers the universe of fixed-rate, non-investment grade debt (High Yield).  Canadian and global bonds (SEC-registered) of issuers in non-EMG countries are included.

U.S. Large Cap Equity: Securities correlated to the Russell 1000 Index: Based on a combination of their market cap and current index membership, this index consists of approximately 1,000 of the largest securities from the Russell 3000. Representing approximately 92% of the Russell 3000, the index is created to provide a full and unbiased indicator of the large cap segment.

U.S. Small/Mid Cap Equity: Securities correlated to Russell Midcap Index: A subset of the Russell 1000 index, the Russell Midcap index measures the performance of the mid-cap segment of the U.S. equity universe. Based on a combination of their market cap and current index membership, includes approximately 800 of the smallest securities which represents approximately 27% of the total market capitalization of the Russell 1000 companies. The index is created to provide a full and unbiased indicator of the mid-cap segment.  Securities also correlated to the Russell 2000 Index.   The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 is a subset of the Russell 3000 Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership. The Russell 2000 Index is constructed to provide a comprehensive and unbiased small-cap barometer and is completely reconstituted annually to ensure larger stocks do not distort the performance and characteristics of the true small-cap opportunity set.

International Large Cap:  Securities are correlated to the MSCI EAFE.  This index is a free float-adjusted market capitalization index that measures the performance of developed market equities, excluding the U.S. and Canada. It consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.

International Small/Mid Cap:  Securities are correlated to the MSCI EAFE Small-Cap Index.  This index is an unmanaged, market-weighted index of small companies in developed markets, excluding the U.S. and Canada.

Strategic Equity:  Securities with exposure to alternative investments that are less correlated to stocks and bonds with expectations and investments that can span across asset classes.  Also includes investments in managed futures.

*This material is for informational purposes only and should not be used or construed as a recommendation regarding any security outside of a managed account. Any opinions are those of The Center for Financial Planning and not necessarily those of Raymond James. Expressions of opinion are as of 03/31/2014 and are subject to change. Diversification and asset allocation do not assure a profit or protect against loss. The prices of small company stocks may be subject to more volatility than those of large company stocks. International investing involves additional risks such as currency fluctuations, differing financial and accounting standards, and possible political and economic instability. Investing in emerging markets can be riskier than investing in well-established foreign markets. Investing involves risk and investors may incur a profit or a loss. Bond prices and yields are subject to change based upon market conditions and availability. If bonds are sold prior to maturity, you may receive more or less than your initial investment. There is an inverse relationship between interest rate movements and fixed income prices. Generally, when interest rates rise, fixed income prices fall and when interest rates fall, fixed income prices rise. High-yield bonds are not suitable for all investors. The risk of default may increase due to changes in the issuer's credit quality. Price changes may occur due to changes in interest rates and the liquidity of the bond. When appropriate, these bonds should only comprise a modest portion of a portfolio. Investments in municipal securities may not be appropriate for all investors, particularly those who do not stand to benefit from the tax status of the investment. Municipal bond interest is not subject to federal income tax but may be subject to AMT, state or local taxes. Global bonds tend to be denominated in the currency of the country in which they are issued. Most global bonds have higher default and currency risks than U.S. bond issues. Also, in some cases foreign governments don't allow the purchase of government bonds by non-residents. Managed futures involve specific risks that may be greater than those associated with traditional investments and may be offered only to clients who meet specific suitability requirements, including minimum net worth tests. You should consider the special risks with alternative investments including limited liquidity, tax considerations, incentive fee structures, potentially speculative investment strategies, and different regulatory and reporting requirements. You should only invest in hedge funds, managed futures or other similar strategies if you do not require a liquid investment and can bear the risk of substantial losses. There can be no assurance that any investment will meet its performance objectives or that substantial losses will be avoided. Individuals cannot invest directly in any index. Past performance does not guarantee future results.

Money Smart Week Participation

 

April 5^th – 12^th marked the Federal Reserve Bank of Chicago’s Money Smart Week. During Money Smart week, a variety of experts in the area of financial planning presented during six days of focused presentations to community groups and educational organizations in an effort to help consumers learn to better manage their personal finances.

This year, The Center’s Melissa Joy and Sandy Adams participated in Money Smart Week as members of the FPA of Michigan. Melissa and Sandy presented Budgeting 101 at community libraries. This is just one example of how we at The Center fulfill our vision of Partnering with a Passion for the Community and our commitment to financial education and literacy.

Why You Can’t Always Take a Tax Deduction on an IRA

On deadline day for filing your taxes, you may be considering making last-minute Traditional IRA contribution.  Most people contribute to an IRA to 1) save for retirement and 2) take a tax deduction on the contribution to hopefully lower one’s overall tax bill.  Many people, however, are not aware that there is a good chance that the IRA contribution they are intending to make or have made in the past, does not allow for a tax deduction. This happens if you are above IRS adjusted gross income (AGI) thresholds.  Eligibility to deduct depends on income and whether or not you are covered under an employer sponsored retirement plan, such as 401k or 403b.

Married Filing Jointly

Both spouses are covered under an employer sponsored retirement plan at work

• Income limit to be able to fully deduct an IRA contribution - $96,000

Only one spouse is covered under an employer sponsored retirement plan at work

• Income limit to be able to fully deduct an IRA contribution - $181,000

Neither spouse is covered under an employer sponsored retirement plan at work

• No income limit to be able to fully deduct an IRA contribution

Single

Individual is covered under an employer sponsored retirement plan at work

• Income limit to be able to fully deduct an IRA contribution - $60,000

Individual is not covered under an employer sponsored retirement plan at work

• No income limit to be able to fully deduct an IRA contribution

There’s a reason the IRS limits the amount that can be deducted by someone who is covered under an employer retirement plan. The IRS tries to prohibit investors who are in higher tax brackets from sheltering “too much” income that won’t be taxed until funds are ultimately withdrawn upon retirement. 

You must also have earned income equal to or greater than the IRA contribution being made during the year in which the contribution will be coded.  For example, for someone to be eligible to make a full IRA contribution, their earned income from work throughout the year must be greater than or equal to $5,500, if under the age of 50, or $6,500 if over the age of 50.  Another important note – Social Security, pension benefits, IRA distributions, dividends, interest, etc. are NOT considered earned income items.  The IRS prevents retirees from contributing to qualified retirement accounts that grow tax-deferred unless they are working. 

In my next blog post, I’ll discuss ins and outs of contributing and withdrawing funds from an IRA where non-deductible contributions were made…this is where things can tricky.  Stay tuned. 

Nick Defenthaler, CFP® is a Support Associate at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. 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. C14-009199

Elder Care Planning: Preparing an Aging Parent for Financial Capacity Challenges

 Financial capacity is one of the first abilities to decline as cognitive impairment appears, whether due to the slowing down in older age or a more specific dementia diagnosis.  Anyone with an elderly parent should be prepared to face the challenges that can come with diminished financial capacity. The first step in preparation is to understand what you and your mother or father may be facing. Quite literally, financial capacity refers to a person’s ability to manage money and financial assets in ways that meet a person’s needs and which are consistent with his/her values and self-interests.  Financial capacity includes basic skills like identifying and counting money, understanding debt and loans, handling cash transactions, paying bills, and maintaining judgment to act practically and avoid exploitation. Given that, for most of us, the loss of some financial capacity is inevitable, these are some risks and how to prepare your family:

Financial Management Challenges – most often, the ability to handle the day-to-day money management becomes a challenge.  This may mean that things like handling incoming checks and bills or balancing the checkbook become difficult.  In these instances, bouncing checks, not paying bills when they are due, and not filing tax returns are commonplace.  It goes without saying that this can cause a multitude of problems (not to mention, extra cost).

Fraud/Financial Exploitation -- more and more we are hearing about occurrences of financial fraud, with older adults being the most targeted victims. Financial fraud and exploitation can come in many forms, including but not limited to theft of checks (Social Security, pension, etc.), theft or unauthorized use of ATM or credit cards to access funds, and tax fraud.  Many times, a trusted friend, family member or caregiver is the one taking advantage of the older adult.

What can you do to prepare to help you and your aging parent avoid these potential risks?

• Make sure to have an update General/Financial Durable Power of Attorney naming a trusted family member or friend in place. 
• Consider having a Revocable Living Trust drafted that names a successor to handle things in the case of financial incapacity; appropriate assets should be titled in the name of the trust.
• Get your aging parent to communicate with his or her current/future Power of Attorney and/or Successor Trustee (and appropriate family members or friends) about money goals and values.  In addition, make sure all of his or her financial information is documented and organized in the case that someone needs to assist with financial matters in the future (consider a tool like our Personal Record Keeping Document and Letter of Last Instruction for this purpose).
• Help facilitate an introduction between your parent’s current/future Power of Attorney and/or Successor Trustee (and appropriate family members or friends) to his or her  financial team (financial planner, CPA and estate planning attorney).  Make sure that each member of the professional team has authorization to talk to (1) other members of your professional team and (2) family members or friends that might assist in the future. 
• Make sure that the chosen financial planner has a written Investment Policy Statement in place for managing your love one’s investment portfolio.  This written document outlines goals, risk tolerance, asset allocation preference and needs related to your parent’s investments. 

By working with a professional and personal team to plan ahead for the possibility of financial incapacity, you give yourself and your loved ones the best chance to avoid the risks to future financial independence.

This is the second in a monthly post (2^nd Thursday of each month) that will address Elder Care planning topics.  If you have a specific question or issue you’d like addressed, please contact me at Sandy.Adams@CenterFinPlan.com.

Sandra Adams, CFP® is a Partner and 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.

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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 in this material does not purport to be a complete description of the issues referred to herein. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. You should discuss any legal matters with the appropriate professional. C14-009365