People Like to Talk About Themselves

People like to talk about themselves. My narcissism rests squarely with my baseball skills. I have played baseball in tournaments now for over 32 years. Some of my teammates say that I like to talk about my stats, thus I am conceited in that way. What they do not understand is that I am a CFP® who focuses on goals. I help people in my business achieve their goals. When I play baseball, guess what? I have goals there too. Generally, I try to hit .500 and minimize my errors. 

Last Fall, I played two weeks in two different divisions in the Men's Senior Baseball League World Series. One division was for those 65 and up (I got an exemption for being too young.) The other division was for those age 60 and up. My goal for both weeks was to hit .500 each week. In the first week, I consistently hit throughout the week and ended up hitting .500. In the second week, I was on a new team and they did not know me, so I had to ride the pine a little. I had one bad game and I was 3 for 11 at one point. I realized that if I was going to hit .500, then I would have to string together several hits in a row. My brain tells me to really focus and concentrate when I step into the batter's box. I only got 5 more at bats during that week, but went 5 for 5 to end up at 8 for 16 or .500.

My goal was to hit .500 for both weeks and I hit exactly .500 for both weeks. 12 for 24 the first week and 8 for 16 the second week. Am I being narcissistic by telling this story? Some people would think so, but I believe that I am simply a goal oriented individual. It seems rather ignorant not to have a goal that may be hard to reach. This goes not only for baseball, but also in your life. 

How are you going to get to where you are going if you do not know where you want to end up?

Oh by the way, I made a couple of errors, maybe three for the two weeks that I played. Hey, I in my sixties! Give me a break will you? How many sixty plus years old do you know that still can play baseball? That's what I thought!

Famous Last Words on Interest Rates

I do not know about you, but this fear of inflation is beginning to get out of hand. Ever since President Carter's unfortunate tenure as our President, we have had this huge fear of another bout of similar inflation. Personally and professionally speaking, I believe it is all a bunch of hooey. This could be my famous last words on the subject, but I am willing to stick my neck out.

What went wrong back then?

• Back when President Carter was in office, we had a horrible position of energy dependence. We needed a lot more oil than we had and we were subject to the whims of other countries.
• Insurance companies were allowed to purchase high yield bonds for their normally staid investment portfolios.
• Banks were just abject fools back then offering double digit CD's.
• Insurance companies were offering fixed annuities to compete with those bank double digit CD's by offering double digit fixed annuities.
• Bank regulators could not keep up with the fast moving changes.
• Insurance regulators were woefully inept.
  
• The biggest factor was that the Federal Reserve Bank thought that the best way to solve the runaway inflation problem was to raise interest rates.

What did we learn from all this?

• Never again be dependent on other countries for our oil supply.
• Limit the amount of high yield bonds that insurance companies can purchase.
• When you are a bank, you offer paltry CD rates and people will still buy them.
• When you are an insurance company, you offer paltry fixed annuity rates and people will still buy them.
• Bank regulation is much improved, especially since the 2008 fiasco.
  
• Insurance regulation is better, but there are still problems with product approvals. They are too complicated for the average consumer to understand, in my opinion.
  
• The Federal Reserve Bank is still a problem. Raising interest rates like they did fueled the problem.
  

We fixed most of those problems, but the Federal Reserve Board of Governors still believe that President Carter days are just around the corner, if we do not watch out. Never mind the fact that according to the Federal Reserve's own numbers, they have over seven trillion on their balance sheet at Federal Reserve banks across the United States. This is not a paltry sum by any means.

https://www.federalreserve.gov/releases/h41/current/h41.htm 

I for one do not believe that we will have to worry about inflation on the par of President Carter's tenure in office. The main reason for this is, if the Federal Reserve raises rates like they did back then, it would doom our economy and nation. It would cause the amount of U.S. Debt to increase exponentially with a rise in interest rates that would cause an enormous hit to our balance sheet, not to mention the government debt. In effect, they would be cutting their own throat. It is much easier for the Federal Reserve to keep buying fixed income investments (bonds and mortgages,) put them on their balance sheet, then let them mature, or pick and choose profitable times to sell. These actions will guarantee rates will be low for the foreseeable future. Inflation is not a problem and I do not believe that we should ever worry about it. So, when you see the pundits on television talking about inflation getting out of hand, know that they are full of bull. It is not going to get out of hand. I'll stick my neck out and say we will never see another round of inflation like we saw when President Carter was in office.

Review Your Parent's Beneficiaries

The best advice that I can ever give adult children of older parents is to review their financial, annuity and insurance policies to see if their beneficiary designations are according to their wishes. A lot of times, one parent passes away and nobody bothers to check the beneficiary designations. Sometimes the deceased spouse is still listed as a beneficiary. This can create a major headache, especially if not corrected. 

I recently ran into another situation where an adult son's ex-girlfriend was named as a beneficiary. The parent thought that his adult son would eventually marry this girl and never got around to changing the beneficiary.

On another case, a lady with dementia in a nursing home was named as a beneficiary. This really complicates things especially when the parent has already passed away. The lady in the nursing home is due the proceeds for their share even if she passes away before paying it. You have to go find out who is handling her affairs, where to send the check, how to apply for the beneficiary share when the person (the lady in the nursing home) cannot legally sign for herself. It just becomes an administrative nightmare.

Of course, sometimes there is no beneficiary at all named like with individual accounts. Individual accounts without a beneficiary designation are guaranteed to have to go through probate if the person has an estate size of more than $75,000 in most states. You can avoid this with a Revocable Living Trust or by adding a transfer on death clause to the individual account.

Personally, I have been in business for over 30 years and I have yet to see the "perfect" estate of a parent who had all their i's dotted and t's crossed. They may be out there somewhere, but I have not seen anyone's estate like this in my thirty plus years. It pays to follow up on these beneficiary designations to make sure that there are no hidden surprises.  

We offer a beneficiary review service for an hourly fee of $100 per hour with a $400 maximum. This is a small price to pay to get things right, in my opinion.

See our Form ADV 2A disclosures on our web site at https://marianfs.com.

10 Critical Mistakes in Estate Planning

Over my thirty-two plus year career, I continued to see mistakes in legal documents prepared by attorneys along with the failure to review and update these legal documents by their clients. No offense to the many "flawless" attorneys out there. These are the biggest mistakes that I often see:

1. Failure by the attorney to make certain that individual and joint assets are re-titled into the new Revocable Living Trust by the client.
2. Failure in drafting a Revocable Living Trust (mostly on purpose) that names a bank or corporate trustee.
3. Failure by the client to update their legal documents periodically.
4. Failure by the attorney, again on purpose, to force the creation of one or more Testamentary Trusts at the death of the grantors.
5. Failure to have clear language regarding beneficiaries ability to accept their share outright, or as a lump sum.
6. Failure in drafting a Revocable Living Trust that restricts all beneficiaries as if they were all addicted to drugs, having maritial problems, or are a spendthrift.
7. Failure to record a deed for real estate into the name of the Revocable Living Trust.
8. Failure by the attorney to make clear their fee and timetable to perform trust updates.
9. Failure by the attorney to obtain client signatures in all the proper places.
10. Failure by the attorney in not drafting a "see-through trust" when recommending the beneficiary of qualified plans and IRA's be the new Revocable Living Trust.

Let's take these one by one. 

Number one is very typical. The attorney drafts the document, then tells the client to re-title everything, yet nobody follows up to see that it is completed.

Number two in most cases is totally unnecessary for middle class families. Someone with a small estate has no need for a bank trustee. This should be a no-brainer by the attorney, but I have seen it often.

Number three is very common. Sometimes the grantor's beneficiary dies before they do and the Revocable Living Trust is never updated. Further still, the grantor may have wanted to change their beneficiaries, but did not get around to it.

Number four is a pure money grab by the attorney, in my opinion. The grantor paid the attorney for the Revocable Living Trust, then the attorney never explained and the client never read it to see that each beneficiary cannot have access to their share of the estate. Only the income from the principal and for their health and welfare. By adding Testamentary Trusts which are created upon the death of the last grantor, then this is what you end up with. This makes each beneficiary have to hire an attorney. You see, even though your parents left you a share, since you are three siblings for example, then all three have to hire their own attorney to draft their own Testamentary Trust. One attorney cannot represent three siblings. They are barred from doing so since each sibling has competing interests and different beneficiaries.

Number five is related to number four. There is no provision for an outright distribution or lump-sum distribution for beneficiaries when Testamentary Trusts are created. You do not need Testamentary Trusts if you pay beneficiaries outright.

Number six is where the attorney drafts the Revocable Living Trust so that all beneficiaries are considered spendthrifts or have marriage or addiction problems. Each family is different, but attorneys tend to treat all the beneficiaries the same when they draft legal documents, even if only one beneficiary has issues.

Number seven is related to number one. I see this a lot. The attorney tells the client to do a quit claim deed, but there is a breakdown in communication somewhere along the line and the quit claim deed does not get filed with the county where the real estate is located.

Number eight is where the attorneys gladly take the client's money to do the initial drafting of the Revocable Living Trust, but do not have a clear explanation about their fee to update the trust as the client's lives change, or tax laws change. Clients are left to wonder how much it costs for an update and typically blow it off and file it away in the "I'll do it later" category. For example, in Florida, the Revocable Living Trust, the Pour-Over Will and the Financial Powers of Attorney should all be witnessed by two people with their full addresses. Everyone, the grantor and the two witnesses signatures should also be notarized. You may have a problem in Florida if the trust does not have two witnesses and a notarization of everyone's signature. You do not want to find out when someone passes away about this issue. Do an Estate Planning Review!

Number nine is another no-brainer. Believe it or not, most attorneys leave the notarization up to someone who works for them in their office. This is ripe for mistakes. I have seen it numerous times where a signature is left blank, or not dated properly and where the grantor's date and the notary's date do not match. Plus, scribbling through something and initialing it, is a mistake. Never ever scribble through anything on a legal document. RE-DO IT!! The attorney that allows this on a newly created trust is not professional, but rather lazy, in my opinion.

Number ten can be costly. I had a client whose attorney let her husband name his Revocable Living Trust as the beneficiary of his IRA. His wife was a beneficiary, but there was also a corporate beneficiary. This failed to meet the definition of a "see-through trust" as far as the IRS is concerned, because a corporation is not a person. Therefore, you cannot "see-through it" to any person. As a result, the wife could not treat the IRA as her own and she had to take it all out in five years.

There you have my 10 Critical Mistakes in Estate Planning. Trust me, it is worthwhile to have someone like me take a look at your legal documents. Although, I am not an attorney, I am qualified by training and experience as a Certified Financial Planner® to review estate planning documents. By this I mean that I can read!

https://marianfs.com