Is the Fiduciary Standard a Plus for Investors?

April 23, 2017
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Will it make a difference in the quality of the advice they receive?

Next year, the Department of Labor is scheduled to introduce new rules regarding retirement planning. Under these rules, any financial services industry professional who makes investment recommendations to workplace retirement plan participants or IRA owners in exchange for compensation will be considered a fiduciary. What does that mean? It means that this person has an ethical and legal duty to provide advice that is in your best interest.

Many investment and retirement planning professionals have reacted to the DoL’s move with “We already do that.” After all, the suitability standard – something very close to a fiduciary standard – has been in place in the financial services industry for decades, and numerous financial services professionals already serve their clients as fiduciaries.

Detractors think the new rules amount to overkill, and they argue that an-across-the-board fiduciary standard will not make a difference in the quality of retirement planning or investment advice that retirement savers receive. The legal implications of the new rules may send retirement planning fees higher, and another effect might be that fewer retirement savers have access to these services.

So, what positive difference could a fiduciary standard make? It could lessen the potential for conflicts of interest creeping into an advisor-client relationship.  The suitability standard emerged in the brokerage industry decades ago. It guides a financial services professional to recommend only investments that are “suitable” for a particular client, given his or her age, income, goals, and net worth.

The DoL sees a shortcoming in the suitability standard. Suppose there are multiple “suitable” investments that a retirement planner could recommended to a retirement saver (a common occurrence). Under the suitability standard, what is to prevent a retirement planner from suggesting and recommending the investment that could result in the most compensation for him or her, over the others? What if the alternate investment options are never mentioned? If this sort of thing happens, is the investment recommendation being made truly one in the client’s best interest?

In theory, the installation of a wide-ranging fiduciary standard takes the potential for conflicts of interest out of retirement planning. It also encourages even more retirement planners to charge fees for services, rather than earning some or even all of their incomes from commissions.   This encouragement will likely sit well with most investors, who naturally want less potential for conflict of interest. It is also sitting well with many retirement planners. While exemptions to the rules can be made and while the rules will not apply to existing investment assets, the implementation of a broad fiduciary standard for retirement planning is good news and reduces potential dissonance in the relationship between the retirement planner and the retirement saver.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

HFG Wealth Management Named Houston Five Star Wealth Manager

April 17, 2017
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Larry Harvey of HFG Wealth Management Selected To Attend Barron’s Top Independent Advisors Summit

April 3, 2017
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The Woodlands, TX — Larry Harvey, Founder and CEO of HFG Wealth Management, LLC has been selected to attend the Top Independent Advisors Summit hosted by Barron’s magazine. Attendees attend workshops that explore current issues from state of the economy, overseeing high-net-worth accounts and families, to portfolio management and retirement planning. The invitation-only conference is held annually in March.  The Barron’s Top Independent Advisors Summit provides highly detailed and thought-provoking perspectives from top advisors on managing investments, clients and practices.  Much of the content is delivered by members of Barron’s Top Independent Advisors, making this conference an extraordinary opportunity to share thoughts with peers and hear what is on the minds of leading practitioners in the industry as they move forward in the ever-changing market.

This annual conference is the basis for the Top Independent Advisors Summit and the advisors are chosen based on the volume of assets overseen by the advisors and their teams and the quality of the advisors’ practices. The Top 100 Independent Advisors are comprised of Registered Independent Advisors and Advisors from Independent Broker Dealers.

“I am extremely honored to once again be selected to be among the Top Independent Advisors in the country.  I am grateful for the opportunity to gain further insight on how HFG Wealth Management as an independent, objective fee-only wealth management firm can best serve our clients and their needs,” said Harvey.

Larry Harvey of HFG Wealth Management, LLC was one of approximately 400 financial advisors who were either selected by Barron’s or their affiliated firm to participate in the event. For more information about HFG Wealth Management, LLC, please visit www.hfgwm.com

Which Financial Documents Should You Keep On File?

March 27, 2017
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… and for how long?

 You might be surprised how many people have financial documents scattered all over the house – on the kitchen table, underneath old newspapers, in the hall closet, in the basement. If this describes your financial “filing system,” you may have a tough time keeping tabs on your financial life.

Organization will help you, your advisors … and even your heirs. If you’ve got a meeting scheduled with an accountant, financial consultant, mortgage lender or insurance agent, spare yourself a last-minute scavenger hunt. Take an hour or two to put things in good order. If nothing else, do it for your heirs. When you pass, they will be contending with emotions and won’t want to search through your house for this or that piece of paper.

One large file cabinet may suffice. You might prefer a few storage boxes, or stackable units sold at your local big-box retailer. Whatever you choose, here is what should go inside:

  • Investment statements. Organize them by type: IRA statements, 401(k) statements, mutual fund statements. The annual statements are the ones that really matter; you may decide to forego filing the quarterlies or monthlies.. In addition, you will want to retain any record of your original investment in a fund or a stock. (This will help you determine capital gains or losses. Your annual statement will show you the dividend or capital gains distribution.)
  • Bank statements. If you have any fear of being audited, keep the last three years’ worth of them on file. You may question whether the paper trail has to be that long, but under certain circumstances (lawsuit, divorce, past debts) it may be wise to keep more than three years of statements on file.
  • Credit card statements. These are less necessary to have around than many people think, but you might want to keep any statements detailing tax-related purchases for up to seven years.
  • Mortgage documents, mortgage statements and HELOC statements. As a rule, keep mortgage statements for the ownership period of the property plus seven years. As for your mortgage documents, you may wish to keep them for the ownership period of the property plus ten years (though your county recorder’s office likely has copies).
  • Your annual Social Security benefits statement. Keep the most recent one, as it shows your earnings record from the day you started working. Please note, however: if you see an error, you will want to have your W-2 or tax return for the particular year on hand to help Social Security correct it.
  • Federal and state tax returns. The IRS wants you to hang onto your returns until the period of limitations runs out – that is, the time frame in which you can claim a credit or refund. Keep three years of federal (and state) tax records on hand, and up to seven years to be really safe. Tax records pertaining to real property or “real assets” should be kept for as long as you own the asset (and for at least seven years after you sell, exchange or liquidate it).
  • Payroll statements. What if you own a business or are self-employed? Retain your payroll statements for seven years or longer.
  • Employee benefits statements. Does your company issue these to you annually or quarterly? Keep at least the most recent year-end statement on file.
  • Insurances. Life, disability, health, auto, home … you want the policies on file, and you want policy information on hand for the life of the policy plus three years.
  • Medical records and health insurance. The consensus says you should keep these documents around for five years after the surgery or the end of treatment. If you think you can claim medical expenses on your federal return, keep them for seven years.
  • Warranties. You only need them until they expire. When they expire, toss them.
  • Utility bills. Do you need to keep these around for more than a month? No, you really don’t. Check last month’s statement against this month’s, then get rid of last month’s bill.

If this seems like too much paper to file, buy a sheet-fed scanner. If you want to get really sophisticated, you can buy one of these and use it to put financial records on your computer. You might want to have the hard copies on file just in case your hard drive and/or your flash drive go awry.  All of this to say, organization is key in keeping financial documents on file.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

10 Financial Resolutions and Tax Changes to Consider for 2017

March 20, 2017
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The year 2017 promises to be a time of change. Based on Trump’s campaign promises and recent actions, we can expect substantial tax reform and a significant rollback of Obamacare in the first half of the year. We will address those changes as they come. In the meantime, here are 10 of the most critical current tax rules and changes for 2017 that affect every high-net-worth taxpayer.

1. Income taxes
For 2017, income tax brackets have widened slightly due to inflation, but tax rates haven’t changed.

The standard deduction did increase slightly:

  • Married couples get $12,700, plus $1,250 for each spouse if age 65 and up.
  • Singles get $6,350, and $7,900 (not surviving spouse) if age 65 and up.
  • Heads of household get $9,350, plus $1,550 once they attain age 65.

Personal exemptions stay the same at $4,050 for taxpayers and dependents

2. Dividend and capital gains tax rates were adjusted for inflation
Dividend and capital gains rates remain the same other than being adjusted for inflation.

Investors who are in the 39.6% income tax bracket will pay a 20% tax rate for qualified dividends and long-term capital gains. The 20% top rate on dividends and long-term gains stays the same, but begins at higher amounts for:

  • Singles with taxable income above $418,400
  • Heads of household with taxable income above $444,550
  • Joint filers with taxable income above $470,700

Investors who fall between the 25% to 39.6% tax brackets will pay a 15% tax rate on qualified dividends and long-term gains. Investors in the 10% and 15% tax bracket will pay 0% tax on dividends and long-term capital gains.  Non-qualified dividends and ordinary income from taxable bonds will be taxed at an investor’s ordinary income tax rate.

3. IRA contributions always make sense when allowed
Contributions remain the same for 2017. For both traditional and Roth IRAs, investors can contribute $5,500 if they are under age 50, with a limit of $6,500 if they are over age 50. Note that the deadline to make an IRA contribution is April 18, 2017 for tax year 2016.

There are income limits for being able to deduct traditional IRA contributions, and these income limits have increased for 2017 as follows:

  • Singles and heads of household who contribute to a workplace retirement plan can claim a fully deductible contribution if their income falls below $62,000.
  • For married couples filing jointly, a spouse who contributes to a workplace retirement plan can claim a full deduction if their income falls below $99,000. From there, the deduction phases out between $99,000 to $119,000. If you can’t make a deductible IRA contribution, consider a nondeductible contribution.

Income limits pertaining to Roth IRA contributions have increased as follows:

  • Single filers earning less than $118,000 can make a full Roth IRA contribution, but contributions are eliminated for filers earning more than $133,000.
  • Married couples filing jointly can make a full contribution to a Roth IRA if their combined income is less than $186,000. However, they are ineligible to contribute if their income exceeds $196,000.

4. Maximize 401(k) contributions whenever possible
Contribution limits for 401(k), 403(b), and 457 plans remain unchanged for 2017. If an investor is under age 50, there’s an $18,000 contribution limit, with an additional $6,000 catch-up contribution limit if the investor is over age 50. The cap on SIMPLE plans remains at $12,500, and $15,500 for individuals age 50 and above. The base pay-in limit for defined contribution plans increased to $54,000.

5. Beware! Medical expense deductions and long-term care deductions have changed
Limits for deducting long-term care premiums have increased. Listed below is how much taxpayers can write off based on their age:

  • Age 71: $5,110
  • Age 61-70: $4,090
  • Age 51-60: $1,530
  • Age 41-50: $770
  • Age 40: $410

6. Health savings accounts still provide nice perks and long-term opportunities
In 2017, any health care plan with a deductible above $1,300 for individuals and $2,600 for families classifies as a high-deductible plan. For single coverage, a contribution of $3,400 can be made to an HSA. For family coverage, a contribution of up to $6,750 can be made. Investors age 55+ can make a catch-up contribution of $1,000 to an HSA.

7. Education savings can make a difference for parents and grandparents
You can contribute up to $14,000 annually to a 529 plan for a student without having the contribution count toward the gift tax. An up-front contribution toward a 529 Savings Plan can be made up to $70,000 on behalf of an individual, but this method eliminates further contributions for the next five years. The contribution doesn’t count toward gift tax. Keep in mind that there is a lot of flexibility with these accounts; the owner can transfer the funds to different family members. And if the account is not used, it can be transferred down to the next generation, which is great for estate-planning purposes.

8. Gift and estate taxes
The lifetime exclusion amount for the estate tax increased to $5.49 million per individual and portability is still available. The highest gift and estate tax rate is 40%.If taxpayers incur heavy estate-tax liability, they may qualify for an installment payment tax break. If one or more closely held businesses make up greater than 35% of an estate, $596,000 of tax can be deferred, and the IRS will charge only a 2% interest rate.

9. Good news for small businesses
Small businesses can once again use pretax funds to reimburse workers for health care costs, especially premiums for individual and family coverage. In a little noticed move, Congress late last year reauthorized Health Reimbursement Arrangements for businesses with fewer than 50 employees. As a result, these firms won’t risk large penalties on payments they provide to workers who purchase their own health insurance. Many of these firms don’t offer group health plans, and this law enables them still to offer a health care benefit.

10. Filing deadlines have changed
The filing deadline to submit 2016 tax returns is Tuesday, April 18, 2017, rather than the traditional April 15 date. In 2017, April 15 falls on a Saturday, and this would usually move the filing deadline to the following Monday—April 17. However, Emancipation Day, which is a legal holiday in the District of Columbia, will be observed on that Monday, pushing the nation’s filing deadline to Tuesday, April 18, 2017.

The following are a few other important deadlines to keep track of in 2017:

  • Taxpayers are able to request an additional six months to file their returns.
  • Employers are required to file W-2s with the federal government by January 31.
  • Partnership returns are due two-and-a-half months after year-end, and March 15 for calendar- year firms. Corporations can request a five-month extension.
  • The filing date for owners of foreign accounts has moved up to April 18.

There is one thing that we can count on. This year is sure to be filled with surprises. We will keep you updated once these changes surface.

At HFG Wealth Management, we embrace a more holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

The Top Tax Frauds

March 19, 2017
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A look at the IRS list.

Have you heard of the “dirty dozen?” Each year, the IRS lists the top recurring federal tax offenses – frauds, cheats, feints and schemes that ethically challenged taxpayers, tax preparers and crooks try to perpetrate. Watch for these scams in all seasons, not just tax season.

  • Identity theft. Casually discarded or displayed personal information is an open invitation to criminals. Even when we are vigilant, multiple firewalls and strong passwords can fail to protect us.
  • Criminals posing as “tax professionals.” Each year, taxpayers get help with their 1040’s at tax preparation businesses. As the IRS notes, nearly all of these businesses are legitimate. Exceptions do exist; however, sometimes a fraudster will rent a storefront with a mission of collecting SSN’s and other personal information pursuant to claiming phony refunds.
  • Unwarranted or excessive refunds. Annually, some taxpayers and tax preparers claim refunds that are embellished or wholly unjustified. A preparer may tout that it will get you a big refund but then claim a percentage of it. Worse yet, they may ask you to sign a blank return.
  • Phishing. This is tax fraud via email. A scammer will send a message mimicking communication from the IRS or the Electronic Federal Tax Payment System (EFTPS). If you get an email like that, forward it to phishing@irs.gov. Neither the IRS nor the EFTPS has a policy of initiating contact with taxpayers through email.
  • Threatening calls. Crooks will sometimes target elders or immigrants with phone scams, pretending to be the IRS or another federal agency. (Sometimes even the caller ID will suggest this.) They will assert that the other party owes thousands in back taxes. The only solution, they contend, is immediate payment through a pre-loaded debit card or a money order. The caller may even know the last four digits of their Social Security Number or volunteer what is supposedly an IRS employee badge number to make the con more believable. A follow-up call from “the DMV” or “the police” may be next. Such behavior can be reported to the Treasury Inspector General for Tax Administration at (800) 366-4484 or the IRS at (800) 829-1040.
  • Sham charities.  A specious charity may ask you for cash, your SSN, your banking information and more. If anything seems fishy, ask for visual proof of the organization’s tax-exempt status, and check it out further at irs.gov using the Exempt Organizations Select Check search box.
  • Tax shelter schemes. Tax evasion is different from legal tax avoidance. Some unprincipled tax and estate “consultants” seem to confuse the two, much to the chagrin of their clients who run afoul of the IRS. Watch out for aggressively marketed “tax shelters” that seem too good to be true or sketchily detailed.
  • Hiding taxable income. How many taxpayers file fraudulent 1099’s? Any hint of bogus documentation to cut taxes or boost refunds becomes especially egregious when a paid preparer attempts it.
  • Inventing income that was never earned to get credits. The IRS notes that some of the shadier tax prep services sometimes convince clients to try this. It is fairly easy to disprove.
  • Claiming unwarranted fuel tax credits. Few taxpayers can legitimately claim these, yet some try thanks to urging from third-party preparers. Most taxpayers don’t own farms, mining or fishing businesses or companies whose vehicles operate mostly on local roads.
  • Frivolous arguments against income tax. Assorted seminar speakers and books claim that federal taxes are unconstitutional and that Americans have only an implied obligation to pay them.

One thing to remember in light of this list: you are legally responsible for the content input into your 1040 form, even if a third party prepares it.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

Tax Season Phone Scams

March 18, 2017
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Beware of crooks calling you up & claiming to be the IRS.

Every year, con artists posing as the Internal Revenue Service perpetrate scams on taxpayers. Their weapon is a telephone, and they use it to leave thousands of households poorer. These gambits can seem very convincing, but you need not fall prey to them if you are informed.

The IRS will never call you up & demand money. Nor will the IRS contact you by phone to discuss your refund. In addition, it will not use social media, text messages or emails out of the blue to talk about tax matters with you. Not everyone knows this, and these criminals exploit that fact. In particular, these crooks target immigrants and elders. They presume that these demographic groups do not understand tax law and tax collection proceedings as well as others. Sometimes the caller ID will even suggest the “IRS” to further the scam.

What are the telltale signs of a bogus IRS call? The classic sign is the demand for an immediate payment of “taxes” when no bill for delinquent taxes has been sent to you by the IRS to begin with. The IRS nearly always makes initial contact with taxpayers by mail.  Another common move is asking for a credit or debit card number. In one common scam, the caller alleges that you have unpaid back taxes that can only be settled by buying a prepaid debit card (and by supplying the card number to the caller).

Bullying is another red flag. In another prevalent scam, a message may be left saying that this is a “final notice from the Internal Revenue Service” and tell you that the IRS is filing a lawsuit against you on a business or personal tax issue. Threats of arrest, deportation or losing your driver’s license may be made. The caller may also tell you that you have no way to appeal, no chance to plead innocence – you are guilty and must pay taxes owed now.

How can you report frauds like this? If you know for a fact that you do not owe any back taxes, call up the office of the Treasury Inspector General for Tax Administration (TIGTA) at 1-800-366-4484 and report what happened to you. (TIGTA is on the Web at tigta.gov.) Alternately, go to FTC Complaint Assistant website maintained by the Federal Trade Commission (FTC) and file a complaint there (click on “Other” in the right-side menu, and then click on “Imposter Scams”). Start your notes with the phrase “IRS Telephone Scam.” If you think you actually might owe some back taxes, call the IRS instead at IRS at 1-800-829-1040 as that really should be resolved; IRS staffers can assist you with such a matter. Watch out for these calls, and let others know about their tactics so that they may avoid becoming victims.

At HFG Wealth Management, we embrace a more holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

HFG Wealth Management Named Top Houston-Area Wealth Management Firms & Practices  

March 1, 2017
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The Woodlands, TX — HFG Wealth Management, LLC has again been named as a Top Houston-Area Wealth Management Firm & Practices as selected by Houston Business Journal in the February 24 – March 2, 2017 issue.  The Houston Business Journal published their list of the Top Houston-Area Wealth Management Firms & Practices with investment minimums of at least $1 million. The development of the list is derived from information gathered from questionnaires, SEC filings and HBJ research.

“HFG Wealth Management is honored to be listed again as one of the Top Houston-Area Wealth Management Firms & Practices.  It is a privilege to serve our clients and is made possible by a strong team with dedicated commitment to serving as an independent, objective fee-only wealth management firm,” said Larry Harvey, Founder and CEO of HFG Wealth Management, LLC.

HFG Wealth Management has been located in The Woodlands for over 11 years and is led by Founder and CEO Larry Harvey. Mr. Harvey is a financial advisor and planning consultant with 32 years of experience providing comprehensive and wealth management strategies for individuals, families and small business owners. He is a Chartered Financial Consultant (ChFC) and an Investment Advisor Representative who helps a select group of accepted clientele make strategic and informed financial decisions that propel them to achieving their desired lifestyle and financial goals.  Mr. Harvey is also an eight time recipient of the Five Star Wealth Manager Award from 2009 to 2016. This award is achieved by less than 3% of wealth managers in the Houston area.

HFG Wealth Management uses a holistic method of financial planning known as Financial Life Planning™. HFG believes this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan to assist individuals and families in creating a long-term financial vision consistent with their core values. For more information, please visit www.hfgwm.com or call 832.585.0110.

Estate Planning for Your Digital Assets

February 27, 2017
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Have you addressed this issue?
Social media and email accounts. Creative works, photos and keepsakes kept on home computers, the cloud or external storage drives. E-commerce accounts. Domain names. These are all examples of digital assets. You will manage them closely as long as you live, but what will happen to them once you aren’t here?

will-testament-337Have you talked about it with those you love? In a recent survey of baby boomers, antivirus software provider AVG Technologies found that only 16% of respondents had thought about what would happen to their digital assets after their deaths. A mere 3% had alerted or prepared their loved ones in regard to this issue. If you have a will or a revocable trust, you must plan for the transfer and/or administration of digital assets just as you have for tangible assets. Your digital assets may or may not be of great financial value, but they need protection against exploitation as well as abandonment. Distributing digital assets is part of fiduciary duty. That is what makes articulating your wishes so important. A financial professional or financial firm acting in a fiduciary role on your behalf has an obligation to distribute your digital assets, but many social media and e-commerce websites will not readily allow this without the permission given by the user or his or her heirs.

How about social media and email accounts? Facebook has a legacy contact feature for its users. You can appoint a custodian for your page after you are gone: your legacy contact will be able to respond to friend requests, change your cover photo and profile picture, and write a notice of your memorial service or funeral; he or she will not be permitted to log in with your password or username, read messages sent to you or modify your account settings. Alternately, you can simply tell Facebook that you would like to have your account immediately deleted at your death. Google has an Inactive Account Manager option that will let you leave instructions for what should be done with your Google Drive docs or Gmail account once you are deceased.

As for LinkedIn, a loved one fills out an online form on behalf of the deceased, which is reviewed by LinkedIn pursuant to getting in touch with that person. The notifying party will need to supply your name, profile URL, email address and date of death plus information on the company you last worked for and a link to your obituary. Twitter handles accounts of the deceased in similar fashion, and it can also remove images in a person’s account per request; the Twitter account is frozen at death, with access barred even to immediate family.

Computer files. Your executor or trustee should be provided with the location of your computers, tablets or e-readers after your death and the passwords to them if you have set password protection. Locating backups may also become crucial. Remember that annual fees for antivirus programs and website hosting may no longer need to be paid; the executor or trustee will need to be informed about those user agreements.

E-commerce accounts. Most of us have eBay, iTunes or PayPal accounts and these accounts can serve as pathways toward banking and credit card information. What if your idle e-commerce account is hacked after your death? What if the account balance is drained or the cybercriminal uses the account to go on a shopping spree? What if your username and password could be stolen and used at other websites you have accessed? These what-ifs need to be considered and addressed during your lifetime and in your estate plan.

Domain names. How can you keep a website going after you die? One way is to pay for a decade (or more) of hosting or domain name ownership with such URL longevity in mind, and letting your trustee or executor know just how to renew the agreement. Only that trustee or executor should have access to that knowledge, unless you want business partners or a future owner to know how the arrangements work.

Does your will or trust need amending? Language regarding your digital assets is essential. At the very least, you want to tell your executor or trustee where digital assets are stored. Even better, the amendment should give your executor or trustee the authority to administer, archive, alter or destroy digital assets in addition to the power to direct them to heirs or other named beneficiaries. That means turning over your online passwords to your executor or trustee at your death, or having them access password management software used to create them.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

Leaving a Legacy Plan

February 26, 2017
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We will all leave this world sometime. Why leave unanswered questions with those we love?

We all want to live a significant, successful life. Yet how many of us realize that our important, positive contributions can last long after we are gone? Two things are certain: death and taxes. Some of us grasp that reality early, so we create wills, living trusts and estate plans. Others deny this reality and leave their heirs with perplexing questions, added stress and even anger when they pass away. The truly farsighted among us opt for a full-fledged legacy plan.

How does a legacy plan differ from an estate plan? An estate plan determines a destiny for your assets. A legacy plan does that and more: it communicates your values, wishes and memories as well as financial directions. If you ask someone about the “why” of estate planning – that is, why should you have an estate plan in the first place – the instant response is “to avoid estate tax.” That is certainly a good reason to create an estate plan, but it may not be the best one.

A legacy plan can convey your values and wishes when it comes to the following matters:

  • The distribution of the estate – selecting a steward, showing that person how these assets are to be managed according to your values and outlook.
  • The future of a family business – you can share the knowledge only the owner and founder has, you can establish who will own it after you, who will manage it and who will benefit financially from it.
  • Protecting your business (and your estate) from “predators and creditors” – taking steps to insulate the business (and your heirs) against lawsuits, debts outstanding, and intrusions of relatives or past associates.

While basic estate plans establish where assets go, they don’t often communicate the personal and practical details that can aid heirs in the case of an unexpected loss. A legacy plan communicates more than financial details, it expresses your values, your final wishes and the life lessons you want to pass along. It conveys knowledge that may make things smoother for your heirs and your company at a time of grief and crisis. It imparts wisdom that your successor may use to guide inherited assets in the future, so that these assets might endure for more than a generation.

In other words, it gives your heirs your business some answers to the questions, “what do we do now” and “what would he/she have wanted us to do.” Legacy plans are built taking many factors into account. The first factor is you. What are your goals, financial and otherwise? A legacy plan should first respect your wishes and intentions. The second factor is family. Different people define “family” in all kinds of different ways. A good legacy plan respects your definition, and is created with an understanding of it and your particular “family” dynamics. Only after this should the tax and financial strategies of the plan be determined. We have seen some plans that are not designed to hand down the experiential wealth and wisdom that should accompany the assets. A good legacy plan transmits values, instructions and guidance to ease a family’s burden when it comes to settling financial and business issues at a time of grief.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.