HFG Wealth Management – Helping Employees Transition a Company Merger or Acquisition

May 17, 2019
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HFG Wealth Management, LLC
(P) 832-585-0110 (F) 832-585-0109
amanda.rabon@hfgwm.com

HFG Wealth Management – Helping Employees transition A Company Merger or Acquisition!
HFG Wealth Management is a Texas-based wealth management and financial advisory firm whose headquarters are in The Woodlands. For over 30 years, HFG’s Founder and CEO Larry Harvey has been helping individuals and families navigate their personal financial challenges when they are faced with a company merger, acquisition, management buyout, or corporate restructuring. “News headlines of corporate turmoil can be unsettling to some employees,” Harvey said. “Typically before, during and after such headlines come to fruition, employees tend to worry about who will be let go, promoted, reassigned, or relocated. An organization’s upheaval can have a short and/or long-term impact on your financial future let alone your equity plan holdings.”

Any type of shake-up at work is an excellent time to speak to a fiduciary financial advisor regarding your 401K, vested and unvested stock and discuss your short and long-term goals and needs. Harvey says, “Ultimately, preparing for the future will help to reduce the stress that your company’s transition might bring upon you and your family.”

The Institute for Mergers, Acquisitions and Alliances (IMAA) collects data from national and cross-border from (outbound) and into the US and reports that “since 1985, more than 325’000 mergers & acquisitions transactions have been announced with a known value of almost 34’900 billion USD. In 2017, a new record was broken in terms of number of deals with 15’100 which is a 12.2% increase over 2016. The record of total value of deals took place in 2015 with 24’100 billion USD.” The Houston Chronicle reported on March 15, 2019, data collected by The Texas Lawbook Corporate Deal Tracker handled 869 mergers & acquisitions in 2018, up 18 percent from 2017. With these record numbers of mergers and acquisitions, along with Greater Houston’s abundant wealth and growth of industries in Healthcare, Technology, Energy and Power, our local workers are targeted, facing corporate upheavals.

HFG partners with some of Greater Houston’s top attorneys and CPA’s, with strong relationships in the community, HFG is able to collaborate with leading-edge individuals and companies to better serve our clients, and help those affected by corporate mergers and acquisitions transition smoothly.

HFG Wealth Management is not a broker-dealer. HFG is a comprehensive, independent, fee-only wealth management and financial advisory firm serving clients nationwide. “We at HFG understand that major life events, such as corporate mergers and acquisitions, are often the catalyst that drive people to seek assistance managing, growing, and protecting their finances,” Harvey said. “With over 30 years of experience, our team has helped individuals, families, and business owners in many unique situations navigate their financial future with our personalized financial life-planning process and concierge-quality advisory services.”

HFG is a Diversified Fund Advisor, lending our clients’ portfolios global investment opportunities that many other wealth management firms do not have access to. Our holistic approach aims to optimize our clients’ diverse finances and life plans to create a coordinated, efficient, and effective road map to financial security – giving them peace of mind.

“Financial success is a journey not a destination,” says Harvey. Come discover the difference at HFG and start your plan today.

For information about HFG Wealth Management or to learn more about our complimentary second-opinion service, please visit www.hfgwm.com or call 832-585-0110.

Warm Regards,



Larry Harvey, ChFC
Founder and CEO

Planning For What Life Brings – Caring For Aging Parents

March 7, 2019
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What is your next big life event? Will it be caring for your aging parents? In 2017, the United Nations Department of Economic and Social Affairs predicted that by the year 2050, the number of people aged 60 and older will have more than doubled. As our nation ages, many Americans are faced with caring for their aging parents. Whatever the circumstance, we want to help you successfully plan for and manage it, reducing the amount of stress that it may have on you or your family. HFG Wealth Management is your life planning specialist.

The worldwide population over the age of 60 is growing mainly in part due to healthier lifestyles and advances in modern medicine.

For many people, one of the most difficult conversations to have involves talking with an aging parent about extended medical care. The shifting of roles can be challenging, and emotions often prevent important information from being exchanged and critical decisions from being made. When talking to a parent about future care, it’s best to have a strategy for structuring the conversation and knowing what to ask.

Along with not procrastinating, it’s important to know the basic information regarding your aging parent’s healthcare, and be thorough when speaking to your parent and/or their doctor(s).

Understanding the Basic Information
Knowing ahead of time what information you need to find out may help keep the conversation on track. Here is a checklist that can be a good starting point:

  • Primary physician
  • Specialists
  • Medications and supplements
  • Allergies to medication

It is also important to know the location of medical and estate management paperwork, including:

  • Medicare card
  • Insurance information
  • Durable power of attorney for healthcare
  • Will, living will, trusts and other documents

Many physicians have a social worker on staff that can assist you, providing guidance, resources, and answers as how to best care for your parent through their stages of aging.

Try hard not to procrastinate speaking to your parent and/or doctor(s). The sooner you begin to communicate about important issues, the more likely you will be to have all the information you need when a crisis arises.

How will you know when a parent needs your help? Look for indicators like fluctuations in weight, failure to take medication, new health concerns, and diminished social interaction. These can all be warning signs that additional care may soon become necessary. Don’t avoid the topic of care just because you are uncomfortable.

Remember, whatever your relationship with your parent has been in the past, this new phase of life will present challenges for both of you. By treating your parent with love and respect and taking the necessary steps toward open communication, you will be able to provide the help needed during this new phase of life.

Be Thorough When Asking the Hard Questions
Remember that if you can collect all the critical information, you may be able to save your family time and avoid future emotional discussions. While checklists and scripts may help prepare you, remember that this conversation could signal a major change in your parent’s life. The transition from provider to dependent can be difficult for any parent and has the potential to unearth old issues. Be prepared for emotions and the unexpected. Be kind, but do your best to get all the information you need.

Communication is Key
This conversation is probably not the only one you will have with your parent about their future healthcare needs. It may be the beginning of an ongoing dialogue. Consider involving other siblings in the discussions. Often one sibling takes a lead role when caring for parents, but all family members should be honest about their feelings, situations, and needs.

Additional Resources from AgingInPlace.

At HFG Wealth Management, we embrace a 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 utilizing the life planning approach, our purpose is to assist individuals, families and businesses 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 information contained herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Planning For What Life Brings – Segment One

February 7, 2019
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What is your next big life event? Will it be purchasing a home? According to 2,000 Americans surveyed by Homes.com, 40% said buying a home was the most stressful event in modern life. Whatever the circumstance, we want to help you successfully plan for and manage it, reducing the amount of stress that home buying may have on you or your family. HFG Wealth Management is your life planning specialist.

The American Dream
Whether it’s your first home or a vacation home you’ve been dreaming of, there are many things to consider when planning to buy. Being well-informed prior to your purchase will prevent most of the unexpected or unwanted from happening. HFG partners with local real estate, mortgage, and title companies which allows for a seamless home buying and/or selling experience.

Three things to consider when buying a home is the mortgage, the insurance, and the closing costs.

  • What type of mortgage is best?
  • What type of insurance do I need?
  • How much are my closing costs?

HFG takes it further, we look at the bigger picture and ask “how does buying a home fit into your financial goals?”

These three simple questions can become extremely complex and costly when you don’t look at the big picture. Do you know how much house you can afford? Rule of thumb is 2 ½ times your annual income, but does this apply to your situation? Will your income grow as fast as inflation? The big housing bubble “burst” in 2008 should definitely have you considering real estate values and finance options.

After careful consideration regarding how much house you can afford lies the question, what type of mortgage is best for your situation? Determining how long you plan on owning the home will help determine what type of mortgage might be best? There are two types of mortgages, a fixed rate and an adjustable rate (ARM). A fixed rate mortgage is set for the duration of the loan whether it be 15, 20, or 30 years, and an ARM is fixed for a shorter amount of time before it adjusts annually according to the terms.

Documents required for the mortgage:

  • Credit report for all buyers
  • Proof of employment and income, W-2’s, 1040 for two consecutive years along with 30-days of paystubs
  • All bank account and investment statements for three consecutive months, along with the source of down payment

Many realtors will ask you for a prequalification, preapproval, or commitment letter from your lending institution before they will start showing you homes in your price range and desired locations. Many home sellers will want a commitment letter prior to considering an offer.

A prequalification letter does not necessarily mean you are guaranteed the mortgage, this is just the estimate of how much financing you may be qualified to borrow. A preapproval letter will be provided after you apply for a mortgage, but the loan is still not 100% guaranteed. Your lender will provide you with a commitment letter once they are certain on your qualified mortgage amount.

You will want to consider insurance regardless if you have a mortgage or not. Three types of insurance to consider are homeowners, life, and disability income.

All mortgage companies will require homeowners insurance. Homeowners insurance will protect both the lender and you against fire, burglary, lawsuits, and other natural acts. Mortgage life insurance is a financial protection policy that will cover your outstanding mortgage debt in the event of your death. If you are married, both parties will want to consider mortgage life insurance. Disability mortgage insurance works in the same manner as life insurance; should you become disabled due to sickness or injury and can’t work, disability insurance can provide money to help you pay your mortgage, along with other monthly expenses.

A title company is usually designated by the seller and/or their realtor. This information can be obtained when submitting an offer on the home, but most importantly, you will want to know how much your closing costs will be. Your mortgage company can give you a rough estimate of this out of pocket cost, but be certain to bring your checkbook, and expect for a higher rather than lower figure.

Closing costs include:

  • Title or attorney fees: they will prepare and review all documents needed to close the loan
  • Appraisal fee: since the house is collateral for the mortgage, the lender will verify the home’s value is comparable to recent sales in the area
  • Points: a point is equal to 1% of the loan amount borrowed, most lenders are able to negotiate this percentage rate so don’t be afraid to ask
  • Recording fees: your city or county charges for reporting a transfer of deed into their public record
  • Title search & title insurance fees: the title company will do a search on the property to verify legal ownership and any possible liens that will need to be cleared prior to the transfer of deed. Title insurance is a form of indemnity insurance insuring against financial loss from defects in the title
  • Lender’s fees: loan or document preparation and processing by the lender, these charges too may possibly be negotiated

Whenever you’re ready for your next home purchase, give HFG Wealth Management a call, our expert advisors can help assure you will be well informed through the home-buying process and you are staying on track with your long-term financial goals.

At HFG Wealth Management, we embrace a 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 utilizing the life planning approach, our purpose is to assist individuals, families and businesses 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 information contained herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

New Year, New You, New Plan to Organize Your Finances!

January 21, 2019
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Are you feeling a little over-whelmed with the paper piles or credit card bills now coming in from Christmas spending? You are NOT alone! How you organize your finances in January will prove beneficial by the time Christmas rolls around in December.

Start organizing your finances by purging the paper piles. Keep the essentials like tax returns, year-end investment statements, insurance policies, active deeds and deed of sales. After one year, most statements may go to the shred pile, unless of course you’re planning on buying a house, you’ll want to keep two years of bank statements (unless you can retrieve these online). Shred what documents you no longer need and clean up the clutter.

After the purge, look into updating and consolidating other accounts. What money might you be throwing out the window?

  1. Look at your credit cards, would it be beneficial to consolidate a few? Choose a card which has the lowest interest rate or best loyalty benefits, but make sure there isn’t a balance-transfer fee prior to shifting monies.
  2. Check your current mortgage rate. Would it benefit you to refinance your home with a much lower rate?
  3. Update the beneficiaries on your insurance policies and retirement accounts if needed.
  4. Look into getting new quotes for your car, home, and life insurance policies, it might benefit you to make a few changes in 2019.
  5. Create or update your will.
  6. Check your credit score. You may check your credit online without impacting your credit score. However, you are only allowed one free copy per credit bureau per year.
  7. Check your fees on phone, cable, internet, and other bills to see if there are services you don’t use.

After updating and consolidating, sit down and create a budget and commit to it.

  1. Calculate both your monthly income and expenditures.
  2. Separate your fixed expenditures from your variable expenditures.
  3. Break down your monthly finances into what you want to spend and what you need to spend.
  4. Set a financial goal of what you want to save each month.
  5. Now set a financial goal for your future.
  6. Track your spending. After each week, evaluate your spending and if you need to make some changes in order to reach your monthly saving’s goal.

Evaluating your bills can save you money. Also, if you can arrange all of your bills to be directly debited, do it! This will save you from forgetting a bill’s due date and incurring additional late fees.

Make your monthly savings a fixed, non-negotiable expense regardless of the amount. Six month’s income saved is often cited as a good starting point, which means you are well covered for whatever life may throw at you financially.

Taking stock of 2018’s life changes, such as a move, marriage/divorce, new baby, or change in job will better equip you when rebalancing investments and budgeting for 2019.

No matter how much money you have or don’t have, it’s what you do with it that’s important. When you organize your finances, you will feel better and in control of your future. Make it your plan to be financially organized in 2019!

At HFG Wealth Management, we embrace a 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, families and businesses 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 information contained herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Last-Minute Charitable Giving With the Best Tax Breaks

December 27, 2018
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Because the Tax Cuts and Jobs Act has set such a high standard deduction, taxpayers may not get additional itemized deductions for charitable donations. However, with a little strategic planning in charitable giving, taxpayers can exceed the standard deduction, start itemizing again, and lower their tax bill.

In 2017, the standard deduction was $6,350 for individuals and $12,700 for married couples. However, as a result of the Tax Cuts and Jobs Act (TCJA) of 2017, the standard deduction has almost doubled for 2018 (and years to come) to $12,000 for individuals and $24,000 for married couples. This means that an estimated 90% of households will now be better off taking the standard deduction rather than itemizing deductions.

This very high standard deduction means taxpayers who opt to make charitable contributions may not get the additional itemized deductions that they would have in the past, which is frustrating. However, with a little clever planning around charitable giving, taxpayers can create ways to exceed the standard deduction and start itemizing again, which will enable them to lower their tax bill.

Bunching is Making a Comeback

Are you interested in giving to charity, but concerned about how the new tax plan limits your ability to deduct contributions? An old method called “lumping” or “bunching” is making a popular comeback! This method involves combining, or “lumping,” two years of charitable and other deductions into one single tax year. For example, if you make a charitable donations in January and December of the same year, you may be able to itemize those deductions in that year to exceed the increased standard deduction for that year. The next year, you can take the standard deduction and forgo itemizing. With this method, you would receive a greater tax benefit for the same dollar amount of charitable contributions, just by cleverly timing the contributions. To accomplish this, you just need to think of your tax situation over a two-year period and time your gifts strategically.

For example, if Will’s itemized deductions are $14,000 one year, he would be better off itemizing, as his itemized deductions are $2,000 higher than the standard deduction of $12,000. However, by implementing the “bunching” method and combining two years of charitable contributions into one year, he can automatically receive the standard deduction of $12,000 in one year and then he can simply make two years’ worth of charitable deductions the next year, which would further increase his deductions in that second year. As shown in the table below, by implementing the bunching strategy, Will can increase his total two-year deductions from $28,000 to $32,000.

Increase Deductions by Bunching Over 2 Years

Donor Advised Funds (DAF)

Another approach is to create a donor advised fund. This will allow you to benefit from the same concept as bunching, just in a different way. With a DAF, you make multiple years’ worth of gifts in one tax year to the fund, and then disperse their gifts later. DAFs have been around for a while, but with the new increased standard deduction, creating one can be more advantageous than ever.

The major benefit of the DAF is that you are able to donate assets and receive an immediate tax deduction, although the actual funds may not be given to charities until sometime in the future—even in a completely different tax year. Separating the timing of when the deduction occurs versus when the charity actually receives the money allows you to fulfill their charitable goals while maximizing their deductions and saving money overall.
Qualified Charitable Distributions (QCD)

If you are an IRA owner or beneficiary over age 70½, a qualified charitable distribution (QCD) up to $100,000 could be the answer for charitable giving. To qualify as a QCD, the funds must be transferred directly from the IRA to the charity. When that happens, the QCD satisfies the required minimum distribution but the deduction is not included in taxable income on your tax return. This means that you are able to get the benefits that come with making a charitable contribution regardless of whether or not you choose to itemize their deductions. Using a QCD can be particularly beneficial if you want to give more and are in a higher tax bracket, and, if your spouse is also eligible to use her IRA, the benefits only increase. This is because, although total annual QCDs from all IRAs cannot exceed $100,000 for an individual, spouses can each make up to $100,000 of QCDs, for a combined total of $200,000!

Although a tax deduction for the contribution is not allowed, the amount transferred from the IRA to the charity is excluded from taxable income and counts toward your required minimum distribution. By excluding the QCD amount from your income, you receive a superior tax benefit than if you had just gotten a deduction as it decreases the income amount, allowing for more AGI-based tax benefits, which results in a lower tax. For example, a lower AGI may mean a lower tax bracket, less taxation on Social Security benefits, no Medicare surcharge, and 0% capital gain tax.

If you are charitably inclined, the increased standard deduction requires that we consider the numerous ways to get more bang for your buck when making contributions. Whether it’s through bunching, using a DAF, or making a QCD, clear tax planning can make all the difference in the world now.

At HFG Wealth Management, we embrace a 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, families and businesses 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 information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.

The 10 Basic Questions of Estate Planning

November 28, 2018
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It’s not easy to contemplate your own mortality, but a good estate plan can provide for your heirs, protect your assets, and promote family harmony once you’re gone. Estate planning is complex and because it involves facing your own mortality, it can be difficult subject to address. While you most likely have a will, this simple document may not be sufficient to manage your estate and efficiently pass on assets to your heirs. Even if you have an estate plan that you’re confident in, it’s a good idea to review that plan in light of changes resulting from the Tax Cuts and Jobs Act of 2018.

Here are 10 simple questions that address the basic issues of estate planning:

1. What size is your estate?
Although some details have changed as part of tax reform, in general the rules regarding estate taxes has stayed the same. In 2018, estates larger than $11.18 million—or $22.36 million for a couple—are subject to federal estate tax. That amount is nearly twice as high as it was in 2017, and will continue until 2025, when exemption amounts will return to pre-2018 levels. In addition, depending on where you live, state inheritance taxes may impact your estate or your heirs.

This means it’s more important than ever to establish a current valuation on the items in your estate so you’ll know whether your estate is likely to be subject to those taxes. Consult with an experienced financial advisor and an estate planning attorney who may recommend legal and financial strategies that can serve to reduce or eliminate estate taxes, depending on your situation. Some of these options include charitable gifts (both during life and at death), annual gifts to family members, and different kinds of trusts.

2. What assets pass outside the will or probate?
If you’re married and have assets that are owned jointly with the right of survivorship, those assets will pass directly to the surviving spouse and fall outside of the will. For many couples, this will include the family home, life insurance policies, and qualified retirement plans. This is good news for the surviving spouse, because those assets are not subject to any delays associated with probate.

Although many states have reduced the costs involved and simplified the probate process, it can be time consuming and difficult. Along with assessing how probate potentially affects your estate, it is a good idea to regularly review and update all your beneficiary designations to ensure that assets pass to the beneficiaries you desire. With divorces and changes in family structure, you don’t want any assets passing by accident to a former spouse, for example.

3. Who should be executor?
The role of executor is a complex one that includes a wide variety of responsibilities. These include identifying the assets and managing them responsibly in terms of filing taxes and the final disposition of the estate. Because the probate process can be time consuming and involved, it is important that the executor you choose has the time and energy to undertake these tasks. They should also have some familiarity with the financial issues involved. Although accountants and attorneys can assist with the task, any executor you appoint has the ultimate responsibility of managing the estate and seeing the task through from start to finish.

4. Are the intended heirs minors or disabled?
If your heirs include minor children or disabled children or adults, you will need to appoint a guardian. The decision surrounding who will raise a child or care for a disabled adult in your absence is one of the most important estate planning decisions you’ll make.

For some parents, a sibling or grandparent is the most appropriate choice. For others a close family friend may work best. For complex estates or in a situation where a significant amount of money will be distributed through the estate, it may make sense to name two guardians, one with the responsibility for disbursing the money and the other who will be responsible for caring for the child or children.

In the case of a mentally or physically disabled person, a special needs trust can protect the heir while providing funds to supplement government benefits. Such trusts can be set up to ensure that the child will continue to be qualified for government benefits while providing for other needs that aren’t covered by Medicare, Medicaid, or Social Security disability. The trust can be funded in a variety of ways, potentially with money from parents or with the beneficiary’s own assets, perhaps from an accident settlement or lawsuit. Regardless of how the trust is funded, engaging an estate planning attorney with expertise in such vehicles is critical to protecting the needs of the child or adult.

5. Who should be a trustee?
If your estate involves one or more trusts, the appointment of a trustee or multiple trustees is a big decision. While executors have significant responsibilities, their tenure is limited. A trustee’s responsibilities can be more involved and last longer, perhaps even a lifetime. Attorney Stephan R. Leimberg says, “The selection of a trustee is one of the most important decisions a grantor makes. A trustee who chooses poor advisors, is careless about tax issues, makes poor investment decisions, or is not sensitive to the needs of the trust beneficiaries” can lead to multiple problems, including infighting amid beneficiaries, tax problems, and potential investment losses.

When deciding who to appoint as a trustee, look for an individual or professional who is competent, has the ability to act in the best interests of the beneficiaries, has no conflicts of interest and who has the availability and interest in assuming this role. If your estate is complicated or large, it may make sense to appoint an institutional trustee along with an individual trustee. An institutional trustee can provide important expertise in tax and investment matters.

6. Should you gift during your lifetime?
Gifting is a powerful tool to reduce a taxable estate. Couples can give $30,000 in 2018— $15,000 per individual—to an unlimited number of people per year, avoiding the gift tax. With ATRA, this provision will be adjusted for inflation annually.

For many high net worth individuals, this is an opportunity to remove money from a taxable estate and help grandchildren, children, nieces, nephews, and other deserving individuals. In addition, when the gifts consist of appreciating property, significant sums can be removed from a potentially taxable estate.  Besides gifting to relatives, charitable gifts, both during life and in the form of bequests, can also reduce your taxable estate. In addition to gifts of cash, you may want to consider such special charitable vehicles as charitable gift annuities and charitable remainder trusts. Both combine a charitable gift with a lifetime stream of income to the donor.

7. Are there unique circumstances requiring specialized advice?
There is no one-size-fits-all solution for estate planning and many situations need specialized expertise. For example, if you own a family business, there may be issues involving equalizing inheritance for children who are actively involved in the business versus those who are not.  Multiple marriages can also complicate estate planning by creating issues between a surviving spouse and children of an earlier marriage. In the case of a large estate, there can be infighting over any trusts in terms of whether assets should be invested to yield maximum income for the survivor or the largest possible remainder for the children. An experienced attorney can help you sort out these issues to reach a solution that is appropriate for you and your family.

8. Have you planned for disability or incapacity?
No one likes to consider the potential for disability and/ or incapacity, but these situations can occur. To cover all the contingencies, it’s a good idea to consider a living trust and/or a durable power of attorney so your affairs can be managed if you or your spouse becomes incapacitated. In such a case, you can serve as the trustee of your own living trust, with backup trustees named to take over when if necessary. Similarly, a durable power of attorney—it must be durable to remain in effect during incapacity—can be structured so that it only takes effect when two or more physicians attest to incapacity. The alternative to having these documents in place is that your family would have to seek guardianship over you to take charge of your financial affairs, a potentially an unpleasant and emotionally draining task.

9. Are advanced directives in place?
Although end-of-life issues are not technically part of estate planning, they are a vital part of your overall plan. Consider drafting a living will that spells out specific measures to take in the event of a terminal illness or incapacity, along with a health care proxy designating someone to speak on your behalf if you can’t do so yourself. Putting your wishes in writing can’t eliminate the anguish your family might face in making end-of-life decisions, but your instructions can go a long way toward reducing their emotional burden.

10. Have you discussed your estate plan with your family?
According to a study by U.S. Trust, less than one-third of parents have shared their estate plans with their adult children. This lack of open communication can exacerbate conflicts within the family and result in expensive and protracted litigation, draining the estate of the very resources you want your family to enjoy in future years.

When communication is open, the potential for conflict is greatly reduced. Attorney Leimberg notes that of those families reporting no conflicts, more than 20% knew what to expect out of the estate and more than 80% believed that they were fairly treated. It’s also important to remember that despite the potential hassles and expense involved in creating a comprehensive estate plan, such a plan can ensure financial stability for your surviving spouse, preserve assets for your children and grandchildren, minimize potential taxes and other expenses, and ensure that your wishes are carried out.

At HFG Wealth Management, we embrace a 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 information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.

 

 

Why Life Insurance Can Matter in Estate Planning


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With or without the estate tax, it addresses several key priorities. 

Every few years, predictions emerge that the estate tax will sunset. Even if it does, that will not remove the need for life insurance in estate planning. Why? The reasons are numerous.

You can use life insurance proceeds to equalize inheritances.
If sizable, illiquid assets make it difficult to leave the same amount of wealth to each heir, then the cash from a life insurance death benefit may financially compensate.

You can plan for a life insurance payout to replace assets gifted to charity.
You often see this move in the planning of charitable remainder trusts (CRTs).

People use CRTs to accomplish three objectives. One, they can remove an asset from their taxable estate by placing it into the CRT. Two, they can derive a retirement income stream from the trust’s invested assets. Three, upon their death, they can donate a percentage of the assets left in the CRT to charities or non-profit organizations.

When a CRT is fashioned, an irrevocable life insurance trust (ILIT) is often created to complement it. The life insurance trust can be funded with income from the invested assets in the CRT and tax savings realized at the CRT’s creation. (The trustor can take an immediate charitable income tax deduction in the year that an appreciated asset is transferred into the CRT.) Basically, the value of the life insurance death benefit makes up for the loss of the CRT assets bound for charity.

Life insurance can help business owners with succession.
It can fund buy-sell agreements to help facilitate a transfer of ownership, regardless of how an owner or co-owner leaves a company. It can also insure key employees – the policy can help the business attract and retain first-rate managers and creatives, and its death benefit could help lessen financial hardship if the employee unexpectedly passes away.

Life insurance products can also figure into executive benefits.
Indeed, corporate-owned life insurance is integral to supplemental executive retirement plans (SERPs), the varieties of which include bonus plans and non-qualified deferred compensation arrangements.

Lastly, a life insurance policy death benefit transfers quickly to a beneficiary.
The funds are paid out within weeks, even days. A beneficiary form directs the process, rather than a will – so the asset distribution occurs apart from the public scrutiny of probate. Life insurance is also a backbone of trust planning, and assets held inside a trust can be distributed directly to heirs by a trustee according to trust terms, privately and away from predators and creditors.

At HFG Wealth Management, we embrace a 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 information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

Estate Planning After a Second Marriage

November 14, 2018
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Special considerations for a complex situation.

Marrying again makes estate planning more involved. How do you provide for everyone you love? Should you provide for everyone you love? How do you arrange to transfer wealth in a way that won’t hurt the feelings of certain heirs?

If you have not planned your estate yet, take inventory. Spend a half-hour and jot down the assets you own, major and minor. Who should own these assets after you die? Your spouse should do this, too – and you should talk about your preferences. It may not turn out to be the easiest conversation, but agreement now may preclude family squabbles and legal challenges down the line. (If you have a prenuptial agreement in place, you may have already discussed some of these matters.) You should also consider two scenarios – what happens if you die first, and what happens if your spouse dies before you do.

If you and/or your spouse have children from prior marriages, there may be some dilemmas for each of you. If you die, there is a real possibility that your current husband or wife will not elect to provide for your children from past marriages. So what might you do to prepare for that possibility? You might make a child the primary beneficiary of a life insurance policy, or set up a trust for your kid(s), or place certain real property under joint ownership with a child.

If you have already written a will, it will probably need revisions. They could be considerable. You want to be extremely specific about which heir gets what; you need to state bequests convincingly, because the more convincing your bequest, the less ambiguity.

How up-to-date are your beneficiary designations? Out-of-date beneficiary decisions are an Achilles heel of estate planning. Be sure to review them; you may want to revise beneficiary forms for retirement plans, investment accounts, and insurance policies.

As you consider these revisions, pay particular attention if you have been divorced. Divorce may actually preclude you from changing beneficiaries in certain cases. Turn to a lawyer and show the lawyer a copy of your divorcee decree; ask if revising your beneficiary designations will violate it. Should you be unable to make beneficiary changes to your life insurance policy, you may want to buy another one in consideration of your new spouse.

Take a look at irrevocable trusts. They can be used to provide for your spouse as well as your kids. Some people establish a separate property trust to provide for their spouse after their death while directing most or all of their real property to their children.

Alternately, parents create irrevocable trusts to direct assets to particular children. They are attractive estate planning vehicles for a number of reasons. A trust agreement is a private mechanism for wealth transfer, while a will is a public document (and some parents who have remarried would rather their wills not be made public). Assets within irrevocable trusts are shielded from creditors, and also from inheritance claims of spouses of the adult children named as heirs. An irrevocable trust represents a “finalized” estate planning decision, one that ensures that particular assets transfer to a parent’s biological children. Irrevocable trusts are also rarely undone. It typically takes permission from beneficiaries (and a judge) to reverse them.

Those aforementioned pre-nups can play an estate planning role as well. They allow you to designate personal assets (such as assets within a college savings account) for existing rather than future children. Post-nuptial agreements (similar to pre-nups, but drafted after a marriage) can also accomplish this. Some states do not view pre-nup and post-nup agreements as legally valid, however – and sometimes carrying out the terms and conditions of these agreements is up to a judge.

Be sure to consult legal & financial professionals. When estates become this complex, collaboration with professionals having a thorough understanding of estate planning and tax issues is essential.

At HFG Wealth Management, we embrace a 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 information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.”

 

A Widow’s Worst Nightmare


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What can be worse than losing a spouse—especially when there are still young children to raise? How about being forced to go through probate and losing needed assets to ex-spouses and estranged family members?  If only there had been a will.

When someone dies without a will, the law of the state they died in determines how assets will be dispersed. Distribution formulas vary according to state law, but they are usually some variation of the following:

  • Spouse gets everything if the deceased had no children, parents, siblings, nieces, nephews, or there are no children of a deceased child.
  • Spouse gets half if the deceased had one child or there are children of one deceased child.
  • Spouse gets one third if there are two or more children or one child and descendants of one or more deceased children.

Messy, complicated, and expensive
Widowed without a will can have serious consequences, as their outright shares of the assets are insufficient to maintain their lifestyle and support their children. Additionally, both face ongoing and cumbersome reporting requirements to their county commissioners, not to mention legal and bonding expenses as they manage assets belonging to their children under court supervision. In a case of a widow with minor stepchildren, it remains to be seen whether the court will appoint her or the ex-wife as conservator of that child’s account.

We often suggest to those who are widowed to try to wait several months before making large financial decisions. But if money is tight and the courts are involved, time is of the essence. The first hurdle is probate. The court determines how to divide the assets—what goes to which beneficiary. The costs can add up quickly and may include court fees, attorney fees, accounting fees, appraisal fees and business valuation fees.

When minor children inherit, the red tape begins and costs can be excessive in comparison to the value of the assets that are being protected. It can be a constant struggle to access the children’s inheritance for their own upbringing. Interaction with the courts occurs in the following ways:

  • The court appoints a conservator to administer the assets in accordance with its rules. This conservator will not necessarily be the surviving parent.
  • Court supervision involves formal accountings, which can be costly and complicated.
  • The conservator may also require legal representation in court.
  • The court controls how funds are to be used and when they can be withdrawn.
  • The court’s interpretation of reasonable costs for health, education, maintenance, and support is        usually very conservative. A parent may be unsuccessful arguing that tutors, orthodontia, music   lessons, sports camp, or help paying a mortgage is a necessity. It may be hard to justify using a larger share of the assets for a child with special needs.

What happens when the children are no longer minors?
Children gain full control of their assets at the age of majority, and this can have tragic consequences. Few 18-year-olds are emotionally and financially responsible enough to handle a large inheritance. This sets the stage for a lifetime of regrets if the children spend through all the assets. They may even become injured by an excessive life style due the toxic combination of immaturity and sudden wealth. This is not a great legacy for any parent to leave their child.

At a minimum, parents need to establish wills to protect their spouses and their children. Physical guardians should be designated for any minor child, and any assets that might pass to a minor should be titled to a named custodian under the Uniform Trust for Minors Act (UTMA) or as a trustee for a minor’s trust. The guardian and trustee do not need to be the same person, and separating the guardian of the children from the “conservator” of the financial resources is often a very good idea.

Provisions can be made so that the guardian will receive sufficient funds to raise the children without creating an unreasonable burden on their own family and resources. A thoughtful will can also be structured to allow gradual distribution of assets at ages older than 18 or 21.

Our two widows would have been spared all these problems if their husbands had even simple “I love you” wills naming them as the beneficiary of all the separate property. And don’t forget, they each need to draft a will now to prevent this from happening all over again if they should experience a loss of capacity or a premature death.

Do it now!
Financial advisors and estate planning attorneys often work together to ensure their clients’ estates are financially and legally protected. And the next time you procrastinate on creating a will, remember the stories of the two young widows now struggling to support their children with far less in assets than they expected or their husbands intended. It can be a nightmare working through the courts for support and maintenance of the children. A proper will is a true act of love and generosity and is absolutely important.  Above all, remember that if you don’t create a will of your own, the state will write one for you. Knowing how probate really works work might be all the incentive you need to visit that nice lawyer and create a will that can enforce your last wishes and protect your family’s assets.

At HFG Wealth Management, we embrace a 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 information contain herein is general in nature and may not be suitable for everyone. We encourage you to give us a call, to discuss your specific situation and to help determine the appropriate course of action.