Tuesday, August 9, 2016

Some Ways to Account for Inherited Assets

As difficult as it is to lose a loved one, it would be nice if the financial situation sorted itself out after a death.

Unfortunately, receiving the assets of a deceased spouse or family member can be a complex process. Most people have their money stored in a variety of different financial vehicles -- checking and savings bank accounts, CD and money market accounts, investment accounts, employer retirement plans and pensions, life insurance policies, annuities and even real property.

So, how do you claim assets that are passed on to you? And should you just leave it where it is or transfer it to an account or policy in your name?

In the case of bank accounts, it helps if the decedent had a “payable-on-death” (POD) beneficiary form on file with the bank. If not, those assets will have to go through probate before they can be released. If the bank accounts were held in a living trust, the funds will be transferred to the beneficiary named in the trust and will avoid probate.1

If you inherit an IRA account, options vary based on whether you’re the account owner’s spouse. If you are the spouse, you can assume the IRA as your own, inherit the IRA, or disclaim the IRA. If you are not the spouse, you may either disclaim the IRA or inherit the IRA in which you would be required to take a required minimum distribution (RMD).2

If you inherit a non-retirement investment account, you can either transfer the proceeds from the inherited account into a new account in your name, or you can disclaim it and it will then pass to the other primary beneficiaries or, if none exist, to any secondary beneficiaries. If you disclaim an account, you can’t change your mind later.3

If you inherit a house, you don’t have to pay income taxes on its value. However, if you decide to rent the house, you will have to report the rent payments you receive as part of your taxable income each year. Therefore, you must pay income tax on the payments you receive.4

To claim life insurance proceeds and annuity benefits, each beneficiary needs to complete the insurance company’s claim form and submit it with a certified copy of the death certificate.5 Interestingly, many life insurance proceeds are never paid out because the owner didn’t tell his or her beneficiaries about the policy before dying. If you suspect this may have happened, visit MissingMoney.com (a database of governmental unclaimed property records) to conduct a search.6

Everyone’s financial situation is unique, so you could face any number of scenarios when claiming assets following the death of a spouse or loved one. If you want to prepare in advance to help simplify the process for your beneficiaries down the road, feel free to give us a call to review your current financial vehicles to ensure a beneficiary is listed.

1 Mary Randolph. Nolo.com. 2016. “What Happens to Bank Accounts at Your Death?” http://www.nolo.com/legal-encyclopedia/what-happens-bank-accounts-your-death.html. Accessed June 10, 2016.
2 Vanguard. 2016. “I’m inheriting an IRA.” https://investor.vanguard.com/inherit/ira. Accessed June 10, 2016.
3 Vanguard. 2016. “I’m inheriting an account that’s not an IRA.” https://investor.vanguard.com/inherit/nonretirement. Accessed June 10, 2016.
4 Mary Randolph. AllLaw.com. 2016. “Must You Pay Income Tax on Inherited Money?” http://www.alllaw.com/articles/nolo/wills-trusts/must-pay-income-tax-inherited-money.html. Accessed June 10, 2016.
5 Mary Randolph. Nolo.com. 2016. “How Beneficiaries Can Claim Life Insurance and Social Security Benefits.” http://www.nolo.com/legal-encyclopedia/beneficiaries-claim-life-insurance-32433.html. Accessed June 10, 2016.
6 Annie Shalvey. WPRI-12. May 16, 2016. “RI treasurer’s office: Thousands owed life insurance benefits.” http://wpri.com/2016/05/16/ri-treasurers-office-thousands-owed-life-insurance-benefits/. Accessed June 10, 2016.

We are not permitted to offer, and no statement contained herein shall constitute, tax or legal advice. Individuals are encouraged to consult with a qualified professional before making any decisions about their personal situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions.  If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor.

Content prepared by Kara Stefan Communications


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Tuesday, August 2, 2016

Boomer Boom or Boomer Bust?

The phrase “boom or bust” refers to a scenario of great prosperity or economic growth followed suddenly by a period of decline. Some economists suspect the aptly termed “baby boomers” could potentially create just such a phenomenon during their twilight years.

As the largest demographic group in history, baby boomers have been an important economic force over the past 70 years. Their influences include the suburbanization of cities, women breaking into corporate America and an overall prosperous period of consumer demand yielding great leaps in technology, health care and education — all of which also have impacted the securities markets. Now, with this massive population in or approaching retirement, will the drop off in the workforce and drain of public entitlement programs create additional challenges?

Putting aside the generational impact of baby boomers for a moment, we are interested in the financial health and well-being of our individual clients. If we can help you create a retirement income strategy you can feel confident about, please give us a call.

Presently, baby boomers hold the highest percentage of net worth among Americans and account for 40 percent of consumer demand.1 This fact, coupled with trends for a more active lifestyle and longer lifespan, means that baby boomers will continue driving demand in consumer markets, particularly with regard to discretionary spending. Naturally, the health care and long-term-care industries are likely to continue benefiting from this generation as well.

Some analysts see value stocks on track for significant growth due to boomer demand for conservative capital appreciation. Value stocks have begun to outperform this year due to relatively low prices (compared to growth stocks) and a better global outlook than in recent years.

According to analysts at Merrill Lynch, value stocks typically perform best when expectations for economic growth are on the rise and there is less fear of recession. The wealth manager observed that for value stocks to continue to outperform, corporate profitability needs to improve, particularly return-on-equity at value firms.2

Other investments that appear to benefit from boomers’ desire for conservative growth include low-volatility ETFs, which have substantially increased assets under management this year.3

Another theory posits that, as boomers retire and start taking distributions from their portfolios, market valuations will shrink. The concern is that the Gen X population — born after the baby boomers — is not large enough or wealthy enough to absorb the sell-off, which will drive down the value of those investment shares.4

Nor are succeeding generations plentiful enough to purchase the 5.5 million small businesses owned by baby boomers, currently valued at $10 to $15 trillion. Without buyers, a boomer relying on the sale of his or her business to fund retirement could experience a rude awakening.5

Baby boomers also continue to impact residential real estate. One strong trend is that empty nesters ae migrating back to the metro areas they abandoned for the suburbs 40 years ago. Boomers are now finding the restaurants, shops and cultural venues of walkable cities and college towns as appealing for their retirement years as the mainstay southern climates.6

1 Jeff Reeves. USA Today. April 2, 2016. “The best investment for Baby Boomers may be in themselves.” http://www.usatoday.com/story/money/personalfinance/2016/03/30/best-investment-baby-boomers-may-themselves/81986134/. Accessed June 3, 2016.
2 Dennis Stattman. Merrill Lynch. April 2016. “The Monthly Letter.” https://mlaem.fs.ml.com/content/dam/ML/Articles/pdf/GWIM-CIO-Monthly-Letter-April-2016.pdf. Accessed June 3, 2016.
3 Yakob Peterseil. Bloomberg. May 31, 2016. “Boomers Fueling a Boom In Low-Volatility ETFs.” http://www.bloomberg.com/news/articles/2016-05-31/boomers-fueling-a-boom-in-low-volatility-etfs. Accessed June 3, 2016.
4 Lawrence Hamtil. ValueWalk. May 15, 2016. “Will Aging Baby Boomers Doom the Stock Market?” http://valuewalkposts.tumblr.com/post/144395831485/baby-boombers-stock-market. Accessed June 3, 2016.
5 Donald Feldman. Business2Business Magazines. April 1, 2016. “Boomer Bust: Why exit planning is becoming more critical than ever.” http://www.business2businessonline.com/Article/1689. Accessed June 3, 2016.
6 Clare Trapasso. Realtor.com. May 17, 2016. “Reverse Migration: How Baby Boomers Are Transforming City Living.” http://www.realtor.com/news/trends/why-more-baby-boomers-are-moving-back-to-cities/. Accessed June 3, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Investment Advisory Services offered through Global Financial Private Capital, LLC, an SEC Registered Investment Advisor.

Content prepared by Kara Stefan Communications


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