Sarah Stewart Legal Group, PLLC

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Month: October 2017

Tips for Slaying 6 Financial Planning Monsters

By Sarah Stewart Legal Group

Retirement can seem so far away, until…well, it isn’t.  When planning for your financial future, there are 6 monsters that can steal your security and peace in your golden years.

(1) Living Paycheck to Paycheck

Are you one of many Americans who finds yourself with no money left after paying your bills at the end of the month? Do you have an emergency fund available?

You may need to budget so you can stash some cash away for your future.  Track your expenses and income for a few months to see where your money goes.  Is there anything you can cut back?

Determine what you need and what you want. Cut back on the entertainment and eating out expenses you have each month and put some money away for emergencies. Strive to have at least 3 months of monthly expenses in savings for an emergency fund.

(2) Reduce Debt

The average American family is drowning in credit card debt, student loans, and mortgages.  Credit card debt is the worst debt you can have.  Interest rates are generally high, and the continual compounding of the interest rates and new debt make it almost impossible to get out of debt when you start.  Cut up your credit cards now and vow not to take on anymore credit card debt.

Pay the minimum monthly payment on each card and work on paying down the lowest balance as soon as possible.  Once that one is paid, apply all the money you were paying to that card to the next highest balance until it’s paid off.  Continue until you are free of credit card debt. Don’t forget to check your credit report annually for fraudulent accounts.

(3) Retirement Planning

Have you planned how much money you will need for retirement?  Have you set retirement goals?  Most employees will fund a 401k through their company, hopefully, the company will make contributions as well.  Find out how much you can put in your account each year and how much your company matches.  Consider using other retirement planning tools as well.

(4) Estate Planning

Many people avoid thinking about estate planning.  They tend to think they’re too young, their estate is too small, or they just don’t understand the process.

Estate planning is more than deciding who gets what when you die.  A good estate plan will also help you plan in case you are unable to make decisions for yourself and decide who will care for your children, and how, if something happens to you. If you already have an estate plan, be sure to review it when major life changes occur so you can be sure it still reflects your wishes.

(5) Planning for Long-Term Care

Long-term care is common for the elderly in today’s world.  With government options like Medicaid constantly on the chopping block, your safest option is to rely on yourself to fund your care. Facilities can cost anywhere from $40,000 – $70,000 per year, depending on the level of care you need and the options and luxury you’re looking for in end of life care. Make sure to budget for the possibility of long-term care in your retirement plan and consider long-term care insurance.

(6) Forgetting to Plan

Be sure to create a financial plan that includes all the aspects of planning we covered here.  A sound financial plan with estate and insurance planning can help you avoid any pitfalls.

3 Reasons to Have an Estate Plan Even With an Estate Tax Repeal

By Sarah Stewart Legal Group

One of the biggest current national headlines is the political discussion regarding changing tax laws and abolishing estate (“Death”) taxes at a Federal level.  Though such a repeal can be beneficial to high income families, don’t fall into the trap of believing an estate tax repeal means you do not need to plan for your estate.

Today, we discuss 3 reasons to make an estate plan, regardless of a Federal estate tax repeal.

(1) You Want to Choose Who Gets What

If you want to choose who gets your assets when you die, you need an estate plan.  Abolishing estate taxes will not change local laws that direct who gets what when someone dies without a plan in place. If you don’t decide, the government will.

If you have a blended, or complicated, family situation, it is even more important to get an estate plan in place.  Families where parents have more than one marriage are well known for having conflicts when the parent dies.  We can all recall cases like Anna Nicole Smith and her battle to access her late husband’s assets.  Putting a strong plan into place can help alleviate problems, and fights, for your family in the future.

(2) Your State May Have Estate Taxes

Getting rid of the Federal Estate Tax will not ensure estate taxes will be gone nationally.  Each state makes their own laws for estate taxes. Often, states that do have estate taxes have a much lower exemption amount than the Federal law.  In Oklahoma, we have not had an estate tax for years, but if you own property in other states, you may be subject to a state estate tax after your death.

The District of Columbia and 14 other states have estate taxes.  At least 6 states tax recipients of gifts under an inheritance tax.  Be sure to check the local laws of the states you have property in to decide if you will need a plan for estate taxes.

(3) Planning for Federal Taxes

Estate taxes are not the only Federal tax concerns of families whose loved one has died.  Repealing the tax will not do away with other federal taxes such as the capital gains tax and the taxes on heirs who receive inheritances.  You will still need to be aware of your potential tax liability and how to minimize your liability.

If the estate tax repeal passes, it will help simplify Federal taxes for some U.S. families.  However, the repeal is not an excuse to skip estate planning.  Every family needs to make a plan for their deaths.  Plans alleviate the stress and heartache your family will have after your death and gives you the power to decide for yourself how your well-earned money will be split.

Reach out to professionals to help you plan for your family today!

Tom Petty’s Lessons on End of Life Care

Image from a Journal of Musical Things

By Sarah Stewart Legal Group

On October 2, 2017, music fans around the world sobbed when legend Tom Petty died.  Fans received the admittedly surprising news that Petty suffered a heart attack and was quickly taken off life support. Petty’s family made this decision so quickly because they followed a do-not-resuscitate order put in place by the musician.

Much like Petty, all of us can benefit from a plan for our end-of-life care.  A well-thought-out plan can save your family money and heartache.

According to a 2010 study, Medical expenses in the last year of life average about $11, 618.  With inflation, we can estimate those expenses would be closer to $18,000 today. For families requiring nursing home or assisted living facility care, this number can be much higher because monthly averages for these facilities run from $4,000 – $6,000 per month.

Advance Directive for Healthcare

One important document to help you make your end-of-life care plans is an Advance Directive for Healthcare.  Only 26. 3% of adults admit to having this undeniably important document.

An Advance Directive only goes into effect when the person who made the document is incapacitated.  That means he or she is unable to make decisions for him or herself.

In Oklahoma, if you do not have this document in place, no one is legally able to make medical decisions on your behalf and/or withhold life-sustaining treatment.

The Advance Directive will memorialize your wishes in different situations regarding life-sustaining treatment, allow you to choose a proxy to make medical decisions for you if you are unable to, and determine if you would like your organs and other body parts donated or science or transplantation.

Do Not Resuscitate Orders

Do Not Resuscitate (DNR) orders are often used by patients who are already suffering from serious illnesses. The patient, or agent for the patient in certain situations, indicates his or her wishes medical staff not try to resuscitate the person if they are in need of CPR. Healthy people will likely not want a DNR.  Healthy people will want to get CPR if they are in a life-threatening situation.

Durable Power of Attorney

Durable Powers of Attorney (DPOA) allow people to choose someone to help them with medical and financial issues, either immediately, or after they can no longer care for themselves. The agent chosen by the person creating the document can stand in the creator’s shoes to take care of matters on the creator’s behalf. The extent of the agent’s powers are outlined in the document itself. If you choose to have your DPOA go into effect immediately, you can override your agent’s decisions, unless you are incapacitated.

Without these estate planning documents, your family will wind up in Court, doing the best they can to make these decisions with a Judge’s supervision. If you have any ideas on how you want your care to go, and who you want to help, you need a plan. It is always wise to work with local attorneys instead of filling out online forms when making end of life care plans.

Local attorneys generally do not charge much more and they can walk you through the documents to help you understand them and tailor them to meet your specific needs.  They will usually also have a copy of your plans on-hand in case your family is unable to find your documents.


Why You Should Follow Hugh Hefner’s Example

By Sarah Stewart Legal Group

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We all know Hugh Hefner.  As the mogul businessman with the groundbreaking idea behind Playboy magazine, he was quite the controversial figure.  Despite your personal beliefs about Hugh’s business and life choices, he is a role model for all of us in one aspect of his life– Estate and Financial Planning.

Say what you will about Hef, but his business acumen was amazing.  He started Playboy in 1953 with $8,000 and transformed it into a global business.  Hef was able to take his eventual fortune from this business and plan well for his retirement and the twilight years of his active lifestyle.

Hef began planning for his future and his empire in about 2010 when he divorced Kimberley Conrad. Records show his net worth at the time was around $43 million and his income was about $3.5 million a year.

With the rise of the internet, Hef knew his business could suffer.  So, he made a decision in 2011 to make Playboy private by partnering with a private equity firm.  This move netted him more than $207 million. He included a deal in the purchase contract that gave him 37% of the stock and a $1 million per year income from the new business.

Hef took his estate planning prowess to a new level in 2012 when he negotiated a pre-nuptial agreement with his 3rd wife. Through the agreement, he established a trust solely for the benefit of the wife and kept all of his agreed, non-marital assets separate.

With this decision, Hef dodged a common estate planning bullet.  He was able to keep his wife happy and keep his assets separate and protected for his adult children.  Those who don’t take these steps in blended families, often have disagreements, and many times full out wars, over assets after the parent’s death.

It is likely Hef used several trusts to plan for his children and spouses after his death.  In fact, it is rumored that he even left half of his estate to a charitable trust to minimize estate taxes.

Hef’s one mistake was leaving his 37% share of the company tied up in stock.  Now, his heirs will have to sell the stock to realize the value, which is hard to determine since the public will not be able to purchase a private company’s stock.

Overall, though, Hef’s planning was sound and inspired.  He was able to take a business that would soon be affected by the technological revolution of the internet and turn it into a free home and yearly stipend. He was able to plan for the people who were most important to him without sparking a massive legal battle.  And, he even planned out his burial, purchasing a plot next to his first model, Marilyn Monroe. I have no doubt his family is eternally grateful for his foresight.

We can all take a cue from Hef’s playbook.  No matter the size of your estate, planning is essential, especially in blended families.  Make a plan for yourself and your loved ones centered around your retirement, and your eventual death. The hardest step is the first step.

Reach out to an experienced estate planning attorney and financial planner to help you plan for your retirement and family today!

4 Considerations for Retirement Planning

By Sarah Stewart Legal Group

Retirement planning is a difficult and confusing task.  But, it is necessary.  When planning there are 4 considerations you should address that could affect your retirement account’s bottom line and your lifestyle when you retire.

(1) Taxes

The only things certain in life are death and taxes.  No matter your age, you will be responsible for State and Federal taxes, including income taxes.  Make sure to account for future taxes in your retirement plan, or your future budget will be thrown off.

For instance, if you stash all of your money into a Traditional 401(k) or IRA, your withdrawals will be subject to income tax. If those monthly withdrawals are high enough, your Social Security income may be taxed as well. The solution is to plan for taxes while drafting your plan.

One tool to consider is a Roth IRA. Roth deposits are made with after-tax dollars, so future withdrawals are not subject to income tax or required minimum distributions.  So, Roth accounts can save you a large tax bill in the long run.

(2) Inflation

On average, inflation causes the U.S. Dollar to lose 3% of its value per year.  So, you must account for the fact that your retirement account will lose at least 3% of its value each year.  To beat inflation, be sure to pick a portfolio that has a historically high enough return to overcome the value lost.

(3) Long-term Care

People are living longer and longer each decade, making the costs of long-term care a likely item you’ll need in your retirement budget.  In our current market, long-term care can cost anywhere from $4,000 – $6,000 per month.  That’s quite the hefty price tag. Medicare usually won’t provide much, if any, assistance in long-term care and State and Federal funding in this area is constantly in flux and one of the first budget lines to go when States are tightening their wallets.

Consider getting long-term care insurance to help with long-term care expenses.  People generally can get low premiums on this type of insurance if they purchase it early enough, usually in their 50s.  It is easier to budget for the insurance premiums associated with long-term care insurance than it is to predict how much long-term care facilities will charge when you need them. But, always use an abundance of caution in planning for your long-term care expenses in retirement planning.

(4) Estate Planning

Anyone who has been through a probate can tell you what a burden the procedure can be for the family.  The burden only increases if you have not completed some form of estate planning. Probates are expensive, time-consuming, and emotionally draining for the loved ones you leave behind.

Also, if you do not take the time to write out a Will or other plan, the State will determine who gets your assets and how, based on the laws they have put in place for these matters.  You will need to consider your goals and wishes for your family and look at the pros and cons of having a Will, Trust, Durable Power of Attorney, Advance Directive, and other documents in your arsenal.

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