Category: Life & Transition Planning

Recent Widows and Widowers – Important Financial Planning Steps

by Elizabeth Camp

The loss of a spouse may be one of the most difficult experiences any of us face in life. And while the emotional burdens may be high, the financial costs of inaction or misguided action could be significant. That’s why it’s critical to identify and eventually address certain important financial matters.

 

 

The First Step: Know Where You Stand

Statements and contracts are the essence of financial control, so you should quickly make every effort to gather as much documentation of your current financial condition as possible. Use this checklist as a guide to help ensure that you are building a comprehensive picture of your circumstances:

  •  Your spouse’s will and trust documents, and any statements of intent that may have been drawn for executors, trustees and guardians;
  • Your spouse’s death certificate (certified copies are most useful. Your funeral director or family attorney can usually help obtain them from the local medical examiner or clerk’s office);
  • Property and vehicle documents, including title certificates, deeds, and lease contracts;
  • Bank, investment, and retirement account statements;
  • Credit card, mortgage, and installment loan documents;
  • Insurance policies;
  • Federal, state, and local tax documents.

Immediate Action Items

The federal government has three different retirement benefit programs – the Social Security Administration (for most people except railroad employees and many federal workers), the United States Railroad Retirement Board, and the Federal Employees Retirement System.1 You are expected to notify all relevant agencies when your spouse passes away and you are required to return all federal pension payments made after passing. Since most federal pension benefits are paid by direct deposit, the receiving bank should be able to handle the necessary payment returns once notified.

The next immediate step is to be sure that ongoing family financial obligations continue to be addressed in a timely manner. This includes mortgage and rental payments, utilities, subscriptions, insurance premiums, tax payments, and the like. Automatic payments that had been made from accounts controlled individually by a deceased person are generally terminated once the paying agency is notified of the death; automatic payments made from joint accounts should continue unabated.

The last necessary step to take right away is to notify institutions responsible for your late spouse’s payments, benefits, and assets. This group could include banks and trust companies, life insurance and annuity providers, stockbrokers, investment custodians, retirement plans, pension administrators, and IRA trustees. Some of these may require certified copies of death certificates to effect important changes. As a fraud-fighting move, you should also consider notifying the credit reporting agencies and requesting them to include the notices in their future reports on your spouse.

 

Things to Do When You Are Ready

Many important decisions can be deferred (for days, weeks or sometimes months) until you feel ready to calmly evaluate your choices. You will face required minimum distribution rules for your late spouse’s retirement accounts, but except for those, you can take all the time you want to decide which assets to keep and which to sell. You should also take your time before buying any new insurance or investment products. Eventually, you’ll want to be sure that you’ve got a financial program and an asset allocation that fit your needs and objectives. And when you are ready to develop that plan, let me help you weigh your options carefully.

 

Sources:
1Social Security Administration, United States Railroad Retirement Board, and Federal Employees Retirement System.

 

 

If you’d like to learn more, please contact Elizabeth Camp at 954-762-3045 or elizabeth.camp@ms.com.

 

Article by Wealth Management Systems Inc. and provided courtesy of Morgan Stanley Financial Advisor.

 

The author(s) are not employees of Morgan Stanley Smith Barney LLC (“Morgan Stanley”). The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley. The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

 

Morgan Stanley Financial Advisor(s) engaged Life Meisters to feature this article.

 

Elizabeth Camp may only transact business in states where she is registered or excluded or exempted from registration http://www.morganstaleyfa.com/camp  Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Elizabeth Camp is not registered or excluded or exempt from registration.

 

© 2014 Morgan Stanley Smith Barney LLC. Member SIPC.

 

CRC 1013340 [09/14]

 

 

Money Management for the Single Parent

by Elizabeth Camp

Money Management for the Single Parent

As a single parent, you’re probably familiar with the dual challenges of managing a household and planning for the future on your own. But are you as familiar with the financial strategies that can stretch your income and help you get ahead? Consider the following lessons to help improve your family’s bottom line.

Lesson #1: Identify Your Goals

You can’t have a financial plan without first defining your financial goals. Start by recording all of your short-, medium-, and long-term goals.

For example, paying for a child’s education could be one of the biggest expenses in your future. During the 2012/2013 school year, the average total cost of one year in a private college was $39,518. At the average public college, it was $17,860. If expenses continue to rise at their current rate, a college education could exceed $490,000 (private) or $220,000 (public) by the year 2031.1

Retirement is another important goal. Financial planners often suggest accumulating enough of a nest egg so that — when combined with Social Security and pension payments — it will provide at least 80% of your final working year’s salary during each year of retirement. To determine how much you may need for retirement, consider using one of the many free, online retirement planning calculators.

Lesson #2: Be a Better Budgeter

To pursue your family’s goals, it’s necessary to manage your household’s cash flow. That involves tracking income and spending, eliminating unnecessary costs, and living within the confines of a realistic budget.

For example, if you spend $1.50 each day on a take-out coffee, that amounts to about $45 each month. By eliminating that minor expense from your budget, you could easily save an additional $500 per year.

Lesson #3: Say No to Debt

High-interest credit card debt can make it extremely difficult to get your budget in order. If you have an outstanding balance, consider paying it off as aggressively as possible. The savings in interest alone could allow you to address other important financial goals.

Consider this: The average U.S. household with credit card debt owes about $7,100.

The average U.S. household with credit card debt owes approximately $7,100; interest rates typically average over 12%. If you made only the minimum monthly payments on such a debt at a 12% annual percentage rate, it would take years to pay it off, and you would spend thousands in interest in the process. But if you paid the minimum plus an extra $100 each month, then you could be out of debt in under seven years.2

It’s also a good idea to review your credit history — commonly referred to as your credit report — to make sure that the information it contains about your past use of credit is accurate.

To obtain and review a copy of your credit report, contact the following companies:

  • Equifax (1-800-685-1111; www.equifax.com)
  • TransUnion (1-800-888-4213; www.transunion.com)
  • Experian (1-888-397-3742; www.experian.com)

 

Lesson #4: Learn About Savings and Investment Opportunities

Once you free up some cash, apply it toward your goals. But first, learn about the savings and investment opportunities available to you. Keep in mind that tax-deferred investment accounts may enable you to “grow” the value of your assets more significantly than taxable accounts. That’s because investment gains in taxable accounts are taxed every year, while those in tax-deferred accounts remain untaxed until you make withdrawals later in life.

  • Employer-sponsored plans, such as traditional 401(k) plans, allow workers to set aside a portion of their pretax income in a company-sponsored, tax-deferred retirement account. As an added benefit, some employers make a “matching contribution” to employees’ accounts each time employees contribute.3
  • Traditional individual retirement accounts (IRAs) may allow you to deduct a portion of annual contributions from your taxes (depending on your income) and offer tax-deferred investment growth. Roth IRAs do not offer a tax break for contributions, but investment earnings are untaxed and qualified withdrawals are tax free.3
  • Coverdell Education Savings Accounts (also known as Education IRAs) allow tax-free earnings on nondeductible contributions of up to $2,000 annually. Qualified withdrawals may be used to pay for college, as well as elementary and secondary schooling.3
  • Section 529 college savings plans are state-sponsored investment programs that allow tax-free withdrawals for qualified college expenses – including tuition, fees, room & board, books and required equipment or supplies.3 College savers who contribute to their home state’s 529 plan may be eligible for state tax breaks. (Some states even offer the dame tax break whether you invest in the home state’s Plan or another state’s Plan) If your state or your designated beneficiary’s state offers a 529 plan, you may want to consider what, if any, potential state income tax or other benefits it offers before investing – but you should also consider other factors such as the breadth and performance of the investments.

Consider the Benefits of Tax Deferral

This chart compares the growth of $100 monthly contributions in taxable and tax-deferred accounts over 30 years at an 8% average annual rate of return.Source: Standard & Poor’s. Assumes a tax rate of 25% for the taxable account. All assets in the tax-deferred account are taxed at the same rate at withdrawal. Nonqualified withdrawals from tax-deferred accounts may be subject to income taxes and/or a 10% early withdrawal penalty. The hypothetical rate of return does not reflect the cost inherent in investing.

Once you’ve selected an appropriate investment account, you’ll then need to determine an appropriate investment strategy. In general, stocks have the most short-term risk, but they also have the potential to generate better long-term returns than money market or bond investments. Therefore, the longer your investment time frame, the more you may want to rely on stock investments to pursue your financial objectives.

Lesson #5: Get Professional Advice

A financial professional can suggest specific strategies for you and point out any considerations you may have overlooked, such as insurance, estate planning, or tax planning.

Always ask how — and how much — a professional charges for his or her services.

Remember, successfully managing the finances of a one-parent household takes time and dedication. But once you begin to see an improvement in your family’s bottom line, you’ll know it’s worth the effort.

Points to Remember

  1. To begin establishing your entire range of priorities, divide your goals into one of three categories: short term, medium term, or long term.
  2. Don’t procrastinate about getting your financial life in order. Cut back on wasteful spending immediately and channel the extra money to your most pressing needs. If big expenses are in your future, start learning what it will take to accomplish them. That could mean signing up to participate in an employer-sponsored retirement plan, or researching financial aid for college.
  3. Consider working with a financial professional at least one time for input into how you may better manage your finances and plan for the future.
  4. Break the credit card habit. Consider transferring balances to lower interest rate accounts, and pay off existing debts aggressively. Check to ensure that the information in your credit history is accurate.
  5. Search for fun, low-cost ways to spend family time together. Ask the children for ideas.

 

1Sources: The College Board; Standard & Poor’s. Private and public college cost projections assume 6% annual increases, which were the average increases at all private and public colleges for the 2012/2013 year. http://advocacy.collegeboard.org/sites/default/files/college-pricing-2012-full-report_0.pdf

2Sources: Federal Reserve, 2010 Survey of Consumer Finances (latest available). http://www.federalreserve.gov/econresdata/scf/files/2010_SCF_Chartbook.pdf Minimum monthly payment of 4% of the balance or $20, whichever is greater.

3 The earnings portion of any nonqualified withdrawal is subject to ordinary income tax and a 10% penalty.

Equity Securities’ prices may fluctuate in response to specific situations for each company, industry, market conditions, and general economic environment.

Investments in a 529 Plan are not FDIC-insured, nor are the deposits of or guaranteed by a bank or any other entity so an individual may lose money.  Investors should review a Program Disclosure Statement, which contains more information on investment options, risk factors, fees and expenses and possible tax consequences.  Investors should read the Program Disclosure Statement carefully before investing.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors do not provide tax or legal advice.  This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.

If you’d like to learn more, please contact Elizabeth Camp at 954-762-3045.

 

Article by Wealth Management Systems, Inc. and provided courtesy of Morgan Stanley Financial Advisor.

 

The author(s) are not employees of Morgan Stanley Smith Barney LLC (“Morgan Stanley”). The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley.  The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

 

Morgan Stanley Financial Advisor(s) engaged Life Meisters to feature this article.

 

Elizabeth Camp may only transact business in states where she is registered or excluded or exempted from registration http://www.morganstaleyfa.com/camp  Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Elizabeth Camp is not registered or excluded or exempt from registration.

 

© 2013 Morgan Stanley Smith Barney LLC. Member SIPC.

 

CRC# 756342 11/13

 

Declaring Credit Independence During and After Divorce

by Elizabeth Camp

Distractions and financial pressures can multiply during divorce, along with the likelihood of making late payments or missing them altogether. Managing your credit may be something new to you if your former spouse handled your family’s finances, but it is a critical skill to develop when you are on your own.

Check your credit report.  A good credit report translates into financial flexibility.  Equally important, credit scores are used by many types of organizations for purposes that extend beyond credit.  For example, insurance companies and prospective employers may request authorization to review your credit reports as a qualifier for employment or coverage.

Note the word “reports.”  There are three primary credit reporting agencies that monitor your credit: Equifax, Experian and TransUnion. You are entitled to request a free credit report from each of these agencies once a year. Because each company scores your credit and reports it slightly differently, it is important to check all three. Fortunately, that is not as complex or time consuming as it sounds.  One easy and free way to start is to visit this government approved website: www.annualcreditreport.com/cra/index.jsp.

Your credit report will be based on a number of factors, the most important being your payment history. If you and your spouse were both listed on an account, payment history for that joint account will influence your individual credit score. That will continue to be true for as long as your name is associated with an account.

You have the right to correct errors on your credit report, and it is important that you do so as quickly as possible — but you won’t know about the errors unless you request the report.

Protect Your Credit. Joint credit is usually not appropriate after divorce, since there is a risk that your credit rating can be damaged by the actions of your former spouse. One way to protect yourself is to close joint credit cards and other joint accounts. Remember, even after your divorce, if you signed the original credit application, you can be held responsible.

Here are the rules regarding joint accounts, as summarized by the Federal Trade Commission:

By law, a creditor cannot close a joint account because of a change in marital status but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation. E

Establish your own credit. One of the first things you can do to establish credit is to open your own bank and investment accounts. If you work with a financial advisor, he or she may be able to help you establish credit as part of that relationship. If your credit reports are strong, you may want to apply for credit cards and store accounts in your own name. A secured loan, such as an auto loan, is often a faster and easier way to establish an independent credit history than an unsecured account.

 

If you’d like to learn more, please contact Elizabeth Camp at 954-762-3045 or elizabeth.camp@ms.com

 

Article byMorganStanleySmithBarneyLLC. Courtesy ofMorganStanleyFinancial Advisor.

 

Articles are published for general information purposes and are not an offer or solicitation to sell or buy any securities or commodities. This material does not provide individually tailored investment advice.  Any particular investment should be analyzed based on its terms and risks as they relate to your specific circumstances and objectives.

 

Morgan Stanley Financial Advisor(s) engaged Life Meisters to feature this article.

 

Elizabeth Camp may only transact business in states where she is registered or excluded or exempted from registration http://www.morganstanleyfa.com/camp  Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Elizabeth Camp is not registered or excluded or exempt from registration.

 

© 2014 Morgan Stanley Smith Barney LLC. Member SIPC.

 

CRC 951233 [06/14]

 

 

 

 

The Reality of Alimony

by Elizabeth Camp

As with most things related to divorce, alimony laws vary from state to state. Fundamentally, however, alimony — also known as “spousal support”— is a monthly payment that one former spouse is required to make to the other as part of the divorce settlement.

There are four types:

  • Temporary support is paid during a separation before the divorce is final. It is likely to change, or cease altogether, depending on the final agreement.
  • Rehabilitative support is also temporary in that it is designed to last until you become self-supporting.
  • Permanent support lasts until the death of either former spouse, or until you remarry or begin living with another person. (Keep in mind that permanent alimony can be increased or decreased by a court, and that there has been recent discussion of reducing alimony when the paying spouse reaches retirement age.)
  • Reimbursement is designed to repay you for specific expenses you helped pay during the marriage, such as the cost of medical or law school for your spouse.

Courts usually award alimony based on a number of factors, including how long you were married, your pre-divorce lifestyle (which makes a pre-divorce budget important), the disparity in earnings between spouses and the health of the receiving spouse.

If you’d like to learn more, please contact Elizabeth Camp at 954-762-3045 or elizabeth.camp@ms.com

 

Article byMorganStanleySmithBarneyLLC. Courtesy of Morgan Stanley Financial Advisor.

 

The opinions expressed by the authors are solely their own and do not necessarily reflect those of Morgan Stanley Smith Barney LLC (“Morgan Stanley”).  The information and data in the article or publication has been obtained from sources outside of Morgan Stanley and Morgan Stanley makes no representations or guarantees as to the accuracy or completeness of information or data from sources outside of Morgan Stanley. Neither the information provided nor any opinion expressed constitutes a solicitation by Morgan Stanley with respect to the purchase or sale of any security, investment, strategy or product that may be mentioned.

 

Morgan Stanley Financial Advisor(s) engaged Life Meisters to feature this article.

 

Elizabeth Camp may only transact business in states where she  is registered or excluded or exempted from registration http://www.morganstanleyfa.com/camp  Transacting business, follow-up and individualized responses involving either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made to persons in states where Elizabeth Camp is not registered or excluded or exempt from registration.

 

© 2014 Morgan Stanley Smith Barney LLC. Member SIPC.

 

CRC 951297 [06/14]