Ten Financial Actions to Take Before the Ball Drops!

As hard as it is to believe, 2017 is almost over! While December is often a celebratory time of the year as we enjoy the holidays and spend time with our families, it can also be overwhelming and stressful for many of us. As we get ready to say goodbye to 2017, we may realize that we have not accomplished all our goals and we frantically attempt to squeeze in a few last-minute projects before January 1st rolls around.

Since your wallet definitely won’t be gathering dust this season, why would you let your financial plan fall to the wayside? Here are ten critical financial steps to take before we enter the new year.

1. Make The Most Of Your Retirement Savings

If possible, max out your contributions to your 401(k) by the end of the year to make the most of your retirement savings. For 2017, you can contribute as much as $18,000 (or $24,000 if you are 50 or older). You might also consider contributing to a Roth IRA. For 2017, you can contribute as much as $5,500 (or $6,500 if you are 50 or older). Keep in mind that if your income is over $196,000 and you’re married filing jointly, you won’t be eligible to contribute to a Roth IRA.

2. Consider a Roth Conversion

Roth IRAs are attractive because you don’t pay income tax when you withdraw funds in retirement. However, if you’re a high-income earner, you may not be eligible to contribute and instead invest in a Traditional IRA. If you have a Traditional IRA, you may have the opportunity to convert to a Roth IRA and save money on taxes in the long run. The deadline to convert to a Roth IRA is December 31st, so if you’ve been considering doing so, or wonder if it’s an appropriate option for you, talk to your financial advisor ASAP.

3. Use Your Medical and Dental Benefits

Did you have good intentions of taking care of some dental work, blood tests, or other medical procedures? Now’s the time to take advantage of all your healthcare needs before your deductible resets. Dental plans, in particular, often have a maximum coverage amount, and many cover two teeth cleanings per year. If you haven’t used up the full amount and anticipate any treatments (or just need a good teeth cleaning!) make an appointment before December 31st.

4. Use Up Your FSA Dollars

Like your health insurance benefits, you’ll want to use up your Flexible Spending Account dollars by the end of the year. Your benefits won’t carry over and you’ll lose any unspent money in your account. Check the restrictions for your account to see what the money can and cannot be used for.

5. Keep Up On Your Charitable Contributions

If you made a charitable contribution in 2017, you might be able to lower your total tax bill when you file early next year. It can be especially advantageous if you donated appreciated securities to avoid paying taxes on the gains. Along with your other tax documents, find and organize any receipts you have from your donations to charities, whether it was a cash, securities contribution, or another type of gift.

6. Review Your Insurance Policies

A lot can happen in a year. As you experience life changes, from the birth of a child to marriage to a new career, it’s important to regularly review your insurance coverages and your designated beneficiaries. Now is a good time to review your current insurance policies and make sure they are up-to-date. You might also want to evaluate your need for other types of insurance you may not currently have, such as long-term care insurance.

7. Double Check Required RMDs

If you’re retired, review your retirement accounts’ required minimum distributions (RMDs). An RMD is the annual payout savers must take from their retirement accounts, including 401(k)s, SIMPLE IRAs, SEP IRAs, and traditional IRAs, when they turn 70½. If you don’t, you may face the steep penalty of 50% of the distribution you should have taken. To calculate your RMD, use one of the IRS worksheets.

8. Discuss Loss Harvesting With Your Advisor

If you invest in bonds, mutual funds, or stocks in accounts other than your 401(k) or IRA, review your realized and unrealized gains and losses. You might be able to offset some of your gains by selling some losses. Tax-loss harvesting can help you save on taxes, but you want to make sure the move also makes financial sense for your situation. Talk with your advisor about potentially harvesting your losses and if it makes sense for you. Should you determine tax-loss harvesting is appropriate, you’ll need to complete the process by December 31st.

9. Avoid Gift Tax Consequences

It’s never too early to start planning for the legacy you want to leave your loved ones without sharing a good portion of it with Uncle Sam. You may want to consider gifting. Each year, you can gift up to $14,000 to as many people as you wish without those gifts counting against your lifetime exemption of $5 million. If you’ve yet to gift this year or haven’t reached $14,000, consider gifting to your children or grandchildren by December 31st.

10. Update Your Estate Plan

If you have taken the time and energy to create an estate plan, you’ll want to check in periodically to ensure all the documents are up-to-date and no major details have changed. Any major life event is a good time to think about updating your estate plan documents. If you change any of the beneficiaries in one place, such as a life insurance policy, make sure that they are consistent with the other documents so that there is no confusion.

Do you have questions on last-minute financial actions you can take before 2017 ends? Do you want to get on the right financial foot for the new year? I’d love the opportunity to offer you support along your financial journey. If you are interested in getting on the right financial foot, I encourage you to reach out to me for a year-end review. Give me a call at 949-445-1465 or email me at [email protected]

About Jeff

Jeff Gilbert is the founder and CEO of Balboa Wealth Partners, a holistic financial management firm dedicated to providing clients guidance today for tomorrow’s success. With nearly three decades of industry experience, he has worked as both an advisor and executive level manager, partnering with and serving a diverse range of clients. Specializing in serving high and ultra-high net worth families, Jeff aims to help clients achieve their short-term and long-term goals and to worry less about their finances and more on their passions in life. Based in Orange County, he works with clients throughout Southern California, as well as Arizona, Oregon, and Washington. To learn more, connect with Jeff on LinkedIn or email [email protected].

How to choose a financial professional

  Who is the right Financial Advisor for you?: 10 points to consider
When is the right time to get your financial life in order? NOW. This is one priority that seems to be pushed to the back burner of our to-do list, however, should be front and center. It’s time to take control of your own financial life.
If you are managing your finances alone, now may be a good time to review how you are doing, compared to the plan you established. You didn’t establish a plan? Perhaps you should. For those who work with financial advisors or are seeking professional guidance, below are 10 things to consider when interviewing financial planners.

1) Is the professional a registered investment advisor? If yes, the advisor has a fiduciary duty, which means he/she must put your needs first. Financial professionals who aren’t fiduciaries are held to a lesser standard, called “suitability,” which means that anything they sell you must be appropriate, but not necessarily in your best interest. The new rule established by the Department of Labor (DOL) addresses this potential conflict, however, is not being fully implemented across the industry. The only way to avoid this conflict is to work with a registered investment advisor.

2) How do I pay for financial planning / wealth management services? The advisor should clearly state in writing how he/she will be paid for the services provided. The three basic methods in which advisors are paid are: flat rate or hourly fee; fees based on a percentage of your portfolio value, often called “Assets Under Management” (“AUM”); and commissions paid per transaction. (The DOL rule is impacting the use of transaction based commissions on retirement accounts) The fees based on AUM are most typical with Registered Investment Advisors.

3) What is the advisor’s experience? Make sure to ask how long the advisor has been in practice and where. Also inquire as to any professional certifications, licenses or designations. While these identify credibility, they don’t guarantee a successful relationship. Here’s a description of some of the more common financial planner designations:
• CFP® certification: The Certified Financial Planner Board of Standards (CFP Board) requires candidates to meet what it calls “the four Es”: Education (Education (through one of several approved methods, must demonstrate the ability to create, deliver and monitor a comprehensive financial plan, covering investment, insurance, estate, retirement, education and ethics), Examination (a 10-hour exam given over a day and a half; most recent exam pass rate was 62.6 percent), Experience (three years of full-time, relevant personal financial planning experience required) and Ethics (disclosure of any criminal, civil, governmental, or self-regulatory agency proceeding or inquiry). CFPs must adhere to the fiduciary standard.
• CPA Personal Financial Specialist (PFS): The American Institute of CPAs® offers a separate financial planning designation. In addition to already being a licensed CPA, a CPA/PFS candidate must earn a minimum of 75 hours of personal financial planning education and have two years of full-time business or teaching experience (or 3,000 hours equivalent) in personal financial planning, all within the five year period preceding the date of the PFS application. They must also pass an approved Personal Financial Planner exam.
• Membership in the Membership in the National Association of Personal Financial Advisors (NAPFA): NAPFA maintains a high bar for entry: Professionals must be RIAs and must also have either the CFP or CPA-PFS designation. Additionally, NAPFA advisers are fee-only, which means that they do not accept commissions or any additional fees from outside sources for the recommendations they make. In addition to being fee-only, NAPFA advisers must provide information on their background, experience, education and credentials, and are required to submit a financial plan to a peer review. After acceptance into NAPFA, members must fulfill continuing education requirements. The stiff requirements make NAPFA members among the tiniest percentage of registered investment advisers, with only 2,400 total current members.

4) What services do you offer? The services offered can depend on several factors including credentials, licenses and areas of expertise. Some offer advice on various topics, but do not sell financial products. Others may provide advice only in specific areas such as estate planning or tax matters. Most people are looking for a planner that does everything, sort of a ‘jack of all trades’. This may be right for you, or a team of professionals specializing in different areas could be the appropriate choice.

5) What is your approach to financial planning and investing? Some advisors prefer to develop a holistic plan that brings together all your financial goals. Others provide advice on specific areas, as needed. Make sure the advisor’s approach is custom to your needs, objectives, risk tolerance, etc. Some advisors will have models they assign you to based on a profile, however, isn’t necessarily a customized solution for your specific needs. It’s important to know whether the planner makes investment decisions or depends on others in the firm to do so. What was the advisor’s performance in both good and bad markets and ask yourself whether it’s more important to you to make money in a rising market or prevent losses in a down market. This is the time to let the advisor know what keeps you up at night regrading finances. If the advisor doesn’t address your concerns, it’s time to interview someone else.

6) It’s O.K. (and expected) that you ask for references. Ask for two or three current clients whose goals and finances match your own, as well as a professional reference, like an accountant or estate attorney.

7) Who is the custodian where my accounts will be held? This is your ‘sleep at night’ question. When interviewing advisors not associated with large brokerage firms or insurance companies, ask if they use an independent, third party custodian (this is the entity that produces your statements), which prevents the advisor from having direct custody of your assets and adds another level of security for your account. Make sure it’s a name / company you recognize (i.e. Charles Schwab)

8) Is there anything in his/her regulatory record that I should know about? Part of your research should include conducting background checks on the professional(s) you are interviewing. You can visit the Securities & Exchange Commission and FINRA websites or the State Securities website NASAA as well as the CFP Board. While some violations are non-starters (settlement of multiple customer complaints) others may be understandable (marketing materials not pre-approved; non-client or investment violations).

9) How often will I hear from my advisor? A good advisor will ask you how often and by what method you prefer to be contacted? If you and your advisor establish a communication schedule and strategy up front, you won’t be disappointed. It’s also important to ask if the advisor will remain your primary contact.

10) Would I have this person over for a BBQ? A relationship with a financial professional should be long term and multigenerational. You need to not only trust your advisor, but you should like him/her too. Ask yourself this question: would I invite him/her to my home for a BBQ? If the answer is no, this is not the right person for you. If you have any reservations, move on. There are plenty of qualified advisors out there, and you should make sure you find the right one that fits your qualifications.

If you have any specific questions on this topic, do not hesitate to contact Balboa Wealth Partners at (949) 445-1465

Should I set up a family trust?

Should I set up a family trust?

Most people don’t quite understand what a family trust is—also known as a revocable living trust— how it works, and if they need one.

The differences between a trust and a simple will, for instance, are often confused.

Many people believe a trust replaces a will; that is absolutely wrong.  The trust needs to be accompanied by a will.

While it can be time-consuming—and more expensive—to have a family trust prepared, there are numerous benefits of the trust for many families.

A family trust is not a requirement in every situation, but in many, it’s quite necessary.

The most common misconception of a trust is that it reduces or eliminates estate tax.  That is false!  A trust does help to avoid probate and directs assets to its beneficiaries.

How a Family Trust Works

A family trust is a legal document that covers an individual’s assets and specifies the terms of dispersing those assets after one’s death or incapacity.  The person who sets up the trust—usually referred to as the grantor—transfers all his/her assets so the trust itself is the owner, not the individual.  It’s important to understand that any asset that is not transferred into the name of the trust will not be protected by it.  This commonly goes overlooked.

The grantor does not give up full control of the assets.

A trustee—the person(s) who will carry out the terms—is appointed at the time the trust is formed but has no role until the grantor is deceased or incapacitated.  The trustee can be a family member, close family friend or even a financial institution.

Typically, choosing a financial institution as a trustee can be costly.  The cost can be justified as these institutions specialize in these matters where a family friend may be burdened with all the responsibilities a trust brings.  In many instances, a financial institution can be named as successor trustee.

The terms of the trust—and the assets included—can be changed at any time. If there’s a new significant purchase of an asset ( Real estate. Automobile, etc.) these can be added to the trust at any time.  Also, intangible assets (securities and other financial investments) can be added at any time as well.  Similarly, the trustee(s) and beneficiaries can be changed by the grantor at any time as the grantor maintains full control.

The way assets are dispersed can be established any way the grantor sees fit and can be changed at any time.   For example, you could set up the family trust to disperse assets at different ages of your surviving child.  They could receive 1/4 of the assets at age 40; The next 1/4 at 45.  And the last half at age 50.    This is one example of the multiple ways a family trust can be established.

Benefits of a Family Trust

Some of the many advantages of a family trust include:

Avoiding the probate process.  If the grantor dies, the estate can avoid a long probate process, a considerable benefit over a simple will, where probate is common for any assets not specifically counted.

Avoidance of legal issues at the time of asset distribution.  A family trust is essentially air tight legally, another potential advantage over a simple will.

Limited exposure to estate taxes, which is part of the estate planning process.

Simple and Flexible.  A family trust is a relatively easy document to prepare. estate planning attorney.  Transferring asset ownership to the trust is an easy task.  The ability to amend and adjust the terms at any time makes it a very versatile vehicle.

Control.  The terms of a trust order what will happen to your assets in the event you are incapacitated or deceased.  The trustee must carry out your instructions, or face civil suits and possibly criminal prosecution.

In Conclusion – What a Family Trust Does

A family trust is a relatively simple and inexpensive, but potentially powerful legal vehicle, with many benefits for a wide variety of individuals.  The family trust makes certain your assets will be allocated per your instructions, should something happen to you. It guarantees your beneficiaries will have access to their inheritance—in the way you intend.  The peace of mind in that alone may be enough to recommend the process.

You can hire an attorney to draft your will and trust, or there are online options that are more cost-effective, such as LegalZoom.

Ready to find out more?

Drop us a line today to speak to you about setting up a Family Trust!


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