When a Minor is a Beneficiary

Posted by on Aug 19, 2015 in 401k, 403b, bank statements, college planning, Fixed Income Investing, insurance, Investing, IRA, Retirement, TSA | 0 comments

Some factors for parents & grandparents to consider.   Provided by Frederick Saide, Ph.D.   Naming a minor as a beneficiary brings up a major concern. If parents or grandparents make a child a primary or contingent beneficiary of an insurance policy, IRA or investment account, they should be aware that most policies and investments will not directly transfer to a minor. They need to be received by a court-approved property guardian, a trustee of a children’s trust, or a revocable living trust beforehand.1 State laws prevent children from receiving large lump sums. They commonly prohibit minors from owning real property worth more than $2,500-5,000 (the limit varies per state) or receiving cash inheritances greater than that. It is incredibly rare for insurers to distribute life insurance proceeds to minors.1,3 As for POD checking and savings accounts and CDs, banks will usually allow the child or the child’s parent(s) to receive sums less than the aforementioned limits. For larger sums, the parent(s) will likely have to turn to a court and ask to be appointed guardians for the money if no property guardian, children’s trust or revocable living trust is in place.2   A personal guardian is not always a child’s property guardian. Usually, one person serves as both – but if that person lacks financial literacy or accountability, another property guardian may need to be appointed to manage assets for the child until the child turns 18. If that is desired, a court must review the choice of guardian and the inherited assets will be probated.3 How may circumstances like these be avoided? Parents or grandparents would be wise to consider three options.   A property guardian can be appointed for a child in a will. If an individual who may become the child’s personal guardian is negligent or incompetent at managing wealth, this may be worthwhile. The property guardian will need court approval to sell any of the inherited assets, and rules will govern how the assets are spent.3 A property guardian should be someone likely to live at least until the child turns 18. A bank is the property guardian of last resort, as banks charge fees and have no personal stake here.    An UTMA custodianship may be arranged. In 49 states (South Carolina being the exception), an adult may be appointed as a custodian for assets left or gifted to a child under the Uniform Transfers to Minors Act (UTMA). This appointment is made through the language of a will or living trust. (Vermont recognizes only the older Uniform Gifts to Minors Act, or UGMA, under which the custodian is more rigorously supervised.)3 The UTMA custodian serves as asset manager and financial recordkeeper, overseeing...

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Is America Prepared for Retirement?

Posted by on Aug 3, 2015 in 401k, 403b, Fixed Income Investing, insurance, Investing, IRA, Retirement | 0 comments

Two-thirds of us have no financial plan.   Provided by Frederick Saide, Ph.D.   Only 48% of Americans say they think they are saving enough. And 30% feel that they are not even slightly confident that they are saving enough for retirement. That finding comes from the 2015 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling. (The survey collected data from 2,017 U.S. adults.)1   Only 40% of us keep a regular budget. If you are one of those two out of five Americans, you’re on the right track. While this percentage is on par with findings going back to 2007, the study also finds that only 29% of Americans are saving any part of their annual income towards retirement.1   Relatively few seek the help of a financial professional. When asked “Considering what I already know about personal finance, I could still benefit from some advice and answers to everyday financial questions from a professional,” 75% of respondents agreed with the statement. Yet only 12% indicated that they would seek out the help of some sort of financial professional if they had “financial problems related to debt.” While it isn’t surprising to think that 25% of respondents would turn to friends and family, it may be alarming to learn that 18% would choose to turn to no one at all.1   Why don’t more people seek help? After all, Americans of all incomes and savings levels certainly are free to set financial goals. They may feel embarrassed about speaking to a stranger about personal financial issues. It may also be the case that they feel that they don’t make enough money to speak to a professional, that a financial professional is something that millionaires and billionaires have, not the average American worker. Another possibility is that they feel that they have a good handle on their financial future; they have a budget and stick to it, they save in an IRA (like a quarter of Americans), or a 401(k) (nearly three out of ten Americans), and many use other investments (30%, according to the survey). But that 75% admission above indicates that a vast majority of Americans are not as confident.1   Defined goals lead to definite plans. If you set financial objectives and plan for them, you vault ahead of most Americans – at least according to these findings. A written financial plan does not imply or guarantee wealth, of course; nor does it ensure that you will reach your goals. Yet that financial plan does give you an understanding of the distance between your current financial situation (where you are) and where you want to be.   How much planning have you...

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