November 2008

A Monthly Newsletter Source of Financial Sources

Don’t miss this month’s timely story ideas, direct dial phone numbers, and E-mail addresses of these accessible experts!

ESTATE PLANNING / REAL ESTATE

• Falling Real Estate Prices Can be a Boon When Gifting Valuable Homes
The value of a Qualified Personal Real Estate Trust (QPRT) is that the owners are gifting away the real estate under specific arrangements for a specified term and in return can receive a large discount on the value of the gift. Pearson

• Renting vs. Selling Your Residence, Based on Inaccurate “Back of the Napkin” Calculations, is Usually a Very Bad Decision Over the Long Term
Most owners grossly underestimate the real expense of renting their property, including property management, repair and maintenance, leasing, legal and tax, and most never set aside a maintenance reserve for capital repairs and improvements. Delay of other life and estate planning goals are seldom acknowledged. Arzaga

PRIVATE EQUITY

• New MIT Center for Real Estate Research Index Data Demonstrates Portfolio Performance Improved by Direct Real Estate Investments, Even in This Market
Until recently advisors have avoided private, direct real estate investments because of doubts about how their performance has been calculated, and because advisors were not aware of how to tap into appropriate investment vehicles and expertise. MIT’s real estate researchers have just taken the first problem away. New direct real estate vehicles currently on offer have removed the second obstacle. Advisors need to develop direct real estate investment expertise or be left behind. Dowd

RETIREMENT

• Managed Accounts 4th Quarter Performance Overwhelms Target Date Funds’ Performance
Dismayed plan participants watch their 2010 target date funds’ assets sink.

INVESTMENTS

• Infrastructure Investors Can Benefit From the Surprising Window of Opportunity Opened by Global Slowdown
Even a moderate adjustment halfway back to levels seen this time last year could translate into 60-100% gains in many infrastructure stocks. Markman

• Five Points Your Advisor’s Client Letter Should Have Discussed Regarding the Market Meltdown
During this year of extraordinary market turbulence, it is reasonable to ask your advisors what they have implemented to help you withstand the changes to your portfolio and how you may benefit over the long term. Craffen

• Question Conventional Wisdom-- Consider Cutting Back Tax-Deferred Investments and Increasing After-Tax and Tax-Free Savings
Revisiting your tax/investment strategy is a proactive step to manage investment anxiety. Cheng

PERSONAL FINANCE

• Six Steps to Take if You Think You Might Get a Pink Slip
You can have your head in the sand about your job security or wake up and plan what you would do if your boss asks you for a meeting on Friday at 5:00 p.m. Neiman

• Who Will Help You Navigate the Loss of Your Loved One?
Concrete guidance is necessary to navigate the financial and legal issues surrounding death. McCoy

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ESTATE PLANNING / REAL ESTATE

Falling Real Estate Prices Can be a Boon When Gifting Valuable Homes
The value of a Qualified Personal Real Estate Trust (QPRT) is that the owners are gifting away the real estate under specific arrangements for a specified term and in return can receive a large discount on the value of the gift.

When real estate prices are down or suppressed, it is an excellent time to look at the tax saving strategies possible through a Qualified Personal Real Estate Trust or QPRT.  A QPRT is particularly useful when property values are down because the property that is transferred has a lower value at the time of the transfer.  Even when the same property appreciates after the date of the Trust, subsequent appreciation is not subject to gift or estate taxes.

QPRTs can be created for a family’s many residences or just one.  The value of a QPRT is that the owners are gifting away the real estate under specific arrangements for a specified term and in so doing can receive a large discount on the value of the gift. The IRS has determined that the gift, for purposes of estate taxes is the present, and now suppressed, value of the future gift. The savings that come with the QPRT can be as high as 50% of the estate taxes.

Owners of the property retain the right to use it for a term, perhaps 10 years. At the end of the term, the real estate is legally removed from their taxable estate. Many owners who establish QPRTs make legal arrangements to rent the house from the recipients of the QPRT, and continue to pay all of the taxes and expenses.  The rent, taxes and expenses come out of the original owners’ taxable estate further reducing that taxable estate. 

The longer the term chosen for the owners to maintain control, the larger the discount.  When the owners die before the term concludes, the owner has not lost anything.  If the owners live beyond the term, the entire value, 100% of the property has successfully been removed from the taxable estate.  The potential estate tax on the residence has been reduced to zero. 

If the owner has gifted away more than the law allows inside the QPERT, the adverse tax consequence (gift tax) is smaller.

Certainly the cost of attorneys, leasing back the house. and loss in step up basis for use in future capital gains taxes, must all be factored in to determine if this strategy will work for a family.  However, it is always an advantage to have a smaller taxable estate. 

Renting vs. Selling Your Residence, Based on Inaccurate “Back of the Napkin” Calculations, is Usually a Very Bad Decision Over the Long Term
Most owners grossly underestimate the real expense of renting their property, like property management, repair and maintenance, leasing, legal and tax, and most never set aside a maintenance reserve for capital repairs and improvements. Delay of other life and estate planning goals seldom acknowledged.

In good or bad markets, well-intended families and investors look to real estate as a way to help achieve financial independence… a time when the property is scheduled to be free and clear of debt, and is expected to rain down cash flow for the balance of their lives. In the current market, where sellers are not getting “their price”, this idea flourishes. Unfortunately for many families who are working hard to make financial independence work and have little margin for error, renting the residence could be a decision that places them significantly further behind their goals. 

There are at least half dozen factors that could create problems for many families. In the short term:

• Homeowners underestimate the amount of time it takes to get their selling price. The current market has yet to stabilize. When it does, it will take more time than expected to get to the sellers price. The rise of home prices over the long run resembles the rate of inflation. So when a home value drops by 25%, to get to the original value, it would have to grow by 33% (the converse of a 25% decline). Make any reasonable assumption on the growth rate, the recovery time will take six to seven years after the market has stabilized.
  

• Homeowners underestimate the cost of owning a rental. The most common “back-of-the-napkin” calculations account for only mortgage, tax, and insurance expenses. For many owners, the criteria to decide to rent seems to be to “break even.” Many are willing to subsidize to some extent. The reality is that these decisions grossly underestimate the real expense of renting, like property management, repair and maintenance, leasing, legal and tax, and the most underestimated expense: maintenance reserve for capital repairs and improvements.
  
  
• Families end up holding their properties longer than anticipated. Not only does this multiply the carrying costs, but also the former owners are likely to blow past the $250,000/$500,000 capital gains exemptions granted to them for living in the property two of the most recent five years. Families get too busy to deal with the property, and end up potentially paying a significant amount of capital gains tax, which greatly erodes the capital generated by the property.
  
  
• Many investors are not wired to manage real estate. Rather than treating the asset as a business, human emotion gets in the way. They like the renter and are afraid to seek rent increases. They seek a higher rent, and take on an unqualified renter. They make emotional choices about maintenance and repairs, and cause either too much expense for themselves or deferred maintenance. They spend time on rental matters that should be spent on other life goals.
  
  
• From an asset allocation perspective, too much of a family’s net worth ends up being tied up on a non-producing asset. This is capital that, for many families, should be invested wisely to help achieve their personal goals.

Long term issues are different and include:

• The ongoing risk of being in the business of real estate. Some states heavily favor renters, and there is a persistent risk of liability and claim. Unfortunately, most investors do not protect their other assets by placing the property is some type of suitable entity. The lack of time and cash flow are blamed, leaving their entire estate subject to claim.
  
  
• Return rates are not what people expect. Even when the debt is finally paid off over 20-30 years or more (due to refinancing), the cash flow remains low. The low performance is disguised because the cash comes in. But when the cash flow before taxes is calculated against the amount of equity needed to generate that cash flow, once again the return rate is much lower than other investments.
  
  
• The hassle of management. Do people really want to manage renters and property? Most don’t, but find themselves doing so to save a few dollars.
  
  
• The amount of time, resources, and capital spent to fund a rental to eventually end up with a debt-free low producing asset greatly reduces the capital necessary for families to achieve their financial and estate planning goals. A financial model will show dramatic differences in the sell and take a perceived loss vs. rent options.
  
  
• All of these scenarios described above, with the corresponding return rates, have assumed a fixed mortgage. Many rentals have adjustable mortgages, which maintain the risk of higher interest rates, a higher mortgage, and even worse cash flow.

If you are considering renting rather than selling, make certain you have a financial advisor with expertise in real estate check your “back of the napkin” calculations. Hanging onto a property may be a really bad decision given the current economic crisis and instability in real estate prices.

Rich Arzaga is Founder and President, Cornerstone Wealth Management, San Ramon, California, a life planning company specializing in providing options and solutions for residential and commercial real estate investors. He is also an instructor in the nationally-recognized financial planning certification program at U.C. Berkeley, and teaches the highly-acclaimed Real Estate Investments course at U.C. Santa Cruz and U.C. Berkeley. Rich can be reached at rich@consultrich.com or toll free (888) 290-9900.

PRIVATE EQUITY

New MIT Center for Real Estate Research Index Data Demonstrates Portfolio Performance is Improved by Direct Real Estate Investments
Until recently advisors have avoided private, direct real estate investments because of doubts about how their performance has been calculated, and because advisors were not aware of how to tap into appropriate investment vehicles and expertise. MIT’s real estate researchers have just taken the first problem away. New direct real estate vehicles currently on offer have removed the second obstacle. Advisors need to develop direct real estate investment expertise or be left behind.

Advisors for higher net worth investors will increasingly have to find the resources and develop the skills to deal with alternate investments, particularly direct real estate investment, or face the risk that the “performance” parade will pass them by.

As of early November, the DJI is down 27.44% year to date.  At the same time, the MIT Center for Real Estate Research’s indices indicate that for the year through September 1, 2008, direct real estate investments have held quite steady. They posted a loss of only about 0.613%.

The MIT real estate researchers knew that the National Counsel of Real Estate Investment Fiduciaries (“NCREIF”) data was subject to criticism. It was in large measure based on appraisals that were commissioned by the fund managers, creating a conflict of interest and the chance of compromising the data. The MIT Center for Real Estate Research has assisted in building two new indices that use sale prices instead of appraisals. Their data is sound and its reliability gives investors, advisors and pension funds positive incentive to investigate the benefits of private, direct real estate investments.

Real estate allocations have largely been working for advisors who knew how to handle the sector. Major pension funds such as the Washington State Investment Board have been reporting substantially above average returns and attributing that advantage to investing in private real estate. Washington State has targeted 25% of its $68 Billion to private investments. Now high net worth individuals are increasingly asking for access to the private direct investments that previously have been the private hunting grounds for really large pension funds and similar institutional investors.

Two noted researchers focus market research directly on the high net worth investor sector. Hannah Shaw Grove and Russ Alan Prince noted last year that: “Simply put, mutual funds are no longer on the radar screens of investors with more than $5 million in net worth. These high net worth individuals were choosing more customized vehicles to meet their core investing needs.”

Advisors to reasonably wealthy ($5 to $10 million net worth and up) investors cannot expect to continue to attract, get or keep clients by picking among mutual funds. Individual stock picking is also becoming a less attractive option. Years of experience and research teaches those who look that very few individual stock pickers will long outperform index funds and ETFs.

In the past, advisors could avoid dealing with less liquid, less easily traded investments such as private equity, start-ups, hedge funds, or specialized disciplines like currency. The advisors’ then claimed that “diversity” requirements were satisfied by the mutual funds, and also, they reasoned, private equity returns were hard to measure.

Now that the results reported for real estate private equity funds can be measured with greater rigor, the out-performance that such investments may offer will be hard for fund managers, advisors, planners and their high net worth investors to ignore, particularly in a market where the S&P and many other fund models are in terrible turmoil.

Meanwhile over the last six to ten years a number of specialized advisors, single-purpose asset based funds, and other alternatives have sprung up that enable smaller fund and portfolio managers to invest in direct real estate even if they do not have the large staffs that major pension funds such as Washington State employ.

In the brave new investment world of the 21st century, advisors for higher net worth investors will increasingly have to find the resources and develop the skills to deal with alternate investments, particularly direct real estate investment, or face the risk that the parade will pass them by.

RETIREMENT

Managed Accounts 4th Quarter Performance Overwhelms Target Date Funds’ Performance
Dismayed plan participants watch their 2010 target date funds’ assets sink

Recent market turbulence has cost investors trillions, but perhaps none are paying more dearly than retirement plan participants invested in the highly popular Target Date 2010 funds. Designed for participants nearest to retirement, 2010 funds are the most conservative of the target date profiles, yet they have lost investors an average of over 24% of their account values in the last 12 months. In general, target date funds have become wildly popular, but plan participant exposure has been magnified by the post-Pension Protection Act shift of assets to approved Qualified Default Investment Alternatives (QDIAs). Target Date funds have been the most widely used QDIA, therefore poor performance, especially in the most conservative profiles, is potentially disastrous for many participants, who have little time left to recover lost value.

In their search for a solution, many plan sponsors are now looking to Managed Accounts, another of the PPA-approved QDIAs. Managed assets at firms like PMFM, Inc., advisor to 401k Toolbox, have fared far better than target date funds. PMFM's most conservative portfolio, which matches up to 2010 target date funds in terms of investor profile, have experienced less than one fifth the average target date losses. The reason: PMFM's risk-based portfolios are able to take significant defensive postures--including large cash and cash equivalent positions--to to protect participant assets.

PMFM professionally managed accounts for 401(k) plan participants are proving far superior to target date funds as they side-step the performance difficulties of target date funds, producing dramatically better performance in these turbulent times. Further, by not digging deep holes of negative performance, they are positioned to benefit quickly from an upturn in the market. By contrast, target date funds that have lost 24% will require a gain of nearly 33% to break even.

This is likely to become a center front issue for 2010 target date funds as participants move closer to retirement with their account values severely depleted.

There are a number of even more complex investor issues related to target date funds:

• All target dates are not created equal. Participant equity exposure varies dramatically, which may lead to fiduciary problems for the plan sponsor.
  
  
• It is unlikely that plan participants will use the target date funds correctly. A Fidelity study showed that 51% of participants holding a lifecycle/lifestyle target date fund owned other funds also, despite education that showed participants that such funds were a complete portfolio investment.
  
  
• Additionally, it is unlikely that plan participants who will retire around to 2010 can tolerate (or recover from) such larger losses this near their retirement.  Their fear of having all eggs in one basket may cause them to bail out of their assigned target date fund ,forcing them to make an untimely and potentially bad decision about what to do with their assets.

PMFM managed accounts, however, offer significant investor and plan participant benefits:

• A managed account can be actively managed by professionals diligently working to protect assets on the downside and grow assets when the market is rising.
  
  
• A managed account provider is usually independent from the 401(k) plan vendor or fund companies who are providing the investments in the plan.
  
  
• Managed account providers offer an additional layer of fiduciary protection for the plan sponsor.

As an example of the performance difference now surfacing between managed accounts and target date funds, look at 401k Toolbox’s Capital Preservation 70+ (a managed account strategy) compared to Fidelity Freedom 2010 target date fund and T Rowe Price 2010 fund.

There is an groundswell of interest among Plan Sponsors as more and more offer PMFM managed accounts to their 401(k) plan participants, particularly as a Qualified Default Investment Alternative (QDIA), to avoid the predictable problems stemming from the increasing numbers of target date funds inside 401(k) plans and the built-in performance issues now being magnified by poor market conditions .

PMFM offers separate account management services, proprietary mutual funds, and is the advisor to 401k Toolbox, one of the leading 401(k) managed account and investment advisory services in the nation. As of 12/31/07, PMFM manages more than $1 billion.  The management team at PMFM includes experienced investment advisors with offices in Watkinsville, Georgia.  PMFM offers 401k Toolbox, it’s investment advice and managed account service, via vendor partnerships with 401k providers and direct to large plan sponsors. You can reach Senior Vice President, Tim McCabe, at 800-222-7636 or tim.mccabe@401ktoolbox.com.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com, 508-479-1033

INVESTEMENTS

Global Slowdown Opens Surprising Window of Opportunity for Infrastructure Investors
Even a moderate adjustment halfway back to levels seen this time last year could translate into 60-100% gains in many infrastructure stocks

The same crisis headlines that have driven down the price of blue chip, globally diversified companies have created new realities that foretell an enormous new, long-term tailwind for infrastructure stocks.

Infrastructure stocks, after a market-beating, multi-year run have slammed into the wall of the global economic slowdown in 2008.  Blue chip, globally diversified companies that focus on designing, engineering and building roads, ports, bridges and energy infrastructure have seen declines of upwards of 80% as markets priced in concerns that the global credit crisis would halt or seriously delay many anticipated projects.  

However, governments around the world are addressing the global economic slowdown by jumpstarting and funding previously dormant infrastructure projects.  There is a bipartisan consensus in the United States that the best way to deliver relief to working America is to create well paying jobs through funding of long needed infrastructure projects. 

On Sunday, November 10, the government of China announced that it would spend an estimated $586 billion on a wide array of infrastructure projects, including new railways, subways, and airports.  There is little doubt that European governments, facing the same prospects of slowdown, will soon follow suit.  The reality in November of 2008 is that, rather than facing a sharp slowdown in infrastructure spending, the world will soon be absorbing an unforeseen trillion dollar flood of spending over the coming few years.  

Thus infrastructure stocks, currently priced for a severe global slowdown, could be ready to be jolted back to life.  As noted, so severe have been the recent declines that even a moderate adjustment halfway back to levels see this time last year could translate into 60-100% gains in many infrastructure stocks.  Investors should be getting their infrastructure stock shopping list ready; this is a sector set to boom in 2009.

Robert Markman, Managing Director, Markman Capital Management, Edina, MN, is the portfolio manager of the Markman Core Growth Fund (MTRPX) and the Markman Global Build Out Fund (MGBOX) bob@markman.com, 952-920-4848.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com, 508-479-1033

Five Points Your Advisor’s Client Letter Should Have Discussed Regarding the Market Meltdown
During this year of extraordinary market turbulence, it is reasonable to ask your advisors what they have implemented to help you withstand the changes to your portfolio and how you may benefit over the long term.

Here are five questions to ask and the answers you should get.

Liquidity
From the beginning, client portfolios need to be structured to meet their liquidity needs; not only for short periods of time but for three to five years.  This liquidity is meant to provide “actual” and “mental” cushions during times when equity markets turn negative.  The initial reaction of most investors is to sell all non-fixed income positions and leave the whole portfolio in cash until the market “recovers”.  This tends to have the opposite long-term effect.  Experiencing sufficient comfort to step back into the market implies that a sustained rally is in place, thereby warranting participation.  The performance missed while you acquire that "good" feeling again about the equity markets may result in many years of underperformance.  Unless your liquidity needs have changed during the last year, your advisor should recommend that you maintain your planned allocation.

Rebalancing
The “semi” silver lining in the current equity reversal is the opportunity to buy stocks much more cheaply than just about any other time during the last decade.  “Mr. Market” has sought to punish well run, well capitalized companies along with distressed entities.  As a result, the equity portion of most portfolios has declined and your current allocation is most likely more conservative than recommended for sufficient long-term growth to meet your plans.

Each client needs to consider whether rebalancing (i.e. increasing your equity investments) is appropriate versus permanently changing your outlook and accepting reduced long-term performance for less risk.  Many advisors will recommend that you rebalance to bring your portfolio into line with your original planned allocation.

Seeking Enhanced Yield  
The recent flight to short term US Treasury Securities has created value in other fixed income areas, including municipal bonds, government backed agencies and CD’s.  The “steepening” of the yield curve has created the opportunity to capture additional yield without significantly increasing risk and holding period.  Your advisor must impose strict standards for the purchase of fixed income securities and employ multiple fixed income “specialists” to provide their firm with a competitive bidding process.  

Avoiding “Black Boxes” and Leverage  
Over the years, many advisors have decided against investing in hedge funds, private equity and related illiquid entities.  As many of these firms continue to deleverage, they are sustaining losses that have clients asking whether this investment structure is a viable alternative to a well diversified, transparent and liquid portfolio.  Ask your advisor about the security and leverage position of their chief custodian who may hold the bulk of your assets.     

Harvesting Tax Losses  
For taxable portfolios, the systematic twinning of capital gains and losses can add up to 1% additional long-term performance.  An integral part of the rebalancing process is the capture of tax losses which, if not usable in the year of sale, are carried forward indefinitely to shelter future gains.  

A money management firm should be able to clearly explain how they have handled your portfolio during this difficult and historically turbulent market.  Ask them.

Stonegate Wealth Management’s highly experienced professionals, including partners Thomas J. Geraghty, Jr., CPA, CFP, Steve Craffen, MBA, CFA, and Craig Marson, JD, CPA, solve complex financial challenges and provide counsel for the pressing financial issues confronting their high net worth clients.  They have deep knowledge and experience in taxes, estate planning, investment management and divorce settlement counseling.  The firm manages $175 million in assets under management. stevec@stonegatewealth.com, office, 201-791-0085
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com, 508-479-1033

Question Conventional Wisdom-- Consider Cutting Back Tax-Deferred Investments and Increasing After-Tax and Tax-Free Savings
Revisiting your tax/investment strategy is a proactive step to manage investment anxiety

There are a number of reasons why investors may want to question traditional thinking and revisit their tax/investment strategy. No one can exercise control over their state or Federal tax rates, but we can assume that given the Federal deficit that the investor's tax load will increase, not decrease over time.  Now may be the time to consider cutting back on pre-tax/tax deferred investments and increasing after-tax and/or tax-free savings. 

Here are several options to consider:

• Increase after-tax savings in a time when job loss may require some period of time without paychecks.  Most advisors suggest that your savings be large enough to cover 6 to 12 months of living expenses.  After-tax savings are more readily available to investors than assets tied up in tax-deferred vehicles like 401(k) plans that levy withdrawal penalties.
  
  
• Increase savings in tax-free vehicles.  If you are currently pinched, but committed to your 401(k) plan deferral of  the maximum of $15,500, then this may be the time to change your 401(k) deferral to only $10,500 and invest the additional $5000 into a Roth account where it can grow tax free after you pay taxes on the amount you are depositing.
  
  
• Consider investing in individual municipal bonds or a municipal bond mutual fund. With a municipal bond mutual fund, investors have the option of investing in a state specific that may provide additional tax benefits, or a national fund with greater geographic diversification without additional tax benefits.
  
  
• Or, consider investing in dividend paying stocks because qualified dividends may be taxed at 15% rather than at ordinary income tax rates beginning at 29%.

In conclusion, tax diversification is just as important as investment diversification. Having a combination of tax-deferred, taxable and tax free investments may provide a more flexible and tax-friendly retirement income strategy or  withdrawal strategy That may help retirees portfolios last longer.

Marguerita (Rita) M. Cheng, CRPC, CFP®, is a financial advisor with Ameriprise Financial Services, Inc., Bethesda, Maryland, helping shape financial solutions for clients that will last a lifetime.  She offers financial advisory services, including investments, insurance and annuity products.  She can be reached at 301-320-1457 or marguerita.m.cheng@ampf.com.

PERSONAL FINANCE

Six Steps to Take if You Think You Might Get a Pink Slip
You can have your head in the sand about your job security or wake up and plan what you would do if your boss asks you for a meeting on Friday at 5:00 p.m.

There are six steps to take if you think you are going to lose your job. Even if your job seems secure today, preparing before you must is a really smart strategy in a stressed economy.

Build up Cash Reserves  
This is the time to examine your cash outflows with a critical eye towards where you can cut expenses.  The more cash you can squirrel away for lean times, the better off you will be.  Plus, it is a great discipline to carry forward in your next period of employment.  

Review Health Insurance/COBRA terms  
Talk to someone in your human resources department about your health insurance coverage – what it costs now and what it will cost you under a COBRA plan.  Your health insurance is portable for 18 months under COBRA; however, your premium will most likely increase.  If you are able to obtain coverage through a spouse or domestic partner’s plan, calculate your cost of coverage and compare plans and costs.  Alternatively, if you are able to obtain coverage through a trade organization or membership organization, get quotes sooner rather than later.  It is best to comparison shop ahead of time.   

Review the other benefits of taking “it” with you. 
Again, the human resources department can provide you with quotes for other benefits that may be portable, such as life insurance.  Group term life insurance can be converted to an individual policy, but the premium will most likely increase.  The upside is that you may not have to show medical eligibility.   

Calculate the ideal severance package, if applicable, as a negotiating tool  
If you are in a position to negotiate a settlement package, determine what you are worth ahead of time.  Factor in your years of service, salary increases over the years, contribution to the bottom line, stock options, and any other quantifiable measure that makes sense.  

Obtain letters of recommendation
It is wise to line up letters of recommendation while you have access to the people you will be relying on for help.  Try to make the task easy by providing suggested talking points for your letter writers or even writing the letters and asking them for edits  

Determine eligibility for pension and/or retirement plan distributions 
If you qualify for a pension, have the human resources department run an illustration for you, so that you have an idea of what your monthly income stream would be.  Alternatively, if you don’t have a pension and will need to withdraw an income stream from retirement plan assets, talk to your financial planner about calculating substantially equal payments.  Of course, you will want to talk with your tax advisor about the tax implications of these distributions.

Debra A. Neiman, CFP, President, Neiman Associates Financial Services, Arlington, MA, is the author “Money Without Matrimony.” She can be reached at 781-641-5700. deb@neimanonline.com
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com, 508-479-1033

Who Will Help You Navigate the Loss of Your Loved One?
Concrete guidance is necessary to navigate the financial and legal issues surrounding death

When a client suffers the loss of a loved one, it is important for a financial advisor to be available to offer support and concrete guidance to the survivor, helping him or her navigate the financial and legal issues surrounding death.  

Many, but not all affluent clients, will have estate attorneys to assist them in dealing with these issues, but often the relationship between a person and their estate attorney is tenuous.  Sometimes, the attorney who originally created the estate plan may have retired and the file now rests with a younger attorney the recently bereaved does not know.  

Hopefully, the financial advisor has a copy of the estate planning documents in the file and has reviewed them in the past.  The relationship of the client to the deceased will determine the level of emotional support the client requires, but the nuts and bolts of the process will be the same.  Emotions can run high at this time, and it is important for clients not to rush into decisions such as selling homes or moving closer to adult children without input from a neutral third party.  

Probate is different in each state, but it isn't as bad as most people imagine.  The trick is knowing where the rocks are underneath the water as you help the client navigate the process.  It is vital for an advisor to acquaint themselves with the procedures of the states where their clients live.  Probate is not something with which the average person has much experience.  

Other issues that financial advisers can help with include insurance proceeds, pensions, 401(k)s, annuities, IRAs, joint investment accounts, social security benefits, military benefits, health care for the survivor, titling of property.  

The client is going to be looking for help at this stressful time whether it involves the loss of a spouse, parent, sibling, adult child or close friend.  The financial adviser must not only be supportive, but must be competent to offer proper guidance in all the areas impacted by death.

Donald L. McCoy, J.D., CMFC -- Planners Financial Services, Inc., 952-835-9000. Minneapolis, Minnesota. Registered investment adviser and subsidiary company Montgomery Investment Management, specialize in the management of no-load mutual fund portfolios for individuals and retirement plans designed to protect capital by reducing risk. 952-835-9000 - pfshim@usinternet.com.
Trends from Ink&Air --Editor: Lisbeth Wiley Chapman, beth_chapman@inkair.com, 508-479-1033