NAPFA Conference

Last year, I joined the National Association of Personal Financial Advisors (NAPFA).  It is the country’s leading professional association of fee only financial advisors.  It requires substantial continuing education as well as adherence to a Code of Ethics and a yearly attestation to a Fiduciary Oath. It has been a tremendous resource for our entire Firm.  When they announced their National Conference was going to be in our backyard (Bellevue), I didn’t think I could pass it up.

The first day was dedicated to investor behavior.  We had professors from Kansas state and the University of Georgia run a workshop on how our behavior can get in the way of making good money decisions.  It was no surprise to me that they listed money as the number one stressor in America since 2007.  Felt good to know that the number one way to cope with that stress is to create a plan and number two is to implement it.

I had a great educational session on College planning and the benefits of deeply integrating tax planning with your investment management.  While neither of these topics are new by any means, it is always beneficial to sharpen the mental saw and stay on top of new developments.  There was also an excellent session on cyber-security.  We are planning on adapting it to a classroom session we intend to offer to clients and post on our website.

My favorite key note speaker was Vivek Wadhwa.  His talk centered on how America is re-inventing itself through innovation.  He spent time talking about the concept of exponential growth.  It is hard to think of things getting twice as good at the same time that they get half as expensive, but the examples are numerous – from computer memory to cell phones.  A very exciting look at the future with implications in the investment world as well as the economy in general.

I also like to take these opportunities to deepen my peer group.  By sharing ideas, we not only have the ability to have better outcomes for our clients, but we also have the ability to help advance the whole industry.   I was certainly not disappointed.  It is refreshing to see so many folks committed and truly passionate about offering fiduciary financial advice.  People committed to not just disclosing conflicts of interest, but doing everything they can to avoid them.  I had some great conversations on different tools and techniques to keep Leonard Rickey Investment Advisors at the forefront of the financial planning community.

For more information about criteria for NAPFA membership, please visit NAPFA.org

Where Your Durable Power of Attorney Won’t Work

You’ve seen a qualified attorney and drafted up a Durable Power of Attorney so your loved ones can act on your behalf if you become incapacitated or disabled. You think everything’s set. But is it? A DPOA is a widely recognized and useful legal document, but it may not work in every situation.

Social Security Administration:

The SSA does not recognize DPOAs. Instead, it has its own classification called “Representative Payees”, who are responsible for managing and spending the beneficiaries Social Security payments.

Needing to become a representative payee may seem daunting but the process is relatively simple. You must be interviewed face-to-face at a nearby Social Security office and then complete a form. To learn more, visit www.SocialSecurity.gov/payee/index.htm  or call 800-772-1213.

Internal Revenue Service

The IRS will accept a durable power of attorney when the document authorizes the named decision-maker to handle tax matters. But, the authorized agent will be required to execute IRS Form 2848 and file an affidavit before being recognized by the IRS. Luckily, the affidavit needs to be only a couple of sentences. To learn more, see IRS Publication 947, which you can get online at http://www.irs.gov/pub/irs-pdf/p947.pdf or call 800.829.1040.

Banks and Financial Institutions:

While your bank should accept a DPOA, many have rules about how recently the DPOA needs to have been drafted. For example, many will not accept a DPOA that is more than 2 years old. You may need to call each bank or financial institution to get their exact requirements.

 

Please Note: The information being provided is strictly as a courtesy.  When you link to any of the web sites provided here, we make no representation as to the completeness or accuracy of information provided at these web sites.  Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third-party technologies, web sites, information and programs made available through this web site.  When you access one of these web sites you assume total responsibility and risk for your use of the web sites your are linking to.  The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.  To determine which investments may be appropriate for you, consult your financial advisor prior to investing. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.   Investment Advice offered through Leonard Rickey Investment Advisors, PLLC (LRIA), a Registered Investment Advisor. To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LRIA is not an affiliate of and makes no representation with respect to such entity. Past performance is no guarantee of future results.

I’m Getting Divorced. Who Can Help Me?

If you are going through a divorce right now, chances are high that you have a lot on your plate dealing with the death of your union. If you are the spouse who didn’t have much to do with managing the finances, you’re probably just now trying to learn what all of these things are…401(k), stock options, Pension, QDRO (Qualified Domestic Relations Order). You have decisions to make about where to live, what you can afford and how to parent in this new world. Top that all off with the actual divorce proceedings and it is no wonder that you just want to get it all over with as soon as possible; but rushing through the financial decisions associated with a divorce without consulting qualified professionals can have serious consequences for your future.

Now, it has been suggested in studies that we are less apt to make good long term decisions when we are faced with short term stress.* To a large extent, the actual divorce proceedings is primarily a division of property. Many couples simply try to determine what is fair and split it; this method can trigger unnecessary taxes, capital gains or require an asset to be sold at an unfavorable value. When I look at couples that have different financial IQ’s separating property themselves, it makes me cringe. In the end, many of the decisions get made because they are easier, or quicker, not because they are right. I think it is time to get help.

Often times this is when we get called. And sometimes we can help you learn the investment language well enough to understand what is going on; but when you are mired down in a crisis even though you may understand what you have now it is almost impossible to relate to what that really means for the future. You have polled all your friends and their experiences are all so different. What do you need to do? What you really need now is a good attorney.

The most expensive divorce is the one you have to do twice. You should hire an attorney. Not because you like them, not because you want to “get back” at your spouse, but because you need to hire someone who can negotiate what is fair for you financially. If your spouse is calling and trying to get you to sign off on something or agree to terms that are going to change the entire future of your financial life, you need to be able to credibly tell them that you have hired someone to make those decisions. Please send it on to my attorney.

When you are facing so many choices going through your divorce, it is practically impossible to do high quality long term planning. You need to get through it before you can look at moving past it. Having a guide to make sure you stay on the road is imperative. Your future has changed. It will be a different path than you thought, but it can still be your best path forward.

*Gray, Jeremy R. “A bias toward short-term thinking in threat-related negative emotional states.” Personality and Social Psychology Bulletin 25.1 (1999): 65-75.

Don’t Have a Will? What Happens Then?

In 2007, a study conducted by Harris Interactive for Martindale-Hubble showed that the majority of Americans do not have a will. Why is this? Some common excuses include cost, not enough time, and the idea you really don’t need one. If this sounds like you, you’re not alone. Abraham Lincoln, the 16th President of the United States, and an attorney himself, didn’t even have a will when he died.

Unfortunately for you, just because Honest Abe didn’t have a will doesn’t mean it’s alright for you not to have one. The fact of the matter is, failing to have a will can have major consequences, which can be both emotionally and financially damaging. Just ask the estate of Jimi Hendrix. For more than 30 years his family battled over who would get the late musician’s estate. Not only did the legal battle divide the family and cause major contention therein, but it also cost his estate hundreds of thousands, if not millions, of dollars in unnecessary attorney fees and court costs. All of which could have been avoided had he executed a simple will.

So what really happens if you die without a will? Each state has a unique descent and distribution scheme for individuals without a will. In Washington State that scheme can be found in RCW 11.04.015, and is dependent on the categorization of your property. Is your property separate or community in nature? Separate property is defined as property acquired prior to marriage, or during marriage by gift or inheritance. Whereas community property is characterized as property acquired, other than gifts or inheritances, during marriage.

Washington State’s intestacy scheme can be fairly straight forward; however, there are a variety of situations where it becomes very complicated. The following is a graph detailing how your separate property will be divided if you do not have a will:
Capture

As you can see, dying with separate property and without a will can be very complicated, and may not be what you want. For instance, if you have a surviving spouse and a minor child from a previous marriage, your separate property will be divided equally between your surviving spouse and minor child. This may create a number of issues, which can include your surviving spouse having inadequate resources to live on, and giving your minor child access to funds that they are not prepared to handle at such a young age. These issues can easily be avoided by having a will in place prior to your death.

Similar issues arise with community property. Below is a graph detailing where you community property goes if you die without a will:
Capture2

Again, passing away with community property and without a will is complex and generates a plethora of issues. Thankfully, these complexities and concerns can easily be remedied with a will.

Lastly, who is going to manage your estate upon your death? In a will an Executor or Personal Representative is named to manage the decedent’s estate. This is someone you trust and have specifically chosen. If you don’t have a will, the court will appoint the Personal Representative on your behalf. This person may or may not be someone you have confidence in. Do you want to take that risk and have the court appointing someone you don’t trust?

Having a will in place prior to your death allows you the freedom to choose how your assets will be divided, regardless of their character (separate or community). Furthermore, it gives you the power to choose who will manage your estate upon your death. Don’t take the risk of dying without a will. See an estate planning attorney as soon as possible. Get your affairs in order and avoid the purple haze of uncertainty.

Lawyers.com, “Majority of Americans Adults Remain Without a Will.” Accessed on January 8, 2014, http://press-room.lawyers.com/Majority-of-American-Adults-Remain-Without-Wills.html.
Legalzoom.com, “10 Famous People That Died Without a Will.” Accessed on January 8, 2014, http://www.legalzoom.com/legal-headlines/celebrity-lawsuits/10-famous-people-who-died
Legacy.com, “Jimi Hendrix’s Messy Afterlife.” Accessed on January 8, 2014, http://www.legacy.com/news/legends-and-legacies/jimi-hendrixs-messy-afterlife/91/.

The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. Securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Leonard Rickey Investment Advisors, P.L.L.C, a registered investment advisor and separate entity from LPL Financial. Leonard Rickey Investment Advisors, P.L.L.C., is not a law firm and does not provide legal advice. If you are seeking legal advice, we recommend you see a licensed attorney to answer any legal questions you may have.

Choosing the Right Attorney

We’ve all heard them before, the quick witted and hilarious lawyer quip. I remember graduating from law school and receiving an email from my proud father with a large attachment containing a list of these entertaining jabs. I never felt so loved. Notwithstanding how much truth may or may not exist within these oft quoted statements, the attorney’s role in society is still be very important, especially when it comes to estate planning matters. Continue reading

Stop Procrastinating! Essential Estate Planning Documents Everyone Needs

It’s 4:00 p.m. at work and you’ve been super productive to this point. You look down at your “To-Do” List and admire all the things crossed off and you’re immediately filled with the great feeling of accomplishment. Then, your attention is drawn to that one remaining item. The item that has been there for what seems like forever. The item that just will not go away. Those feelings of success are suddenly overtaken by the negative emotions of dread and hate. Your immediate reaction and decision is to put the remaining item on the back burner and handle it at a more convenient time. Unfortunately, you know deep down that such a time does not exist. Continue reading