Blog Archives - PFwise.com

Tax Reform: 7 Key Changes From January 1 2018

3/31/2019

The latest U.S. tax reform went into effect on January 1, 2018. Most taxpayers will see the impact when filing for the 2018 tax year. Whether you choose to file your own taxes or hire an expert, below are some major updates that may impact you, especially if you are considering itemizing:

1.The personal exemption was eliminated for the years 2018 - 2025. Taxpayers can no longer claim personal exemptions for themselves, their spouses, or each of their dependents. (For 2017 the amount for each exemption was $4,050.)

2.The Child Tax Credit increased from $1,000 to $2,000 for each qualifying child for the years 2018 - 2025; $1,400 of which is refundable. The tax reform bill also introduced a new $500 credit for non-child dependents.

3.The threshold for deducting medical expenses was lowered from 10% to 7.5% of your adjusted gross income (AGI). This could benefit you, your spouse, or anyone in your family that had major medical expenses in 2018.

4.The alternative minimum tax (AMT) exemption amount and phaseouts were increased, potentially resulting in you not being subject to the AMT (depending on your AGI and other factors).

5.The Affordable Care Act’s (ACA) individual mandate was repealed. The ACA required taxpayers to buy a qualifying health plan or pay a penalty if you were not covered at any point during the year.

6.The State and Local Tax (SALT) deduction was capped at $10,000. This SALT deduction includes sales and local income taxes as well as property taxes.

7.The Home Mortgage Interest deduction was reduced. Individuals who purchased a home after December 15, 2017 can only deduct interest up to $750,000 in mortgage debt (previously $1 million). If your mortgage was in place prior to December 14, 2017 the $1 million in qualified debt is still in place. The interest deduction on home-equity loans is eliminated unless the home-equity loan was used to acquire, construct, or substantially improve the residence.

Do You Need An Investment Provision In Your Life Insurance Policy?

3/30/2019

In our last blogpost, we discussed how to determine if your life insurance needs are temporary or permanent. Now we will discuss another important question -

Do You Need an Investment Provision In Life Insurance Policy?
Both term and whole life insurance provide a death benefit. But only one—whole life—also provides an investment provision.

The main reason why whole life is so much more expensive than term life is the investment provision. Most of the difference in price between the two goes into the cash value of the policy.

The cash value represents an account value that you can borrow against, or liquidate by canceling the policy.

That means that a whole life insurance policy, besides providing a death benefit, will also provide an investment benefit. And that benefit can be substantial after 20 or 30 years, even to the point of representing an additional retirement resource.

It is often said that the best strategy is to buy term, and invest the difference. This refers to buying an inexpensive term life insurance policy, then investing the savings (versus a whole life policy premium) in an index fund. You will generally have more money at the end of many years using that strategy, simply because the index fund is highly likely to outperform the whole life insurance investment. However, you do have to factor in tax since there are ways to use the cash value in whole life policies tax-free, while in your own investment, you have to pay tax on any gains.

If you don’t have an orientation toward saving money, you’ll want to take out a whole life policy instead, so you don’t just blow through the savings intended for your investment.

How To Determine If Your Life Insurance Needs Temporary or Permanent?

3/29/2019

In our last blogpost, we discussed how long do you need life insurance coverage. Now we will discuss another relevant question -

Are Your Life Insurance Needs Temporary or Permanent?
There are many reasons, other than having a family, that would require additional life insurance, either on a temporary or permanent basis.

For example, you might want to have additional insurance coverage while you owe a mortgage on your house. The policy will pay off your mortgage in the event of your death, enabling your spouse or your family to continue living in the home mortgage-free.

You might also want to have additional coverage for other types of debts. One prominent example is debt you owe jointly with your spouse, such as credit cards or car loans.

Another type of debt is business-related. If you took on debt to start a business, or to either expand a business or sustain it during a rough patch, you might want to have additional life insurance that will pay off those debts.

Term life insurance will be the more cost effective solution, since you can match the term of the policy with the length of time it will take you to pay off your debt.

On the permanent side, if you set up a trust for your spouse or children, you may want to fund it with whole life insurance—that’s a very common practice. A term policy would not be appropriate for this purpose, since the policy will either terminate or renewals will become expensive as you move into old age.

In our next blogpost, we will discuss if you need an investment provision in your life insurance policy.

How Long Do I Need Life Insurance Coverage?

3/28/2019

In our last blogpost, we discussed term life vs. whole life, which is better. Now we will take a look at how long do you need life insurance coverage.

How Long Do You Need Life Insurance Coverage?
Covering final expenses is a permanent insurance need. If final expenses are all that you need, a small whole life policy will get the job done.

Raising a family, on the other, creates a large temporary need. You may need a large amount of coverage for 20 or 25 years, and after that, final expenses may be all that needs to be covered.

If the need for life insurance is temporary, term life is usually the better option. You can take a policy that has a term running from five to 30 years, which can be used to cover the higher need. After the initial term expires, you’ll have the option to either:

Continue coverage at a higher premium,
Lower the death benefit and therefore the premium, or
Cancel the policy completely

In our next blogpost, we will help you decide whether your life insurance needs are temporary or permanent.

Term Life or Whole Life: Which Is Better?

3/27/2019

Q. Term or whole life, which is better?

A. This question is a true ongoing debate. The reality is that both term and whole life insurance have their virtues. It’s just a matter of which will work best for you.

Here’s what you need to ask yourself when trying to decide between the two.

How much life insurance do you need?
A single person who has no dependents probably only needs a small life insurance policy. $50,000 or even $25,000 may be enough. Since there is no one else who will rely on the income, it’s basically a matter of having enough insurance to pay for final expenses and any lingering obligations.

Given that the amount of coverage is relatively small, a single person may be well served by a whole life policy. The benefit will be a permanent policy, with a fixed annual premium—two qualities that term life doesn’t offer.

At the opposite end of the spectrum is a young family. If you have very young children, your need for life insurance is probably greater right now than it will be at any other time in your life.

Were you to suddenly die, there would have to be sufficient funds available, not only to cover final expenses, but also to provide sufficient support for your children until they reach adulthood. In addition, you will might want to make some sort of provision to pay for their college educations.

In this situation, a $500,000 life insurance policy might be the absolute minimum. For example, it would provide $20,000 for final expenses, $300,000 to provide $20,000 a year for support for the next 15 years, and the remaining $180,000 to be used for their educations.

Naturally, it will be much more expensive to have a larger amount of life insurance coverage. In that situation, the young family would likely favor term life insurance.

In next blogpost, we will discuss how long do you need life insurance coverage.

Why Life Insurance Rates Are the Lowest In 20 Years?

3/26/2019

Q. I heard life insurance premiums are lowest in 20 years, is it true?

A. It is true that life insurance premiums are at their lowest levels in 20 years, here is why:

There are 3 major factors that determine life insurance premiums:

Insured person's mortality rates
Insurance company's business expenses
Insurance company's ability to earn interest through investments

There are several major factors that impact the above 3 factors:

Longer Life
It's a fact that people are living longer, this allows life insurance companies to offer lower rates.

Also, access to technological advancements like “big data,” artificial intelligence, and machine learning have helped insurance companies improve their predictions for life expectancies. This predictive algorithm can potentially better identify individuals with lower risks of premature death and, in turn, offer them lower rates.

Lower Reserve Ratios
Regulations now require insurers to leave less money in their reserves, this means insurers don't have to keep larger amount of cash that they likely won’t need and could invest the rest for optimal investment returns.

Advanced Technology
Technology has helped to streamline the insurance underwriting process immensely. Instead of taking many man-hours to determine your rates and other policy details, advanced software applications can take care of the lengthy process. This increased efficiency has allowed insurance companies to cut their costs and pass the savings along to their customers

What Really Increases Average Lifespan?

3/25/2019

Case Studies from American National About How to Use Annuities

3/24/2019

Case Study: Help Your Parents Stop Worrying

The Challenge: Providing for parents that are resistant to assistance.
The Solution: Joint and Survivor Immediate Annuity

Anthony DiPaolo grew up in a poor New York neighborhood but he was happy as a child as he had a used computer his father had purchased for him that allowed him to go into his own world. After working his way through college, Anthony went to work for a Silicon Valley start-up. He was able to grow and develop his love for computers while working for a company that grew rapidly and gave out stock options. Twenty-five years later Anthony at the age of 47 had accumulated a net worth of ten million as his company was sold and his stock options paid out.

Anthony would visit his parents at least once per year and would ask them if they needed anything. Each time they would tell him they were fine. On a recent trip home Anthony talked to his cousin who would check in on his parents and his cousin told him that his parents really had very little money and were not eating right as they tried to stretch their meager social security benefits. His cousin said they were too proud to ask Anthony for money.

Anthony called his financial advisor back in California and asked him what he could do for his parents. He had offered them money before but they always refused. Anthony‘s advisor told him he could purchase a Joint and Survivor Immediate Annuity for his parents that would provide them sufficient funds to meet their lifestyle needs.

It was money they could not outlive and they would not have to ask Anthony for money. Anthony and his agent went over the application with his parents, had them sign as annuitants, and explained to his parents that they would soon begin receiving checks each month from an insurance company that would pay for their food, clothing, housing and entertainment.

Anthony’s parents were extremely proud people and did not want to ask their son to take care of them but by providing his parents a monthly income that they needed, he eliminated the need for them to ask him for money. Each month they would have enough money to meet all of their needs. Anthony could go home knowing that his parents would have the money to live on while preserving his parents pride in not having to ask their child for money.

How IUL Can Be Used For Various Unique Situations

3/23/2019

Below is a brochure with numerous case studies from American National that show how its Signature IUL can be used for various unique situations including:

Supplemental Retirement Planning
Funding College Education
Divorce Planning
Children From a Prior Marriage
Special Needs Trust
Credit Shelter Life Insurance Trust
Irrevocable Life Insurance Trusts
Key Person Insurance
Buy-Sell Planning
Other Business Succession Planning

How Trust Fund Payouts Are Taxed?

3/22/2019

In last blogpost, we discussed 3 ways of trust fund payouts. Now we will discuss:

How trust fund payouts are taxed?

The answer is it depends on how it's structured.

A trust fund payout consists principal and the income. The principal is the value of the original assets. The income is generated in the form of interest or dividend or capital gains paid on the principal.

Simple trusts may not hold onto the income earned by the principal, so they must distribute the income to beneficiaries, complex trusts may hold onto earned income, distribute income or principal to beneficiaries, and make distributions to charitable organizations.

Also, some trust documents may state that the trust will pay the income taxes, but most trusts won't do it, the trustee makes the decision as to if the trust of the beneficiaries will be liable for the income tax payment.

If the beneficiaries are liable to pay taxes, anything they receive from the trust is taxed at their income rate. If the trust pays the taxes, the trust is taxed at trust income tax rates.

For 2019, the estate tax exemption is $11.4 million per person (versus $11.18 million in 2018), for a couple, that amount doubles to $22.8 million, this means you can inherit up to that amount as a beneficiary before owing any federal estate tax. However, you may still be subject to state estate tax in your state since those amounts are usually much lower.

How Trusts Pay Out?

3/21/2019

In our previous blog series, we discussed Trust 101. Now we will discuss two topics not addressed in those blog posts:

First, how trust pay out?

The simplest way is to get all of the trust's assets at once. The grantor may stipulate that the beneficiary receive the assets when reaching a certain age or life milestone.

Another way is to receive money from a trust in several large payouts. For example, if you are the beneficiary of a trust, some of the proceeds may have been used to pay for your college, then the rest might be paid out over the next few decades.

The third way is the grantor may divide up the trust fund payout into even smaller increments, for example, a monthly payout from the trust for the rest of your life.

In our next blog post, we will discuss how trust fund payouts are taxed.

Does a Cap Hurt Earnings?

3/20/2019

Q. Would an index annuity using an S&P 500 annual point-to-point crediting method hurt or help earnings?

A. This is a fair question. For an index annuity using an S&P 500 annual point to point crediting method, it could actually help people against sequence of return risk and the cap may not have the effect on earnings as people often expect. See the document below for actual numbers.

2018 Tax Brackets and Standard Deductions

3/19/2019

With tax season in full swing, you may be thinking about how President Trump’s sweeping tax reform affects you. Let's start with the 2018 income tax brackets as follows to better understand the impact of new tax laws, then the Standard Deduction table which shows a much larger standard deduction across the board -

How Much Long Term Care Coverage Do I Need?

3/18/2019

In our last blogpost, we discussed when to buy and when to use long term care coverage. Now, we will answer the following questions:

How Much Long Term Care Coverage to Buy?
Most long-term care policies cover the same types of costs, from nursing home stays to home health aides. You have to decide how much coverage you want, both in terms of the dollar amount of your benefits and how many years you want those benefits to last. Buying long-term care insurance is like purchasing a pool of money that you can use for daily coverage (e.g., $200 per day) or monthly coverage (e.g., $6,000 a month).

Importantly, don't buy more coverage than you can afford. Instead, consider reducing the amount of coverage to balance your financial situation with your long-term care needs. Also, recognize that there are different ways to pay for your policy. While some are single-payment-premium policies that you pay in one lump sum, other policies, like traditional long-term care coverage, can be paid for through periodic premium payments. Keep in mind, however, that when you choose periodic premium payments, often your premium payment amount isn’t guaranteed, and it may increase after purchase.

If you're going to spend the money on long-term care insurance, make sure your benefits will be sufficient—and available to support you. Since long-term costs will likely continue their upward climb, you might consider adding inflation protection.

Also, choose an insurance company with a strong track record and solid financial health. You want to make sure the company has the longevity to be around for the long-term, so it can pay your benefits when you need them.

When to Buy Long Term Care and When to Use It?

3/17/2019

In our last blogpost, we discussed 4 ways to pay for long term care coverage. Now, we will answer another 2 questions:

When to buy Long Term Care?
The older you are, the greater the chance you'll have a medical event that requires long-term care, or that you'll develop a health issue that will keep insurers from approving your policy application.

People typically buy long-term care insurance when they’re in their 50s or they are reviewing their retirement plan with their financial advisor. At that point in your life, you're old enough to think seriously about long-term care and there are advantages to making the decision at this time rather than putting it off until later. You're likely to pay less for the same amount of coverage than if you wait until you're older and you're less likely to have medical issues that disqualify you for coverage.

In addition to the risk of your health deteriorating as you age, the financial cost of waiting to purchase a policy should be considered as it will typically become more expensive to purchase the same amount of long-term care coverage each year you wait.

When do benefits begin?
Typically, you become eligible for your long-term care benefits when you can no longer perform 2 "ADLs," or Activities of Daily Living (e.g., eating, bathing, dressing) without help. Then, most policies have a waiting period ("elimination" or "deductible" period), during which you pay for your care separately from your policy until your waiting period is completed and you can start long-term care benefits.

In our next blogpost, we will discuss how much long term care coverage you need to buy.

4 Options to Pay For Long Term Care

3/16/2019

There are 4 different ways to pay for long-term care, your options depend largely on your personal and financial circumstances and what you expect for your standard of care—both now and in retirement.

1. Government programs:
Veterans and people with low income who can't afford to cover long-term care expenses might be eligible for long-term care assistance from the federal government, through Medicaid and the Veterans Health Administration, or state-run assistance programs.

You can't rely on Medicare to cover these costs, even if you're age 65 or older. Medicare provides limited benefits for long-term care, and would not cover an extended stay in a nursing home.

As for Medicaid, benefits kick in only after you've depleted your savings, and the choices for where and how you receive care could be limited. Benefits and eligibility vary from state to state, and savings and income are frequently key factors.

2. Traditional long-term care insurance policies:
You can choose the amount of coverage, how long it lasts, and how long you have to wait before receiving benefits. Typically, you pay an annual premium for life, although your premium payment period could be shorter.

However, many insurance companies no longer offer traditional policies and those that do may raise annual premiums after purchase.

3. Hybrid policies:
One type of hybrid insurance offers life insurance and long-term care. A life insurance and long-term care hybrid policy will pay for long-term care during your lifetime if you need it. But if you don't use your long-term care benefits, it will pay a life insurance death benefit to your beneficiary upon your death.

If you had a long-term care need, you would be able to draw down or accelerate the death benefit amount to pay for your care, subject to a monthly maximum amount. However, even if you used up the entire death benefit, the insurance company would still provide additional long-term care coverage.

Another type of hybrid is a long-term care annuity, which provides long-term care insurance at a multiple of the initial investment amount. The investment grows tax-free at a fixed rate of return, and, if used for long-term care expenses, gains will be received income tax-free. If you qualify for long-term care benefits, the long-term care coverage would draw down both the account value and the long-term care pool. Once your account value has been exhausted, the insurer would provide the remaining long-term care pool benefits, which is effectively the insurance component of the policy.

However, today's low-interest-rate environment has made it challenging for insurers to provide annuities with long-term care coverage. So, it's important to note that these products have yet to gain any significant traction in the market, and, as a result, may not be available through your insurance company.

4. Personal savings:
Using your personal savings to pay for long-term care costs can provide you with greater flexibility. However, before using your savings, ask yourself if your retirement plan is built to withstand these potential expenses. Also consider whether you have enough time to continue to save for this option given you won’t know when you might need to begin long-term care services—or for how long you may need them. And even if you believe your plan is sound, keep in mind that long-term care coverage can also help protect your other assets and allow you to pass your wealth on to your loved ones.

If you do use your qualified retirement accounts, such as your 401(k) or IRA, there may be tax ramifications for withdrawals.

5 Common Scams and How to Deal With Them

3/15/2019

1. Tax refund fraud
A criminal, having illegally obtained your Social Security number, files a fraudulent tax return in your name and collects a refund. When you submit your legitimate tax return, it is rejected because the IRS has already processed a return with your Social Security number. In some cases, you may receive a notice prior to filing your return that the IRS has received a suspicious return using your identity.

What to do:

File your return early, reducing the likelihood that a criminal would have previously filed a fraudulent return.
If your return is rejected because of a duplicate filing under your Social Security number, submit Form 14039, Identity Theft AffidavitOpens in a new window, to the IRS.
Remember, the IRS will contact you through the US Postal Service, not a phone call. If you receive a letter from the IRS that it has received a suspicious return using your identity, contact the IRS. Visit IRS.govOpens in a new window for contact information.
Do not return a call from someone claiming to be with the IRS.

Continue to pay your taxes and file your legitimate tax return, although you may have to submit a paper return rather than an electronic one. Attach Form 14039, Identity Theft Affidavit, when filing your return.

2. Employment or health care fraud
A person uses your identity to obtain a job or receive health care services. You may become aware of the scheme after you file your tax return, and are notified by the IRS that you appear to have underreported your income and owe additional tax. Or, in the health care version of the scheme, you receive notification that you are required to pay for medical exams, procedures, and prescription drugs that you never received.

What to do:

If you suspect you are a victim of taxpayer identity theft, immediately contact the IRS and file Form 14039, Identity Theft AffidavitOpens in a new window.
Never surrender Social Security, Medicare or health insurance numbers to anyone you don't know and trust.
If you believe someone has signed up for health insurance in your name, call the Health Insurance Marketplace call center at 800-318-2596, and explain the situation.

3. Tech support scam
You receive a phone call from someone claiming to be a technical support person, informing you that there is something wrong with your computer and the caller can help you fix the problem. Alternately, a message appears on your computer screen informing you that your computer is infected with viruses, or that you are locked out of your computer and your files have been encrypted, denying you access. If you follow the instructions of the caller or the screen message, your computer may be taken hostage and your personal information stolen. You are then asked to pay a fee to restore access to your computer or data.

What to do:

Prevention is the best medicine. Don't click pop-up ads or attachments from unknown senders. Avoid clicking links in emails. Visit known websites by manually typing the URLs in a browser.
Do not allow anyone to control your computer remotely and don’t give passwords and security codes to anyone on the phone.
Hang up if you receive tech support call, and don't respond to scare messages about your computer being infected. If you need help with your computer, go to your local computer or electronics store.
Back up your data regularly. That way, you can reboot and regain control of your computer by cleaning your hard drive and reinstalling your operating system.

4. Credit card fraud
Someone using your identity signs up for a credit card and racks up large charges. A crook who obtains a new card could use it extensively before being discovered. Sometimes, a stolen identity is used to obtain personal loans or open unauthorized financial accounts. You will likely learn about this when bills are not paid and collection agencies start calling for payments.

You may notice either you are not getting any postal mail or you start receiving confirmation or decline letters for credit cards or loans that you did not initiate.

What to do:

Report the crime and start a recovery plan on IdentityTheft.govOpens in a new window.
Notify law enforcement officials.
Consider freezing your credit files if you do not have any plans to take new credit cards or loans. Beginning September 21, 2018, you can freeze and unfreeze your credit file for free. Read more about it on the Federal Trade Commission websiteOpens in a new window.
Put a fraud alertOpens in a new window on your credit reports, which notifies lenders and creditors that they should take extra steps to verify your identity before extending credit. Contact one of the 3 credit bureaus to report the crime (Equifax at 800-525-6285, Experian at 888-397-3742 or TransUnion at 800-680-7289). For a fee, these credit bureaus can also help with freezing your credit files, to prevent unauthorized activity.

5. Fake charities
You are solicited by email, phone, or in person to contribute to an organization that sounds like a good cause but is actually a scam. Such schemes may be general in nature, often using a name very similar to a well-known charity, or they may be more targeted, attempting to prey on people who are victims of a natural disaster or known to have a personal interest in a particular disease or social cause. These days, charity scams are also being circulated through social media posts such as Facebook, Twitter, WhatsApp and LinkedIn.

What to do:

Before contributing, research the charity through the Better Business Bureau's (BBB) Wise Giving AllianceOpens in a new window, Charity NavigatorOpens in a new window, Charity WatchOpens in a new window, or GuideStarOpens in a new window.
If you suspect you have been a victim of charity fraud, file a complaint on IdentityTheft.govOpens in a new window.

Strategy for People Who Max Out Retirement Contributions - A Case Study

3/14/2019

If you have maxed out your retirement contributions, you can supplement traditional retirement savings with a tax-efficient asset. Lincoln WealthAccumulate® IUL (2019) gives clear choices for cash value growth opportunities and ways to access cash value over time.

With just one policy, you can have the protection you need now and:

Significant growth opportunities with choices to help increase their wealth over time
Access to cash value to do the things they want in life
Downside protection to help shield them from market losses
Financial security for their loved ones or beneficiaries

8 Ways to Access Money in Fixed Annuity

3/13/2019

Based on a marketing flyer from American National which has a huge lineup of annuity products (see here), there are 8 ways to access money if you need it from your fixed annuity:

WHY SHOULDN’T I JUST “BUY TERM AND INVEST THE DIFFERENCE”?

3/12/2019

Q. What's the downside of "buy term and invest the difference"?

A. To start with, every family should have life insurance coverage, and term life is the starting point. If you are considering permanent life insurance, another option could be "buy term and invest the difference". The idea is that investing the difference would replace or exceed the cash value accumulation of permanent life insurance.

If you are deciding if this strategy is right for you, you need to consider what best suits your personal objectives and circumstances. For example:

You may not have the discipline to actually invest the difference.
You need the discipline not only to invest the difference, but also to invest early while the difference between the amount of your term insurance premium and the amount of the premium for your permanent insurance is the greatest.
You need to make up early for the dramatic increase in the cost of term insurance at later ages.
If you need to renew or reapply for your term policy, the cost may become prohibitive as you get older or if you develop health problems.
If health problems occur, you could become uninsurable and not even be able to purchase term insurance when it comes time to renew.
The investment you choose may not perform as hoped for. (This can also happen with variable life insurance, that's why I am against variable universal life for most people.)

Carefully weigh knowledge about your habits and self discipline along with the benefits, risks, product features, and any current or future charges associated with any insurance and/or investment product before making

How New Tax Law Affects Social Security?

3/11/2019

The new rules would not change the taxation of Social Security benefits.

Under current and future laws, Social Security benefits are subject to federal income taxes above certain levels of combined income (see table below). Combined income generally consists of your adjusted gross income (AGI), nontaxable interest, and one-half of your Social Security benefits.

What has changed are the applicable tax brackets—the new law lowered most tax rates and adjusted the income thresholds for the different tax brackets (get details). So the taxes paid on the same Social Security benefit could be lower.

How the New Tax Laws Affect Retirees?

3/10/2019

Q. I retired last year, how the new tax law will affect my taxes in 2019?

A. Perhaps the most important tax rule change for many retirees will be the increase in the standard deduction. For older taxpayers who don’t carry a mortgage and have limited deductions, that standard deduction is often more valuable than itemized deductions. That will be the case for even more people, as the tax law roughly doubled the size of the standard deduction.

At the same time, the additional standard deduction for the elderly will still be available. In 2017, the tax rules allowed individual tax filers over age 65 to claim an additional standard deduction of $1,550, and married couples over the age of 65 could increase their standard deduction by $2,500. The new rules would increase these higher standard deductions for people over age 65 to $1,600 per individual and $2,600 per couple.

On the other hand, the new tax code eliminated personal exemptions. Still, many retirees may come out ahead due to the higher standard deduction, rate cuts, and other changes (see below).

4 Money Topics Every Couple Should Talk About - Part IV

3/9/2019

The third topic is here, now we will turn to the 4th topic.

4. Organize Your Documents
The last 2 years of tax returns, marriage and birth certificates, insurance policies, wills, and health care proxies are a few of the things both partners need to know where to find.

It's best to designate a specific place for them. You can either store your estate plan and other important documents in your attorney's office or select a fireproof place—such as a bank safety deposit box—that someone close to you can access in an emergency. You can also use secure virtual safes like FidSafe to store copies of important documents and other information, such as passwords, financial statements, and wills.

4 Money Topics Every Couple Should Talk About - Part III

3/8/2019

Having discussed the second topic, now we will discuss the third topic.

3. Prepare For The Unexpected
No matter your age, it makes sense to be prepared for the unexpected. Below are 3 the most important documents:

a) A will or a living trust and "pour-over" will combination
A will is an essential legal document that sets forth your wishes regarding the distribution of your property and the care of any minor children when you die. A pour-over will is established by an individual, often in conjunction with a trust. Upon the death of the individual, all or a portion of their assets can be transferred—or "poured over"—to a trust. By doing so, an individual can ensure that their estate has explicit directions on moving estate assets to a trust. Additionally, a properly structured pour-over may alleviate the burden of requiring the estate to undergo an often costly and lengthy public probate process.

b) A power of attorney
A power of attorney appoints an agent to act on your behalf regarding financial and other matters while you are alive. It can be a durable power of attorney, which takes effect immediately—or a springing power of attorney, which takes effect if you become incapacitated and unable to handle matters on your own.

c) A health care proxy
A health care proxy names a person, or persons, who can make health care decisions for you if you are unable to communicate or don't have the capacity to make decisions.
You may also want to draft an advance medical directive, also known as a "living will." In general, it outlines your wishes regarding life-prolonging medical treatments and may vary depending on your state of residence. It becomes effective only under the circumstances stated in the document.

Now, the final money topic that every couple should discuss.

4 Money Topics Every Couple Should Talk About - Part II

3/7/2019

After our topic 1, now we will move to topic 2.

2. Name All Your Accounts' Beneficiaries
Having a named beneficiary for retirement and investment accounts and insurance policies is as important as writing a will. Assets in these accounts pass directly to the beneficiaries you've designated with your account custodian, trustee, or plan administrator—and generally supersede any instructions in your will.

It’s not hard to name—or update—beneficiaries on financial accounts. Most financial service providers let you do it online. Naming beneficiaries on all accounts can help avoid legal complications in the event of a death.

Retirement accounts beneficiaries
You can name beneficiaries on your retirement accounts, such as 401(k) accounts and IRAs. If you are married, keep in mind that some employer-sponsored retirement plans automatically designate your spouse as the beneficiary unless you name another beneficiary and your spouse has consented in writing. Check with your company.

Nonretirement accounts beneficiaries
Designating beneficiaries on a nonretirement bank account or brokerage account may establish a "transfer-on-death" (TOD) registration for the account. It allows ownership of the account to be transferred to a designated beneficiary upon your death.

Insurance policies beneficiaries
It's a good idea to check your insurance beneficiary designations. Your life insurance policies may not be something you think about often but it’s important that your beneficiaries reflect your current wishes. For example, if you forget to change the beneficiary after a big life event like a marriage or a divorce, insurance proceeds could go to the wrong person if anything were to happen to you.

The third topic is here.

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