JUNE 2016

Estate-Planning Checklist

M any people unwiselyassume that estate plan-ning is only for the

wealthy, inadvertently causing com-plications for families followingtheir death. Imagine for a secondthe following scenarios:

4The assets you leave behindare not distributed as you

assumed due to an unanticipatedfamily conflict, and your spouse or certain family members areexcluded.

4A spouse keeps you on lifesupport against your prior

verbal wishes.

4Your minor children have noappointed guardian, and their

future depends on a court decision.

4Cherished pets are left for thepound.

4Your assets go directly to thegovernment.

Contrary to popular belief,estate planning isn’t just aboutmoney or family heirlooms; there isfar more at stake, including the wel-fare of your loved ones. As unimag-inable as your sudden demise mayseem, you need a strategy in place.With appropriate planning, yourfamily can grieve properly withoutthe added disadvantage of worryingabout complicated financial matters,living arrangements, unexpected

Should You Serve as a Guardian?

W hen asked to serve as the guardian of someone’s minor children inthe event of his/her death, it is usually meant as a compliment.

While you may fear that you’ll hurt your relationship by saying no, don’taccept this role without serious thought. Consider the following:

4Are your lifestyles compatible? Go over all details involved inraising the children. Consider the impact on your children, includ-

ing the fact that you will probably have less time available for them.

4How much financial support will be available? This involves morethan making sure money is available for college and other expenses.

Additional children in your house will increase many of your bills.

4Are you comfortable taking on responsibility for the children’sfinances? You may feel more comfortable with another person

involved to review how the children’s money is spent.

4Has a contingent guardian been named? Find out if a contingentguardian has been named in case you cannot serve. However, don’t

use this as an excuse to say yes when you really want to decline. mmm

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U C C E S S

taxes, or even funeral costs andpreparations. Here are the mostimportant steps you should takenow to protect both your loved onesand your assets:

4Prepare a Last Will: The firstand most imperative step is to

have a last will and testament pre-pared, specifying the following: 1)Your heirs; 2) The executor who willimplement your instructions; 3) Thedesignated guardian who will act as caregiver of your minor children;

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Copyright © 2016. Some articles in this newsletter were prepared by Integrated Concepts, a separate, nonaffiliated business entity. Thisnewsletter intends to offer factual and up-to-date information on the subjects discussed but should not be regarded as a complete analysis ofthese subjects. Professional advisers should be consulted before implementing any options presented. No party assumes liability for any lossor damage resulting from errors or omissions or reliance on or use of this material.

Private Wealth Management200 Public Square, Suite 1650Cleveland, OH 44114Toll-free (888) 792-9821Fax (216) 737-7370www.rwbaird.com

Member SIPC

John KraftSenior Vice PresidentFinancial Advisor216-737-7337jkraft@rwbaird.comwww.bairdfinancialadvisor.com/kraft

Diane DawsonClient Specialist216-737-7333ddawson@rwbaird.com

David BrownFinancial Advisor216-737-7332dgbrown@rwbaird.com

Robert W. Baird & Co. does not provide tax or legal services.

4) The guardian who will manageassets you leave to your minor chil-dren. Consider working with anestate-planning attorney to assurethis essential document is correct, aseven the most insignificant-seemingerrors can alter your will’s intent.

4Name Your Durable Power ofAttorney: Don’t confuse this

with the executor of your last will,although you can certainly desig-nate the same person to serve asboth. A durable power of attorneyis a person you choose to overseeyour finances should you becomeeither temporarily or permanentlyincapacitated; they’ll manage yourbills, bank deposits, medical bene-fits, and insurance when you areunable to do so.

4Establish a LivingWill/Health Care Directives:

Just as you must consider yourinevitable death and its financialimplications, there is also the unfor-tunate chance of becoming eithertemporarily or permanently unableto make your own medical deci-sions. In a living will, you defineyour medical preferences, such aswhether you wish to remain on lifesupport. You should also designatea health care proxy (also referred toas a medical surrogate), who advo-cates on your behalf to ensure thatyour medical instructions are car-ried out.

4Choose Your Beneficiaries: Besure to set up or revise the

Estate PlanningContinued from page 1

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beneficiaries on your savings andchecking accounts, life insurancepolicies, retirement plans, and evenstocks, bonds, and brokerageaccounts, particularly so that theyalign with your will. Understandthat because a named beneficiaryon an account will override yourwill, people can unknowingly disin-herit a loved one. You can preventthese unintended mishaps byreviewing your beneficiaries inaccordance with your will.

4 Familiarize Yourself withEstate Tax Laws: The last

thing you want for your heirs arethe unexpected costs associatedwith federal and state estate andinheritance taxes. While your heirsare not required to pay income taxon their inheritance, estate taxeslevied against your total wealth —which occurs prior to any distribu-tions — could dramatically impactwhat your loved ones or chosencharities receive. Careful review ofyour assets along with strategicplanning can protect your legacy.

4Consider Life Insurance: Ifyou’re married, have minor

children, or even a disabled adultchild, life insurance is a great wayto assure these loved ones continueto receive financial support in theevent of your death. Properly struc-tured, beneficiaries can receive thelife insurance proceeds with noincome- or estate-tax ramifications.You can also consider life insuranceas a supplemental source to helpoffset any levied estate taxes.

4Think about Funeral andFinal Arrangements: Do you

plan on donating organs? Whattype of funeral service do you envi-sion? Why burden family with suchdifficult decisions when you canplan ahead by preparing a writtendocument specifying instructionsfor the disposition of your bodyand funeral service preferences?You can even consider a Tottentrust, where a specific amount fromyour assets is earmarked for funeralcosts.

4Protect Your Business: Own-ing a business can significant-

ly complicate your estate, as anyassets won’t necessarily transfer tospouses or beneficiaries withoutproper directives. Likewise, if youshare a business, make sure youhave an arranged buyout agree-ment, which among several otherscenarios, plans for the event ofyour death.

4Set Up a Trust: The larger thevalue of your estate, the more

you should consider setting up atrust. Similar to a last will, a trustallows you to designate financialbeneficiaries and even a guardianfor your minor children, with threeimportant advantages over wills: 1) Assets retained through a trustare not subject to probate, thereforeallowing for faster distributions toloved ones or cherished organiza-tions; 2) Unlike wills, trusts are notconsidered public documents, pro-viding the added benefit of privacy;and 3) You can place special condi-tions on your legacy, such as whenit’s dispersed and how it can bespent, which may be more benefi-cial for young adult recipients ormore irresponsible heirs.

4Store Your Documents: Makesure your power of attorney

or executor has quick and conve-nient access to your importantpaperwork: wills and trusts, lifeinsurance policies, bank and retire-ment account statements, certifi-cates of other assets, mortgagepaperwork and real estate deeds,and debts. The last thing you wantfor your family is for an importantdocument to go missing.

Please don’t delay taking theseimportant precautionary measures.Even if you’ve already wiselyplanned ahead, understand thatbirths, deaths, divorces, changes inincome, and other recent life devel-opments can greatly impact theestate plan you currently have inplace. To get started on a planimmediately or review your currentplan, please call. mmm

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rather than downsize, choosinglarger, more expensive propertiesthan their current residence. If youcount yourself among that number,make sure you have the financialresources to turn that dream of apalatial retirement abode into areality.

If you’re sure that relocating inretirement is the right choice foryou, don’t rush into a decision. Atrial run of a month or two in yourideal destination will allow you tosee how you really like living there.A place that’s great to visit for aweek might lose its luster after amonth.

In addition to obvious consider-ations like weather, make sure youthink about amenities both fun andnot so fun. Are there hospitals near-by? What about public transit incase you’re eventually unable todrive? Will you be part of a ready-made retirement community, or willyou be on your own when it comesto making new social connections?Are the amenities you’d like to useaffordable?

Knowing the answers to thesequestions in advance can help youavoid making a costly financial mis-take.

Thinking about relocating inretirement? Please call if you’d liketo discuss this in more detail.mmm

Should You Stay or Should You Go?

D oes your retirement planinvolve long days of golf insunny Arizona? Perhaps

you’re dreaming of a beachsidecondo in Florida? Or maybe youwant to explore life in a foreigncountry. Of course, there’s alwaysthe possibility of just staying put,close to family, friends, and a famil-iar community. The options are end-less and overwhelming.

Nonetheless, choosing a placeto live is one of the most importantdecisions you can make when plan-ning for retirement. And it’s notalways an easy choice to make.You’ll have to weigh financial, emo-tional, and lifestyle issues beforeyou can decide where to live afteryou stop working. Below are sometips that may help you make yourchoice.

Questions to Ask Yourself

You can start your retirementhousing search by asking yourselfsome or all of these questions:

4Where do I really want to livein retirement?

4Where can I afford to live afterretirement?

4 If I’d like to relocate, howmuch will that cost?

4Will relocating allow me tosave money on housing and

other expenses?

4Can I save on taxes by movingto another area?

4 If I’d like to move, what pricecan I expect to get for my

house?

4Where do my friends and fam-ily live?

Deciding on the answers tothese questions is the first step inpreparing to make a decision aboutwhere to live in retirement.

Making the ChoiceSo, what if your answer to the

above questions suggests that relo-cation is a good idea? It’s hardly anunusual situation. Getting a freshstart in retirement is a dream formany.

But depending on your currentfinancial situation, it may not berealistic. Many baby boomers sawtheir home values plummet duringthe most recent financial crisis, andsome are still underwater on theirhomes. Others still have hefty mort-gage payments heading into retire-ment. Some people who want torelocate simply may not have thefinancial ability to do so.

If you are interested in moving,it pays to do your homework. Look-ing into housing in your ideal loca-tion is just the start.

You’ll also want to think abouthow much you can get from the saleof your current home (be realistic).Taxes are another issue. Someretirees can save money by movingfrom a high-tax state to one thatoffers tax breaks to retirees, likeGeorgia, Mississippi, or Illinois.

Another thing to consider? Thecost of travel back to your originalhometown if you still have familyand friends living there.

According to a study by theDemand Institute, while mostboomers won’t relocate in retire-ment, a significant minority — 37%— are planning to do so.

Of those who do expect to relo-cate, roughly 40% plan to upsize

5 Steps to Protect Spouse

Financial Thoughts

Asset Allocation Tips

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M any surviving spouses havebeen financially blindsided

due to poor planning. The followingsteps will ensure your spouse istaken care of upon your death:

Update wills: While any jointlyowned property will go to yourspouse, only up to half of your indi-vidual assets will transfer unlessyou specify otherwise in your will.

Review beneficiaries on retire-ment and other accounts: Manyassets disbursed to beneficiaries.Beneficiary designations typicallytrump wills.

Make jointly owned debt a priority: While your spouse isn’trequired to pay any debt owed inyour name only, he/she is still liablefor jointly owned bills.

Make sure there’s enough: Willyour spouse have enough to surviveon once you’re gone? Age, workopportunities, individual debt, andfuture retirement are all importantfactors to consider.

Identity theft: Leave a notereminding your spouse to reportyour death in writing to the threemain credit-reporting bureaus.He/she should also request a copyof your credit report so he/she isaware of all your open accounts.mmm

U nfortunately, there is no oneasset allocation plan that issuitable for all investors.

You need to evaluate your risk tol-erance, time horizon for investing,and return needs to determine howyou should allocate your portfolioamong the various investment categories. To help you with thosedecisions, consider these points:

4 Some asset classes move inopposite directions while oth-

ers move in the same direction atdifferent speeds. By owning differ-ent types of assets, it is hoped thatwhen one asset suffers a majordecline, other assets will be increas-ing in value.

4 Investments with higherreturn potential generally

have higher risk and more volatilityin year-to-year returns. Asset allocation allows you to combine more volatile investments with lessvolatile ones. This combination canhelp reduce the overall risk in yourinvestment portfolio.

4Not only should you diversifyacross broad investment

categories, such a stocks, bonds,and cash, you should also diversifywithin those categories.

4Assessing your risk toleranceis one of the most important,

yet most subjective, parts of deter-mining your asset allocation. Youare trying to assess your emotionalability to stick with an investment.

4Your portfolio can becomemore aggressive as your time

horizon lengthens, since you havemore time to overcome downturnsin investments. You can add higherpercentages of stocks to your port-folio at that time.

4Make sure you have reason-able return expectations for

various investment categories.

4 In general, consider a moreconservative allocation if you

are older, have short-term needs for your money, have low earnings,have a low risk tolerance, or areuncomfortable with investing.

4Time diversification is alsoimportant. By staying in the

market through different marketcycles, you reduce the risk of receiv-ing a lower return than expected.

4Rebalance your portfolio atleast annually. Over time,

your actual asset allocation willstray from your desired allocationdue to varying rates of return onyour different investments.Changes may be needed to bringyour allocation back in line. mmm

A pproximately 22% of long-term-care costs were paid out

of pocket, while private insurancepaid for 18%. One in five elderlyAmericans will incur more than$25,000 in lifetime out-of-pocketlong-term-care costs before theydie (Source: REP., November2015).

The lifetime probability ofbecoming disabled in at least twoactivities of daily living or beingcognitively impaired for individu-

als age 65 and over is 68% (Source:Centers for Disease Control andPrevention, 2015).

Approximately 87% of Ameri-cans received needed long-termcare from informal or unpaid care-givers (Source: AARP, 2015).

Individuals age 65 and olderspend 33.9% of their annual bud-get on housing, 15.9% on trans-portation, 13.4% on health care,12.5% on food, 5.8% on cash con-

tributions, 5.5% on entertainment,and 12.7% on other expenses.Average annual expenditurestotalled $43,635 (Source: Bureau ofLabor Statistics Consumer Expen-diture Survey, 2014).

Life expectancy at birth in theUnited States is 78.8 years — 76.4years for males and 81.2 years forfemales (Source: Centers for Dis-ease Control and Prevention,2015). mmm­­