Your Assets Deserve Proper Titles

It may not seem to be a very important decision at the time, but careless titling of your assets can imperil your property, your finances and your estate plan.

Imagine a widow who adds her eldest daughter to her substantial checking account so that she can assist her in paying bills. Depending on how it’s done, the daughter could drain the account.

Even if the daughter is an honorable person who wouldn’t touch her mother’s money, she might get divorced or be sued by a creditor. Suddenly, the account is a vulnerable asset because it was set up as a joint tenants with right of survivorship (J.T.W.R.O.S.) account.

The widow could have accomplished her purpose by adding the daughter as an account signatory without ownership rights, or by granting her a power of attorney that authorized her to act on her mother’s behalf.

While the widow should still keep a close eye on her account if the daughter had been granted signatory rights, she could easily withdraw that privilege, because ownership of the account would have remained solely with the mother. If the daughter were to be sued, the checking account, which perhaps represents an inheritance to the daughter and other children, wouldn’t be at risk because the daughter isn’t an owner.

Unwanted consequences of financial collaboration often can be avoided by simply titling assets in ways that wrap your ownership rights in maximum protection.

Joint Property

You can, of course, own property by yourself as “sole and separate property.” You might want to retain this ownership title if you owned the property before marriage, received it because of a relative’s will or purchased it with funds that were yours alone. If you keep it separate and later divorce, no one else has a claim.

There are several ways to handle the titles of joint property. The most common for married couples is joint tenancy. All co-owners own the same percentage of interest, have equal rights and responsibilities, and must agree on any property sale. If one tenant dies, the property automatically goes to the other(s). Ownership transfer occurs outside of probate court.

The “tenants in common” arrangement gives each co-owner controlling interest in the property, often along the lines of what was provided. One might have paid 50% of the cost and therefore owns 50% of the property, while another owns 40% and yet another 10%.

A potential drawback to this arrangement is that individual ownerships can be transferred to others without the consent of the existing owners, so it is at least theoretically possible that you could end up jointly owning property with someone you dislike.

Each tenant can will his or her property to anyone, so that sort of property transfer will have to go through probate court.

In the nine community property states, spouses have equal interests in the property. When one dies, the interest of that person goes to the designated heir, while the surviving property owner retains his or her interest.

Some states have a “community property with right of survivorship” arrangement that is similar to the joint tenancy title – the surviving spouse becomes owner of the entire property.

Some non-community property states allow “tenants by the entireties,” wherein spouses have equal interests and rights in the property. Each effectively owns the entire property, which can provide some legal protections against creditors (some states restrict this arrangement to primary residences only).

While proper titling is essential during your lifetime, making sure your assets are titled properly can be key to the success of your estate plan. If you have questions about how you own property or financial assets, please give me a call.

Tough Interview:
Family Conversations About the Inevitable

In earlier times, death was a family affair. The elderly or sick died at home as two or three succeeding generations went through the experience together. While that still happens, death in modern societies has tended to become a much lonelier experience, something that occurs in hospitals or nursing homes. The living are isolated from the dying.

This situation seems to make all the more difficult that “tough interview” – talking to someone about death to learn whether legacy plans have been executed and that all is in order.

When extended families lived in the same house or in the same town, learning essential information may have been easier because of regular contact, even if legacy conversations were fleeting and awkward. Vital information these days is more likely to be passed from one generation to another through awkward, whispered conversations during structured visits.

Vital Information

Psychologists who work with hospices say that each family is different. Some relatives who are dying try to be quite forthright about it, even if other family members don’t want to listen, preferring not to entertain the idea that someone isn’t going to live forever. Others, even who are very near the end, cling to the notion that they are survivors, and are disinclined to discuss “final” plans.

Yet, it seems best for everyone if vital information is passed on. Is an updated will signed, in proper order and its whereabouts known? Is there an unresolved financial or property issue that could get in the way of the family’s well-being if it’s not dealt with? Do the appropriate family members have contact information for attorneys, CPAs and other professionals who have been part of the family's financial picture? In this electronic age, are there usernames and passwords, security question answers, or other information essential to beneficiaries who will need to access online financial or other accounts?

Unfortunately, there is no universal approach that will work in every situation, but there is general consensus that families who share information may be more content than those who do not.

When Reality Bites – Gender Is Not a Minor Thread in
the Fabric of Retirement

Nearly as many employed women as employed men are contributing to employer-sponsored, tax-advantaged retirement plans, the Employment Benefit Research Institute found in its 2008 Retirement Confidence Survey. Another survey found that nearly as many women as men overall contributed to a tax-advantaged retirement plan of some sort (63% of women; 68% of men).*

Yet, women are more likely than men to worry about all aspects of retirement. They are more likely than men to spend their later years in poverty.

Academic research shows there are good reasons for women to be more concerned than men about retirement. The imbalance stems from simple facts of life – most women earn less than men over their working careers – which are often interrupted for childbearing and child care – and they live longer, which means, among other things, that women are likely to spend more years in costly assisted living or nursing home facilities. It’s not a surprise, then, to find that women tend to have lower retirement assets and income, spend more time as sole financial and lifestyle decision-makers, and worry, more than men do, about long-term healthcare and outliving their assets.

No Simple Fix

For some of these circumstances, there is no “fix.”

Women are likely to continue to have families in their late 20s and early 30s, even if that means taking a break from a career position just as their male colleagues are gaining promotions and moving up the corporate ladder. During those months or years out of the office, not only are 401(k) contribution possibilities lost, but, depending on the career, vital skill sets may become outdated or intended job paths diverted because of personal decisions.

Confronting Reality

However, that doesn’t mean women should follow in the footsteps of some, who, according to most surveys, elect not to think about retirement. A better move is to accept the realities as they are and determine to deal with them.

It remains essential that as women approach the idea of retirement, they fix their sights on a somewhat longer retirement than the average man and plan accordingly. If you would like to discuss how your portfolio is working to provide for your retirement goals, please give me a call.

* Sources: Bankrate.com, Women’s Institute for a Secure Retirement, AARP Bulletin, The Hartford Advance 50 Team/MIT AgeLab.

What Women Can Do to Improve Retirement Outlook

Women can take some practical steps to spruce up their retirement prospects.

Start saving early in a 401(k) or other available tax-advantaged retirement savings arrangement. As your investment portfolio grows, make sure its assets are allocated intelligently to balance growth and risk.

True, there is considerable evidence that women are more risk-averse than men, but you can help put that idea to rest by assuming enough risk to allow your investments to grow to support your financial goals. Your worst retirement fears could be realized if you choose only “safe,” low-return investments. Inflation is an enemy of retirement savings; it may well outstrip the “safest” investments.

If you take a few years out of the workforce to raise a family, don’t forget that your working husband can contribute to your spousal IRA. And if you’re married, try to take an active role with your spouse in meeting the challenges of planning for retirement. In addition, invest in a healthy lifestyle, because it gives you the potential for a longer, more enjoyable life while possibly lowering current and future healthcare costs.

Don’t underestimate your life expectancy – add a few years to your estimate. And as you plan for a long, healthy retirement, consider your need for life, disability and long-term care insurance. As you get closer to retirement, be sure you’re planning for an income stream to supplement Social Security and whatever pension funds you might expect. Whether you have only a short time or many years before you retire, taking positive steps encourages the kind of confidence you’ll need to succeed.

---

Investmentmyth

Buy What You Know

Not necessarily. Investing in companies you know – or think you know – isn’t automatically a wise strategy. The overconfidence that familiarity brings tends to lead investors into unsound concentrated equity investment positions, poor portfolio decisions and an inflexible reluctance to sell the holding, any or all of which can be detrimental to your financial health.

Remedial Finance:
Impatient Echo Boomer Adults May Be Financially Illiterate

Even if you’re not an echo boomer – or a member of Generation Y, referring to Americans born between 1977 and 1994 – you might consider how to help your children or grandchildren if they are among the 47% of that generation who confess to financial illiteracy. A National Foundation for Credit Counseling survey earlier this year also found that 45% of individuals in this group have no savings, and no knowledge or appreciation of investing for retirement or other goals.

Social observers point to several likely causes. This is an “instant gratification” generation, they say. Twittering away, microwaving food and using a bar code in the window to pay highway tolls, they’re likely to be impatient multi-taskers, inclined to demand instant results. This is not exactly the mindset of the patient, long-term investor.

Educating these younger adults in the ways of savings and investing could pay off for them and be part of your valuable legacy. You might begin by pointing out that 2039, when Gen-Y's leading edge turns 62, is the year today’s actuarial assumptions forecast the Social Security trust fund will be exhausted. Where will they be without personal savings and retirement funds? Try that in 140 characters or less.