Your Legal Documents

If you become incapacitated, who will be deputized with giving directions? For individual accounts, this responsibility often falls to the agent named under your durable power of attorney.

Some provisions to consider:
Gifts. Does the document authorize the agent to make gifts? If you are not supporting other family members and do not face an estate tax, is such a provision warranted? Too often the gift provision is boilerplated and has little relevance to your circumstances.

Investments. Many power of attorney documents do not make mention of investments beyond a general authorization to conduct banking or securities transactions. If you have existing holdings or unique investments, will the general investment directions permit those to be continued?

Many Agents try to continue whatever investment plan you might already have been pursuing. But unless the power of attorney document permits such a path, the agent might be held to the standards of a prudent investor with appropriate diversification.

A will – or in many instances a “pour-over will” that pours assets into a trust created during your lifetime – provides for the disposition of assets upon your death. In many instances, the bequests are made into trust for various beneficiaries.

Standards. What investment standard does the document require? You should review these provisions ahead of time, as the document may hold some odd standards that might conflict with the investment policy pursued by you, or that might be inappropriate for an heir. Does the investment provision permit the present plan?

If a beneficiary has a particular need, be certain that the investment provisions permit it to be addressed. Too often, lawyers draft these provisions relying on standard clauses, without know what investment approaches you actually wants.

Taxes. Consider the tax consequences of any trusts created upon your death. Which states might tax them? Is there sufficient flexibility to change trustees or take other steps to diminish or avoid state taxes?

Strategies. A common estate planning strategy upon the death of a spouse is to fund a bypass or credit shelter trust. The remaining assets would pass to a trust qualifying for the estate tax marital deduction.


It is common for individuals to create irrevocable trusts that are taxed to the client for income tax purposes (grantor trust).

Perhaps most of these should include a swap power so that you, the grantor can return appreciated assets to the estate in exchange for cash. That maintains the same estate tax benefits but facilitates bringing appreciated assets into your estate to provide for an increase in income tax basis upon your death.

If this power is missing, it is suggested that you review with the attorney whether it can be added through a decanting (that is, a merger) of the trust. Without a swap power, maximization of the net of income tax returns for the family can be hindered.

Many irrevocable trust will include an annual demand, or Crummey power. This provision has the trustee give notice to the beneficiaries when gifts are made to the trust, so that they can qualify for the annual gift exclusion.

Even if you will not face an estate tax, it is necessary to meet these criteria to avoid having to file a gift tax return.

It’s common for individuals to hold investment assets in LLCs and family limited partnerships (FLP). Such entities can provide management, control, asset protection and other benefits.
While most, if not all, trusts include some type of investment provisions, typical LLC and FLP forms may not.

But many LLCs don’t have a manager. Instead, decisions are made by the members.



Roth IRA/401(k)?

Income tax rates, established under the 16th amendment in 1913, move like a pendulum in a clock. The movement is extreme at each end from ultra high top rates (94% in 1945) to low top rates (24% in 1929). Over all the years the average top rate has been 58% (this does not include state, city or local taxes). At the end of 2016 the top rate is 39.6% plus the 3.8% Obamacare surcharge for a grand total of 43.4% at the federal level. The new Trump administration is proposing 3 rates of 12% – 25% and a top rate of 33%. Think long term in your life. If these lower rates do take place then over time a “regression to the mean” states that rates have to rise in the future (during your retirement years).

One of our goals, at Founders Group, is for each client to have 80% – 100% of their retirement income to be TAX FREE for life. It takes time and planning. It cannot be done at the last minute.

My question to you ……… wouldn’t it make sense to sock money away in tax free investments when rates are low, today, and then harvest the money when tax rates are higher in your retirement years??? There are a few fantastic vehicles to accumulate money for tax free retirement income. For the “do-it-yourself” crowd there are Roth IRAs or Roth 401(k) plans. The problem with both is there are so many strings attached (how much you can contribute, when you can take monies out, etc). Here is some information on Roth’s:

You can take money out of your Roth IRA anytime you want. However, you need to be careful how much you withdraw or you may get stuck with a penalty. In order to make “qualified distributions” in retirement, you must be at least 59 ½ years old, and at least five years must have passed since you first began contributing.

You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason, but you’ll be penalized for withdrawing any investment earnings before age 59 1/2, unless it’s for a qualifying reason. Money that was converted into a Roth IRA cannot be taken out penalty-free until at least five years after conversion.

Not sure whether the money will be counted as contributions or earnings? Well, the IRS view withdrawals from a Roth IRA in the following order: your contributions, money converted from traditional IRAs and finally, investment earnings. For example, let’s say your IRA has $100,000 in it, $50,000 of which are contributions and $50,000 of which are investment earnings. If you withdraw $60,000, the IRS will consider $50,000 of that to be contributions and $10,000 to be earnings. So any penalty would apply only to the $10,000.

There are more sophisticated vehicles that magnify a Roth program and make Roth’s look like child’s play. These programs have been around since 1913 and require education and guidance by a professional adviser.

Health Care Decisions

This is a tough subject, but there are three decisions you should make regarding your life-support preferences, because not making them could cause you and your relatives undue pain.


A Living Will is a document explaining which medical treatments you want if you have a life-threatening illness or are too sick to voice your own wishes. You don’t need a lawyer or doctor to write a Living Will, but consulting both isn’t a bad idea. The forms for Living Wills are easy to fill out and vary among states.


A health-care power of attorney form designates a specific person to make decision for you when you cannot. The person you choose might be your spouse or a close family member. Although current spouses are the legal next of kin and almost always have power of attorney, this doesn’t mean a family won’t challenge their decisions.

The person you designate to call the shots for you should have the following qualities:

• Assertiveness. This person needs to state your wishes and stay firm to them amid differing opinions from relatives and hospital staff.
• Accessibility. You need someone who can be available quickly and give you his or her attention for undetermined periods of time.
• Money sense. Your health-care proxy should understand and follow your instructions for how your finances should be allocated for your care.


You can opt for a do-not-resuscitate (DNR) order even if you don’t yet have a living will or health care power of attorney. This order means that if your heart stops or you stop breathing, the medical staff won’t try to revive you. You have to specifically ask for a DNR and put it in writing. If you don’t ask for one, you’ll get the default RLC order (That’s Resuscitate Like Crazy!)

“Perfection is not attainable,
but if we chase perfection we
can catch excellence.”

-Vince Lombardi


Unfortunately, there is no one-size-fits all template that can be used to determine which option is best for a person. Each persons retirement plan must be evaluated individually, based on its own merit and the persons specific situation.

There are numerous variables to consider. These include fees, available investments, services provided, the 10% early distribution penalty, creditor protection, convenience, required minimum distributions and estate planning.

The ability to roll over is not limited to participants in the company plan.

A spouse who is a beneficiary can roll over inherited company plan funds to his or her own traditional or Roth IRA. Non spouse beneficiaries can directly roll over inherited plan assets to an inherited IRA (or directly convert the inherited plan to an inherited Roth IRA).

Probably the strongest argument for an IRA rollover is the ability of a beneficiary to stretch the money for years, keeping it growing in either a tax-deferred traditional IRA or tax-free in a Roth IRA. A non spouse beneficiary can stretch distributions on an inherited IRA over his or her life expectancy.

But many company plans do not allow the stretch option.

Another advantage to a rollover is that IRAs are more flexible than company plans in terms of estate planning and investment choices. IRAs offer the option of splitting accounts and naming several primary and contingent beneficiaries. Individuals can name anyone they wish as their IRA beneficiary.

In many company plans, a participant must name his or her spouse as beneficiary unless the spouse signs a waiver.

In an IRA, individuals can customize investment choices. In addition, investment changes can be made faster in an IRA because there is usually not as much bureaucracy as in a company plan.

Another attraction of a rollover is that it is much easier to access funds in an IRA than in company plans.

Another potential appeal is that an IRA can be a convenient place for a person to consolidate all retirement funds.

IRAs can be aggregated for calculating RMDs. The employee usually has to take his RMD from each company plan separately.


If a person is interested in delaying RMDs as long as possible, continuing with the company plan may be a good idea because of the “still-working” exception that may apply. The individual may be able to delay the required beginning date until April 1 of the year after he or she retires. This rule does not apply to IRAs.

At the other end of the time spectrum, individuals who may need their retirement funds early should also give serious consideration to sticking with the company plan. If a person is at least 55 years old when he/she leaves their job, and he/she needs to tap retirement funds, distributions from the company plan will be subject to tax but no 10% penalty. But, if the funds are rolled to an IRA, withdrawals before age 59 ½ will be subject to the 10% early withdrawal penalty. The age 55 exception does not apply to IRA distributions.

For some people, creditor protection may be a concern. Company plans have an advantage here, as they receive federal creditor protection. State laws protect IRAs, and they can vary significantly.

An IRA cannot be invested in life insurance, but life policies can be held in a company plan. For some people, the life insurance offered through their company plan may be the only such coverage a person can qualify or pay for.

If a lump-sum distribution from a company plan includes highly appreciated company stock or bonds, a person may roll it over to an IRA, but he/she may not want to. Under a special rule, the participant can withdraw the stock from the plan and pay regular income tax on it, but only on the original cost to the plan and not on what the shares are worth on the date of the distribution.

The difference is called the net unrealized appreciation (NUA). A person can elect to defer the tax on the NUA until he/she sells the stock. When he/she does sell, he/she will pay tax only at his/her current long-term capital gains rate. The ability to use the NUA tax break is lost if the stock is rolled to an IRA.

The Optimism Quiz: Are you a Pessimist, Optimist or a Realist? (Excerpts from December 2016 Article of Success Magazine)

Being an optimist has benefits that extend beyond feeling cheery. In fact, optimists react better to stress, have more satisfying romantic relationships and are less likely to suffer from depression and hypertension. See if you have what it takes to be an optimist in this little quiz.

Rate the following statement as:

1 = Strongly disagree
2 = Somewhat disagree
3 = Neutral
4 = Somewhat agree
5 = Strongly agree

No looking ahead at the answer guide!

___ 1. I am grateful for even the smallest things in life.
___ 2. I am motivated by other people’s stories of achievement.
___ 3. I don’t let what others do or say negatively affect me.
___ 4. I welcome and accept change.
___ 5. I acknowledge the important people in my life.
___ 6. I try to feel like a kid whenever possible.
___ 7. I take the time to eat right, exercise and relax.
___ 8. I still enjoy my favorite hobbies.
___ 9. I hold myself accountable to achieve my purpose and passion.
___ 10. I am persistent in all of my efforts until I feel I have completed them.


10 – 22 = Pessimist
23 – 36 = Realist
27 – 50 = Optimist

Optimists have some of the highest qualities of gratitude, hope, altruism and persistence.

Keep a positive outlook!