Paul Ferraresi

Most people do not want to think about or discuss Estate Planning. The definition of Estate Planning is the process of getting resources to where you want them to go with the least cost and least problem.

This process includes risk management and a review of all your insurance coverage — life, disability, liability, long-term care. Also reviewed are tax planning, cash flow analysis, and much more.

You should not just look at your own life, but, you must consider the possible caring for elderly parents, multi-generational relationships, and other personal planning issues.

Most people think that simply drafting a Will solves all these problems. Far from it. Wills are not the best vehicle for carrying out one’s wishes.

In addition, one should do at least an annual estate review with their advisor to make sure that beneficiary designations are current and intended distributions match your current intentions.

With your advisor you should discuss how you want your finances handled if you cannot function or after you pass away.

To most people their estate is simple, but, I have seen fortunes wasted by people who do not understand what the laws are and how they can and will affect your loved ones. Let me give you an example…. If you are married with children, and, you do NOT have a Will…where do your assets go? Most people think all of it goes directly to the surviving spouse…. AH-OO-GA! Wrong Answer! See your advisor for the answer!

With some of the financial scams that have taken place recently don’t you find yourself feeling a little sorry for those that were taken? I become confused when I hear that people placed all of their savings into one investment!

Come on, no one should put all their eggs in one basket. There have been many cases in which individuals have placed all their money in their company stock. Later, after the company went bankrupt, all their investment monies were evaporated. People began to blame their company for the loss. In reality, the individual made the mistake by being greedy and not diversifying.

When you see someone do something beyond common sense, you say…gee, that was stupid. You see, everyone needs to be responsible for their actions. Unfortunately, in this country the tide has changed and no one wants responsibility for anything.

I came across a blog about frivolous lawsuits that have resulted in ridiculous warning labels like:

• “Remove child before folding,” on a baby stroller.

• “Harmful if swallowed,” on a brass fishing lure with a three-pronged hook.

• “Never iron clothes while they are being worn,” on a household iron.

• “Shin pads cannot protect any part of the body they do not cover,” on shin guards.

I can only imagine what financial advisors will now have to print on their ADV and application forms to alert clients to the obvious as this irresponsibility sweeps the country.

All of this raises the question: What is your responsibility as an investor to minimize the risk of fraud or failure in the management of your account?

Your steps:

• Do your due diligence.

• Work with financial advisors that have credentials and maintain ethical conduct.

• Develop an Investment Policy and Asset Allocation.

• Do not invest in anything that you cannot handle a loss level greater than your tolerance.

• Make sure your advisor uses an independent custodian.

• Do not invest in anything you do not understand.

• Evaluate your advisor, not just on performance, but on his/her ability to listen, communicate, and respond to your concerns.

Funny how investors never praise an advisor when their portfolio goes up, but they criticize or sue when the portfolio goes down. This thinking is a true portrayal of the American attitude today of…”I am not responsible for anything that goes bad in my life.”

If you want someone to take care of you so that you never get hurt, well, that brings to mind a saying I learned long ago…“Beware of someone who offers to take care of you, for your caretaker may soon become your jailer.”

The roller coaster stock market over the past year has many people questioning their risk tolerance. When I do investment planning for my clients, we go through an exhaustive process. To develop a person’s Asset Allocation (AA), we take everyone through an Investment Policy Statement (IPS).

This IPS is about 20 typewritten pages and once completed, it portrays the amount of risk (volatility), or in plain English… how much you can tolerate losing.

The format of the IPS allows us to develop an Asset Allocation that is specific to the client. There isn’t a cookie-cutter-one-size-fits-all method like you see on many websites.

A second part of providing comprehensive financial planning is determining their “Behavioral Finance” attributes. You see, all of your attitudes about money are ingrained in you by your life’s experiences. For instance, many senior citizens were affected by the depression or World War II. The Vietnam War and the wild ‘60s influenced me. The young people today have been affected by the “tech wreck” and recently the subprime mortgage mess.

In developing legacy and holistic planning for my clients, I use a Behavioral Finance Quiz. It is 25 questions, done online, with no right or wrong answer, and can be completed in 5-10 minutes. It will produce your profile based on countless years of research. The report will tell you about yourself… it will amaze you. You will swear someone has been sitting in your home watching you.

Now, if you would like to take this quiz, at no charge to you, it will take a few steps:

Contact us at founders@foundersgroupinc.net and let us know your name, email address and phone numbers. We will email you a link with your user name and password. Once you complete the quiz then you will get a report. If you would like to discuss the results, I would be pleased to assist.

Why do people buy long-term care insurance? There are lots of reasons. A recent policy holder survey in which current Mutual of OMAHA LTCi policy holders were asked what motivated them to purchase a policy.

The underlying basic reason was that it was helping people protect their independence and their life savings. Although the purchase of these policies is an emotional issue, here are seven common reasons people purchase LTCi.

See if any of these are the reasons you and/or your parents made the intelligent purchase.

1) They acknowledge they’re getting older and want to be prepared in case they need help. The policy holders want to maintain their independence as long as possible. They don’t want to rely on their kids to take care of them or make decisions on their behalf. They certainly don’t want to spend their life savings on LTC services.
2) They want to stay at home as long as they can. Remaining at home is a top priority for most people. No one wants to think about going to a nursing home. Instead, the policy holders said they prefer to receive the care they need in the comfort of their own homes.
3) They’ve seen what happens to people who don’t have it. Overwhelmingly, the majority of policy holders surveyed (78 percent) said they knew someone – either a friend or family member – who needed LTC services. They talked about watching these people struggle financially and seeing the physical and emotional toll it took on their families. And that was enough to make them say, “I don’t want that to happen to me”.
4) They don’t want their kids to take care of them. Many people interviewed had experience caring for a parent. These folks know how difficult it is to juggle family and work obligations while providing care for an aging relative. And that’s why they don’t want their own kids to have to care for them. People said over and over … “I don’t want to become a burden to my family”.
5) They don’t want to spend their life savings on LTC services. People know LTC services are expensive. They also know that paying for the care they need without the help of an LTCi policy could quickly deplete their life savings. And that’s not something they’re willing to risk.
6) They want to leave an inheritance for their kids. Many of the policy holders said they want to make sure they have something left to pass on to their children and grandchildren. One person said, “My long-term care policy is in my name, but it’s for the future of my children”.
7) They know it’s the smart thing to do. Many people interviewed said they view LTCi like other types of insurance.

They have automobile insurance to protect them in case of an accident, homeowner’s insurance to protect them in case of a fire and life insurance to protect their families if they die too soon. These folks know LTCi is just a smart thing to have.

One Reason Not To Buy

The survey also revealed one important reason many people almost didn’t buy a LTCi policy: they thought it was more expensive than it turned out to be. One policy holder summed it up saying, “I didn’t think I could afford long-term care insurance. But I found out it is less expensive than I thought”.

Investing in LTCi is not just through standard policies. There are innovative methods using existing or new annuities, life policies, programs that are paid up in 10 years, return of premium programs and countless other alternatives. If you or your parents are over 40 years old it is time to get serious about this. Procrastination leads to costs increasing in the future and, later you may not qualify. Ah, ‘tis better to have coverage and not need it, than, need it and not have it – you know the old … “Discipline of Regret”.