In the Blink of an Eye, She Was Gone

grave-image-for-trent-blog-postSeveral years ago, I asked a client, “If your wife died today, can you afford someone to help you take care of your three kids?”

He told me that yes, he could afford to pay a nanny, but it would leave a sizable dent in his finances. The client was very well off. He had a c-suite level job, but the death of his wife would still impact his financial future.

Less in 90 days later he called and asked, “How did you know I would be faced with this? She has breast cancer and I am scared to death.”

Fortunately, his wife is alive and well today. But, the question of “what if it had gone another way” remains. Five years later, after being cancer free, they purchased a life insurance policy for her and eliminated that potential disaster from their financial plan.

You and everyone you know will leave this world eventually. The question is when. Most people ignore this important question. But for some that will not be an option. The death of a spouse is devastating. The death of a son or daughter is devastating. The death of a sibling is devastating. Some people can bounce back, but a lot can’t and don’t. You won’t know until it happens. I know this from experience. My sister died of cancer on December 26, 2014.

The loss of a loved one can be emotionally devastating, but it doesn’t have to be financially disastrous as well. Contact me for a free risk analysis and together we can make sure you and your family are prepared, no matter what the future holds.

Saving for college, so many choices. Which one fits my family’s needs?

shutterstock_295169024.jpgThe hardest thing about being a parent is that time flies by so fast when raising children. One minute you can hold them in your arms and the next minute they’re graduating high school. Once they have graduated from high school, typically college or trade school education is next. Individuals with a college degree make substantially more than those who don’t. As a parent we want the best for our children. In a lot of cases we want their lives to be better than ours.

College education costs in the United States has gone through the roof. Each day we read about how college graduates are graduating with 5 to 6 figures in education debt. This has become a major problem making it harder to build for a solid financial future. Saving early on for your child’s education, so that they have a better financial footing, is becoming more and more important. The following are three college savings plans that you can implement today to bridge the financial gap to college.

  • UGMA – Uniform to Minors Act. This type of account is in the child’s name and a parent’s name. Until the age of 18, the parent is the owner/controller of the account. All money in the account needs to be spent for the benefit of the child. Once the child turns 18, legal adult age, the account goes into the child’s name alone thus removing the parent’s control over the money. The risk of this type of account is the money that was intended for the child’s education, actually ends up going to “other things”. I rarely see UGMA accounts used for education purposes only.
  • State sponsored education plans. Most states have a plan that you pay into for a period of time, the sooner you start the lower the monthly payment. Once the plan is paid up, the child can go to any state school for little to nothing out of pocket. If your child is going in-state, this can be a great plan to purchase. The risk is if your child goes out-of-state. What you paid into the plan may not be enough for out-of-state tuition. Typically, tuition costs for students with residency in a different state can be double what in-state tuition would have been. I like state sponsored plans as long as the state sponsoring them is financially sound and as long as the child is going to go to college in-state.
  • 529 plans. 529 plans are the most flexible education plans between these three education examples. A 529 plan is an investment account that is solely for the purpose of the child’s education. Each parent can contribute up to $14,000 per child each year. You can typically invest that money based on the child’s age which will determine the risk tolerance of the investment portfolio. As the child gets older, the risk of the underlying portfolio will decrease. The risks with a 529 plan is the money is invested into the stock market. The underlying portfolio value can fluctuate. The benefit of this type of education savings plan is that the assets can increase in value beyond inflation. This potentially reduces the amount that you will have to put into the plan to meet the child’s financial obligations while in college. Ginger and I have set up two 529 plans for our children. We chose the 529 plan because of its flexibility, it’s potential growth due to stock market performance and because if one of our children don’t go to school or if there’s money left over after their college education, I can change the beneficiary of the 529 plan to another family member.   I also like the 529 plan because grandparents and relatives can contribute to the child’s education.

The key to any successful education goal or financial goal for that matter is time, consistency of contributions and management of risk. If you would like to know more about college savings plans or other financial matters, contact me trent@grinkmeyerleonard.com. Let me know if this was helpful. If you have any suggestion on subjects you would like me to write about, please email me.

Happy parenting,
Trent

The fees, expenses, and features of 529 plans can vary from state to state. 529 plans involve investment risk, including the possible loss of funds. There is no guarantee that a college-funding goal will be met. In order to be federally tax-free, earnings must be used to pay for qualified higher education expenses. The earnings portion of a nonqualified withdrawal will be subject to ordinary income tax at the recipient’s marginal rate and subject to a 10-percent penalty. By investing in a plan outside your state of residence, you may lose any state tax benefits. 529 plans are subject to enrollment, maintenance, and administration/management fees and expenses

Realtors: It’s Tax Time!! Tax strategy that will save you $$$$!!

realtorIt’s so common. I always ask the question to our prospects who are realtors, ‘”How do you receive your commissions?” Most come back to me with a simple , “I receive them in my checking account.” And most pay ordinary income tax on their earnings.

Here is a secret…you’re a business, so structure your “Business” as a business, not a sole proprietorship. The following should be confirmed by your CPA.

  • Set up an LLC that files as a S-corp. Ever heard of Warren Buffet? He once said that he paid, percentage wise, less taxes than his secretary. How is that possible? It’s all in how receives his income. How do you receive your income?
  • Deductions. Depending how your “business” is structured, deductions can be a big savings. Mileage, advertising, entertainment.
  • Set up a retirement plan. As a small business, you have the opportunity to set up a 401(k), SEP or a Simple IRA. Great way to save for the future.

With 2015 tax’s due this month, begin to plan for 2016 tax season now. For more information on this and other financial planning strategies, contact me, Trent Grinkmeyer, at 205-266-7509 or email me at trent@grinkmeyerleonard.com

 

Trent

You have a baby…now what?

baby

At some point within the first 30 days of having our first child, I asked the question “What the hell do we do now??” Being responsible for another human being can be a daunting task. When you have a tiny human that can’t feed itself or wipe it’s own bottom…that at times is overwhelming!

Recently I have had some friends who have and their first child and some who have had their third child. I got to thinking about what were the things that Ginger and I didn’t do back in our girls’ baby days that would have been helpful? I have found that all parents get caught up in the day-to-day of having children that we forget to take care of some very important items and find ourselves playing catch up later on when they are older.

The following are three action items for new parents or parents with small children. (For now, only three. If I give you the whole list, you will be Googling Smith and Wesson.):

  1. Put your child on your health insurance plan. Typically, you need to add your child on your health insurance plan within the first thirty days from your child’s birth. On some employer plans, you may have 60 days from the date of birth to add the child. Whichever the time period is, you don’t what to be figuring out what to do without health insurance for your baby when he/she does get sick.
  2. Update your wills and trust. Oftentimes this is something that is way overlooked. Making sure there is plan for your child, but also care of your family if you or your spouse were to prematurely pass away, is vital. A few things you will have to decide when drawing up a will and trust:
    1. If both you and your spouse were to pass at the same time, who would become the guardian or your child(ren)?
    2. Is there life insurance on the parents and who is the beneficiary of the life policy? Consider opening a trust at the passing of the second spouse’s death and fund the trust with life insurance. With a trust, you can set stipulations on how the children are to be cared for and how the money is to be spent or distributed if the children are over 18 years of age.
    3. You will have to elect an executor of the estate. This person needs to be organized and reliable. My sister-in-law is the executor of Ginger and I’s estate. She is extremely organized and I know she can take care of all of the details.
  3. Purchase life insurance on BOTH parents. The fact is, we all take a dirt bath at some point. Hopefully later than sooner. But in the case of an early passing of one of the parents, life insurance does come in handy. Having an adequate amount of life insurance is key. I use the basic rule of 5%. By taking each parents income and dividing it by 5% you will come up with a rough estimate of how much life insurance you’ll would need to replace each parent’s income. Example: If you make $50,000 year and divide it by .05, you will come to $1 million dollars. That is the amount of insurance needed for that person. If both parents make $50,000 per year, you would need $2 million in coverage.  Now that does not take in account inflation, but it is a good rule of thumb. ONE VERY IMPORTANT ITEM TO CONSIDER! Even if one of the parents does not work, you need to insure that parent’s life. Sadly, I have seen it in the past. The mother dies, she doesn’t work and now the father has to hire help. A good nanny is going to cost upwards of $50,000 a year with salary and expense. Wow! That’s a lot! Consider Term Insurance for the first 18 years of the child’s life and permanent for life time insurance.

That wasn’t so bad, right? Easy compared to nighttime feedings and dirty diapers.   These are items that once you have implemented them, you don’t have to come back to them but every three years or when you have major changes in your family dynamic. If you would like to have the full list of things to consider, email me at Trent@grinkmeyerleonard.com. A good financial advisor can assist you on a lot of these planning items. Everyone should have a financial advisor…even a financial advisor.

Happy parenting,

Trent