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An Estate Planning Checklist

October 24th, 2011 | No Comments | Posted in Financial News
Things to check and double-check before you leave this world.

Estate planning is a task that people tend to put off, as any discussion of “the end” tends to be off-putting. However, those who leave this world without their financial affairs in good order risk leaving their heirs some significant problems along with their legacies.

No matter what your age, here are some things you may want to accomplish this year with regard to estate planning.

Create a will if you don’t have one. Who doesn’t have a will? You might be surprised. Some tremendously wealthy people have passed away without leaving a valid will. For example, Pablo Picasso and even Howard Hughes!

It is startling how many people never get around to this, even to the point of buying a will-in-a-box at a stationery store or setting one up online. A recent Lawyers.com survey of 1,022 Americans found that just 35% had wills. (For that matter, only 18% had some kind of trust.)1

A solid will drafted with the guidance of an estate planning attorney may cost you more than the will-in-a-box, but may prove to be some of the best money you ever spend. A valid will may save your heirs from some expensive headaches linked to probate and ambiguity.

Complement your will with related documents. Depending on your estate planning needs, this could include some kind of trust (or multiple trusts), durable financial and medical powers of attorney, a living will and other items.

You should know that a living will is not the same thing as a durable medical power of attorney. A living will makes your wishes known when it comes to life-prolonging medical treatments, and it takes the form of a directive. A durable medical power of attorney authorizes another party to make medical decisions for you (including end-of-life decisions) if you become incapacitated or otherwise unable to make these decisions.

Review your beneficiary designations. Who is the beneficiary of your IRA? How about your 401(k)? How about your annuity or life insurance policy? If your answer is along the lines of “Mm … you know … I’m pretty sure it’s…” or “It’s been a while since …”, then be sure to check the documents and verify who the designated beneficiary is.

When it comes to retirement accounts and life insurance, many people don’t know that beneficiary designations take priority over bequests made in wills and living trusts. If you long ago named a child now estranged from you as the beneficiary of your life insurance policy, he or she will receive the death benefit when you die – regardless of what your will states.2

Time has a way of altering our beneficiary decisions. This is why some estate planners recommend that you review your beneficiaries every two years.

In some states, you can authorize transfer-on-death designations. This is a tactic against probate: TOD designations may permit the ownership transfer of securities (and in a few states, forms of real property, vehicles and other assets) immediately at your death to the person designated. TOD designations are sometimes referred to as “will substitutes” but they usually pertain only to securities.3

Create asset and debt lists. Does this sound like a lot of work? It may not be. You should provide your heirs with an asset and debt “map” they can follow should you pass away, so that they will be aware of the little details of your wealth.

  • One list should detail your real property and personal property assets. It should list any real estate you own, and its worth; it should also list personal property items in your home, garage, backyard, warehouse, storage unit or small business that have notable monetary worth.
  • Another list should detail your bank and brokerage accounts, your retirement accounts, and any other forms of investment plus any insurance policies.
  • A third list should detail your credit card debts, your mortgage and/or HELOC, and any other outstanding consumer loans.

Think about consolidating your “stray” IRAs and bank accounts. This could make one of your lists a little shorter. Consolidation means fewer account statements, less paperwork for your heirs and fewer administrative fees to bear.

Let your heirs know the causes and charities that mean the most to you. Have you ever seen the phrase, “In lieu of flowers, donations may be made to …” Well, perhaps you would like to suggest donations to this or that charity when you pass. Write down the associations you belong to and the organizations you support. Some non-profits do offer accidental life insurance benefits to heirs of members.

Select a reliable executor. Who have you chosen to administer your estate when the time comes? The choice may seem obvious, but consider a few factors. Is there a stark possibility that your named executor might die before you do? How well does he or she comprehend financial matters or the basic principles of estate law? What if you change your mind about the way you want your assets distributed – can you easily communicate those wishes to that person?

Your executor should have copies of your will, forms of power of attorney, any kind of healthcare proxy or living will, and any trusts you create. In fact, any of your loved ones referenced in these documents should also receive copies of them.

Talk to the professionals. Do-it-yourself estate planning is not recommended, especially if your estate is complex enough to trigger financial, legal and emotional issues among your heirs upon your passing.

Many people have the idea that they don’t need an estate plan because their net worth is less than X dollars. Keep in mind, money isn’t the only reason for an estate plan. You may not be a multimillionaire yet, but if you own a business, have a blended family, have kids with special needs, worry about dementia, or can’t stand the thought of probate delays plus probate fees whittling away at assets you have amassed … well, these are all good reasons to create and maintain an estate planning strategy. PRIMESolutions Advisors can help you through the process, call us today.

Citations.
1 financial-planning.com/news/Schenkman-lawyers-estate-2665998-1.html [3/1/10]
2 sfgate.com/cgi-bin/article.cgi?f=/g/a/2010/11/02/investopedia6151.DTL [11/2/10]
3 raymondjames.com/branches/c2c/35C/oxleygrouprja/articles/distribution/tod_will_substitutes.pdf [2006]
4 www.montoyaregistry.com/Financial-Market.aspx?financial-market=reasons-not-to-write-your-own-will&category=30 [1/23/11]

How Fast the Markets Recover

October 24th, 2011 | No Comments | Posted in Financial News
Don’t let the headlines get you down.
Look at how the markets have rebounded.

The stock market is amazingly resilient. The sky is not falling, despite what the pessimists would have you believe. Yes, the Dow Jones Industrial Average entered bear market territory in early July. Yes, oil prices are incredibly high. Yes, June was a really lousy month for stocks. We can’t change all this. But you might be surprised at how fast the stock market can change … for the better. Looking back, the market has recovered remarkably – and quickly – from some notable downturns.

2001-2002. After the four-day closure of the stock market following 9/11, the Dow fell 685 points (the biggest single-day drop ever) to 8920 on September 17. It kept falling, losing 14.26% in a week to close at 8,235 on September 21. But what happened next? A huge gain. The Dow closed 2001 at 10,021 – a 21% rebound in less than three months.1

There were more challenges ahead. On October 9, 2002, the Dow had fallen to 7,286. But on Halloween, the Dow sat at 8,397 – a 10.6% gain in 22 days.1

As for the people who panicked and bailed out of the stock market, they ended up kicking themselves: in 2003, the DJIA gained 25.3%, the S&P 500 26.4%, and the NASDAQ 50%.2

1987. October 19 was Black Monday: in a contagion of selling exacerbated by unchecked computer technology, the Dow lost 22.6% in one day, falling to 1,738, a 508-point loss.3 (That would be akin to a 2,300-point one-day drop today.) The S&P 500 lost 20.4%.4 By comparison, the initial “Black Monday”, the stock market crash of 1929, represented a 12.8% market loss.5

Then the recovery kicked in. During the next two trading days, the Dow gained nearly 300 points – and it closed 1987 at 1,939, gaining back all of the loss and ending up 2% for the year.6 By January 1990, the DJIA was at 2,800.7

If you were fortunate enough to invest $1,000 in the S&P 500 index at the close of Black Monday and reinvested your dividends, you would have wound up with about $10,800 20 years later.3 If you had invested in the Dow stocks a week before Black Monday, you would have lost 30% on your investment in the crash … but if you held on, your investment would have gained 462% over the next 20 years.6

1974. With investors fretting over rising inflation and the energy crisis, the Dow loses 30% of its value during the first three quarters of the year. Suddenly, the Dow gains 16% in October.8 In early December 1974, the Dow is at 577; in July 1976, it hits 1,011.1

I hope these examples give you some encouragement and confidence when it comes to the market right now. The Dow, S&P and NASDAQ have been through some rough periods, but the important thing is to look at how they have climbed across the decades.

On August 12, 1982, the Dow was at 777. On January 14, 2000, it was at 11,722.98. That’s a 1,500% gain in 17½ years.9 This is why people stay in the market through the downturns. This is what the market is capable of achieving. There are periodic descents, but history is definitely on an investor’s side.

What should you do now? That’s a good question. If you would like to talk about how to invest in light of this recent market, and what financial moves you might make that could help you manage risk and take advantage of a rebound, then talk with us at PRIMESolutions Advisors today.

Citations. 1 the-privateer.com/chart/dow-long.html [6/30/08]
2 upi.com/Business_News/2003/12/31/UPI_NewsTrack_Business/UPI-75601072911443/ [12/31/03]
3 sfgate.com/cgi-bin/article.cgi?file=/c/a/2007/10/18/BUODSRIN6.DTL&type=printable [10/18/07]
4 foreignpolicy.com/story/cms.php?story_id=4026 [10/07]
5 money.cnn.com/2004/10/26/markets/1929crash/ [10/26/04]
6 articles.moneycentral.msn.com/Investing/Dispatch/BlackMonday20YearsAfter.aspx [10/19/07]
7 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average [7/3/08]
8 money.cnn.com/2008/06/27/markets/bear_market.moneymag/index.htm
9 answers.com/topic/closing-milestones-of-the-dow-jones-industrial-average  [7/3/08]

401k Study: Help Can Improve Performance By 3%

October 24th, 2011 | No Comments | Posted in Financial News

By DAVID PITT, AP Personal Finance Writer – Sep 26, 2011

DES MOINES, Iowa (AP) — Sometimes it pays to get help. A new study of 401(k) accounts provides further evidence that workers who get help pocket higher returns than those handling their own investment choices.

The study by human resources consultant Aon Hewitt and investment adviser Financial Engines shows that workers who received some form of help experienced annual returns on average of 3 percent better than workers who handled their own accounts.

But it’s important to clarify what’s meant by “help.” Workers who used target-date mutual funds, professionally managed accounts or accessed online advice were all deemed to have used help for purposes of this study. Their behavior from 2006 through 2010, and how it affected account risks and returns, was studied.

Target-date funds automatically set the mix of stocks and bonds according to a worker’s risk tolerance and years until retirement. Managed accounts are those with professional manager so the accountholder doesn’t have to make ongoing investment decisions.

Based on the returns estimated in the study, the difference that 3 percent could make over 20 years is striking. If two accountholders — one who sought help and one who did not — invested $10,000 at age 45, the person who got help could have $71,400 saved by age 65. That’s 70 percent more than $42,100 of the worker who handled their own affairs.

The study looked at eight large 401(k) plans representing more than 425,000 individual participants with $25 billion in assets.

It should be noted that Financial Engines’ services include managed accounts and advice services. Aon Hewitt offers companies retirement plan options including self-directed brokerage accounts and financial planning help services.

The difference in performance can be attributed to common mistakes made by 401(k) accountholders managing their own investments.

GETTING OUT

Getting scared and pulling money out of stocks when the market tumbles, and then failing to reinvest before the market recovers hurts many retirement investors. This behavior was very damaging in 2008, when the Standard & Poor’s 500 index fell nearly 39 percent. Unfortunately many stayed out and missed the 26 percent recovery in 2009.

“When markets are as volatile as they are now there is a substantial opportunity to make some very bad mistakes,” said Christopher Jones, chief investment officer for Financial Engines. “Particularly if you’re a near retiree. That can be very damaging.”

TOO MUCH OR TOO LITTLE RISK

Choosing an inappropriate level of risk for a worker’s age and years until retirement is another common error. Leading up to the market collapse in 2008, many workers within five years of retirement carried too much risk, keeping a large portion of their money in stocks. When the market dropped, on average, 401(k) investors lost a third of their account balance. Those who were close to their planned retirement didn’t have time to make up the losses and in many cases had to continue working.

Younger workers who are too cautious and shy away from stocks can cut their earning potential significantly over time.

COMPANY STOCK

Another common costly mistake is investing too much money in the employer’s company stock, Jones said. Many workers believed their own company stock was less risky than other choices. When the market plunged in 2008, many of these stocks fell as much as 70 percent. This led to a devastating loss for heavily invested workers.

REBALANCING

Failure to periodically rebalance a portfolio can also hurt returns. By rebalancing, investors adjust the allocation between stocks and bonds in their portfolios to ensure their investments reflect their appetite for risk. For instance, in a market where stocks surge, a portfolio can become too heavily invested in stocks unless the accountholder moves some of that money from stock funds into bonds or other assets.

Failure to rebalance after a market surge or drop leaves a portfolio at risk to underperform.

COMPLACENCY

A large segment of 401(k) accountholders have historically been complacent about their investments, failing to do anything with their account for years.

“Rather than do something wrong they’re just not doing anything,” said Pamela Hess, director of retirement research at Aon Hewitt. “With all the volatility in the last few years, I think folks don’t know what to do and a lot are just doing nothing.”

More workers with 401(k) accounts are using some form of help, Hess said. An earlier study of 401(k) accounts indicated about 25 percent of workers used help with their investments in 2009. As of the end of 2010, about 30 percent of workers were using help.

Hess points out it, however, that still means about 70 percent of workers don’t get help.

“This study really quantifies the fact that he gap between doing things on your own and what you can get with professional help does in fact get substantially wider during periods of volatility and economic stress,” Jones said.

While acknowledging that some forms of help including managed accounts carry higher costs, Jones said the difference in performance outweighs the increased cost.

Managed account fees typically range from 0.20 percent to more than 1 percent of the account balance. Target-date fund fees can range from around 0.18 percent to more than 1.5 percent of assets.

October Monthly Economic Update

October 24th, 2011 | No Comments | Posted in Monthly Economic Update

Creepy Crossword Puzzle

October 24th, 2011 | No Comments | Posted in Fun

Instruction: HOW TO PLAY. Double-click the first square of a word to toggle between down and across. To enter letters, simply type them on your keyboard.

At first it looks like this game only has one crossword. But after you finish the first one, click the “START OVER” button and a new crossword will appear. The game contains several Halloween crossword puzzles, so keep playing!

Top 10 Public Domain Horror Movies – Watch Now On Your Computer

October 24th, 2011 | No Comments | Posted in Fun

As it is Halloween, we would be remiss not to include a list of horror movies that you can watch online. For the sake of others on the site – be sure to let us know of any public domain movies you know of that people might also enjoy. Happy Halloween from the List Universe!

10. Dementia 13 ~ 1963, Francis Ford Coppolla

John Haloran has a fatal heart attack, but his wife Louise won’t get any of the inheritance when Lady Haloran dies if John is dead. Louise forges a letter from John to convince the rest of his family he’s been called to New York on important business, and goes to his Irish ancestral home, Castle Haloran, to meet the family and look for a way to ensure a cut of the loot. Seven years earlier John’s sister Kathleen was drowned in the pond, and the Halorans enact a morbid ritual in remembrance. Secrets shroud the sister’s demise, and soon the family and guests begin experiencing an attrition problem.

9. Phantom of the Opera ~ 1925, Rupert Julian

At the Opera of Paris, a mysterious phantom threatens a famous lyric singer, Carlotta and thus forces her to give up her role (Marguerite in Faust) for unknown Christine Daae. Christine meets this phantom (a masked man) in the catacombs, where he lives. What’s his goal? What’s his secret?

8. The Last Man on Earth 1964, Ubaldo Ragona

Dr. Robert Morgan (Vincent Price) is the only survivor of a devastating world-wide plague due to a mysterious immunity he acquired to the bacterium while working in Central America years ago. He is all alone now…or so it seems. As night falls, plague victims begin to leave their graves, part of a hellish undead army that’s thirsting for blood…his!

7. The House on Haunted Hill ~ 1959, William Castle

Millionaire playboy Fredrick Loren hosts a party for his 4th wife Annabelle Loren at the “House On Haunted Hill,” a house that has seen seven murders, Fredrick invites 5 guests: Lance Schroeder,a pilot, Ruth Bridges, a journalist, Watson Prichard, the owner of The House On Haunted Hill, Nora Manning, a worker for one of Fredrick Loren’s companies, and David Trent, a psychiatrist. Fredrick will offer each of them $10,000 to spend a night in The House On Haunted Hill. They all want the money. At midnight, the caretakers lock to doors, and the terror begins!

6. Dr Jeckyll and Mr Hyde ~ 1920, John Robertson

Based on the story by Robert Louis Stevenson, Dr. Henry Jekyll believes that there are two distinct sides to men – a good and an evil side. He believes that by separating the two men can become liberated. He succeeds in his experiments with chemicals to accomplish this and transforms into Hyde to commit horrendous crimes.

5. Night of the Living Dead ~ 1968, George Romero

The dead come back to life and eat the living in this low budget, black and white film. Several people barricade themselves inside a rural house in an attempt to survive the night. Outside are hordes of relentless, shambling zombies who can only be killed by a blow to the head.

4. Dracula ~ 1931, Tod Browning

After a harrowing ride through the Carpathian Mountains in Eastern Europe, Renfield enters castle Dracula to finalize the transferal of Carfax Abbey in London to Count Dracula, who is in actuality a vampire. Renfield is drugged by the eerily hypnotic count, and turned into one of his thralls, protecting him during his sea voyage to London. After sucking the blood and turning the young Lucy Weston into a vampire, Dracula turns his attention to her friend Mina Seward, daughter of Dr. Seward who then calls in a specialist, Dr. Van Helsing, to diagnose the sudden deterioration of Mina’s health. Van Helsing, realizing that Dracula is indeed a vampire, tries to prepare Mina’s fiance, John Harker, and Dr. Seward for what is to come and the measures that will have to be taken to prevent Mina from becoming one of the undead.

3. The Cabinet of Dr Caligari ~ 1919, Robert Wiene

A horror film that surpasses all others. Alan relates the story of traveling magician Dr Caligari and Cesare. Their arrival in a town coincides with savage killings. Secretly Caligari was an asylum director who hypnotizes Cesare to re enact murders. But the final reel contains something, which will leave an audience shattered. It blows away all your moral certainties and beliefs. This is the true power of its horror. To leave you vulnerable and uncertain of what you feel was secure and certain.

2. Nosferatu ~ 1922, F Murnau

An unauthorized production of Bram Stoker’s work (The legal heirs didn’t give their permission), so the names had to be changed. But this wasn’t enough: The widow of Bram Stoker won two lawsuits (1924 and 1929) in which she demanded the destruction of all copies of the movie, however happily copies of it were already too widespread to destroy them all. Later, the Universal studios could break her resistance against this movie. Count Orlok’s move to Wisburg (Obviously the real “Wismar”) brings the plague traceable to his dealings with the Realtor Thomas Hutter, and the Count’s obsession with Hutter’s wife, Ellen the only one with the power to end the evil.

1. M ~ 1931, Fritz Lang

A psychotic child murderer stalks a city, and despite an exhaustive investigation fueled by public hysteria and outcry, the police have been unable to find him. But the police crackdown does have one side-affect, it makes it nearly impossible for the organized criminal underground to operate. So they decide that the only way to get the police off their backs is to catch the murderer themselves. Besides, he is giving them a bad name.

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Sixth Sense Technology May Change How We Look at the World Forever

October 24th, 2011 | No Comments | Posted in Videos

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