Bears versus bulls 

Corrections of 10% or more and bear markets of at least 20% are a regular occurrence. Since 1929, there have been 18 previous 20%-plus bear markets (not including 2011 market action). Losses on the S&P 500 in those markets ranged from almost 21% in 1948-49 to 83% during 1930-1932; the average loss for all 18 bears was 37%.*

However, since 1929, the average bull market has tended to last almost twice as long as the average bear, and has produced average gains of about 79%.* Individual bull market gains have ranged from 21.4% at the end of 2001 to the nearly 302% increase registered during the 1990s.* The worst annual loss–47%–occurred in 1931, but the all-time best annual return–a capital appreciation gain of just under 47%–happened just two years later in 1933.**

Points of reference

Last year’s volatility rattled even seasoned investors. For example, during a single week in August, 2 of the Dow’s 11 best days in history alternated with 2 of its 11 worst daily point losses ever.***

While by no means normal, the highs and lows are hardly unprecedented. Even though the 634-point drop on August 8 felt historic, it didn’t begin to match the real record-holders. The single biggest daily decline occurred in September 2008, when the Dow fell 778 points. The biggest percentage drop was October 1987′s “Black Monday,” when the Dow fell almost 23%; that makes the Dow’s 5.5% loss on August 8, 2011, seem relatively tame by comparison. And August 8 was followed by the Dow’s 10th best day ever, with a gain of 430 points. While that upward movement may seem exceptional, the Dow’s best day ever came during the dark days of October 2008, when a 936-point move up on October 13 represented a gain of more than 11% in a single day.***

Stocks versus bonds

The last decade has been a challenging one for stocks. Between 2001 and 2010, the S&P 500 had an average annual total return of just 1.4%, while the equivalent figure for Treasury bonds was 6.6%.**** For much of that time, interest rates were falling, helping bonds to outperform stocks. However, interest rates are now at record lows, and rising rates could change the relative performance of stocks and bonds.

While there may be ongoing volatility in the markets that needs to be monitored, it’s important to keep things in perspective. Your ability to meet your goals could be affected if you change your overall long-term game plan with every new headline.

Past performance is no guarantee of future results. Market indices listed are unmanaged and are not available for direct investment. All investing involves risk, including the risk of loss of principal, and there can be no guarantee that any investment strategy will be successful. The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The Standard & Poor’s 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy.

DATA SOURCES: *Bull and bear market time frames, gains/losses: all calculations based on data from the Stock Trader’s Almanac 2011 for the Standard & Poor’s 500.

**1931 and 1933 annual stock returns: based on Ibbotson SBBI data for capital appreciation of S&P 500.

***Based on data from the Stock Trader’s Almanac 2011.

**** 10-year rolling stock returns: based on Ibbotson SBBI data for annual total returns between 2001 and 2010 of S&P 500 and an index of U.S. Treasury bonds with an approximate 20-year maturity.

Copyright 2012 Forefield Inc.

How it works

The rule is especially helpful if one spouse has little or no compensation. For example, Mary (age 45) and Joe (age 50) are married and file a joint return for 2011. Mary earned $100,000 in 2011 and Joe, a stay-at-home dad, earned nothing for the year. Mary contributes $5,000 to her IRAs for 2011. Even though Joe has no earnings, he can still contribute up to $6,000 to his IRAs for 2011, because Joe and Mary’s combined compensation is at least $11,000.

It gets just a little more complicated if your combined compensation is less than the maximum IRA contribution allowed. Assume Nicole earns $4,000 in 2011, and Jack earns $2,000, for total compensation of $6,000. If Nicole makes no contribution at all to her IRAs in 2011, Jack can contribute up to $5,000 to his IRA ($6,000 if he’s 50 or older). If Nicole contributes $4,000 to her IRAs for 2011, then Jack can contribute up to $2,000 to his IRA. Note that the spousal IRA rule applies only to the spouse with the lesser amount of compensation. In the previous example, the maximum amount that Nicole (the higher earning spouse) can contribute to her IRAs is $4,000, because she’s not entitled to take Jack’s earnings into account.

Here’s the actual contribution formula, as stated by the IRS: The spouse with the lesser amount of taxable compensation can contribute the smaller of the following two amounts:

$5,000 ($6,000 if age 50 or older)
The total amount the couple includes in gross income for the year, reduced by the amount the higher earning spouse contributes to his or her own IRAs (traditional or Roth) for that year.

Source of funds

The spousal IRA rule only determines how much you can contribute. It doesn’t matter where the money you use to fund your IRA actually comes from. For instance, in the first example, Mary earned $100,000 and Joe earned nothing in 2011. But Joe could still contribute up to $6,000 to his IRA because of the spousal IRA rule. It doesn’t matter if the money Joe actually uses to fund his IRA comes from Mary, from savings, from a gift Joe receives, or from any other particular source. The spousal IRA rule doesn’t require you to track the source of your contribution.

Impact on other IRA rules

The spousal IRA rule doesn’t change any of the other rules that generally apply to IRAs. You can contribute to a traditional IRA, to a Roth IRA, or both. However, you can’t make regular contributions to a traditional IRA for the year you turn 70½ or thereafter. And your contributions to a traditional IRA are deductible only if neither you nor your spouse is covered by an employer retirement plan or, if either of you is covered by a plan, your combined income is within certain limits.

If you aren’t eligible to make deductible contributions to a traditional IRA because you and your spouse earned too much, you can make nondeductible contributions instead. However, you may be better off contributing to a Roth IRA (if you qualify) instead of making nondeductible contributions to a traditional IRA.

Your ability to make annual contributions to a Roth IRA may also be limited, or eliminated, depending on the amount of your combined income. If you’re eligible, though, you can contribute to a Roth IRA at any age–the 70½ rule doesn’t apply. And it doesn’t matter if you or your spouse is covered by an employer plan.

Copyright 2012 Forefield, Inc.

Standard homeowners insurance generally does not cover damage directly caused by either floods or earthquakes. Federal disaster assistance is usually in the form of loans or grants and is only available if the damage is widespread and very serious, and the affected area is declared a disaster area by the Federal Emergency Management Agency (FEMA). So what should you do? First, review your current insurance with your insurance professional to determine what is, and especially what isn’t, covered. Assuming you aren’t covered for damage caused by flood or earthquake, consider buying flood or earthquake insurance, especially if you live in an area prone to recurrent disasters of this type.

Flood insurance

You might consider purchasing flood insurance even if you don’t live in a high-risk area for floods. Storms, inadequate drainage, melting snow, and hurricanes can all cause serious flooding. According to the National Flood Insurance Program (NFIP), approximately 20% of all flood insurance claims come from areas that are at low to moderate risk for floods (www.floodsmart.gov). And if you’re buying a home in a designated flood zone, your mortgage lender will require you to carry flood insurance before granting you a mortgage.

However, you can’t simply buy flood insurance as an endorsement to your current homeowners policy. Instead, if you are eligible, you can purchase a separate flood insurance policy through an insurance company that participates in the NFIP. A few insurance companies also offer excess flood insurance policies that can supplement NFIP coverage.

A flood insurance policy provides flood protection for both your home and its contents. You can purchase up to $250,000 of coverage for the building itself, and up to $100,000 of coverage for the contents. If you own a home whose value exceeds the amount available through the federal program, you may be able to buy excess flood insurance through a private insurer. Excess flood insurance covers amounts above the $250,000 federal limit, and unlike NFIP coverage, may cover your home for its full replacement cost. You may be able to purchase these policies even in high-risk flood zones. Flood insurance offers some degree of protection for flood-related basement damage, but it doesn’t cover all types of damage. It also doesn’t cover events such as seepage or failure of a sump pump, and damages caused by sewer backups aren’t covered unless they are directly related to a flood.

Earthquake insurance

Most homeowners policies generally have very limited coverage for earthquake damage–excluding direct loss from earth movement but covering loss by a subsequent fire, explosion, breakage of glass, or theft. As a result, if you live in an area prone to earthquakes, you may want to purchase earthquake insurance.

Typically, earthquake insurance covers damage to your home and your possessions. Most policies also cover costs incurred to minimize further damage after the earthquake, and costs for additional living expenses. The cost of earthquake insurance varies, depending on the scope of coverage, type of structure, and your location (e.g., in an earthquake zone). Coverage can be purchased as an endorsement to your existing homeowners insurance, or as a separate policy.

Whether you should buy earthquake insurance may depend on a number of factors that include:

• The frequency and severity of earthquakes in your area
• The likelihood an earthquake would cause considerable damage to your home
• Whether your home is constructed to withstand an earthquake of moderate strength
• Whether you could absorb the cost of replacing your residential and personal property

If you do buy earthquake insurance, you’ll probably want to buy enough to cover the costs of rebuilding your home and replacing damaged personal property. That means that the amount of insurance you buy generally should be based on replacement or reconstruction costs and not the current market value of your home and possessions. Also, you may not notice some damages to your home or possessions immediately after an earthquake, so be sure the policy you buy gives you adequate time to discover damages and file a claim.

Copyright 2012  Forefield Inc.

Prior to 2011, each spouse was entitled to his or her own applicable exclusion amount, and any amount that a spouse did not use was lost, absent special planning.

But, thanks to legislation passed in 2010, the estate of the first spouse to die can now elect to transfer any basic exclusion amount that is not used to the surviving spouse. This is known as “portability.” For 2011 and 2012, the applicable exclusion amount is redefined as equal to the sum of the basic exclusion amount of the surviving spouse and the unused basic exclusion amount of the last deceased spouse. For 2011 and 2012, the basic exclusion amount is $5 million (plus indexing in 2012).

Portability of the exclusion between spouses and an increase in the basic exclusion amount would seem to make estate planning easier for many estates. However, unless extended by Congress, in 2013, portability of the unused basic exclusion amount between spouses is set to expire and the exclusion is scheduled to decrease to $1 million.

Simple planning with portability
If you’re planning today, you could transfer everything to your spouse and, if you die in 2011 or 2012, your estate can elect to transfer your unused basic exclusion amount to your surviving spouse. Your spouse will then have an applicable exclusion amount equal to the sum of his or her own basic exclusion amount and your unused basic exclusion amount, which your spouse can use for gift or estate tax purposes. For example, if you transfer your $5 million unused basic exclusion to your surviving spouse, who also has a $5 million basic exclusion amount, your spouse then has a $10 million applicable exclusion amount to shelter property from gift and estate taxes. Such simple planning might be very practical for some married couples, especially where the spouses’ combined estates are expected to be less than the applicable exclusion amount.

Potential need for more complex planning
There are a number of reasons why such simple planning with portability may not produce the desired or best results. These include:

• Portability is set to expire in 2013, and tax rates are scheduled to increase while the applicable exclusion amount is set to decrease.
• You have family members or individuals other than your spouse that you would like to benefit prior to the death of your spouse.
• You have grandchildren or younger generations that you would like to benefit. The $5 million generation-skipping transfer (GST) tax exemption is not portable between spouses (and is scheduled to decrease to $1 million as indexed in 2013).
• State exclusion amounts may be lower than the federal applicable exclusion amount and may not be portable between spouses.

Use of A/B trust arrangement
Prior to the 2010 legislation, many married couples with estates that were greater than the applicable exclusion amount would set up an A/B (or A/B/C) trust arrangement. In general, the first spouse to die would transfer an amount equal to the applicable exclusion amount to the “B” or credit shelter (bypass) trust. The B trust could benefit the surviving spouse and their children, but the B trust would be designed to bypass the surviving spouse’s estate. The balance of the estate would be transferred to the surviving spouse, either outright or by using an “A” marital trust, and qualify for the marital deduction. In some cases, a “C,” “Q,” or QTIP marital trust was also used if the first spouse to die wanted to control who received the marital trust property at the second spouse’s death. The A/B trust arrangement typically assured that there would be no estate tax at the first spouse’s death and that neither spouse’s applicable exclusion amount was wasted.

An A/B trust arrangement may still be useful whether or not portability is available. For example, the B trust can assure that the applicable exclusion amount of the first spouse to die is not lost, even if portability is not available in the future. The B trust can be used to provide for family members or individuals other than your spouse (and even your spouse) prior to the death of your spouse. You could also allocate your GST tax exemption or state exclusion to the B trust. The A trust could use your spouse’s applicable exclusion amount, GST tax exemption, and state exclusion.

Review estate plans and documents
Your documents and plans may need to be revised to reflect the tax changes for 2011 and 2012 and for the uncertainty for 2013 and beyond. To help guide you through these opportunities and uncertain times, consult an experienced estate planning attorney.

Copyright Forefield Inc.

Proceed with caution
The first thing you’ll want to do after receiving a large sum of money is to take a deep breath. You may feel the urge to spend, invest, move, quit your job, or give to others. But if you want your windfall to last, don’t do anything until you’ve had a chance to come to terms with the personal and financial consequences. Regrettably, some people who suddenly come into money lose it all within a few years because they fail to plan. Taking the time to make well-thought-out financial decisions will help ensure that your money will last.

Put your money somewhere temporarily
Until you’ve had time to explore your options, there’s nothing wrong with putting a lump sum into a relatively liquid account, such as a savings or money market account. You don’t have to leave it there forever–just set it aside until you’ve had time to formulate a plan.

Assemble a support team
Because your finances are likely going to be a lot more complex now, one of the first things you should do is to get unbiased advice from a financial professional who can help you put together a financial plan. You may also need to work with an accountant, an attorney, or an insurance professional who can help address any tax, estate planning, or insurance planning concerns. Although receiving a windfall should be a happy event, it’s sometimes very stressful, and you may need help from trusted professionals to help you handle the pressure.

Avoid spending and giving impulsively
Spend or give your money away too quickly and you risk depleting your nest egg. Although it’s tempting to go out and buy something you’ve always wanted but couldn’t afford before, watch your spending. A financial windfall can turn even a financially conservative person into an impulsive shopper. If your ultimate goal is to create lasting wealth, take time to consider your future needs, not just what you need (and want) today.

What about giving or loaning money to family and friends, or making a charitable donation? Again, it’s best to wait until you’ve set priorities and developed a financial plan. Otherwise, your personal relationships could suffer (will your sister be hurt if you give $10,000 to your brother?), and your generosity might have unintended consequences (will you be approached by dozens of charities once you donate to one?).

Watch out for too-good-to-be-true opportunities
Unfortunately, more than one person has become the target of unscrupulous individuals looking to profit from the good fortune of others. And even if you’re approached by a well-meaning friend, family member, or business associate, you should thoroughly investigate any investment or business opportunities presented, instead of relying on someone else’s judgment. If you have trouble saying no, consider referring any requests you receive to a third party, such as an attorney or financial professional you’re working with.

Look at your financial needs and goals
An important part of handling a financial windfall is to evaluate your short- and long-term needs and goals. This will serve as a foundation for your financial plan.

• Do you have enough money set aside in an emergency account?
• Do you have outstanding debt that you’d like to pay off?
• Do you plan to pay for your children’s education?
• Do you need to bolster your retirement savings?
• Are you planning to buy a first or second home?
• Would you like to quit your job or go into business for yourself?
• Are you considering giving or loaning money to loved ones or donating to a favorite charity?
• What would you like to accomplish with your wealth over time?

Have a little fun
Once you’ve made some initial decisions and set aside money needed to pay taxes, consider spending a small portion of your windfall on something you’d like. There’s no reason to deprive yourself, as long as you’ve taken care of business first. If you plan well and control the urge to spend lavishly, your windfall may provide you with financial security and comfort for many years to come.

Copyright Forefield, Inc.

First, consider a plan loan
Many 401(k) plans allow you to borrow money from your own account. A loan may be attractive if you don’t qualify for a withdrawal, or you don’t want to incur the taxes and penalties that may apply to a withdrawal, or you don’t want to permanently deplete your retirement assets. (Also, you must take any available loans from all plans maintained by your employer before you’re even eligible to withdraw your own pretax or Roth contributions from a 401(k) plan because of hardship.)

In general, you can borrow up to one half of your vested account balance (including your contributions, your employer’s contributions, and earnings), but not more than $50,000.

You can borrow the funds for up to five years (longer if the loan is to purchase your principal residence). In most cases you repay the loan through payroll deduction, with principal and interest flowing back into your account. But keep in mind that when you borrow, the unpaid principal of your loan is no longer in your 401(k) account working for you.

Withdrawing your own contributions
If you’ve made after-tax (non-Roth) contributions, your 401(k) plan can let you withdraw those dollars (and any investment earnings on them) for any reason, at any time. You can withdraw your pretax and Roth contributions (that is, your “elective deferrals”), however, only for one of the following reasons–and again, only if your plan specifically allows the withdrawal:

• You attain age 59½
• You become disabled
• The distribution is a “qualified reservist distribution”
• You incur a hardship (i.e., a “hardship withdrawal”)

Hardship withdrawals are allowed only if you have an immediate and heavy financial need, and only up to the amount necessary to meet that need.In most plans, you must require the money to:

• Purchase a principal residence or repair a principal residence damaged by an unexpected event (e.g., a hurricane)
• Prevent eviction or foreclosure
• Pay medical bills
• Pay certain funeral expenses
• Pay certain education expenses
• Pay income tax and/or penalties due on the hardship withdrawal itself
• Investment earnings aren’t available for hardship withdrawal, except for certain pre-1989 grandfathered amounts.

But there are some disadvantages to hardship withdrawals, in addition to the tax consequences described below. You can’t take a hardship withdrawal at all until you’ve first withdrawn all other funds, and taken all nontaxable plan loans, available to you under all retirement plans maintained by your employer. And, in most 401(k) plans, your employer must suspend your participation in the plan for at least six months after the withdrawal, meaning you could lose valuable employer matching contributions. And hardship withdrawals can’t be rolled over. So think carefully before making a hardship withdrawal.

Withdrawing employer contributions
Getting employer dollars out of a 401(k) plan can be even more challenging. While some plans won’t let you withdraw employer contributions at all before you terminate employment, other plans are more flexible, and let you withdraw at least some vested employer contributions before then. “Vested” means that you own the contributions and they can’t be forfeited for any reason. In general, a 401(k) plan can allow you to withdraw vested company matching and profit-sharing contributions if:

• You become disabled
• You incur a hardship (your employer has some discretion in how hardship is defined for this purpose)
• You attain a specified age (for example, 59½)
• You participate in the plan for at least five years, or
• The employer contribution has been in the account for a specified period of time (generally at least two years)

Taxation
Your own pretax contributions, company contributions, and investment earnings are subject to income tax when you withdraw them from the plan. If you’ve made any after-tax contributions, they’ll be nontaxable when withdrawn. Each withdrawal you make is deemed to carry out a pro-rata portion of taxable and any nontaxable dollars.

Your Roth contributions, and investment earnings on them, are taxed separately: if your distribution is “qualified,” then your withdrawal will be entirely free from federal income taxes. If your withdrawal is “nonqualified,” then each withdrawal will be deemed to carry out a pro-rata amount of your nontaxable Roth contributions and taxable investment earnings. A distribution is qualified if you satisfy a five-year holding period, and your distribution is made either after you’ve reached age 59½, or after you’ve become disabled. The five-year period begins on the first day of the first calendar year you make your first Roth 401(k) contribution to the plan.

The taxable portion of your distribution may be subject to a 10% premature distribution tax, in addition to any income tax due, unless an exception applies. Exceptions to the penalty include distributions after age 59½, distributions on account of disability, qualified reservist distributions, and distributions to pay medical expenses.

Rollovers and conversions
Rollover of non-Roth funds
If your in-service withdrawal qualifies as an “eligible rollover distribution,” you can roll over all or part of the withdrawal tax free to a traditional IRA or to another employer’s plan that accepts rollovers. In general, most in-service withdrawals qualify as eligible rollover distributions except for hardship withdrawals and required minimum distributions after age 70½. If your withdrawal qualifies as an eligible rollover distribution, your plan administrator will give you a notice (a “402(f) notice”) explaining the rollover rules, the withholding rules, and other related tax issues. (Your plan administrator will withhold 20% of the taxable portion of your eligible rollover distribution for federal income tax purposes if you don’t directly roll the funds over to another plan or IRA.)

You can also roll over (“convert”) an eligible rollover distribution of non-Roth funds to a Roth IRA. And some 401(k) plans even allow you to make an “in-plan conversion”–that is, you can request an in-service withdrawal of non-Roth funds, and have those dollars transferred into a Roth account within the same 401(k) plan. In either case, you’ll pay income tax on the amount you convert (less any nontaxable after-tax contributions you’ve made).

Rollover of Roth funds
If you withdraw funds from your Roth 401(k) account, those dollars can only be rolled over to a Roth IRA, or to another Roth 401(k)/403(b)/457(b) plan that accepts rollovers. (Again, hardship withdrawals can’t be rolled over.) But be sure to understand how a rollover will affect the taxation of future distributions from the IRA or plan. For example, if you roll over a nonqualified distribution from a Roth 401(k) account to a Roth IRA, the Roth IRA five-year holding period will apply when determining if any future distributions from the IRA are tax-free qualified distributions. That is, you won’t get credit for the time those dollars resided in the 401(k) plan.

Be informed
You should become familiar with the terms of your employer’s 401(k) plan to understand your particular withdrawal rights. A good place to start is the plan’s summary plan description (SPD). Your employer will give you a copy of the SPD within 90 days after you join the plan.

Copyright Forefield, Inc.

Automate your retirement savings
In 2011: The economic slowdown took its toll on retirement savings.

In 2012: While the economy–and its impact on financial markets–may be out of your hands, you can still look for ways to increase your retirement savings. First, determine whether you’re leaving any money on the table. If you participate in an employer-sponsored retirement plan such as a 401(k) or a 403(b), contribute the maximum amount you can–particularly if your employer matches some or all of your contributions.

Contributing to an employer-sponsored retirement plan can help you save more consistently. Because your contributions are deducted automatically from your salary each pay period, you won’t be tempted to skip one now and then. And this year, why not resolve to steadily increase your retirement contributions? Your employer may allow you to sign up for automatic contribution increases based on a certain schedule or triggering event (e.g., annually or whenever your pay increases).

If you’re self-employed or contributing to a traditional or Roth IRA on your own, you can still automate your contributions by having money sent directly from a savings or checking account to your retirement account.

Plan ahead for a cash crunch
In 2011: According to the Federal Reserve, use of consumer credit rose in 2011 after falling for two straight years.

In 2012: If you’ve reigned in your spending but are still burdened by debt (especially credit card debt), your lack of emergency savings may be partly to blame. For example, even if you pay much more than your monthly minimum credit card payment, you’ll be caught in an endless cycle of debt unless you can avoid using your credit card for new expenses. Resolve to have at least three to six months of your living expenses set aside in a liquid account such as a savings or money market account so that you have cash on hand to pay for unexpected expenses (e.g., costly car or home repairs, large medical bills) instead of racking up new credit card debt and interest charges.

Review your investments
In 2011: Market volatility was the norm.

In 2012: You can’t control the market, but you can control your response to market volatility. Is your asset allocation still in line with your investment goals, time horizon, and risk tolerance? Is it time to rebalance your allocation in light of changing market conditions and/or your changing needs? Are you taking appropriate advantage of available investment products or offerings? Reviewing your portfolio periodically can help you stay on track.

Check your insurance coverage
In 2011: Floods, hurricanes, tornadoes, earthquakes, and wildfires were widespread.

In 2012: The federal government issued more disaster declarations in 2011 than in any other year on record, serving as a reminder that it’s important to review your property and casualty coverage to make sure you’re adequately protected. Is there coverage you really should have (e.g., personal umbrella liability, renters insurance, or flood protection), but don’t?

Update your estate plan
In 2011: New estate and gift tax laws took effect.

In 2012: Your estate plan should be reviewed in light of the changes made last year to estate and gift tax laws. Certain life events, such as changes in employment, family circumstances (marriages, divorces, births, illness or incapacity, and deaths), or even the valuation of your estate, may also affect your estate plan.

Copyright Forefield Inc.

FFP’s disclosure brochure

FFP’s privacy statement:

Frisco Financial Planning LLC  Privacy Statement

We respect your privacy. This statement details how we obtain information, what information we share and with whom, and measures we take to ensure your privacy. This statement applies to current and past clients and prospective clients.

Sources of information

• Information provided by you*.
• Information provided by third parties such as other advisers or financial institutions, family members, doctors, or medical facilities.
• Information provided by publicly-available sources.

Such information may be in verbal, electronic, or written form. We use reasonable means to verify the accuracy of information obtained from sources other than you. We assume that information provided by you is accurate and fully disclosed.

* We ask that you remove social security numbers and account numbers from any material that you provide to us (the best protection you have against misappropriated information is not disclosing it).

Who we share information with

• Current legally married spouses. We freely share information with the current legal spouse of a client. We consider current husband and wife to be a “joint client.” This policy is effective even though we only require one spouse’s signature on our client agreement.
• Any information that we communicate to one spouse is considered to be relayed by the recipient to the other spouse.
• It is your responsibility to notify us promptly of any marital status change and/or electronic mail address change(s). References in this privacy statement and in our client agreement and disclosure brochure to “you” or “client” refer to either husband or wife or both.
• Parties that you give us express consent to share information with (although it is our preference that you share any desired information directly with such third parties).
• Any party, when required by law.

Electronic information storage

We store information such as planning documents, investment statements, tax information, meeting and conversation notes, and other items electronically. Such information may be stored on “local” workstations as well as on “cloud-based” internet servers.

Local workstation data is encrypted and password-protected. “Cloud-based” services that we use employ password protection and 128 bit SSL encryption to protect your information. Additionally, several of the services we use provide additional security such as server-level data encryption
and/or 24/7 on-site security.

If we become aware of a security breach that might compromise your personal information, it is our policy to notify you promptly.

Non-electronic information storage

We limit non-electronic information storage to a small collection of current client work papers. We follow reasonable measures to protect such documents including the use of locked file cabinets and offices.

Electronic communications

We consider social security numbers, account numbers, dates of birth, and specific health-related conditions to be confidential information and we will not send these items electronically without using a password-protected document and/or encrypted e-mail or similar means.

We consider financial information such as account types, account values, statements of financial condition, and specifics to your financial plan (ie, assumptions, recommendations, and illustrations) as semi-confidential. This means we will use unprotected electronic means to communicate such items to you but we will not communicate such information directly to other parties (except as detailed above). In short, you agree that for such semi-confidential information, the ease of unsecured electronic communication outweighs the possibility of such information being intercepted by others.

We use several third party internet communication services to communicate with clients. By providing us with your email address, you give us permission to communicate with you via e-mail and via such services. We will not give away or sell your e-mail address to any other third parties.

Employees and contractors

This privacy statement applies to all employees and contractors of our company. When possible, we limit employee and contractor access to certain information and we use reasonable measures to prevent the unauthorized release of your information.

Have a fun, happy, and safe new year holiday!

As the number of Internet websites and software packages have quickly multiplied, along with the many books and stationery store kits that have always been available, do-it-yourself (DIY) estate planning is on the rise. The one-size-fits-all fill-in-the-blank forms that these sources provide may be attractive to some individuals because they cost a fraction of what attorneys typically charge. But is saving a few dollars worth the risk and potentially high cost of doing things incorrectly?

Cheap, easy, and better than nothing?

Proponents of DIY estate planning typically have two arguments:

It’s cheap and easy: A will, for instance, can be completed online in about 15 minutes for about $69. In comparison, working with an experienced attorney to create common estate planning documents (wills, trusts, health-care directives, and powers of attorney) may cost you anywhere from $800 to $3,000 or more, depending on the complexity of your estate.
It’s better than nothing: The consequences of dying without estate planning documents are that the state will make important decisions for you, such as how your property will be distributed, who will care for your minor children, and what medical care you’ll receive if you are unable to make your wishes known.
These points are valid; for those who cannot afford to pay an attorney, DIY may be the only economical alternative available. For others, a poorly drafted will is better than no will at all, especially where the naming of a guardian for minor children is involved. But the chances that DIY estate planning will effectively accomplish exactly what you intend is slim. Here’s why.

It’s too easy to make mistakes

DIY sources typically only handle simple estates, and can’t deal with even the most common complexities such as children from a prior marriage, children with special needs, property that has appreciated in value resulting in capital gains, or estates that are large enough to be subject to estate taxes. And, DIY sources generally fail altogether to take advantage of sophisticated estate planning strategies because they typically can’t account for an individual’s unique circumstances.

Further, you may make an error by failing to understand the instructions or by following the instructions incorrectly.
The result is that the documents you create could be invalid, ineffective, or contain legal language having consequences you never intended. You might not know if that is the case during your lifetime, but at your death your loved ones will find out and may suffer the lasting consequences of your mistakes.

You’re not getting legal advice

DIY sources provide forms but not legal advice. In fact, these sources clearly state that they are not a substitute for an attorney, and that they are prohibited from providing any kind of legal advice.

Estate planning involves a lot more than producing documents. It’s impossible to know, without a legal education and years of experience, what the right legal solution is to your particular situation and what planning opportunities are available. The actual documents produced are simply tools to put into effect a plan that should be specifically tailored to your circumstances and goals.

Estate planning laws change

Laws are not static. They constantly change because of new case law and legislation, especially when it comes to estate taxes. Attorneys keep up with these changes. DIY websites, makers of software, and other sources may not do as good a job at keeping current and up-to-date.

Fixing mistakes can be costly
As previously stated, estate planning documents can be obtained from a lawyer for $800 to $3,000 or more, depending on the complexity of your estate. But these costs are minor in comparison to the costs that your loved ones may incur if there are serious errors in your DIY estate planning. Many more thousands of dollars may have to be spent by your loved ones to undo what was done wrong.

The bottom line

There are obvious savings in legal fees by using form wills and trusts, but there are also risks involved. One of them is that problems such as defective forms, violations of state law, or improper witnessing will not be apparent to you when the documents are signed. It may be only after death occurs many years later when the problems are discovered, and at that point it may be very costly, or even worse, too late to revise the documents.

Copyright Forefield, Inc.