Advisor Spotlight: Kylie Fletcher

Ms. Fletcher is the Founder and Principal Attorney at Fletcher Law in San Diego. She serves clients throughout California in the area of Estate Planning. I recently had Kylie answer some frequently asked questions.

Linda Rogers: What is the biggest mistake that families with young children make with regards to their Estate Planning?

Kylie Fletcher: Often, young parents avoid estate planning because they believe that they are young and healthy and need not be concerned yet. Sometimes, they feel they can’t afford an attorney. However, estate planning is a vital part of caring for your young child. Doing nothing can be a very serious and costly mistake. 
The most important part of an estate plan for young parents is naming a guardian for their children. The guardian is the person who will care for the children who have not reached the age of majority before both parents die. Select someone you trust to raise your children and determine if that person is agreeable before finalizing your will. When selecting a guardian, consider the age of the person and whether they will be able to provide adequate care. Name a secondary guardian in the event that the primary guardian is unable or unwilling to serve.

Linda Rogers: For children under 18, do you recommend a Trust be listed as the contingent beneficiary (assuming the primary beneficiary is the spouse) as opposed to the children themselves?

Kylie Fletcher: Yes. If the child is still a minor when the parent dies, the court will usually get involved, especially if the inheritance is significant. Minor children can be on a title, but they cannot conduct business in their own names. When the owner’s signature is required to make a sale, refinance or transact other business, the court will have to get involved to protect the child’s interests. When the court is involved things move slowly and can become very expensive. Every expense must be documented, audited and approved by the court and an Attorney will need to represent the child.

If you establish a Trust as the contingent beneficiary, a person you select, not the court, will be able to manage the inheritance for your minor children until they reach the age(s) that you determine. A Trust can accommodate each child’s needs and circumstances and protect your children’s inheritance from the courts, irresponsible spending and creditors (even divorce proceedings).

Linda Rogers: Can you give us examples of plans that you have seen parents use to stipulate how children will receive an inheritance upon their passing?

Kylie Fletcher: Often parents worry about leaving money to their children. They want their children to have enough to do whatever they wish, but not so much that they will be lazy and unproductive. Therefore, parents who create estate plans usually create a Trust to hold assets for their children. Below are two very common planning options:

Option #1: Lump Sum

Parents will create a Trust to hold assets for children until they reach a certain age. Once the child reaches a designated age (usually 25, 30 or 35 years old) he or she will receive a lump sum payment.

Option #2: Installments

Many parents like to give their children more than one opportunity to invest or use the inheritance wisely, which doesn’t always happen the first time around. Installments can be made at certain intervals (say, one-third upon your death, one-third five years later, and the final third five years after that) or at certain ages (say, age 25, age 30 and age 35).

To learn more, Fletcher Law is hosting a Special Needs and General Needs Seminar on Sunday, November 10th from 9:30am to 11:00am at Pump It Up in Sorrento Valley. Child Care will be provided. Contact Kylie if you are interested in attending.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

Making the Most of your Holiday Budget

Holiday spending tends to be a budget buster. It is just like our tendency to overdo the dessert table, knowing we have the New Year around the corner to start over with a “blank slate”! Here are some tips to keep costs in check. Set a holiday budget for the year – This should include gifts, decorations, and extra babysitting time for the holiday parties. You do not want to rack up credit card debt. The goal is to spend within your means while not feeling deprived.

Break it down - List everyone you have to buy for and decide on gifts and amounts for each. Remember, it is not about the amount. I have a few friends who give $5 Starbucks cards for special occasions. It is perfect! I can treat myself to a cup of coffee and biscotti on them.

Save the list – Keep the list of gifts given so you don’t repeat gifts. Nobody wants to be the Aunt or Uncle who gives a scarf every year!

Go creative with wrapping – Use repurposed gift-wrapping or boxes. My husband is a pilot and has a lot of leftover aeronautical charts. We use them as wrapping paper. It sounds strange but it looks great and people love it! The dollar stores also have some great holiday boxes in different shapes and sizes.

Encourage wish lists – My family does this through Amazon but you can do it through many retailers. It is the same concept as a registry. It gives the gift giver the opportunity to choose something within his or her budget that the recipient would actually like.

Join in on big-ticket items – Dinners out, golf lessons and zoo or museum memberships for the family are all things people can chip in for and give as a group.

Bonus tip: I asked some of the best gift-givers I know how they always come up with such a thoughtful gift. Their response – they write down ideas throughout the year as they come to them! Try it. It is sure to make holiday shopping easier and more enjoyable.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

The Dark Side of UTMA Accounts

With this next post, I wanted to share an issue I have seen a couple times within the last few months. Parents have called asking how to postpone their child from receiving a UTMA account at age 18. The answer is, you cannot postpone the inevitable. Minor children cannot legally hold mutual funds, stocks, bonds and life insurance policies. If parents want to transfer these to their children, they have the option to set up a UTMA (or UGMA) account for them. The issue is that this money needs to be handed over to the child at the age of majority (age 18 or 21 depending on the state).

This may seem in the distant future when you are holding a newborn in your arms, but the reality is that the age of majority, whether 18 or 21, is still incredibly young. Not surprisingly, there are some young adults that are just not ready or responsible enough to receive a lump sum.

UTMA funds are irrevocable gifts. The article below is a good overall summary of UTMA’s. It mentions that one option is to spend the money for the benefit of the child before the age of majority. You would need to use the money for items other than parental obligations and work with a qualified accountant.

http://www.finaid.org/savings/ugma.phtml

An alternative vehicle for parents looking to gift assets to their children is a 529 account. It is often the one I recommend. While it also has its limitations, when presented with the pros and cons of each, parents often choose the 529.

I recommend meeting with a financial planner to review your specific situation and see which vehicle may be better for you.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

Can We Teach Our Kids Delayed Gratification?

I came across something interesting while reading Thinking Fast & Slow by Daniel Kahneman. He talks about an experiment conducted among 4-year-old children. They were given one Oreo. They could eat the Oreo now, or wait 15 minutes before eating it, and they would get a second Oreo. While waiting, they had to remain alone in a room without any distractions (books, puzzles, video games, etc.) About half of the children managed to wait. These “resisters”, 10-15 years later, were more successful (defined as less likely to take drugs and having substantially higher test scores). Another, similar, experiment can be found on Ted TV here.

This experiment is fascinating to me because a lot of financial planning is about delayed gratification. I see adults that are resisters. They can easily adjust their lifestyle as needed when children are born or when a spouse loses a job. I also see those who struggle with impulsive spending and prioritizing wants vs. needs.

I spoke with Kathryn Mercurio, MSW, who practices in the greater Boston area. She provides some great tips for teaching kids delayed gratification:

1. Set a good example – While shopping with your children, show them that everything you buy has meaning. For example, use a shopping list and stick to it.

2. Teach mindfulness - Help children become aware of their thoughts, emotions, body sensations, and the surrounding environment. When your child seems distressed, ask them what they are thinking. If they are old enough, have them write down every thought that goes through their mind. You can help them challenge/reframe thoughts that may be distorted or irrational. For example, "I can't go on unless I get the new iPhone. I will be the only girl in school without a smart phone and everyone will think I'm a loser."

3. While parenting, practice healthy emotional regulation – By giving children treats or TV time to calm them down during tantrums, we may be making it more difficult for them to self-soothe or emotionally regulate and thus, learn delayed gratification. Try instead to give your child some time to regulate their emotions. Show them you believe in them and teach them to sit with their distress. You can say something like, "I know you are mad right now. I will sit next to you and we'll wait together for this mad feeling to pass."

4. Teach your child how to make informed decisions - Your 10-year-old tells you he's changed his mind about his goal of saving towards a skateboard because he wants to buy a new hat that has become the hottest new trend. You might ask him these questions: What led you to this new choice? How will you feel after you have bought the hat? How will you feel 2 weeks after you buy the hat? Will you regret not buying the skateboard down the road?

I have a couple more suggestions for the list:

5. Provide a weekly allowance – Start teaching your child money skills with their income. Suggest (or require) they use a portion for short-term items, like going to the movies with friends, a portion for more expensive wants, like designer jeans, and the balance for the future, like college savings.

6. Consider sharing your budget – I have a neighbor who was a single Mom for a while. Money was tight and she was always fighting with her daughter about purchases. She sat down and showed her daughter what money comes in each month and what money had to go out for necessities. The woman said her daughter just “got it” and wasn’t resentful or upset. The daughter now applies those skills in her own life.

Personally, I can’t wait until my daughter turns 4 so I can do the Oreo experiment with her.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

The Possibilities are Endless with Systematic Savings

Systematic savings is an easy yet powerful concept.  It involves setting up an automatic deduction from one account to another at some frequency (weekly, monthly, yearly, etc).   

Many of us already experience systematic savings with our paycheck.  We have automatic deductions for retirement such as 401(k) or TSP plans. Federal taxes are also automatically deducted from our paycheck.  The IRS knows that they are much more likely to get their money if they force you to pay as you go.

The benefits of systematic savings have been so well documented that the government passed a law in 2006 allowing businesses to auto-enroll employees into retirement savings plans.  Once people are enrolled, they are much less likely to make a change.  Instead, they learn how to adjust to a smaller amount in their paychecks, if they even notice.

We can apply the concept of automatic savings to other things.  It doesn’t cost anything to open up a new savings account at my bank.  Therefore, I set up separate accounts for various goals and save automatically for these goals each month. 

The idea started when we got our dog, Fulton, a few years ago.  We looked into pet insurance and, at the time, it didn’t seem to make sense for us.  Insurance didn’t cover as much as we thought it would, so it seemed hard to justify the cost.  That being said, we didn’t want to dip into our savings account in the event of a health emergency for him.

As an alternative, we decided to self-insure.  Instead of paying pet insurance premiums every month, we automatically contribute the cost of a monthly insurance premium to a separate savings account.  If we need money for a surgery or medication for our dog, we just take it out of that separate account without touching our other investments.  And when our dog passes away, we will still have the savings account to do with it what we want.  If we were paying premiums, we wouldn’t get that money back.

The negative side is that if your pet needs a $10,000 surgery, and you do not have even close to $10,000 in his savings account, you are going to have to come up with the money. If you had opted to pay insurance premiums, it may have been covered. 

Systematic savings accounts will work for some people and maybe not for others.  You have to consider your risk tolerance, self-discipline, and current emergency fund.

I have found the concept to be liberating. We have an account for future cars and car repairs.  We also have a travel fund.  You don’t stress over purchasing a gift or going out to dinner with friends when you know you are saving each month for things that are important to you, and you can enjoy the rest.  Give it a try next time you find an expense that is throwing your monthly budget into a tailspin!

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships. 

Highlights from Bernstein Interview

William Bernstein was interviewed in the September issue of Money.  Here are some highlights:

1.  How young people should invest – no surprise here:  “For the average person, you’ll want a very high stock allocation.”  The reason is that you have three to four decades of earnings potential ahead of you.  “So even if your investment capital when you’re 26 years old falls by one-half, your total worth has fallen by only a couple of percent because you still have that 34 years of human capital left.”

2.  A different take on inflation protection:  Bernstein points out that buying dividend-yielding stocks is not the only way to protect against future inflation.  Another asset class is short, high-quality bonds with a maturity of less than three years.  “If we ever do get an inflationary shock, investors will demand a high real short-term rate of return.  It’s what happened during the late ‘70s and early ‘80s.”

3.  On investing near and after retirement:  “…you should save 20-25 times your residual living expenses – that is, the yearly shortfall you have to make up after Social Security and any pension.  This portfolio should be in safe assets….”  This is yet another reason why you should have a good handle on your expenses now.  It is hard to set goals and plan for the future otherwise.

To view the entire interview, including how to invest during other stages of life and how to find a good financial advisor, go here.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.

Visit your Local Library

I am amazed at how many of the young couples that I meet with don't take advantage of their local libraries.  I was also guilty of giving in to convenience for a few years.  It is so easy to click on Amazon and have a book delivered to your front door.  It is even easier to select a popular book on a Kindle or Nook® and start reading instantly! These purchases add up.  After reviewing many budgets with families, the cost of books is right up there with Starbucks as one of the line items that completely shocks people.  Some people say they will sell the books back, but if they actually do, it will be for a fraction of the purchase price.  Others insist on keeping books for future reference.  As someone who goes through at least 3 books a week, I have found that you can almost always do without purchasing the book.  And it's not just books.  Are you still getting magazines delivered monthly?  The library has most magazines too.

In addition to being a free source of books and magazines, many libraries have become similar to community centers.  They have all sorts of programs for kids and adults including story time, book clubs, concerts, and even Zumba classes!  Some have a section dedicated to kids where they can run around, draw with chalk and make a mess (and you don't have to clean it up for once!)  The libraries are also resources for unemployed people, giving them access to the Internet to search for jobs and work on resumes.  Many libraries offer meeting rooms for community use and so much more.

So the next time you want a book, try and get it from your local library instead.  If you decide you want your own copy, add it to your Amazon Wish List for someone else to get you as a gift.  Start saving your book money for something special.

Linda Rogers, CFP®, EA, MSBA is the owner and founder of Planning Within Reach, LLC (PWR). Originally from New Jersey, Linda services clients throughout San Diego county and nationwide. She leads the design of PWR's investment portfolios which utilize broad, low-cost investments that integrate environmentally, socially, and governance (ESG) factors.

Planning Within Reach, LLC (PWR) is a fee-only and fiduciary wealth management firm offering one-time comprehensive financial planning, ongoing impact-focused investment management and tax preparation services in San Diego and nationwide. PWR is a woman-owned firm that specializes in busy professionals and impact investors. Planning Within Reach, LLC and their advisors do not receive commissions and do not hold any insurance licenses or brokerage relationships.