Carolyn Stewart

Podcast

The financial challenges of losing a spouse: Interview with Mike Switzer on SC Business Review

Ann J. Beckwith Wealth Planning

There’s an old saying that nothing in life is sure except death and taxes. But maybe the word “change” should be added because transitions are a natural part of life, such as changing jobs, having children, retiring, or losing a spouse. All of which can affect your finances. The death of a spouse, in particular, can present some tough challenges.

Mike Switzer interviews Abacus advisor Ann Beckwith.

abacus lowercase a logo Ann J. Beckwith

Article

Is your life insurance policy still viable?

Karlyn M. Jones Wealth Planning

The objective of this article is to supply you with four thinking points to make informed decisions about whether to maintain, modify, or surrender your life insurance policy based on your evolving financial goals.

1. Check the stability of the insurance company who underwrote the policy to help ensure that your coverage remains in force.

Check the Company’s Financial Ratings:

Look for financial ratings from reputable rating agencies such as A.M. Best, Moody’s, Standard & Poor’s, and Fitch Ratings. These agencies assess the financial strength and stability of insurance companies. Higher ratings generally indicate a stronger and more stable company.

Visit State Insurance Department Websites:

Each U.S. state has an insurance department that regulates insurance companies operating within its jurisdiction. Check your state’s insurance department website for information on the company’s financial status, including any complaints or regulatory actions.

Research the Company’s History and Reputation:

Investigate the company’s history, including its years in business and any significant events or changes. Look for customer reviews and complaints online to gauge the company’s reputation for customer service and claims processing.

2. Request an in-force illustration.

An in-force illustration is a resource that provides a comprehensive snapshot of your existing life insurance policy’s current values, benefits, and performance. This information offers transparency into how your policy has performed over time, including the growth of the cash value (for permanent life insurance), premium payments, and death benefit.

In-force illustrations often include projections of future policy values, benefits, and premiums based on certain assumptions (e.g., future interest rates, policy expenses). These projections help policyholders anticipate how the policy may perform in the future. It shows the current premium payment schedule and whether there have been any changes or adjustments to premium amounts. In-force illustrations should be viewed as a tool that allows you to assess whether the policy aligns with your original goals and whether any adjustments or changes are needed.

3. Cost-benefit analysis of return on investment.

Analyzing the return on investment for life insurance policies can be complex because life insurance serves multiple purposes beyond traditional investment vehicles. The primary purpose of life insurance is to provide financial protection for your loved ones in case of your death, rather than generating investment gains. However, permanent policies do have a cash value component that can be considered an investment and should be when thinking about surrendering your policy.

Costs of life insurance policies: 1. Premiums – calculate the total amount you pay in premiums over the life of the policy 2. Policy fees and charges – be aware of administrative fees, rider charges, and other expenses associated with the policy 3. Opportunity cost – consider the opportunity of the money used for premiums, what could you have done with that money if it were invested elsewhere? Could you have made a better return?

Benefits of life insurance policies: 1. Death benefit – determine the potential payout your beneficiaries would receive if you were to pass away, is it worth the premiums you have paid in? 2. Tax advantages – some life insurance policies offer tax advantages,

4. Consult with your financial advisor for recommendations. Their expertise, objectivity, and ability to integrate insurance into your broader financial plan can help guide you to the decision that optimizes your overall financial well-being.

abacus lowercase a logo Karlyn M. Jones

Article

Failing to plan in family business succession: planning to fail?

Brittany M. Midgette Family Business

Anyone who has watched the HBO series Succession has seen the challenges of passing along a family business to the next generation.

While most family businesses do not operate with the same level of drama as in the TV show, succession planning is one of the most significant challenges that family-owned businesses face. Having a plan for succession is crucial to ensure the smooth transition of leadership and ownership from one generation to the next.

Family business succession planning is a complex, necessary process to ensure the continued success and sustainability of a business across generations. By starting early, involving all relevant stakeholders, seeking professional guidance, and addressing challenges head-on, a family business can transition smoothly and preserve its legacy for future generations’ prosperity.

By following some careful steps and preparing for challenges, a business succession plan can go smoothly.

Key Steps in Succession Planning

  • Initiate early. Start planning early to ensure a seamless transition. Ideally, succession planning should begin at least five (to ten) years before the intended transition.
  • Identify successors.  Assess and identify potential successors within the family. Consider their skills, interests, and commitment to the business.
  • Train and develop. Provide adequate training and development opportunities to groom the identified successors to include mentoring, leadership training, and exposure to different aspects of the business.
  • Assess financial and legal aspects.  Evaluate the financial health and legal structure of the business to understand tax implications (and plan accordingly) to minimize any negative financial impacts during the transition.
  • Communicate and involve. Keep open communication with family members about the succession plan to manage expectations and avoid conflicts. Involve all relevant stakeholders in discussions and decision-making processes.
  • Seek professional guidance. Seek advice from financial advisors, legal experts, and business consultants with experience in family business succession. They can provide invaluable insights and help create a robust succession plan.
  • Consider trial periods and obtain feedback. Consider implementing trial periods for potential successors to assess their capabilities in real business scenarios. Gather feedback from key stakeholders and make adjustments as needed.

Common Challenges and How to Overcome Them

  • Conflict of interest.  Address potential conflicts of interest by setting clear expectations, roles, and responsibilities for each family member involved in the business.
  • Fairness and equality. Ensure fairness in the selection process and be transparent about the criteria for choosing the successor. Consider appointing an external advisor to ensure objectivity.
  • Emotional attachments. Separate emotions from business decisions. Focus on the best interests of the business and its stakeholders rather than personal feelings or family dynamics.
  • Resistance to change. Implement change management strategies to help family members adjust to new roles and responsibilities. Emphasize the benefits and opportunities associated with the transition.

Effective succession planning is vital for the long-term sustainability and prosperity of a family business. Without a well-thought-out plan, businesses risk internal conflicts, decline in performance, and potential failure. A solid plan of succession helps to preserve the family legacy and the values the business was first built upon.

abacus lowercase a logo Brittany M. Midgette

Article

Tax Planning Across Generations

Stephen E. Maggard Wealth Planning

High on the priority list for many families is minimizing taxes across generations. This strategy often requires coordinating with an expert over multiple years to develop and implement a plan to save in taxes for the whole family system.  For many wealthy families, coordinating planning strategies across generational lines can have a meaningful impact on the family system’s balance sheet.

Consider the following example of a family patriarch making annual gifts to his young adult granddaughter who was beginning her first job as a teacher:

Back when his granddaughter was 7 years old, the father opened an investment account in her name and transferred a relatively small (but not inconsequential) amount of stock into the account. When the little girl grew up and flew the nest, she would have some money to get her started in life.

Fast forward 14 years:  the young girl has grown into a young woman and has begun her career. Meanwhile, the account has grown to nearly three times its original value! She now stands with access to a healthy starter fund with which to face the challenges of adulthood.

Here is where smart tax planning comes in.

The young lady followed her passion and is now a teacher and her income is within the threshold to be able to pay the 0% Federal Capital Gains tax for the next couple of years – 14 years’ worth of capital gains with no taxes due to the IRS!  What a tremendous gift the family patriarch was able to give his granddaughter!

If this strategy sounds appealing, here are some important points to consider:

  • If you sell an asset that has increased in value, the IRS requires that you report the sale as a capital gain.
  • When transferring assets to others, transfer assets that are easily sold such as stocks, mutual funds, Exchange Traded Funds and only those assets that you have held longer than one year.
  • For the greatest tax avoidance, gift assets that have appreciated the most.
  • If you need to rebalance your investment portfolio, consider giving overweight positions to bring your portfolio back into balance.
  • The capital gains tax rate is based on taxable income, which is calculated after all your deductions, whether standard or itemized. (A married couple making $100,000 of gross income would likely benefit from this strategy.)
  • Keep in mind that while you may pay 0% at the federal level, many states will levy their own taxes on the capital gains.

A savvy tax planning strategy is one of the many ways you can keep more money in the family, and give less to the IRS. Talk to your financial advisor to see if any of these strategies will work for you and your family.

abacus lowercase a logo Stephen E. Maggard

Article

What is a Health Care Power of Attorney?

J. Abigail Mason Wealth Planning

During my first year of college, my college roommate was in a minor car accident and broke her leg.  Erin called her mom, and her mom rushed to the hospital to be by Erin’s side.  I remember thinking at the time what would have happened if Erin had not been able to call her mom. Who would have taken care of her medical decisions? Erin’s mother was in charge of making medical decisions for Erin in case Erin could not.  This was the first time I had ever heard about a Health Care Power of Attorney (HCPOA) and its importance for all adults.

What is a HCPOA, who needs one, and how do you obtain one?

What is a Health Care Power of Attorney?

A Health Care Power of Attorney (HCPOA) is a legal document that allows you to designate someone to make health care decisions on your behalf.  An HCPOA ensures that your medical wishes are respected when you are unable to communicate or make decisions due to illness, injury, or incapacitation. The following are included in the HCPOA document:

1.  Agent.  You designate a trusted person as your health care agent and authorize that person to make healthcare decisions for you.  Choose someone who knows your values and preferences regarding medical treatment and will advocate for your wishes.

2. Scope of authority.  You can specify the scope of your agent’s authority, including the types of medical decisions your agent can make or any specific instructions. Be as specific (or as general) as you like in defining their authority.

3.  Effective.  Health Care Power of Attorney usually becomes effective when a healthcare provider determines that you are unable to make your own medical decisions: a temporary situation (being under anesthesia for surgery), or a more permanent condition (coma or advanced dementia).

4.  Advanced directives.  A Health Care Power of Attorney may be part of a broader set of advanced directives, such as a living will, which outlines your preferences for life-sustaining treatment.

Who needs an HCPOA?

Accidents, sudden illness, or unexpected medical emergencies can happen. Having a designated healthcare agent ensures that you have an advocate making the best decisions for you. 

1.  Any adult, regardless of age or health status. Once children reach the age of majority in your state (usually 18 or 21) they become adults and take control of their health care decisions and medical records.  The Health Information Portability and Accountability Act (HIPAA) protects medical professionals from sharing sensitive medical information. Consequently, if a young adult is injured and seeks medical treatment, parents will not automatically be able to consult with medical providers, get information, and have input into their child’s treatment.

2.  Elderly individuals. As people age, they face a higher likelihood of experiencing health issues that could lead to loss of decision-making capacity.  An HCPOA can provide clarity and guidance for family members and healthcare providers.

3. Individuals with chronic illnesses.  If you have an illness or condition that may progressively worsen over time, having an HCPOA outlines your preferences for treatment, especially during times you cannot communicate your wishes.

4. Individuals facing surgery.  Before undergoing surgery, you may want to appoint a healthcare agent to make medical decisions if complications arise during the procedure.

5. Individuals at the end of life.  For people nearing end of life, having an HCPOA can help ensure that their preferences for end-of-life care (including decisions about life-sustaining treatment or hospice care) are followed.

How do I get an HCPOA?

Because laws governing healthcare power of attorney vary by state, it is essential to create the document in accordance with the laws of your state.  Many states provide standardized HCPOA forms that are often available online or at local government offices, such as county clerks’ offices or health departments.  In most states, HCPOA documents require the signatures of witnesses and, in some cases, notarization. Check your state’s requirements for witness and notary signatures to ensure that the document is properly executed.

While you can create an HCPOA without an attorney, it’s advisable to consult with a lawyer, especially if you have complex medical preferences or live in a state with specific legal requirements for healthcare power of attorney documents. An attorney can ensure your document is legally sound and complies with your state’s laws.

Having an HCPOA in place can save yourself and others from worry during a health emergency, or in case you become unable to make healthcare decisions for yourself. 

abacus lowercase a logo J. Abigail Mason

Article

Senior citizens beware!

Carolyn A. Stewart Wealth Planning

It’s amazing how creative (and treacherous) scammers have become – especially when their deceptions are aimed at older folks.


Take spry, 80-year-old Evelyn. She received a phone call from someone who identified himself as a local police officer. His story: Evelyn had unpaid taxes that needed to be paid immediately – over the phone – or she would be arrested. Her response: panic. The result: After being transferred to a person claiming to be an IRS agent, she withdrew $10.000 from her bank account and purchased a prepaid debit card to cover the debt.


Evelyn’s story is all too common. The Federal Trade Commission has estimated that consumers lost $8.8 billion to scams in 2022, an increase of 30% from the previous year. This number will only grow as technology and the schemes that take advantage of the elderly become more sophisticated.


The first line of defense is knowing what’s out there.


1 Phone Scams \ Scammers call and claim the person owes back taxes or has some other tax-related issue. Don’t fall for it. The IRS initiates most contact through the mail and will never initiate contact with taxpayers by email, text, or social media regarding a bill or tax refund. Additionally, the IRS will never demand immediate payment.


2 Phishing Emails \ Scammers send fake emails that appear to be from the IRS, Social Security
Administration, or Medicare. Don’t click on anything. Any links or attachments may contain malware or lead to phishing websites designed to steal personal and financial information.


3 Grandparent Scams \ Fraudsters pretend to be a grandchild in distress, needing money urgently for an
emergency situation. Even if the scammer uses the grandchild’s real name or pretends to be the grandchild, be skeptical. A common warning sign is that the caller will not let you get off the phone or be able to verify some personal information about the “grandchild” in trouble.


4 Tech Support “Exams” \ A scammer will pretend to be a tech support agent for a well-known company such as Apple or Microsoft. They will inform the victim that their computer has a virus and instruct the victim to download malicious software. Other tricks involve the scammers obtaining remote access to the computer or demanding payment for non-existent software.


5 Fake Websites \ Scammers create fake websites (typically IRS or Social Security Administration) that
mimic the official websites. Look very closely. Make sure the website has “.gov” in the domain name.


Bottom line \ Learn about the common scams that target seniors. Stop and think before reacting to any
“urgent” request that seems unusual. Trust your instincts. Never be afraid to reach out to friends or family if something seems amiss.

abacus lowercase a logo Carolyn A. Stewart

Article

Living with reminders after a Loss

Ann J. Beckwith Family Business

When you lose someone you cherish, their fingerprints, reminders of them, don’t vanish.

Grief over the loss of a loved one is not unlike the sea: a depth and breadth unfathomable at times; waves with an intensity to knock the breath out of you; a tide that laps incessantly (gentle at times yet ferocious at others); and unpredictable. The ache that feels crippling will ease as you work through reminders of your loved one. You will learn how to be kind to, and care for, yourself as you re-visit memories from the past.


After the loss of a loved one, these events–certain days, locations, objects, sounds, smells–can crash over you like a wave you didn’t see coming, leaving you feeling attacked and disoriented. These feelings are a normal part of the grieving process. In fact, while your reaction to these reminders may feel like a setback, this is a part of the journey and a necessary step in the healing process. The following tips may help you to embrace the time instead of dreading the moment:


1 Plan for the day. For the reminders you can anticipate (your loved one’s birthday or an anniversary), consider ahead of time how you would like to spend the day. You may choose to plan a gathering to mark the event, or you may prefer to schedule some form of self-care.


2 Honor their memory. Remembrances of your loved one may feel intense but could also be an occasion to pay tribute to their character, their contributions, and how they loved well. How can you carry your loved one’s legacy forward so that you and others might continue to benefit?


3 Invite others. Grief can feel isolating, and your journey is, after all, unique to you. Nevertheless, you do not have to move through this time alone. When you are missing your loved one, connect with a family
member or a friend who may appreciate reminiscing and being with you.


4 Share your feelings. The burden of grief is heavy, and you were not meant to keep your feelings bottled up inside of you. How you share your feelings is up to you. You may prefer journaling, or talking to someone, or even writing a letter to your loved one. The important part is to get your feelings out.


While healing from loss has no predetermined timetable, if you feel stuck in your grief and unable to manage day-to-day living, seek help from a mental health professional who can assist you in processing your experience and developing healthy coping skills. Reminders of a loss do not have to inhibit your healing; they can be a catalyst for personal restoration.

abacus lowercase a logo Ann J. Beckwith