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Nothing is certain but death and taxes, and not many topics make for worse conversation starters at the Thanksgiving table. Yet, finding the time to have thoughtful conversations and plan for the death of loved ones can ensure their wishes are met and can simplify the work for those remaining.

The following checklist can serve as a guide to your conversations.

Acknowledge that the conversation may be difficult, but important.

Make sure to include the right people.

Siblings, spouses, financial advisors – discuss with the loved one whom they would like to include in the conversation and plan for a time where everyone can join and be present. (hint: Christmas morning with seven cousins under the age of ten running
around isn’t the right time.)

Craft an agenda for your time together and consider including the following:

• Review estate planning documents.
  • A last will and testament and, in some cases, a revocable trust are the cornerstones of an estate plan. These documents dictate how assets transfer at death, name a personal representative, and name a guardian in the case of minor children. Review the documents together to make sure the documents are current and reflect the loved one’s wishes.
  • A power of attorney allows someone else to make financial decisions on
    the persons behalf if they are unable to act.
• Talk about health care wishes.
  • Discuss long-term case planning and wishes and explore preferences for end-of-life care. Having this discussion while healthy means family members won’t have to guess about what a loved one would have wanted for their care.
  • A living will and health care power of attorney legally document wishes and name someone to make decisions in case the family member is unable to do so themselves. Be sure to include HIPAA language in the document so the power of attorney can discuss conditions with medical staff. (Most states have a statutory form online to complete without
    needing to visit an attorney.)
• Get organized.
  • Craft a financial statement that details all assets and accounts. Consider consolidating multiple bank accounts.
  • Find out if there is a safety deposit box and determine how to access the contents.
  • Create a list of bills for payment and the funds used to pay. Consider enrolling in automatic e-pay to minimize the work of the power of attorney.
  • Document all passwords for online accounts. A password manager such a LastPass or 1Password is a secure option for gathering passwords for a single access point.
  • It’s never too early to eliminate clutter. If you can sort through financial documents together, minimize where you can. Go ahead and shred those monthly bank statements from decades back.
  • Organize life insurance information. Gather policies and contact information to expedite the benefits process.

Share funeral plans and wishes.

Find out what your family member would like for his or her funeral service. Understand what is important to your loved one.

Talking about dying with those you love is a difficult task. But, having these critical conversations will ensure their wishes are met and will simplify the responsibilities of those left behind.

Brittany M. King

You may be familiar with 529 accounts. 529 Plans are so named from the originating IRS Code section and serve as tax-advantaged college savings accounts. A new account known as the ABLE 529 is now available as a similar vehicle to save for expenses unique to those with special needs. Previously, the most common option to meet those needs were trusts known as special needs trusts. However, the introduction of ABLE 529s provide those looking to provide a means to cover expenses unique to those with special needs another option.

What are they?

On December 19, 2014, President Obama signed the ABLE (Achieving a Better Life Experience) Act. This law expanded the provisions in Section 529 to provide a framework for savings vehicles for beneficiaries with special needs.
Within that framework, individual states have created ABLE 529 Programs similarly to the way states have various 529 plans for college savings. The South Carolina ABLE Program was signed into law by Governor Haley on April 29, 2016 and the state treasurer’s office rolled out the program on November 16, 2017.

Who is eligible?

To open an account, the account owner (also the account beneficiary) must:

• Have been diagnosed with a disability before age 26 and have a condition expected to last at least 12 consecutive months.
• Be receiving SSI (Supplemental Security Income) benefits, SSDI (Social Security Disability Income) benefits, or have the ability to obtain a disability certification from a doctor.

How do they work?

ABLE 529s have some similarities to the traditional college savings 529s, but there are some distinct differences as well.

• Similarities
  • Contributions limited to annual gift tax exclusion amount ($15,000 in 2018) per contributor, per year.
  • Earnings grow tax-deferred and distributions are tax-free if made for qualified expenses.
  • Contributions made by South Carolina residents to the South Carolina ABLE 529 Plan can be tax-deductible for South Carolina income tax purposes.
• Differences
  • Qualified expenses include education, job training, health care, assistive technology, personal support services, and financial management.
  • If account value is under $100,000, account does not count as an available financial resource for the purposes of determining eligibility for SSI.
  • At beneficiary’s death, Medicaid may recoup any public benefits paid to beneficiary since the account was established. Assets may be used for funeral/burial costs.

ABLE 529 or Special Needs Trust?

After acquainting yourself with the basics of the new ABLE 529s, the question boils down to which is better, an ABLE 529 or a special needs trust? Special needs trusts do not limit the account value to $100,000 and can provide broader provisions on how the funds are used. Costs related to establishing, administering, and preparing and filing trust tax returns are also a substantial factor to consider. The trust will also need to be properly structured so trust income isn’t taxed at the highest rate of 39.6%, which comes into play with only
$12,500 in income based on the 2017 tax brackets. However, trust assets will be taxable to the beneficiary when distributed.

If you are looking for a way to provide for someone with special needs and do not anticipate the need or ability to save more than $100,000, an ABLE 529 may be your best bet. The South Carolina ABLE Program has monthly maintenance fees of $3.50 and investment management fees ranging from 0.19% to 0.35% depending on the investment options selected. These costs are likely lower than the costs associated with establishing and maintaining a special needs trust.

For more information on the South Carolina ABLE Program, visit www.scable.org.

Jonathan J. Robertson

Frequently asked questions for those that have experienced flood-related damage.

1. Does my homeowner’s policy cover flood damage?

Probably not, the majority of homeowners’ policies exclude flood damage. However, if your home was damaged by water, you may be covered under your homeowner’s policy if:

• Your property was damaged by wind-driven rain, or falling rain that got in through an intrusion (hole) –for example, water damage as result of an intrusion created by a falling tree which allows water to accumulate in your home.
• The damage was not caused by a “flood” (as that term is defined in your policy).
• The wording of your policy’s exclusions for flood damage and/or simultaneous causes is vague or
  unclear. Review your policy for specific wording that excludes flood damage or mentions “water
  damage.”
• You have a “surplus line” policy that does not exclude flood damage.

We recommend that you contact your insurance agent to report the damage of your property or home. Your agent will determine your coverage options based on your specific damages and existing insurance coverage.

2. Are there weather-related items that will be covered under my homeowner’s policy?

• Loss of food by spoilage due to electrical outages, or damage from power surges related to storms
• Falling tree damage: If a tree falls on your home (or other structure) covered by your homeowner’s
  policy, your insurance policy should pay the cost of removing the tree from the damaged structure.

3. Does flood or homeowner’s insurance cover flood damage to my car?

Damage to your motor vehicle may be covered under your auto policy’s comprehensive coverage.

4. I have flood insurance through the National Flood Insurance Program. What does my policy cover?

The NFIP has two types of flood coverage: building property, up to $250,000 and personal property (contents), up to $100,000. If you have a NFIP flood policy, the policy provides the following coverage for the building property:

• The insured building and its foundation
• Electrical and plumbing systems
• Central air conditioning equipment, furnaces, and water heaters
• Refrigerators, stoves, and built-in appliances such as dishwashers and ovens
• Permanently installed carpeting over unfinished flooring
• Permanently installed paneling, wallboard, bookcases, and cabinets
• Window blinds
• Detached garages (up to 10 percent of building property coverage); detached buildings (other than
  garages) require a separate building property policy
• Debris clean up and repairs; outside and inside walls; debris removal and remediation of resulting
  mildew, mold, and fungus.

If you’ve paid for personal contents coverage, this policy covers the following items:

• Personal belongings, such as clothing, furniture, and electronic equipment
• Curtains
• Portable and window air conditioners
• Portable microwave ovens and portable dishwashers
• Carpets that are not included in building coverage
• Clothing washers and dryers
• Food freezers (and the food in them)/li>
• Certain valuable items, such as original artwork and furs (up to $2,500)

5. What is NOT covered by my flood policy?

The following is not covered:

• Damage caused by moisture, mildew, or mold that could have been avoided by the property owner
• Currency, precious metals, and valuable papers such as stock certificates
• Property and belongings outside an insured building, such as trees, plants, wells, septic systems,
  walks, decks, patios, fences, seawalls, hot tubs, and swimming pools
• Living expenses such as temporary housing
• Financial losses caused by business interruption or loss of use of insured property
• Most self-propelled vehicles such as cars, including their parts (see Section IV.5 in your policy)
• Coverage is limited in basements, regardless of zone or date of construction. It’s also limited in
  areas below the lowest elevated floor, depending on the flood zone and date of construction. These areas include:
  • Basements
  • Crawl spaces under an elevated building
  • Enclosed areas beneath buildings elevated on full-story foundation walls that are
    sometimes referred to as “walkout basements”
  • Enclosed areas under other types of elevated buildings
• Make sure to ask your agent for additional details on your basement coverage.

6. Does a flood policy cover additional living expenses while my home is uninhabitable?

No. Expenses like temporary rent and other costs you incur due to the loss of use of your home are not
covered under flood insurance.

7. What are the steps associated with submitting a claim under a flood insurance policy?

1. Contact your insurance agent, who will assist you with the claim process. You must submit a written “Notice of Loss” to the NFIP as soon as possible after a loss. A copy of the NFIP Notice of Loss form (Form 086-0-11).
2. Document, Document, and Document – take lots of photos of the damage before removing any of the damaged or destroyed items from the home or starting repairs. Pictures should include damaged property, including discarded objects, structural damage, and standing floodwater levels. Make a list of damaged and lost items (include age and value), and provide receipts.
3. Obtain independent estimates to repair the damage and restore your home to a safe and livable condition. Remember that the scope of the damage can be beyond what is visible. In particular, look for structural damage.
4. Be accommodating to the NFIP adjusters; let them inspect the damage to your property and answer any questions they may have regarding the loss. However, don’t assume that they have your best interest. Their goal is to complete the claim in a timely fashion without paying more than necessary. Compare your independent estimate to the adjuster’s estimate; make note of necessary repairs and feel free to question any differences in suggested repairs or costs. If rebuilding on existing slab/foundation, obtain a second opinion from qualified concrete professional before submitting your proof of loss claim. If you agree with estimate, you may ask adjuster for an advance or partial payment to begin repairs.
5. Complete, sign, and submit a “Proof of Loss” form within 60 days (or as soon as possible) (Form 086-0-9). This document substantiates the insurance claim and is required before the National Flood Insurance Program (NFIP) can make payment. Note the deadline is mandatory and if you exceed sixty days, your claim will be denied.*
6. Payment: You’ll receive your claim payment after you and the insurer agree on the amount of damages and the insurer has your complete, accurate, and signed Proof of Loss. In catastrophic flooding events, such as the South Carolina floods, it may take longer to process claims receive payments because of number of claims submitted.

*FEMA often extends the deadline for filing a proof of loss after a disaster. The extensions are typically issued in the form of a memo from the Federal Insurance Administrator. Check the NFIP’s website to find out if the deadline for your claim has been extended (www.floodsmart.gov).

8. What should I do while my claim is being filed?

If the NFIP tells you there will be a delay in getting an adjuster out to inspect: dry out your home as best you can, and hire a qualified company that specializes in water damage repairs.

• Keep organized with a journal of conversations, names, phone numbers, and events related to the damage and your claim.
• Take necessary measures to prevent further damage and loss to your home and property. (Prevent mold by removing wet contents immediately, use tarps to cover areas open to the elements.)
• Ensure your home is structurally safe prior to re-entering.
• Keep power off until an electrician has inspected your system for safety.
• Continue to take photos of any floodwater in your home and save any damaged personal property.
• If you must dispose of damaged items, take photographs of these items prior to removal.
• Wear gloves and boots to clean and disinfect. Wet items should be cleaned with a pine-oil cleanser and bleach, completely dried, and monitored for several days for any fungal growth and odors.
• Don’t hesitate to consult an insurance agent or flood expert if you are told that damage isn’t covered under your policy.

9. What else should I do to ensure my total recovery from a flood?

A flooded home is susceptible to mold, mildew, and fungus which may grow in hidden areas. Mold can be extremely dangerous to breathe and it will damage your home, so all mold should be removed quickly and efficiently. Mold damage is evaluated on a case-by-case basis, and pre-existing mold problems will not be covered by your NFIP policy. However your policy does cover “reasonable actions” taken to mitigate mold and/or mildew.

10. What are my options if I am underinsured or don’t have any flood insurance?

Homeowners, renters, and business owners affected by the recent flooding in South Carolina can register with the Federal Emergency Management Agency for disaster assistance. You may be eligible for a FEMA grant or an SBA loan. South Carolina survivors should register with FEMA even if they have insurance. FEMA cannot duplicate insurance payments, but under-insured applicants may receive help after their insurance claims have been settled. Benefit amounts and time periods vary by agency and form of assistance, based on survivors’ needs. You can see what’s available by clicking Find Assistance on the Home page.

Additional FAQs regarding FEMA assistance:

Limits: FEMA’s Individuals and Households Program (IHP) gives financial help or direct services to people with essential needs that could not be met through other means. The maximum amount offered under IHP is set on an annual basis, and not everyone qualifies for the maximum.
IHP aid is supplemental and meant to help you restore your damaged property to a safe, sanitary and usable condition. It doesn’t take the place of insurance, and isn’t meant to restore the property to its condition before the disaster.

Proper use: All money offered by FEMA is tax-free and must be used as stated in your award letter. This includes renting another place to live, making repairs, or repairing or replacing personal property. Failure to use the money as required may disqualify you from other assistance.

Insurance: By law, FEMA can’t duplicate benefits for losses covered by your insurance company.They can only help with confirmed losses that weren’t covered. FEMA’s programs aren’t meant to replace insurance. The help offered isn’t as complete as an insurance policy. They can’t cover all disaster-related losses.

Assistance periods: Repair and Replacement Assistance is issued as a one‐time payment. Temporary Housing Assistance is issued for an initial period of one, two, or three months. To be considered for further assistance, you must prove that you’ve spent any prior FEMA money as instructed and show your efforts to obtain permanent housing. Extended Temporary Housing Assistance is issued for one, two, or three months at a time. The maximum period for IHP assistance is 18 months.

X. Alexandra Chastain

Applying for a mortgage, especially for your first home purchase, can seem confusing and overwhelming for some people. Maybe you struggle to stay organized with your financial affairs. Perhaps the thought of proving your financial preparedness to take on a large amount of debt feels akin to writing that dreaded college application essay.

Being approved for a home mortgage does take time and energy, but, with the guidance of a trusted financial advisor and a reputable lender, the process does not have to be complicated. The following step-by-step guide shows what you should consider and items you will need to provide to the lender as you finance the purchase of your first home.

Get Organized

A lender will want to understand your debt-to-income ratio to determine your ability to pay your mortgage along with any existing debt.To calculate your ratio, lenders will ask for the following documents early in the process, so start gathering them now:

• W-2 form [ or 1099 form for business owners ] from previous 1-2 years
• Recent earnings statements
• Tax return from previous 1-2 years
• List of minimum monthly payments and balances for any debts, including credit cards, student
  loans, car loans, or child support payments
• List of assets—including bank statements, investment account statements, titles to real estate
  and automobiles
• Proof of rent [ or mortgage ] payments

Note: Your financial planner should already have these types of documents on file for you and will work with a reputable lender to provide the necessary documents on your behalf.

Check your credit

A lender will want to see your level of responsibility with credit in the past to determine the riskiness of lending to you, so take the pre-emptive measure of obtaining your credit score and credit history report now. You can request a free copy of your credit report from each of the three major credit reporting agencies [ CRAs ] — Equifax, Experian and Transunion — once a year at annualcreditreport.com. Your credit card company may provide your credit score free of charge. Alternatively, you can purchase your credit score from any of the CRAs. Avoid applying for new credit in the months prior to applying for a mortgage to protect yourself from extra scrutiny by your lender.

Determine what you can afford

A good rule of thumb is for your monthly housing costs-including principal, interest, taxes, and insurance-plus your other recurring debt payments to total no more than 36% of your monthly gross [ pre-tax ] income. Look at your existing monthly budget to determine a responsible amount to spend per month on housing costs. Check with your financial advisor to help you think about your monthly mortgage payments in light of your long-term cash flow projections.

Decide on a down payment

Conventional mortgages may allow you to put down as little as 5% of the home purchase price, but to avoid having to pay for private mortgage insurance, you should put down at least 20%. The more you put down when you purchase a home, the more you will save over the term of the loan. Check out Zillow’s mortgage calculator to estimate your mortgage payment using different variables of home prices, down payments and interest rates.

To put into perspective: if you were to put down 20% on a $300,000 home with a 30-year loan at 4% interest, you would end up paying about $172,000 in interest over the life of the loan. If you purchased the same home with a 10% down payment, you would end up paying about $194,000 in interest—a difference of nearly $22,000 or 12% over the life of the loan!

A savings of $22,000 over the term of your loan means being able to pursue other personal dreams. For some, those savings could mean the ability to hire a monthly cleaning service for your new home. For others, it may mean putting away a little more each month for retirement and letting your money grow. Ask your financial advisor to help you think through the best strategy to not only obtain a mortgage, but also to accomplish your personal goals.

While the mortgage application process can seem daunting, careful planning will set you up for success—and keep you level headed—as you embark on finding your perfect new home.

Ann J. Beckwith

Congratulations! Either you are considering getting married, are recently engaged, or are newly married; you aren’t alone. In 2014, the CDC reported 2.14 million marriages in the United States, which correlates to 1.3% of the population. The obvious goal for a married couple is to experience a flourishing marriage, including financial success. The following thinking points are designed to initiate thoughtful life discussions (along with pre-marriage and post-marriage considerations) to launch both of you into a prosperous financial future.

Pre-marriage considerations

Get the uncomfortable conversations out of the way

• Have an open discussion about your current financial situation. Think through assets, income, debt, and spending patterns. The key is clear and open communication. Sometimes these frank decisions can feel hard or uncomfortable but sharing your financial history now with your partner can help you form a solid financial plan while alleviating potential stresses in the future.
• Consider accessing credit reports (freeannualcreditreport.com) and determine your needs for establishing or rebuilding credit and paying down student loans, credit cards, or other debts.
• Have a discussion about each of your beliefs and values regarding money and family. Consider questions like: What is your first memory of money? What does money mean to you? How do you make financial decisions? How do you feel about your financial situation? How do you manage debt?

Set goals

• Discuss each of your short, medium, and long-term goals, including financial goals, family goals, career planning, retirement goals, and travel goals, to name a few. Think through how each partner can support the others goals and how to develop joint goals.
• The book Five is a goal-setting workbook that guides individuals and couples through a goal-setting exercise with the idea of sparking thoughts and questions along the way.

Were either of you previously married?

• If either of you was married before, are you now legally divorced? Will alimony, child support, pensions, and/or healthcare coverage cease upon remarriage Will alimony or child support need to be considered in your new budget?

Be certain your assets are protected

• Prenuptial agreements are useful when one or both of partners have substantial assets, an expected inheritance, family wealth, family assets, and/or a business.
• If you are considering a prenuptial agreement, consider reading Jonathan Robertson’s article “5 Myths on Pre-nuptial Agreements.”

Discuss the mechanics of your financial life

• Disclose your current spending habits, recurring and situational expenses, and budget. Determine how these factors will change when households are combined.
• Determining how you will manage household expenses can be a tricky or unsettling conversation if you already have a set way of managing your finances. Consider how to combine and manage these expenses. Some couples split expenses pro rata, 5Q/50. or one spouse paying everything.
• Consider your money management system. Some couples use one checking account for all income and expenses, some keep everything separate, and others utilize a “yours, mine, and ours” approach. There is no right or wrong way, and every partnership handles money management systems differently.

Post-marriage considerations

Update name

• If you’re changing your name, visit the local county clerk or Social Security Administration office to process any official name changes. Consider updating your driver’s license, passport, bills, financial accounts, and other essential documents.

Insurance

• Review property and casualty insurance policies, including homeowners or renters, automobile policies for lapses in coverage, under-coverage or duplicate coverage. The key here is to make sure that, when combining households, you have an appropriate level of insurance at a reasonable premium to cover all members of the new household.
• Review your health insurance to determine whether one partner’s coverage is best suited for both partners, while keeping cost, medical history, and medical expenses in mind.
• Review your coverage and needs for life insurance and disability insurance.

Beneficiary designations

• Beneficiary designations are legally binding documents that take precedence over your will, meaning your beneficiary designations determines who will receive your assets at your passing.
• Review and update your beneficiary designations on key financial accounts, including investment accounts, checking and savings accounts, 40i(k) or other employer-sponsored retirement accounts, and individual retirement accounts. Discuss who the appropriate primary and contingent beneficiaries should be for each account. For 40l(k) and other employer-sponsored retirement plans, your spouse is legally entitled to inherit those assets unless your spouse signs a waiver.

Estate documents

• If one or both of you have yet to execute estate documents, meet with an estate planning attorney to ensure your spouse is provided for and your goals are met in the event of passing away.
• Consider updating the agents of your durable power of attorney and health care power of attorney.

Tax

• You and your new spouse may be able to take advantage of potential tax savings. Determine your tax filing status as either married filed jointly or married filed separately. Consider updating your W-2 tax exemptions and filing status to account for changes in tax brackets.

Having thoughtful discussions before (and after) your marriage can ensure you and your spouse have a clearer understanding of your present and future financial life.

Anne Marie E. Ashworth

You may have decided who inherits Grandma’s favorite vase at your death, but have you determined who gets your pictures on Shutterfly? Today, almost everyone has a digital presence—email accounts, online banking accounts, frequent-flyer miles, shopping accounts, blogs, and, even, residential security systems. Including these digital assets in your estate plan is essential to ensure that the assets are disseminated according to your wishes.

South Carolina passed legislation on June 13, 2016, that offers a guide for fiduciaries to access the digital assets of incapacitated or deceased family members. The act—the Uniform Fiduciary Access to Digital Assets Act [ UFADAA ]-outlines a process for fiduciaries, including a court-appointed conservator, an agent under power of attorney, or a personal representative of an estate (or a trustee), to access these accounts. This law provides a basis for a fiduciary to handle online accounts and digital assets; however, the best plan for managing these assets is to outline in your estate plan how you wish your digital assets to be disseminated.

What are digital assets?

Digital assets include any electronic records in which an individual has a right or interest. These assets include items with monetary value like hotel points, domain names, and virtual assets as well as items with sentimental value including photographs, email correspondences, and social network accounts.

Most websites have a Terms of Service Agreement [ TOSA ], which users consent to before enrolling in the site’s services. The terms of service can be complicated when looking at estate implications. For example, Facebook allows you to determine whether or not you wish for your account to be terminated at your death or memorialized. Google has an inactive account manager that provides you with the option to designate contacts to be notified if your account is inactive for a certain time period.

Digital property can pose many impediments at your death since not all websites allow for access to your records at the time of your death. If the Terms of Service Agreement does not allow for access by someone other than the deceased, then the individual accessing the account may be in violation of federal and state anti-hacking laws—a criminal offense. It is crucial for you to address your digital assets in your estate documents and give a fiduciary the power to access these properties. Otherwise, some assets could be lost forever.

The following estate planning strategies can serve to protect and preserve your digital assets:

Compile a digital asset inventory

To proactively manage your digital assets, create an inventory of assets including usernames, passwords, and security questions. Update this list regularly as your usernames and passwords change. If maintaining this list seems overwhelming, you can simplify the process using a password manager service like LastPass. Then you have one username and password to maintain and communicate with your fiduciary. Many password managers also give you the option to name an Emergency Access contact who can request access to your account in the event of your incapacity and/or death.

Keep a written list of your digital inventory at home (or in a safety deposit box) with a copy at your estate attorney’s office. Do not include your account information in your will as your will is filed publicly.

Maintain a back-up file of digital assets

If you store digital assets in the cloud, consider backing up these items on your local computer or other storage device. Having a back-up file will allow family members to easily access these items with few challenges.

Incorporate digital assets into your estate plan

Work with your estate attorney to address digital property upon your incapacity and/or at your death.Your attorney can add suitable language to your durable power of attorney to name individuals who can control your digital assets upon your incapacity. Your attorney should include similar provisions in your will or revocable trust to appoint a fiduciary. Adding these features to your estate plan will make the administration process and recovery of digital assets as easy as possible.

Detail who inherits your digital assets

Some of your digital property like hotel points, virtual assets, or intellectual property may have monetary value. You may wish to instruct your fiduciary to handle those assets in a particular way. In addition, you may want your children to inherit the pictures in your Walgreens photo account, and your husband to retain all the emails you wrote to family members and destroy the remaining emails. You can leave specific instructions like these in your estate documents.

In the future, the majority of our transactions and communications will occur online. Planning ahead to ensure access to your accounts during incapacity (and at death) can save additional headaches for your loved ones, which can make a difficult time a little easier.

Laird W. Green

Financially speaking, your biggest asset is your ability to earn an income. Your income enables you to pay for your everyday living costs. It is from earnings too, that many people save for retirement—funding your retirement by saving from income you earn today. Have you ever considered the following questions: “What would happen if I became too sick or too injured to work? What would happen if my husband or wife, who is the primary breadwinner, became too sick or too injured to work?” How to prepare for such an emergency?

When you are unable to work, disability insurance can replace a portion of your income. If you depend upon your income (or have people who depend upon your income), you need disability insurance. Become informed about disability insurance before you ever need to have it.

Who becomes disabled?
The following sobering statistics are provided by Low Load Insurance Services, the advisor’s insurance advisor:

• 3,000 Americans become disabled every hour
• A 30-year-old is 4 times more likely to become disabled than to die before age 65
• Most disabilities (almost 90%) are due to illness and not injury
• 95% of disabilities are not work-related

What do I need to know about the different types of disability insurance?
It is important to understand the differences between group long-term disability insurance and individual long-term disability insurance. If you are employed, there is a good chance your employer offers group long-term disability insurance. Often the group disability coverage is 60% of your base salary with a capped monthly maximum. The employer may pay the premium as an employee benefit. Should you become disabled, your disability benefit would come to you as taxable income, lowering your benefit at a time when you may need every penny. (Note: An employer-sponsored long-term disability insurance coverage is often not portable, meaning if you leave your job you do not take the disability coverage with you.)

Group disability insurance coverage can be less expensive than individual disability coverage. Many people consider individual disability coverage as a supplement to their group disability coverage if the group disability benefit is not sufficient.

Individual long-term disability insurance policies can insure beyond the group maximum, up to 100% if a catastrophic rider is included on the policy. Individual disability policies can include protection for not only income, but also for bonuses and commissions. With an individual disability policy, you may pay the premiums with pre-tax dollars, so your disability income benefits come to you tax-free.

MyLTDbenefits.com, an online website with a team of disability experts, does a good job of explaining the important distinctions in the definition of occupations in disability policies; “Disability Insurance covers you and your income and the polices vary in their type of occupation by definition. Disability claims generally fall into two broad categories: own occupation and any occupation. An “own occupation policy” typically requires that the insured be unable to perform the material and substantial duties of his or her occupation to be considered “totally disabled. The disability need not render the claimant totally helpless; rather the claimant must be rendered unable to perform the material and substantial duties of his or her occupation. Other policies, sometimes referred to as a general disability policy, create an “any occupation” standard to qualify for disability benefits. These policies typically define disability in terms of the insured’s inability to engage in any gainful occupation that the insured is reasonably suited for based on his or her education, work experience, and other individualized factors.”

What matters most when making this decision?
Understanding how much disability insurance you would need to continue your lifestyle or “standard of living” if you become disabled if the first question to answer. As a rule of thumb, it is good to protect 60-80% of your after-tax income. Once you decide how much, then you should choose a reputable insurance agent who specializes in disability insurance and can provide several quotes from different insurance carriers. The Consumer Affairs website www.consumeraffairs.com/insurance/dis.htm lists the top ten rated disability insurance providers.

After you derive at the amount of insurance you need, do your homework! When reviewing a disability policy, know what questions to ask. Some questions to ask include: What is the monthly benefit level? What is the benefit period? What is the elimination period? Is this policy guaranteed renewable? Is the policy non-cancelable? Is there inflation protection? Are there exclusions?

Next, partner with someone—an insurance agent, a financial advisor, or even your human resources department to understand what income replacement or disability insurance you have, how much you need, and what are the best avenue to obtain this loss of income coverage. This person should listen to your goals, answer any questions, and guide you in the right direction.

Any disability insurance protection is better than no disability insurance protection. Ask yourself, “What would happen if I became too sick or too injured to work”? And remember, that financially speaking, your biggest asset is your ability to earn an income.

Karlyn M. Jones

Many times when financial planners are working with families to create an estate plan, we hit a sticking point: What is to be done with the family vacation home? Often children want to keep the house, which can be a complicated decision especially if multiple siblings may end up owning the house together. Owning property with siblings presents a challenge that should be planned for well in advance of parents’ deaths. Many people have never needed to maintain this type of business relationship with their siblings, so having such a plan in place can help ensure success and reduce stress for all.

When thinking through whether or not you would like to inherit the family vacation home, consider the following questions and discuss among yourselves:

1. How much does it cost to keep the house?
   Talk with your parents. What are the taxes, insurance, utilities, and maintenance? Once you know the ongoing costs, can everyone afford to keep the house? Also, is that how you and your siblings want to spend your money?
2. What is the house worth?
   When you know the value, you may decide you would rather sell the house and have the money to do other things.
3. Is there deferred maintenance?
   Are there looming expenses for the property? Many vacation homes are in challenging climates: sea air is corrosive, and mountain snow can be damaging. Be aware of unexpected expenses that can occur.
4. How will you make maintenance and upgrade decisions?
   The timing of when a maintenance item becomes a necessity is often subjective, and budgets for upgrades can be all over the map. Discuss these possible occurrences among yourselves in advance to see if all of you are on the same page.
5. Who will use the property?
   If you own the property jointly with your siblings, some of you may live closer to the property than others. Some siblings may have children who want to use the property more frequently. Will you be able to coordinate schedules? If one family’s members will use the property more than the others, what is a fair way to split costs? Can people invite friends? Must an owner be on the property if a guest is on the property?
6. Will you rent the property?
   If you do, what will the net income be after expenses, management fees, and taxes? Be specific. People often over-estimate the rental potential of a property. If you rent the property, will the rental process and schedule affect your ability to enjoy the property at desired times?

Think through these questions and talk through the potential problems with your family. Have these conversations in a low-stress environment in advance, which is much easier than having to make a rushed decision during a time of crisis. Also consider putting the plan in writing to make sure all of you have an accurate understanding.

Consult an attorney to discuss the optimal way to own the property as well as the optimal way to receive the property. The attorney will be able to assist with liability protection as well as tax planning to ensure success and reduced stress for all the family.

Jonathan J. Robertson

With the passage of the Tax Cuts and Jobs Act of 2017, the use of Qualified Charitable Distributions [QCD] from your Individual Retirement Account [IRA] remains a tax-savvy option for making charitable gifts and, for many people, is now an even more appealing choice. Making QCDs can lower your taxable income and reduce the tax due on withdrawals from your IRA, all while benefiting your favorite charity.

A QCD is a direct gift from your IRA to a qualified charity. Once you reach the age of 70.5 and begin the Required Minimum Distributions [RMD] from your IRA, you can use QCDs for your charitable planning. A gift made through a QCD counts toward your annual RMD. (Your RMD is taxed as ordinary income.) Reducing your RMD total by the QCD amount lowers your adjusted gross income and taxable income and, therefore, your income tax due. A QCD also provides an opportunity to leverage your charitable gift: you deposited the money into the IRA without paying taxes, the money grew tax-deferred for the time it was in the account, and the money is received by the charity as a tax-free gift.

Qualified charitable distribution rules include:

• You must be 70.5 years old or older to be eligible to make a QCD.
• You are limited to $100,000 of QCDs each year.
• Your spouse can also make a $100,000 QCD, but the funds must come from his/her IRA.

You can make a QCD from many types of IRAs:

• Traditional, Rollover, Inherited, SEP [ Inactive plans ], and SIMPLE [ Inactive plans ].You cannot make a QCD from your 401[k].
• To be eligible for QCD benefits, the funds must go to a 501[c][3] organization. (Private foundation and donor advised funds are not eligible.)
• You cannot receive any benefit from your QCD, e.g., playing a golf tournament, seating at a table.
• The distribution check from the IRA must be payable to the charity in order to qualify as a QCD.

Since a QCD from your retirement account is not included in your taxable income, you are not able to deduct the gift as a charitable contribution in your itemized deductions. Under new tax laws, the standard deduction for singles increased to $12,000 and for those married filing jointly to $24,000. Given this change, itemizing deductions will no longer be the optimal tax solution for many filers, and in turn, those who elect the standard deduction will not receive a tax benefit from charitable contributions. Individuals in this scenario will receive the maximum benefit from QCDs.

Depending upon your level of income, using a QCD to lower your taxable income can have far-reaching effects by reducing the amount of your Social Security payments subject to taxation, increasing your eligible medical expense deduction on Schedule A, or lowering your Medicare premiums.

Does a qualified charitable distribution make sense for me?

• If you claim the standard deduction, you can still fully benefit from the charitable gift, even though you do not itemize deductions.
• If your charitable contributions exceed the 60% of adjusted gross income [AGI] limitations on charitable contributions, you can still fully benefit from the charitable gift.
• If you don’t have appreciated securities in a taxable account to give, using a QCD will offer the most “bang for your tax buck.”

Mapping out your goals for charitable giving and creating a plan for making those donations creates the opportunity to maximize the impact of your charitable gifts for the charity and for yourself!

Carman F. Young