Monday, January 15, 2018



Avoiding the Cybercrooks
How can you protect yourself against ransomware, phishing, and other tactics?

Provided by WenJing He

Imagine finding out that your computer has been hacked. The hackers leave you a message: if you want your data back, you must pay them $300 in bitcoin. This was what happened to hundreds of thousands of PC users in May 2017 when they were attacked by the WannaCry malware, which exploited security flaws in Windows.
  
How can you plan to avoid cyberattacks and other attempts to take your money over the Internet? Be wary, and if attacked, respond quickly.
 
Phishing. This is when a cybercriminal throws you a hook, line, and sinker in the form of a fake, but convincing, email from a bank, law enforcement agency, or corporation, complete with accurate logos and graphics. The goal is to get you to disclose your personal information – the crooks will either use it or sell it. The best way to avoid phishing emails: stick to a virtual private network (VPN) or extremely reliable Wi-Fi networks when you are online.1

Ransomware. In this scam, online thieves create a mock virus, with an announcement that freezes your monitor. Their message: your files have been kidnapped, and you will need a decryption key to get them back, which you will pay handsomely to receive. In 2016, the FBI fielded 2,673 ransomware attack complaints, by companies and individuals who lost a total of $2.4 million. How can you avoid joining their ranks? Keep your security software and operating system as state of the art as you can. Your anti-virus programs should have the latest set of virus definitions. Your Internet browser and its plug-ins should also be up to date.2

Advance fee scams. A crook contacts you via text message or email, posing as a charity, a handyman, an adult education provider, or even a tax preparer ready to serve you. Oh, wait – before any service can be provided, you need to pay an “authorization fee” or an “application fee.” The crook takes the money and disappears. Common sense is your friend here; avoid succumbing to something that seems too good to be true.
  
I.R.S. impersonations. Cybergangs send out emails to households and small businesses with a warning: you owe money. That money must be paid now to the Internal Revenue Service through a pre-paid debit card or a money transfer. These scams often prey on immigrants, some of whom may not have a great understanding of U.S. tax law or the way the I.R.S. does business. The I.R.S. never emails a taxpayer out of the blue demanding payment; if unpaid taxes are a problem, the agency first sends a bill and an explanation of why the taxes need to be collected. It does not bully businesses or taxpayers with extortionist emails.1
      
Three statistics might convince you to obtain cyberinsurance for your business. One, roughly two-thirds of all cyberattacks target small and medium-sized companies. About 4,000 of these attacks occur per day, according to IBM. Two, the average cost of a cyberattack for a small business is around $690,000. This factoid comes from the Ponemon Institute, a research firm that conducted IBM’s 2017 Cost of Data Breach Study. That $690,000 encompasses not only lost business, but litigation, ransoms, and the money and time spent restoring data. Three, about 60% of small companies hit by an effective cyberattack are forced out of business within six months, notes the U.S. National Cyber Security Alliance.3


Most online money threats can be avoided with good security software, the latest operating system, and some healthy skepticism. Here is where a little suspicion may save you a lot of financial pain. If you do end up suffering that pain, the right insurance coverage may help to lessen it. 

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - gobankingrates.com/personal-finance/avoid-12-scary-money-scams/ [8/28/17]
2 - eweek.com/security/the-true-cost-of-ransomware-is-much-more-than-just-the-ransom [8/18/17]
3 - sfchronicle.com/business/article/Interest-in-cyberinsurance-grows-as-cybercrime-12043082.php [8/28/17]

Monday, January 8, 2018



Are Millennial Women Saving Enough for Retirement?
The available data is more encouraging than discouraging.

Provided by WenJing He

Women 35 and younger are often hard-pressed to save money. Student loans may be outstanding; young children may need to be clothed, fed, and cared for; and rent or home loan payments may need to be made. With all of these very real concerns, are they saving for retirement?
   
The bad news: 44% of millennial women are not saving for retirement at all. This discovery comes from a recent Wells Fargo survey of more than 1,000 men and women aged 22-35. As 54% of the millennial women surveyed were living paycheck to paycheck, this lack of saving is hardly surprising.1
    
The good news: 56% of millennial women are saving for retirement. Again, this is according to the Wells Fargo survey. (A 2016 Harris Poll determined roughly the same thing – it found that 54% of millennial women were contributing to a retirement savings account.)1,2

The question is are these young women saving enough? In the Wells Fargo survey, the average per-paycheck retirement account contribution for millennial women was 5.7% of income, which was 22% lower than the average for millennial men. One influence may be the wage gap between the sexes: on average, the survey found that millennial women earn just 74% of what their male peers do.1
    
In the survey, the median personal income for a millennial woman was $28,800. So, 5.7% of that is $1,641.60, which works out to a retirement account contribution of $136.80 a month. Not much, perhaps – but even if that $136.80 contribution never increased across 40 years with the account yielding just 6% annually, that woman would still be poised to end up with $254,057 at age 65. Her early start (and her potential to earn far greater income and contribute more to her account in future years) bodes well for her financial future, even if she leaves the workforce for a time before her retirement date.1,3
 
More good news: millennial women may retire in better shape than boomer women. That early start can make a major difference, and on the whole, millennials have begun to save and invest earlier in life compared to previous generations. A recent study commissioned by Naxis Global Asset Management learned that the average millennial starts directing money into a retirement account at age 23. Historically, that contrasts with age 29 for Gen Xers and age 33 for baby boomers. If the average baby boomer had begun saving for retirement at age 23, we might not be talking about a retirement crisis.4  
  
In the aforementioned Harris Poll, the 54% of millennial women putting money into retirement accounts compared well with the 44% of all women doing so. The millennial women were also 14% more likely to voluntarily participate in a workplace retirement plan than male millennials were, and once enrolled in such plans, their savings rates were 7-16% greater than their male peers.2

In 2015, U.S. Trust found that 51% of high-earning millennial women were top or equal income earners in their households. That implies that these young women have a hand in financial decision-making and at least a fair degree of financial literacy – another good sign.4


Clearly, saving $136.80 per month will not fund a comfortable retirement – but that level of saving in their twenties may represent a great start, to be enhanced by greater retirement account inflows later in life and the amazing power of compound interest. So, while young women may not be saving for retirement in large amounts, many are saving at the right time. That may mean that millennial women will approach retirement in better financial shape than women of preceding generations.

 WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - time.com/money/4438063/millennial-women-not-saving-retirement/ [8/4/16]
2 - bloomberg.com/news/articles/2016-04-21/millennial-women-save-more-than-mom-but-less-than-men [4/21/16]
3 - investor.gov/additional-resources/free-financial-planning-tools/compound-interest-calculator [3/23/17]
4 - bustle.com/p/5-ways-youre-better-at-managing-money-than-your-parents-were-44402 [3/15/17]

Tuesday, January 2, 2018


Understanding Inherited IRAs
What beneficiaries need to know and consider.

Provided by WenJing He

At first glance, the rules surrounding inherited IRAs are complex. Here are some questions (and potential answers) to consider if you have inherited one or may in the future.
   
Who was the original IRA owner? If the original owner was your spouse, you have a fundamental choice to make. You can roll over your late spouse’s IRA into an IRA you own, or you can treat it as an inherited IRA. If the original owner was not your spouse, you must treat the IRA for which you are named beneficiary as an inherited IRA.1,2

What kind of IRA is it? It will either be a traditional IRA funded with pre-tax contributions or a Roth IRA funded with post-tax contributions.

Do you want to let the money grow and take RMDs or cash it all out now? In the case of a small IRA, many heirs just want to cash out – it seems bothersome to schedule tiny withdrawals out of the IRA across the remainder of their lifetimes. Money coming out of an inherited traditional IRA is taxable income, however – and if a lump sum is taken, the tax impact could be notable.1

If the IRA is substantial, there is real merit in scheduling Required Minimum Distributions (RMDs) instead. This gives some of the still-invested IRA balance additional years to grow and compound. Any future growth will be tax deferred (traditional IRA) or tax free (Roth IRA).1

Internal Revenue Service rules say that RMDs from inherited IRAs must begin by the end of the year following the year in which the original IRA owner died. These RMDs are required even for inherited Roth IRAs. Each RMD is considered regular, taxable income.1,2

One asterisk is worth noting regarding inherited traditional IRAs. If the original IRA owner died on or after the date at which RMDs are required for that IRA, then you can schedule RMDs during the remainder of your lifetime using tables in I.R.S. Publication 590 as a guide. If the original IRA owner died before that date, you have a choice of scheduling RMDs over a lifetime or withdrawing the whole IRA balance by the end of the 5th year following the year of the original owner’s death.2,3
   
What is the IRA’s basis? In other words, what is the amount on which the original IRA owner paid taxes? For an inherited traditional IRA, the basis equals the amount of all non-deductible contributions that the original IRA owner made. For an inherited Roth IRA, the basis equals the amount of total contributions made by the original owner.4

When you know the basis, you can figure out the percentage of an RMD from an inherited traditional IRA that is subject to tax. RMDs out of inherited Roth IRAs are not normally taxed, but if the inherited Roth IRA is less than five years old, you must determine the basis. The Roth IRA’s basis will be distributed to you first, then the Roth IRA’s earnings, and only the earnings will be taxed. Earnings can be withdrawn tax free from an inherited Roth IRA starting on the first day of the fifth taxable year after the year the Roth IRA was first created.1,4
   
Can you withdraw more than the RMD amount from an inherited IRA each year? Certainly, but keep in mind that a large, lump-sum payout could leave you in a higher tax bracket.1
 
What happens when you inherit an inherited IRA? As a secondary beneficiary to that IRA, you assume the RMD schedule of the person who was the primary beneficiary.1
 
Can you convert an inherited traditional IRA into a Roth IRA? The I.R.S. forbids this – with one exception. A spousal IRA heir who rolls over an inherited IRA balance into their own traditional IRA can arrange a Roth conversion.3
   

If you have inherited an IRA, talk with a financial professional. That conversation may help you determine a tax-efficient way to manage and withdraw these assets.

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - forbes.com/sites/ashleaebeling/2017/07/10/what-to-do-if-you-inherit-an-ira/ [7/10/17]
2 - irs.gov/retirement-plans/required-minimum-distributions-for-ira-beneficiaries [8/17/17]
3 - fool.com/retirement/iras/2017/06/01/5-inherited-ira-rules-you-should-know-by-heart.aspx [6/1/17]
4 - finance.zacks.com/basis-inherited-iras-2711.html [10/12/17]

Monday, December 18, 2017



Are There Blind Spots in Your Insurance Plan?
Deficient coverage may cost you someday.

Provided by WenJing He

  
Too many people go without disability insurance. If you work in a physically demanding field, your employer may provide short-term disability coverage – but many companies do not. According to the Bureau of Labor Statistics, just 39% of workplaces offer employees short-term coverage, and only 33% offer long-term coverage.1

If you are disabled and cannot work, your income soon disappears. Short-term disability insurance, which may last anywhere from 10-26 weeks, commonly replaces around 60% of it. Not ideal, but better than 0%. About 8% of the time, however, a short-term disability lasts more than six months and extends into a long-term disability. Long-term disability coverage can replace 50-70% of your salary for a period of 2-10 years, perhaps even until you turn 65.1,2
   
More people ought to have earthquake and flood coverage. You may think that earthquake insurance is only for those living right on top of fault lines. If your home sustains quake damage that you must repair with tens of thousands of dollars of your hard-earned money, or if your business is forced to close for two weeks after a major quake hits your area, your opinion will change.
 
Recent hurricanes and flood surges have underlined the value of flood insurance for those living in low-lying areas. Just 12% of U.S. homeowners have this coverage. A typical homeowner policy will cover minor water damage, but not flood damage.3
   
If you finance a car and it is stolen or totaled, will you have to pay for it? Not if you have GAP (Guaranteed Auto Protection) insurance. If you are going to finance a car, SUV, or truck, ask about this coverage – especially if you intend to use that vehicle for work or business. The coverage is cheap – payments are usually $10-15 more each month (over the life of the loan).4

If you buy a new truck for $25,000 and it is totaled a year later, the insurer providing GAP coverage will determine the current value of the vehicle and write a check for that amount minus your deductible. You may want GAP coverage if you are buying a vehicle with less than 30% down. Without it, you may risk owing more than the current market value of your vehicle if it is stolen or wrecked.4

Is your sewer line insured? Cities usually require homeowners to maintain the sewer lateral running onto their property – the “branch” of the main sewer system on the street that connects to their house. If that sewer lateral backs up, it could cost you thousands and create a health problem for your neighbors. (Businesses have the same responsibility.) Tree roots and even improper disposal of paper products and grease can lead to this problem. Coverage against it is relatively cheap – it just adds about $40-50 to the annual premium on a homeowner policy.5


Address the weaknesses in your personal or business coverage, today. You certainly do not want to look back with regret on “what you should have done.” Be prepared, and put coverage for some or all of these potential crises in place.

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - time.com/money/4428179/short-term-disability-pay/ [6/19/17]
2 - thebalance.com/what-is-long-term-disability-insurance-1918178 [7/9/17]
3 - cnbc.com/2017/09/11/navigating-insurance-claims-post-hurricane-irma.html [9/11/17]
4 - chron.com/cars/article/Financing-a-car-GAP-insurance-can-keep-drivers-12200736.php [9/15/17]
5 - wnins.com/resources/personal/features/sewerbackup.shtml [9/15/17]

Monday, December 11, 2017


Retirement Plan Trusts
These tools can shield inherited IRA assets from lawyers and creditors.

Provided by WenJing He

Inherited IRA assets are vulnerable in bankruptcy proceedings. Many older IRA owners and their beneficiaries do not realize this, but it is true.
 
In Clark, et ux v. Rameker (2014), the Supreme Court ruled 9-0 that inherited IRAs cannot be defined as “retirement funds” under federal bankruptcy law. They now lack the protection that retirement savings accounts commonly get in bankruptcy courts.1

So today, a longstanding estate planning dictum is being reevaluated. If you have non-spousal heirs who seem at risk for bankruptcy, you might want to leave your IRA to a trust.
 
When IRA owners make this move, it is usually because they want a legal and financial firewall in place, i.e., the potential heir to the IRA is a minor or someone who is bad with money. Add protecting inherited IRA assets against creditors and lawyers to the list of objectives. Spouses can inherit IRA assets and receive creditor protection for those assets when they roll them into IRAs of their own, but federal tax law does not yet give other heirs that perk.2
 
Two types of retirement plan trusts exist to help shield inherited IRA assets. The first is the conduit trust. True to its name, the trust is a means to an end. The conduit trust is designated as the IRA beneficiary, and an individual is named as the beneficiary of the trust.2

When the original IRA owner passes away, the (inherited) IRA goes into the conduit trust, and a series of yearly Required Minimum Distributions (RMDs) to the trust beneficiary begin. The trustee calculates and authorizes these RMDs; like other RMDs, they are characterized as regular income. The IRA assets held within the trust are protected from creditors, as the trust legally owns them (the RMDs out of the trust, however, are not).2

Do you want to stretch IRA assets out for future generations? Think about an accumulation trust. An accumulation trust requires no RMDs. It does require a separate trustee and beneficiary, just like a conduit trust does; the trustee can distribute the assets out of the trust as preferred. Those invested IRA assets can keep growing within the accumulation trust, but the trust will be taxed at the top marginal income tax rate if it earns more than $12,150 in a year.2
 
If the person in line to inherit your IRA faces a high risk of litigation or has poor financial habits, an accumulation trust may be worth exploring. As with a conduit trust, assets held inside an accumulation trust are out of reach of creditors and attorneys – and the trustee can hold back the money from being distributed until the lawyers disappear or the beneficiary is ready to handle it responsibly.2

IRA assets must be transferred into a retirement plan trust carefully. A trustee-to-trustee transfer (direct rollover) needs to be made, and the involved financial and legal professionals and IRA custodian all need to be on the same page.3


You should not attempt to create a retirement plan trust without an attorney’s help. As an example of what can go wrong for do-it-yourselfers, the 60-day rule applying to indirect rollovers of qualified retirement plan assets does not apply for inherited IRAs. If you make an indirect rollover of such assets and take possession of them on the way to setting up the trust, you will be considered to have received taxable income, even if you complete the rollover process within the 60-day window. To do this knowledgeably, seek those with the right knowledge.3

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - wealthmanagement.com/estate-planning/retirement-plan-trusts-headline-ira-forecast [7/15/14]
2 - nerdwallet.com/blog/finance/how-to-protect-inherited-ira-assets-from-creditors/ [1/26/16]
3 - marketwatch.com/story/dont-make-this-mistake-with-an-inherited-ira-2017-09-29/ [9/29/17]

Monday, December 4, 2017


Actively Managed 401(k)s
An option that may help your retirement efforts.

Provided by WenJing He

How should your 401(k) be invested? While some investors manage their 401(k)s themselves, others may seek a different kind of “hands-on” approach: having their retirement plan assets actively and professionally managed.

Why should a 401(k) be actively managed? In a volatile stock market climate, there are potential drawbacks to leaving a 401(k) alone. If 401(k) participants don’t adjust asset allocations in response to market conditions or don’t adjust their investment mix for years, they can potentially lose on their investment. While “buy and hold” can be a successful investment strategy at times, passivity can be equally problematic.

Passive and reactive management can backfire. After years without adjustments, employees may change their 401(k) investment preferences following a bad stock market quarter – but months later, they might miss out on big gains by sitting on the sidelines during a Wall Street rally.

There are two central problems with a DIY management approach: 1) the average employee doesn’t have the knowledge base of a financial professional; 2) the stock market does not move once every three months, but is constantly moving. Investing without monitoring and acting upon changes in the market can have an undesirable result, to say the least.

Many funds offered to 401(k) participants can move with the market; target funds and asset allocation funds may be quite diversified. The problem is that their performance may simply emulate that of the broad market. In addition, passive investing will seldom outperform the market, because the investments involved are directly linked to the performance of stock market indices. In a healthy bull market, many investors can live with that limitation; in a sideways or bear market, many can’t.1

Is there another way? If your goals are to make money in a down or volatile market or to reduce the losses brought on by volatility, an actively managed 401(k) may be appealing. Active investment management uses technical analysis with the twin goals of buying near support levels and selling at resistance levels.

Buy-and-hold investors often prosper in lengthy bull markets, in which the major indices tend to make steady incremental gains punctuated by occasional corrections. Bull markets are characterized by long periods of subdued volatility. Bear markets are another animal: many emerge through significant ups and downs, with institutional investors finally deciding to sell off steadily rather than buy.

A passive, buy-and-hold approach can hurt a 401(k) participant when stocks do sell off; waiting too long to respond to a market slump might be disastrous for a retirement saver, depending on that investor’s goals and time horizon. In contrast, active professional management of 401(k) assets may uncover opportunities for gains amid the volatility and help mitigate losses stemming from sector or asset class downturns.
  
If you are interested in having some or all of your 401(k) assets actively managed, you may explore this choice without having to obtain permission from your employer or plan administrator. Active 401(k) management can mean higher plan fees, but the fees may be a very small price to pay if the performance of the 401(k) improves.  


Ask about this option. While past performance is no guarantee of future results, an actively managed 401(k) may offer you the potential to outperform the market during volatile times. 

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.
1 - investopedia.com/news/active-vs-passive-investing/ [4/22/17]

Monday, November 27, 2017




Minimizing Probate When Setting Up Your Estate
What can you do to lessen its impact for your heirs?

Provided by WenJing He

Probate subtly reduces the value of many estates. It can take more than a year in some cases, and attorney’s fees, appraiser’s fees, and court costs may eat up as much as 5% of a decedent’s accumulated assets.1
  
What do those fees pay for? In many cases, routine clerical work. Few estates require more than that. Heirs of small, five-figure estates may be allowed to claim property through affidavit, but this convenience isn’t extended for larger estates.
 
So, how you can exempt more of your assets from probate and its costs? Here are some ideas.
  
Joint accounts. Married couples may hold property as a joint tenancy. Jointly titled property includes a right of survivorship and is not subject to probate. It simply goes to the surviving spouse when one spouse passes. Some states allow a variation called tenancy by the entirety, in which married spouses each own an undivided interest in property with the right of survivorship (they need consent from the other spouse to transfer their ownership interest in the property). A few states allow community property with right of survivorship; assets titled in this way also skip the probate process.2,3
  
Joint accounts can still face legal challenges. A potential heir to assets in a jointly held bank account may claim that it is not a “true” joint account, but a “convenience account” where a second accountholder was added just for financial expediency (an adult child able to make deposits and pay bills for a mom or dad with dementia, for example). Also, a joint account with right of survivorship may be found inconsistent with language in a will.4
  
POD & TOD accounts. Payable-on-death and transfer-on-death forms are used to permit easy transfer of bank accounts and securities (and even motor vehicles, in a few states). As long as the original owner lives, the named beneficiary has no rights to claim the account funds or the security. When the original owner passes away, all the named beneficiary has to do is bring his or her I.D. and valid proof of the original owner’s death to claim the assets or securities.5
    
Gifts. For 2017, the I.R.S. allows you to give up to $14,000 each to as many different people as you like, tax free. By doing so, you reduce the size of your taxable estate. Gifts over $14,000 may be subject to federal gift tax (which tops out at 40%) and count against the lifetime gift tax exclusion. The lifetime gift tax exclusion is currently set at $5.49 million per individual (and correspondingly, $10.98 million per married couple).6
  
Revocable living trusts. In a sense, these estate planning vehicles allow people to do much of their own probate while living. The grantor – the person who establishes the trust – funds it while alive with up to 100% of his or her assets, designating the beneficiaries of those assets at his or her death. (A pour-over will can be used to add subsequently accumulated assets to the trust at your death; yet, those assets “poured into” the trust at that time will still be probated.)7
 
The trust owns assets that the grantor once did, yet the grantor can invest, spend, and manage these assets while living. When the grantor dies, the trust lives on – it becomes irrevocable, and its assets should be able to be distributed by a successor trustee without having to be probated. The distribution is private (as opposed to the completely public process of probate) and it can save heirs court costs and time.7
   
Are there assets probate doesn’t touch? Yes, there are all kinds of non-probate assets. The common denominator of a non-probate asset is a beneficiary designation. By law, these assets must pass either to a designated beneficiary or a joint tenant, regardless of what a will states. Examples: jointly titled real property, jointly held bank accounts with right of survivorship, POD and “in trust for” accounts, life insurance policies, and IRA, 401(k), and 403(b) accounts.8   
  
Make sure to list/update retirement account beneficiaries. When you open a retirement savings account (such as an IRA), you are asked to designate eventual beneficiaries of that account on a form. This beneficiary form stipulates where these assets will go when you die. A beneficiary form commonly takes precedence over a will.9
  
Your beneficiary designations need to be reviewed, and they may need to be updated. You don’t want your IRA assets, for example, going to someone you no longer trust or love.
  
If you are married and have a workplace retirement plan account, your spouse is the default beneficiary of the account under federal law, unless he or she declines to be in writing. Your spouse is automatically entitled to receive 50% of the account assets should you die, even if you designate another person as the account’s primary beneficiary. In contrast, a married IRA owner may name anyone as a primary or secondary beneficiary, without spousal consent.10   
  

To learn more about strategies to avoid probate, consult an attorney or a financial professional with solid knowledge of estate planning.

WenJing He may be reached at 800-916-9860 or hew@wenadvisory.com.
www.wenadvisory.com

This material does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment

Citations.
1 - nolo.com/legal-encyclopedia/why-avoid-probate-29861.html [9/26/17]
2 - info.legalzoom.com/difference-between-community-property-rights-survivorship-vs-joint-tenancy-21133.html [9/26/17]
3 - law.cornell.edu/wex/tenancy_by_the_entirety [9/26/17]
4 - jpfirm.com/news-resources/survivorship-rights-in-joint-bank-accounts/ [1/15]
5 - nolo.com/legal-encyclopedia/avoid-probate-transfer-on-death-accounts-29544.html [9/26/17]
6 - tinyurl.com/y7rf2ayh [9/6/17]
7 - thebalance.com/how-does-a-revocable-living-trust-avoid-probate-3505224 [11/14/16]  
8 - thebalance.com/what-are-non-probate-assets-3505237 [6/21/17]
9 - marketwatch.com/story/make-this-estate-planning-move-right-now-check-your-beneficiary-designations-2017-06-29/ [6/29/17]
10 - connorsandsullivan.com/Articles/Beneficiary-Designations-Getting-the-Right-Assets-to-the-Right-People.shtml [9/27/17]