Why You May Not Want to Use an UGMA for Education Planning

We often come across clients who have UGMA or UTMA accounts set up for minor children. These are custodial trust accounts that are set up with a minor as beneficiary and parent or guardian as custodian under the Uniform Gifts/Transfers to Minors Act. These are often set up out of good will as a desire to make a gift to a child. When it comes to education planning, however, UGMA/UTMA accounts are often not the best vehicle for savings. This is because deposits to these accounts are considered irrevocable gifts to the minor, and the asset is considered an asset of the child’s for financial aid purposes. Such assets have a high impact on financial aid eligibility, whereas 529 plans, for example, do not. Transfers can be made from UGMA/UTMA accounts to 529s, but one has to title the account correctly when making the transfer.

If you’d like assistance with this and other education planning strategies, contact us today for a complimentary consultation.

First Seen right here: Why You May Not Want to Use an UGMA for Education Planning


Before You Pay for Financial Advice, Read This Guide via The NY Times

Earlier this year our firm was featured in The New York Times in an article about fees and the fiduciary rule. Our thoughts in that article were cited this week in another NY Times article about what consumers need to know before paying for financial advice. Generally I thought the piece was helpful and accurate. I will say that consumers need to be chary of hiring a robo-adviser, which is something the article points out as an option to investors. Investing is best done in the context of a financial plan, and a robo-adviser simply cannot give the kind of holistic and adaptable advice that is often necessary for financial success (e.g. When was the last time a robo-adviser monitored a portfolio with a keen eye so that an appropriate amount was converted to a Roth IRA?). Additionally, the article cites that one can get a financial plan in New York for $1,200. Perhaps this is true, but I hardly know a competent financial planner who would do a financial plan for $1,200. Financial planning fees often vary by complexity, and a better estimate would be a range beginning with $2,500 for less complex plans and $5,000 and up for more complex advice. Other than these minor points, I thought the article pointed consumers in the right direction, and I appreciated its focus on the need for sound fiduciary advice.


Article Source right here: Before You Pay for Financial Advice, Read This Guide via The NY Times

Quick Tip: Why You Shouldn’t Use a Roth IRA for Education Planning

When planning to fund a child’s education, there are many vehicles in which one can save for college expenses. These include, but are not limited to, Coverdell Educational Savings Accounts (ESAs), 529 plans, and UGMA/UTMAs. Sometimes one will even save in a Roth IRA. What many people don’t realize, however, is that the FAFSA financial aid form considers withdrawals from a Roth IRA to be untaxed income to the child. Consequently, such withdrawals can adversely affect a child’s ability to obtain financial aid. What is more, it’s generally best to keep retirement savings accounts earmarked for retirement and not to use them for other purposes.

Article Source here: Quick Tip: Why You Shouldn’t Use a Roth IRA for Education Planning

How to Be Prepared for Involuntary Retirement

Here’s a helpful retirement planning article that I came across this morning over at cbsnews.com Money Watch. I appreciated this piece because it touches on something that I regularly bring up with our clients, which is that saving for retirement should be viewed as something much more than just a time during which one’s savings can be applied to the pleasures of life. Hopefully retirement does create such pleasures but, in many ways, retirement savings should also be viewed as the largest emergency reserve fund that one will ever accumulate. This is because, as the article rightly points out, retirement is not always voluntary:

For many older workers, their retirement “plan” is to keep working as long as possible. Unfortunately, life events often intervene and force people to retire sooner than they expected. This may result from job loss, illness, disability, caregiving responsibilities or some other reason. This unanticipated situation can force people to make many decisions quickly and without a lot of forethought, leading to inappropriate choices.

To put this differently, many people don’t take saving for retirement seriously because they think they’ll simply be able to work until they die. I genuinely hope that all of us are still going strong like Banana George was when he was still barefoot waterskiing at age 85 (see video below), but, for many Americans, old age will inevitably set in and they simply won’t be able to do the things they once could, which includes not only play, but work.

I don’t bring up the realities of aging in an attempt to scare one into saving for retirement; instead, it’s my hope that retirement will be viewed holistically: I hope one will view retirement not only as a time to play and work, but also as a time to be financially prepared in the event one is unable to play or work. For more tips on how to be prepared for an involuntary retirement, you can read more at cbsnews.com.

Originally Posted right here: How to Be Prepared for Involuntary Retirement

FAQs about Long Term Care Planning

Our firm recently attended a continuing education session on long-term care planning, a topic with which we regularly assist our clients. One of the panel speakers, Brian Gordon with MAGA Long Term Care Planning, followed up to provide us with a helpful recap of some of the questions we tackled:

Q. What’s the best age for clients to consider purchasing LTCI?

A. This isn’t a question of chronological age, but rather a person’s stage of life. The best time to purchase is when:

  • A client is financially stable and feels premiums are affordable and can be maintained.
  • A client wants to protect retirement income.
  • A client has limited debt.

So if you have clients or family members who meet these criteria, regardless of age, now is the best time to plan for the consequences of a long term care event.

Remember, the longer a person waits, the more expensive coverage will be and the more likely that a health issue could impact their premium or eligibility. 

Last year, the average age of our clients purchasing new policies was 56 years old.

Q. What conversation should I have with affluent clients who want to self-insure their LTC risk?

A. If your clients can afford to self-insure, that’s fine. But they’ll need to plan it out with you. Ask them to identify exactly what funds they would liquidate first to pay for a long term care event and make sure it’s not already earmarked. We also would shift the conversation to catastrophic coverage.   

We have many affluent clients who—after having that conversation—elect to self-insure part of their risk and obtain coverage with guaranteed benefits and premiums. Often, they do so to protect income, assets for retirement, and family legacy.

Many of our clients in this position choose to purchase an asset-based life policy with an LTCI rider. They like the guaranteed premium and having a fully-paid up LTCI policy. They sometimes purchase similar plans for their children and even grandchildren, so they don’t need to worry about future LTC costs and premium payments.

Q. I have clients who are planning to retire outside the U.S. Do LTCI policies provide benefits for long term care received in another country?

A. It depends. Most LTCI policies do offer international benefits, but they’re often more limited than those providing care received in the U.S.

Sometimes, the dollar amount is reduced, the benefit period is shorter or the benefits are limited.  International benefits vary widely by carrier and plan. 

Clients who already have LTCI should review their policy provisions if contemplating a move abroad, so they can plan accordingly.

For clients preparing to purchase LTCI, ask them if they’re considering retiring overseas. If so, we can make sure they are offered an LTCI policy that offers the most generous international benefits. 

Email us to request a copy of our most recent International Benefits Chart.

CCRCs & LTCI: The Least You Should Know

At the conference, Justine Vogel, CEO of RiverWoods of Exeter, and Cathleen Toomey, VP of Marketing of RiverWoods, made an excellent presentation on Continuing Care Retirement Communities, or CCRCs. As long term care planners, we feel it’s important to understand how CCRCs and LTCIs work together.

CCRCs offer their residents lifetime housing and increased levels of care as health needs change. In addition to providing three tiers of care (independent living, assisted living, and skilled care), CCRCs typically offer three types of contracts, ranging from full-service life care (spanning all three tiers of care) to ala carte care (which typically doesn’t include nursing home care).

Here’s where LTCI comes into play. If a client has LTCI, it should play a role in what type of CCRC contract he or she chooses. For example, he or she may not need to choose the most expensive life care contract, since assisted living and nursing home care will be covered under their LTCI plan.

A few tips for clients with LTCI when selecting a CCRC:

  • Make sure the CCRC allows for home care. While most CCRC contracts do not include home care, some allow it—so a client with LTCI coverage could take advantage of home care benefits while living in a CCRC’s independent living arrangement.
  • In order to be covered under an LTCI policy, the CCRC’s assisted living unit must have an RN on duty 24/7. Not all assisted living facilities provide this, so it needs to be confirmed in advance.
  • Ask the CCRC if they would consider the client’s LTCI policy an asset when applying.

Article Source over here: FAQs about Long Term Care Planning

Monday Quick Tip: How to Provide Housing for Aging Parents with a Family Opportunity Mortgage

Time for another Monday Quick Tip.

Did you know you can buy a home for aging parents and avoid having to classify it as an investment property or second home? You can. Sometimes referred to as the Family Opportunity Mortgage, this type of loan allows you to get the lower interest rates associated with an owner occupied home, avoid the distance requirements that lenders require for a second home, and also avoid the high down payment requirements that come along with an investment property. What is more, as a child, you do not have to occupy the home with your parents (you can thank me later!). Parents also do not have to be on the loan, something which can come in handy if one or more of the aging parents do not have good credit.

Want to learn more about how this fits into your overall financial plan, reach out to Dunston Financial Group here.

First Seen over here: Monday Quick Tip: How to Provide Housing for Aging Parents with a Family Opportunity Mortgage

Is It Time for a Disability Insurance Checkup?

Many people own life insurance but, at our firm, we see fewer people who own disability insurance. Why might one need disability insurance? Often one’s biggest asset is one’s ability to earn an income. Calculate the present value of a future income stream, and the resulting value is usually pretty large. Disability insurance is designed to replace some of this income in the event of a short-term or long-term disability. And, contrary to what one might think, a disability need not be the result of some catastrophic event; one might not be able to work due to a skiing accident, running injury, or some other unexpected event that arises from an activity one enjoys. According to the Council for Disability Awareness, “Musculoskeletal system and connective tissue disorders remain the leading cause of new and ongoing disability claims….”

As we all know, however, buying insurance often feels like gambling. What are the odds one might need to file a claim? Listen to some insurance companies and they’ll scare you into buying disability insurance with inaccurate statistics. This helpful article by Ron Lieber over at The New York Times points out some of the fallacious reasoning behind such claims, and it goes on to point out that the odds of a long-term disability that will keep one out of work for more than 90 days are around 30%. These odds, he goes on to explain, could be even lower depending one’s occupation. If you want to know your odds, here’s a helpful calculator that will take into account your own occupation and circumstances.

For short-term disabilities, a good cash reserve can help one pay expenses. Longer term disabilities lasting more than 90 days often need to be insured. For many of our clients, this insurance is provided through a group benefits plan. Many of our clients have never looked at their group disability plan, and many aren’t aware if they even have one. The bottom line, as Lieber rightly point out, is that “A majority of American adults have no private, long-term disability insurance, which can replace a chunk of their salary when they get hurt or become sick for several months or more. Many who do have coverage may not have enough. On this, most prudent financial planners agree.”

What is more, things can get complicated when one learns that disability benefit plans rarely cover more than 60% of one’s salary, often have confusing definitions of disability, can be coordinated with Social Security and other benefits that one may or may not obtain, and can also be taxable. While you don’t need to be scared into buying something based on inaccurate data, a long-term disability is still a real risk that needs to be given serious consideration when doing responsible financial planning. At Dunston Financial Group, we regularly analyze our clients’ disability needs and policies. Some times we recommend they keep them and other times we advise them to get rid of them. The good news is that we don’t sell insurance, so our clients can rest assured knowing that we’ll give objective advice that is always in their best interest. If it’s time for a disability checkup, please feel free to get in touch with us here.


Original Post over here: Is It Time for a Disability Insurance Checkup?

Announcing the Newest Member of the Dunston Financial Group Team


Dunston Financial Group is excited to announce the addition of our newest team member, Meera Meyer. Meera is a Certified Financial Planner™ professional with over five years of experience working with independent fee-only advisory firms in both California and Colorado. She brings to Dunston Financial Group a variety of financial planning experience, including college and retirement planning, financial security analysis, real estate and rental property analysis, and estate planning. She began her career in the non-profit sector where she worked with, and currently sits on the board for, Project Education South Sudan, an organization that educates and empowers girls in South Sudan. She also sits on the advisory board for the Women’s Partnership Market, a B Corp that partners with grassroots organizations and female artisans to empower women worldwide.

Article Source on: Announcing the Newest Member of the Dunston Financial Group Team

A Deeper Sense of Self: Ruminations on Philanthropic Giving

Have you ever thought about giving financially to support a cause that’s important to you? Would you like to leave a legacy? Do you believe that money is more than something to accumulate? Studies have shown that charitable giving has psychological and health benefits, and that it can also help train your heirs to have certain values you might want them to have. According to charitable giving expert Lorraine del Prado, some of these values include:

  • Inoculation of heirs “from ‘affluenza,’ the dysfunctional relationship with money.
  • Giving provides a psychological boost for those of inherited wealth, who suffer from guilt and low self-esteem from money they haven’t earned.
  • Giving reduces the sense of separation from the larger world.
  • Philanthropy provides good training in letting go.
  • A forum for meaningful intergenerational communication.”*

Of course philanthropy offers economic benefits as well, including, but not limited to, reduced income, capital gains, gift, and estate taxes, diversification of one’s inheritance, and unlocking income from underperforming or highly appreciated assets. And while tax savings are important, they generally aren’t the primary drivers of philanthropic giving. Instead, del Prado maintains that a deep sense of community, family, and strong values are often what lead people to give.

Even though wealth is not merely a tool given that it’s needed for basic economic security, wealth can and often should be viewed as an instrument that helps one accomplish greater good for one’s self, family, and community. Personally, the idea that there’s a nexus between wealth and the greater good is exciting to me. Our society needs strong families and communities and wealth can be a wonderful means to that end.


*Private training session with Lorraine del Prado, 2017.

Originally Posted here: A Deeper Sense of Self: Ruminations on Philanthropic Giving

Investors Aren’t Yet Safe: Why Working with a Fiduciary Is More Important than Ever

A recent editorial in The New York Times points out that consumers of financial services aren’t yet safe even though the Department of Labor’s Fiduciary Rule will likely go into effect. They are not yet safe because the new secretary of labor, Alexander Acosta, is now proposing a replacement rule that will essentially rescind the original fiduciary rule. In case you’re not familiar with the issue at hand, the editorial board explains that “While some financial advisers must adhere to a legal duty to act in a client’s best interest, many others face no such obligation. One result is that consumers pay an estimated $17 billion a year in excessive fees because advisers steer them into high-cost products when lower-cost ones are available.”

Why would Mr. Acosta propose such a rescission?  “Mr. Acosta objected that the rule ‘as written may not align with President Trump’s deregulatory goals.'” The editors go on to explain how striking this is given that “Mr. Acosta’s job as labor secretary is to advise Mr. Trump on how to help working people, not how to achieve his deregulatory goals. The fiduciary rule, as written, will help working people. Rescinding it will not.”

So what is the consumer to do? The article is correct when it says that “some financial advisers must adhere to a legal duty to act in a client’s best interest…,” but who are these advisors? These advisors are fee-only advisors, and many of them are members of the National Association of Personal Financial Advisors. If you don’t want to worry about whether or not an advisor has your best interest in mind or, if the current administration is going to act to protect your financial interests, then be sure to work with a fee-only advisor. Fee-only advisors are legally obligated to act in a fiduciary capacity and must always place your interests ahead of their own.

Article Source over here: Investors Aren’t Yet Safe: Why Working with a Fiduciary Is More Important than Ever