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Chevron Employees: Avoid These Common Estate Planning Mistakes

Estate planning is one of the most important things you can do to protect your family and your assets. It ensures that your assets and belongings go exactly where you want them and saves your family an immense amount of stress, pain, and cost. Still, estate planning often becomes an afterthought, something that’s a “long way off” or “not a top priority right now.” 

The good news is that estate planning isn’t as complicated as it sounds. You can establish the key documents you need with much less effort or investment than you might think. In my 33 years of advising Chevron employees, here are the most common mistakes I’ve seen and the steps you can take to avoid them. 

1. Underestimating probate.

Too often, people put off estate planning because they don’t realize the alternative. If you didn’t have key estate documents in place, and something were to happen to you, all of your assets would go to probate. That is basically a simple way of saying the government would decide for you — in a very long, expensive, and public way — what to do with your assets. 

I’ve seen probate negatively impact already grieving families who don’t have the bandwidth or money to deal with the probate process. It makes everything much simpler for your surviving family to have all of your documents in place, so they can focus on things that matter instead of the cost and process of dividing up your assets.

2. Believing estate plans are just for the rich.

Estate planning might sound fancy, but estate plans are not just for the wealthy. The six estate planning documents everyone should have include: 1) Will/trust, 2) Durable power of attorney, 3) Beneficiary designations, 4) Letter of intent, 5) Healthcare power of attorney, and 6) Guardianship designations. Beneficiary and guardianship designations are particularly critical for those with minor children, as they allow you to decide who would look after them. 

A will or trust should be one of the core components of every estate plan, regardless of the amount of assets. These documents ensure that your assets go exactly where you want them. A durable power of attorney sets whom you would want to make decisions for you if you were unable to (otherwise, it would be up to the courts) — and the same principle applies to the healthcare power of attorney. Your letter of intent streamlines asset distribution and can also include wishes for your funeral. Beneficiary and guardianship designations state your wishes for your children and other beneficiaries. 

3. Assuming estate plans are too expensive.

Having your assets go through probate is actually far messier and more expensive than creating an estate plan. How much more expensive? The average cost for probate and attorney fees for a $1MM estate is $46,000. The fee to set up an estate plan, on the other hand, averages just a few thousand dollars. That’s a drop in the bucket compared to probate, not to mention you also save your family time and stress by outlining everything in advance. 

Most importantly, an estate plan leaves nothing to chance or guessing. Estate documents make it exceedingly clear whom you would like to take care of your children, get ownership of your house, inherit your money, etc. You can also detail how inheritance should occur (at specific ages, in specific percentages over time, etc.).

For more detail on how to set up your estate plan, join Warren Street and Hunsberger Dunn for a “Will, Trusts, & Estate Planning Webinar” Sept. 27. We’ll break down how to know if you need a living trust, best practices for creating wills and trusts, and more! Estate planning can seem convoluted, but we’re here for you to help make it as streamlined as possible. 

Have questions about your Chevron retirement plan? Len is an expert in Chevron benefits and would be happy to meet with you. Click here to schedule a complimentary consultation with him. 

Len Hanson

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Six Financial Best Practices for Year-End 2021

Believe it or not, another year has rounded third base, and is dashing toward home plate. That said, there’s still time to make a few good plays in 2021, while positioning yourself to score more in the year ahead. Here are six financial best practices for the record books.

1. Keep Your Eye on the Ball. While there are always distracting trading temptations, it seems as if 2021 has had more than its fair share of them. Remember the January excitement over GameStop and its ilk? That frenzy was soon followed by “SPAC-Man” Chamath Palihapitiya, tweeting out “Shooters shoot” to his disciples, as SPACs started flying every which way. Tradeable memes and non-fungible tokens (NFTs) became a thing around then too, followed by the pursuit of fluffy little dogecoins.

Our Best-Practice Advice: Instead of swinging at fast fads, we encourage you to lean into the returns our resilient global markets are expected to deliver over time. As always, this means looking past the wild throws and building a low-cost, globally diversified portfolio, tailored for your personal financial goals and risk tolerances. Isn’t that your aim to begin with?

2. Revisit Your Saving and Spending. COVID changed a lot of things, including our saving and spending patterns. Stimulus and unemployment checks offered cash flow relief for many families. Business owners received generous loans. Moratoriums on paying off college debt or being penalized for dipping into retirement savings helped as well. Retirees were permitted to skip taking Required Minimum Distributions (which is NOT the case in 2021).

Our Best-Practice Advice: As these and similar relief programs wind down, now is an excellent time to recalibrate your own financial plans. If you borrowed from your future self by withdrawing from or not adding to your retirement reserves, please establish a disciplined schedule for paying yourself back. If you became accustomed to spending less on items you used to think you couldn’t live without, try directing those former expenditures to restoring your retirement and rainy-day funds. Work with a financial planner to assess other ways your budgeting may benefit from a fresh take. Every little bit counts!

3. Watch for Fund Distributions. Even as we’ve continued to weather the pandemic storm, our forward-looking, global markets have been delivering relatively strong returns year-to-date for many foreign/U.S. stock funds. That’s good news, but it also means mutual funds’ capital gain distributions may be on the high side this year. Capital gain distributions typically occur in early December, based on the fund’s underlying year-to-date trading activities through October. For funds in your tax-sheltered accounts, the distributions aren’t taxable in the year incurred, but they are for funds held in your taxable accounts.

Our Best-Practice Advice: Taxable distributions aside, staying put to earn all potential market returns is the more important determinant in our buy-and-hold approach. With that said, in your taxable accounts only, if you don’t have compelling reasons to buy into a fund just before its distribution date, you may want to wait until afterward. On the flip side, if you are planning to sell a fund anyway—or you were planning to donate a highly appreciated fund to charity—doing so prior to its distribution date might spare you some taxable gains.

4. Consider Tax Gain Harvesting. Along with relatively strong year-to-date market performance, many Americans are also benefiting from historically lower capital gain and income tax rates that may or may not last. Often, taxpayers view each tax season in isolation, seeking to minimize taxes owed that year. We prefer to view tax planning as a way to reduce your lifetime tax bill. Of course, we can’t know what your future taxes will be. But it can sometimes make good, big-picture sense to intentionally generate taxable income in years when tax rates seem favorable.

Our Best-Practice Advice: If you have “room” to take some taxable capital gains this year—and if it actually makes sense for you to take them—you may want to consider working with your tax planning team to do so. 

5. Seize the Day on Your Charitable Giving. Unlike many other pandemic-inspired tax breaks, several charitable-giving incentives still apply for 2021, but may not moving forward. This includes the ability for single/joint filers to deduct up to $300/$600 in cash contributions to qualified charities, even if they’re already taking the standard deduction on their tax return. If you’re so inclined, you also can still donate up to 100% of your AGI to qualified charities.

Our Best-Practice Advice: Charitable giving remains another timeless tactic for offsetting taxable capital gains you may want or need to report, as well as any other extra taxable income you may be incurring. And charitable organizations need our contributions as sorely as ever. So, if you’re charitably inclined, you may as well make the most of your generosity by pairing it with your 2021 tax planning.

6. Plan Ahead for Estate Planning. Holiday shoppers may not be the only ones facing supply chain shortages this year. Estate planning attorneys, CPAs, and similar planning professionals may also be in shorter supply toward year-end and beyond. In addition to the usual year-end crunch, many such service providers have been extra busy responding to a “COVID estate planning boom,” as well as to the fast-paced action in Washington.

Our Best-Practice Advice: If you’ve been thinking about revisiting your estate or tax planning activities, know that the process may take longer than usual. Especially if you’re planning for changes that are up against a hard deadline (such as year-end or April 15th), you’ll benefit yourself by giving your attorney, accountant, and others the time they need to do their best work for you. High-end estate planning in particular is best approached as a months-long, if not years-long process.

How else can we help you wrap 2021 and position yourself and your wealth for the year ahead? As always, we stand ready to assist!

Cary Facer

Founder and Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Estate Planning: A Checklist of Essentials

As school starts again and we are getting back to our routines, this may also be a good time to review the following list of estate planning essentials. This is a good checklist to scroll through at least once a year and upon any significant life changes. We will be there to remind you as your life events unfold.


Check Your Beneficiaries: We cannot say this one often enough. Check the beneficiaries on your retirement accounts and your life insurance policies at least once a year and remember to update your beneficiaries upon births, deaths, marriages, and divorces. It is important to have both Primary and Contingent beneficiaries listed. If your retirement account is managed by Warren Street, we will review your beneficiaries during your annual review meeting.

Set Up TOD/POD On Brokerage And Bank Accounts: If you do not have a Trust established yet, be sure to set up a TOD (Transfer On Death) or POD (Payable on Death) feature on all brokerage and/or bank accounts. This feature will add beneficiaries to your accounts, and will keep the accounts out of probate.

Don’t Name Minors As Account Beneficiaries or Life Insurance Beneficiaries: If you do, your estate will need an appointed guardian and will potentially need to provide annual accountings to the probate court. If you want the assets to ultimately flow to a minor, the best option is to name a Trust as the beneficiary of beneficiary-driven accounts.

Review Your Trust, Will, Advanced Health Care Directive, Durable Power of Attorney: If you have not yet established the four documents listed above, please contact Warren Street and we will connect you with an estate attorney. If you have gone through the process of setting up your Estate Plan, you should review these documents on a regular basis. If you would like Warren Street to review these documents with you, please contact us.

Transfer Your House To Your Trust: Once your Trust is established, you will be instructed by your estate attorney to transfer your primary residence to your Trust. If you do not have a Trust yet, and you live in CA, you can add a Transfer-On-Death Deed to your property to name beneficiaries and to keep the property out of the probate process.

Simplify Your Balance Sheet: We are often in the position of helping clients when a family member has passed away. When individuals have several different retirement accounts and several different bank accounts, it can create unnecessary complexity for their beneficiaries. It is often a good idea to consolidate accounts to the extent possible at a minimal number of institutions — this will not only make your life easier, it will also make life easier for your beneficiaries when you pass away.

Guardianship Designations: If you have minor children, it is important to name your chosen Guardians should something happen to you. This will normally be taken care of with your estate attorney during the estate planning process, and these Guardians will be named in your Will. Review these designations on a regular basis.

Review Your Life Insurance Coverage — Is It Enough?: At Warren Street, we typically recommend Term Life Insurance policies with level premiums (policies for a set number of years with a set premium) for clients who have dependents. If you would like us to review your current coverage, please contact us.

Business Owners Should Consider a Buy-Sell Agreement: A Buy-Sell Agreement provides a mechanism for business succession if an Owner should retire or pass away. It is best to establish these agreements long before any transition process. We recommend you work with an experienced attorney to establish your agreement and we recommend that every co-owned business go through this process.

This is just a starting point, and there are certainly more complex issues to address if your estate might be facing an estate tax bill when you pass away. If you have any questions about the specifics of your estate plan, please feel free to reach out to us — it is what we are here for!


Emily Balmages, CFP®, CRTP

Wealth Advisor, Warren Street Wealth Advisors

Investment Advisor Representative, Warren Street Wealth Advisors, LLC., a Registered Investment Advisor

The information presented here represents opinions and is not meant as personal or actionable advice to any individual, corporation, or other entity. Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Nothing in this document is a solicitation to buy or sell any securities, or an attempt to furnish personal investment advice. Warren Street Wealth Advisors may own securities referenced in this document. Due to the static nature of content, securities held may change over time and current trades may be contrary to outdated publications. Form ADV available upon request 714-876-6200.

Practice with Genene Dunn: Trust Basics

Hunsberger Dunn LLP

Warren Street Sits Down with Partner Genene Dunn 

At Warren Street, we want to ensure we are continuing our education to give our clients a financial edge. This applies to all aspects of their overall financial picture.

We recently had the opportunity to sit down with one of the partners of the law firm Hunsberger Dunn, LLP, Genene Dunn. During our conversation, we had the chance to talk with her about estate planning, and specifically, building a trust.

Here are some of the issues we discussed, our key takeaways, and some of the nuances we learned regarding trusts and avoiding the probate process.

Who needs a trust and what does it do?

A trust’s primary objective is to avoid probate for the client. Period.

The threshold for probate is $150,000 of real assets, which are defined as physical assets that have value due to their substance. Real assets can be things such as: precious metals, commodities, real estate, land, machinery, or oil, so estate with $150,000 in real assets or more without a trust is subject to probate.

Genene gave the example of $500,000 in real assets with no trust. In this instance, you can expect to pay approximately $26,000 in fees.

Going through probate, both the lawyer and the personal representative (administrator), the person named by the court to handle the estate, are paid according to the fee schedule below. This is why probate can be so expensive.

Chart

Not only is probate an expensive process, but it is lengthy as well. The probate system in Orange County is significantly backed up, it could take up to a year to complete the process.

If you have real assets in excess of $150,000, it might be time to start thinking about building your own trust and avoiding the probate process all together.

How do I handle creditors when the trustee has passed?

If the deceased person had debt in their names, then these become debts of the trust.  They do not become debts of the beneficiaries.

When handling credit card collections, the collectors have 4 months after the announcement of the death of the trustee to file for a claim for their debt. An announcement of death can be placed in the local newspaper of the trustee. If the credit card companies do not file their claims through the appropriate process within this 4-month window, their claim becomes void and does not need to be paid by the trust.

If there is real property inside the trust, such as real estate, Genene suggested to continue paying the bills that “keep the lights on”, such as utilities and house maintenance services (pool cleaning, gardening, etc.). The reason for this is that the property may eventually be sold and you want it to remain presentable to a prospective buyers.

What about my 401(k) or other outside accounts?

Genene will sometimes gets asked about placing a 401(k) or retirement account inside a trust. This is something that is probably not recommended as these types of accounts have listed beneficiaries. Probate can be avoided if the beneficiaries are named and appropriate forms are completed.

On the other hand, non-retirement or brokerage accounts can be placed inside the trust to then be distributed according to the wishes of the grantor, the person who established the trust.

Another interesting topic was Transfer on Death (TOD) bank accounts. If a TOD is in place, then you can present your bank branch with a Death Certificate, which typically can take 10-12 days to process, before being allowed access to funds. However, if they accounts are held in trust, there would be no delay since a spouse is typically the co-trustee and would be able to act on the account immediately upon death. If there is not a Transfer on Death established or a trust account, then the assets would be subject to probate.

Special Needs Beneficiaries

One of the most interesting things we learned from our conversation was with regard to children or beneficiaries that have special needs. Some of these people receive assistance from the government for their condition, and they can become disqualified from that assistance if they have an interest in the assets of a trust.

It is imperative if you have someone in your life with special needs whom you want to ensure receives assets from your estate, that a special needs trust is established and that it is set up correctly to avoid disqualifying them from government assistance in the future.


As we had mentioned earlier, the main objective of establishing a trust is to avoid probate and the wasted time and expense associated with it. A trust usually runs between $2,000-$3,000 depending on the complexity, but the amount of time and money saved by going through the process can be 8-10x the cost of the trust itself. Not to mention not having to waste time in an Orange County probate system that is already significantly backed up.

If you are concerned about your current estate planning situation, including your current assets, trusts or other aspects of your plan, please feel free to contact us to discuss.

Contact Us

Next Event: Taxes & You


Joe OcchipintiJoe Occhipinti
Wealth Advisor
Warren Street Wealth Advisors

Joe Occhipinti is an Investment Advisor Representative of Warren Street Wealth Advisors, a Registered Investment Advisor. Information contained herein does not involve the rendering of personalized investment advice, but is limited to the dissemination of general information. A professional advisor should be consulted before implementing any of the strategies or options presented.

Warren Street Wealth Advisors and its representatives are not attorneys and all information herein should be verified via qualified legal opinion. 

Any investments discussed carry unique risks and should be carefully considered and reviewed by you and your financial professional. Past performance may not be indicative of future results. All investment strategies have the potential for profit or loss. Changes in investment strategies, contributions or withdrawals may materially alter the performance, strategy, and results of your portfolio.Historical performance results for investment indexes and/or categories, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results.Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any particular benchmark. Nothing in this commentary is a solicitation to buy, or sell, any securities, or an attempt to furnish personal investment advice. We may hold securities referenced in the blog and due to the static nature of content, those securities held may change over time and trades may be contrary to outdated posts.

Major Risks to Family Wealth

major risks to family wealthWill your accumulated assets be threatened by them?

Provided by: Warren Street Wealth Advisors

                               

All too often, family wealth fails to last. One generation builds a business – or even a fortune – and it is lost in ensuing decades. Why does it happen, again and again?

 

It is because families fall prey to serious money blunders – old and new. Classic mistakes are made, and changing times aren’t recognized.

 

Procrastination. This isn’t simply a matter of failing to plan, but also of failing to respond to acknowledged financial weaknesses.

 

For example, let’s say we have a multimillionaire named Alan. The named beneficiary of Alan’s six-figure savings account is no longer alive. While Alan knows about this financial flaw, knowledge is one thing and action is another. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy, and it is an inconvenience.

 

Sadly, procrastination wins out in the end and as the account lacks a POD beneficiary, those assets end up subject to probate. Then his heirs find out about other lingering financial matters that should have been taken care of regarding his IRA … his real estate holdings … and more.1

 

Minimal or absent estate planning. Every year, multimillionaires die without any leaving any instructions for the distribution of their wealth – not just rock stars and actors, but also small business owners and entrepreneurs. A 2015 Caring.com survey found that only 56% of American parents have a will or living trust.2

 

A will may not be enough. Anyone reliant on a will alone risks handing the destiny of their wealth over to a probate judge. The multimillionaire who has a child with special needs, a family history of Alzheimer’s or Parkinson’s, or a former spouse or estranged children may need more rigorous estate planning. The same is true if he or she wants to endow charities or give grandkids a nice start in life. Is this person a business owner? That factor alone calls for coordinated estate and succession planning.

 

A finely crafted estate plan has the potential to perpetuate and enhance family wealth for decades, perhaps generations. Without it, heirs may have to deal with probate and a painful opportunity cost – the lost potential for tax-advantaged growth and compounding of those assets.

 

The lack of a “family office.” Decades ago, the wealthiest American households included offices: a staff of handpicked financial professionals worked within the mansion, supervising a family’s entire financial life. While the traditional “family office” has disappeared, the concept is as relevant as ever. Today, select wealth management firms emulate this model: in an ongoing relationship distinguished by personal and responsive service, they consult families about investments, provide reports and assist in decision-making. If your financial picture has become too complex to address on your own, this could be a wise choice for your family.

 

Technological flaws. Hackers can hijack email accounts and send phony messages to banks, brokerages and financial advisors greenlighting asset transfers. Social media can help you build your business, but it can also lend personal information to identity thieves who want access to digital and tangible assets.

 

Sometimes a business or family installs a security system that proves problematic – so much so that it is turned off half the time. Unscrupulous people have ways of learning about that. Maybe they are only one or two degrees separated from you.

 

No long-term strategy in place. When a family wants to sustain wealth for decades to come, heirs have to understand the how and why. All family members have to be on the same page, or at least read that page. If family communication about wealth tends to be more opaque than transparent, the mechanics and purpose of the strategy may never be adequately conveyed.

 

No decision-making process. In the typical high net worth family, financial decision-making is vertical and top-down. Parents or grandparents may make a decision in private, and it may be years before heirs learn about it or fully understand it. When heirs do become decision makers, it is usually upon the death of the elders.

 

Horizontal decision-making can help multiple generations understand and participate in the guidance of family wealth. Estate and succession planning professionals can help a family make these decisions with an awareness of different communication styles. In-depth conversations are essential; good estate planners recognize that silence does not necessarily mean agreement.

 

You may plan to reduce these risks (and others) in collaboration with financial and legal professionals who focus on estate planning and wealth transfer. It is never too early to begin.

 

Warren Street Wealth Advisors

190 S. Glassell St., Suite 209

Orange, CA 92866

714-876-6200 – office

www.warrenstreetwealth.com

 

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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/free-books/avoid-probate-book/chapter1-5.html [5/5/15]

2 – caring.com/about/news-room/american-parents-wills.html [4/22/15]