Greek Reaction Demonstrates Fragility of EU

European Unity and Global Markets
Reaction by Greek Prime Minister

Greek Prime Minister George Papandreou seemingly took the world back to square one. Papandreou will have a referendum to approve the latest, second, bailout for his country.  The agreement signed last week and agreed to by Greece is now up for a referendum.

With that, global markets crumbled. In early trading here the S&P, DAX and FTSE are off and dropping. Bank stocks are leading the way with 10% drops not at all uncommon as the Greek vote calls into question whether or not the entire deal struck last week will need to be renegotiated. What is surprising is that the referendum does not seem to have a date.

Some believe that “The Papandreou decision is kinda smart, who is he to unilaterally commit his country to financial servitude for the next decade or so without the backing of Parliament?”  Considering that his government did the bulk of the spending it is a political calculation to refuse to now comply with the Maastricht Treaty which forced other member nations to bail Greece out, again.

The net result is an unexpected sell-off, that could last – ending a rather positive run of data regarding the U.S. economy.

It is time to buy during smaller market growth and then selling each time fear rises.  The super committee meets this month – prepare for another period of volatility.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Debit Fees are off for the near future

Bank of America Reverses Debit Fees

Bank of America Corp announced that it will not implement the $5 monthly fee for debit card use in 2012.

Not only was this a move that would cost them current clients, it would also cost them new clients.  They were left alone when rivals backtracked on charging fees on debit cards.  Other higher account fees remain.

JPMorgan Chase & Co and Wells Fargo & Co last week decided to not implement similar programs.  SunTrust Banks Inc and Regions Financial Corp decided that they would end monthly charges and reimburse customers.

Banks explained that they needed to increase fees to maintain their earnings in view of the new regulations regarding the fees they charge retailers when consumers swipe their cards. The fees sparked a firestorm of criticism from consumers and politicians – even shareholders.

Bank of America began softening its stance last week suggesting that clients would have ways to avoid this fee. It appears that their goal was to direct clients to use their Bank of America credit card.

The reversal is another embarrassing about-face for Bank of American CEO Brian Moynihan since his request for a modest increase in dividend was denied by the Fed. Reserve Board.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Always have a valid WILL

What is a will? Your will is a legal document in which you describe instructions to be carried out after your death. You can direct the distribution of your assets (money & property), and give your choice of guardians for your dependents.  It becomes irrevocable (unchangeable) when you die.

In your will, you can name:
1. Your beneficiaries

2. A guardian for your minor children – a person responsible for your child’s personal care if you and your spouse die before the child turns 18. You may name your guardian, who may or may not be the same person, to be responsible for managing any assets given to the child, until he or she is 18 years of age.
3. An executor – an institution or person to collect and manage your assets, pay any debts, expenses and taxes due (on court approval) and distributed to beneficiaries according to the instructions on the will.  Role has significant responsibilities and is time-consuming – choose the executor wisely.

Does a will cover everything I own? No. Your will affects only those assets that are titled in your name at your death.  The following may not be affected by your will.

Life insurance
Retirement plans
Assets owned as joint tenant with rights of survivorship
“Transfer on death” or “pay on death.”
“Community property with right of survivorship”
– Married couples or registered domestic partners may hold title to their community property assets in their names as “community property with right of survivorship”.  When the first spouse or domestic partner dies, the assets pass directly to the surviving spouse or partner without being affected by the will.

What happens if you don’t have a will? If you die without a will (you die intestate), California law will determine the beneficiaries of your estate.

Contrary to popular myth, if you die intestate everything is not kept by the state but the state may inherit your estate under certain situations.  In California, those married or in a registered domestic partnership will have their community property assets passed to their spouse/registered domestic partner.  They may also receive part of your separate property assets, with the rest going to your children, grandchildren, parents, sisters, brothers, nieces, nephews and other legal relatives.

If you are not married or in a legal partnership, your assets will be distributed to your closest relatives and if your partner dies before you, their relatives may also be entitled to some or all of your estate.  Friends, a non-registered partner or your favorite charity will receive nothing unless you name them in a will.

If you die intestate and your deceased spouse/registered partner have no living relatives then your estate does go to the State of California.

What if my assets pass to a trust after my death? A will can provide that all assets be distributed to trust on your death.  When trusts are created under a will, they are testamentary trusts.  If you have a living trust (a trust established during your life) then your will is referred to as a pour over will.  The purpose of such a will is to make sure that any assets not already in the name of your trust are transferred to your trust upon your death.

How is a will carried out? A will is managed by a court-supervised process called probate.  The executor of a will needs to start the probate process by filing a petition in court seeking official appointment as executor.  The executor can take charge of your assets, pay debts and, with court approval, distribute your estate to your beneficiaries.

Advantages of probate:  Rules that are followed on dispute are defined and quickly executed.
The court reviews the executor’s handling of the estate protecting the beneficiaries’ interest

Disadvantages of probate: It is public – your words and the value of your assets are on public record.
Fees are usually higher because they are based on a statutory fee schedule which can be more than under a trust. It takes longer – usually 6 weeks for each court request

Who should know about your will? You will need to decide who should know about your will – the exact content will be (at minimum) known by your attorney and yourself.  Your executor and close family should know how to access your documents but don’t need to know the details.  Your original signed will, should be kept in a safe place (lawyer’s safe or a fireproof box).

*** THIS INFORMATION IS PROVIDED ONLY AS EDUCATION AND NOT AS LEGAL ADVICE ***

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Introduction to Living Revocable Trust

Introduction to a Living (Revocable) Trust

(information summarized from the State Bar of California)

Living trust is a legal document that you use to control your assets during your life and that your trustee can use to direct your assets when you are incapacitated or at death.  Your assets (bank accounts, brokerage accounts) are put in the name of a trust (instead of your own) and administered by the trust.

You manage the trust during your life and your successor trustee (an institution or person) will direct it when you are unable or unwilling to do it yourself.  This type of trust is called a revocable living trust or revocable inter vivos trust or grantor trust.  Your trust can be amended or revoked while you are competent.

  • A living trust agreement gives the trustee the legal right to manage and control the assets held in your trust.
  • Instructs the trustee to manage the trust’s assets for your benefit during your lifetime
  • Names the beneficiaries (person and charitable organizations) who are to receive your trust’s assets when you die
  • Finally, it gives guidance and certain powers and authority to the trustee to manage and distribute your trust’s assets – the trustee is a fiduciary.

What can a living trust do for me? It can allow someone of your selection to make financial decisions and act on your behalf if you’re unable to manage them yourself.  In setting up your living trust, you may serve as its trustee initially or you may choose someone else to do so.  You can name a trustee to take over the trust’s management for your benefit if you ever become unable or unwilling to manage it yourself.  At death or if disabled your trustee like a will’s executor and would then gather your assets, pay any debts, claims and taxes, and distribute your assets according to your instructions.  Unlike a will, this can only be done without court supervision or approval.

Should everyone have a living trust? No.

What are the disadvantages of a living trust?  No court supervision.
Cost of trust can be higher than creating a will.
Creates additional paperwork since lenders don’t usually lend to a trust and you may need to take it out of the trust (by deed) before you can take the loan on any real property.

If I have a living trust, do I still need a will? Yes.  Your will affects any assets that are titled in your name at your death and are not in your living trust or some other form of ownership with a right of survivorship.

Will a living trust help reduce the estate taxes? No.

Will I have to file an income tax return for my living trust? During your lifetime the trust is identified by your social security number and all income and deductions related to the trust’s assets are reportable on your individual income tax returns.

How do you find an attorney to work with you?
Ask us for a referral or ask a trusted friend. You can also call the California State Bar – certified referral service.  www.calbar.ca.gov/lrs or 1-866-442-2529.  You may want one who is ‘certified specialist in estate planning, trust and probate law’ although some good estate attorneys do not have this certification.  You could also check a list at www.californiaspecialist.org and click Specialist Search. Some attorneys charge hourly and others have a fixed/flat fee.  Always be wary of insurance an annuity sales companies giving estate planning advice.  You may want the pamphlet “How Can I Find and Hire the Right Lawyer?” from the state bar: www.calbar.ca.gov

** The information provided is NOT legal advice it is only provided for informational purposes to guide you through this process **

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Begin 2010 with a plan in mind!

2010 has begun and you should have received our annual financial planning calendar.

You should review the calendar adding your own important dates and family target dates. Post it somewhere that will be visible daily. This will help you enjoy the inspirational views from around the world as well as regularly target you and your family to think of the financial consequences of our actions.

Don’t forget to mark your personal financial review/planning times as well as your family meetings. We recommend that financial family meetings be set quarter or semi-annually. Allow for enough time to prepare your financial data for these family financial planning meetings.

Engage our help if you need a third party to run or coach you to run these family meetings.

I encourage you to focus on your career, family life and worthy causes with a solid financial plan/structure for you and your family. Although we live in an interconnected world it is up to us to ensure that we keep moving towards our goals and dreams.

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com

Welcome to the Aikapa discussion board (forum/blog)!

Edi Alvarez, CFP®

From time-to-time, there are news items, events or topics relating to financial planning and/or investment management that stand out as worthy of special note or comment. I will post them here, along with my own thoughts and analysis. Of course, this is a blog. So feel free to join the conversation, but please, keep it civil! Learn, share, and enjoy! — Edi Alvarez, Principal, Aikapa

 

Edi Alvarez, CFP®
BS, BEd, MS

www.aikapa.com