Tag: Financial Planning

Why Do You Need a Will?

December 18, 2018
Estate Planning, Financial Planning, Wisdom

According to the global analytics firm Gallup, only about 44% of Americans have created a will.[i] This finding may not surprise you. After all, no one wants to be reminded of their mortality or dwell on what might happen upon their death, and writing a last will and testament is seldom on a Millennial or Gen Xer’s to-do list. What may surprise you is the statistic cited by personal finance website The Balance: around 35% of Americans 65 and older lack wills.[ii]

A Will Is an Instrument of Power

By creating one, you gain control over the distribution of your assets. If you die without one, the state decides what becomes of your property, without regard to your priorities.

A will is a legal document by which an individual or a couple (known as “testator”) identifies their wishes regarding the distribution of their assets after death. A will can typically be broken down into four parts.

Executors — Most wills begin by naming an executor. Executors are responsible for carrying out the wishes outlined in a will. This involves assessing the value of the estate, gathering the assets, paying inheritance tax and other debts (if necessary), and distributing assets among beneficiaries. It is recommended that you name an alternate executor in case your first choice is unable to fulfill the obligation. Some families name multiple children as co-executors, with the intention of thwarting sibling discord; this can introduce a logistical headache, as all the executors must act unanimously.²
Guardians — A will allows you to designate a guardian for your minor children. The designated guardian you appoint must be able to assume the responsibility. For many people, this is the most important part of a will, since if you die without naming a guardian, the courts will decide who takes care of your children.
Gifts — This section enables you to identify people or organizations to whom you wish to give gifts of money or specific possessions, such as jewelry or a car. You can also specify conditional gifts, such as a sum of money to a young daughter, but only when she reaches a certain age.
Estate — Your estate encompasses everything you own, including real property, financial investments, cash, and personal possessions. Once you have identified specific gifts you would like to distribute, you can apportion the rest of your estate in equal shares among your heirs, or you can split it into percentages. For example, you may decide to give 45% each to two children and the remaining 10% to your sibling.

A Do-It-Yourself Will May Be Acceptable, It May Not Be Advisable.

You have worked hard to create a legacy for your loved ones. You deserve to decide how that legacy is sustained.

Remember, A Will Puts Power In Your Hands.

The law does not require that a will be drawn up by a professional, so you could create your own will, with or without using a template. The problem is that if you make a mistake, you will not be around to correct it. When you draft a will, consider enlisting the help of a legal, tax, or financial professional who may be able to offer you additional insight, especially if you have a large estate or a complex family situation.

To learn more about estate planning please call our office to meet with a CapSouth advisor or visit our website.

[i] https://news.gallup.com/poll/191651/majority-not.aspx

[ii] https://www.thebalance.com/wills-4073967

https://www.nolo.com/legal-encyclopedia/naming-more-one-executor.html

What is Medigap Insurance and How Do I Get It?

December 18, 2018
Insurance, Retirement Planning, Uncategorized

Establishing a national health insurance plan for senior Americans has followed a sometimes-wayward path through U.S. history.

President Teddy Roosevelt first began discussing the idea of implementing a system of health insurance in the United States more than a century ago. President Harry Truman called for developing a health insurance fund in 1945.[i]

President John F. Kennedy pushed unsuccessfully to create a national health insurance program for senior Americans.

In 1965, President Lyndon B. Johnson signed legislation that established Medicare. More than 58 million people now receive health insurance through Medicare.

Medicare Covers About 80%

Original Medicare—which includes parts A, B, and D—does not cover all medical expenses.[ii] Typically, those on Medicare still must pay 20% of the cost of their doctor’s visits and for other medical procedures.

Medicare.gov provides more in-depth explanations of payment schedules and treatment coverage.

Most people who have Medicare Part A (hospital insurance) don’t pay monthly premiums.[iii]

If you didn’t pay Medicare taxes for at least 30 quarters (7½ years) of work, you’ll have to pay $422 for Part A. If you paid Medicare taxes for 30-39 quarters, your standard Part A premium will be $232 a month.[iv]

A Quarter of Medicare Recipients Have Supplemental Insurance

Nearly 12 million people on Medicare—about one in four—have supplemental Medigap coverage.[v]

Medigap often covers all or most of the difference in health-care costs—that 20% not covered by Medicare.[vi] Policy and coverage choices include plans A, B, C, D, F, G, K, L, M, and N. Private companies provide the government standardized coverage.

Medigap covers copayments, coinsurance, and deductibles.[vii] Some policies provide coverage of services that Medicare doesn’t cover.

Medicare pays its portion of covered approved health-care services first before Medigap insurance pays its share.

Here are eight facts about how Medicare and Medigap work:

You have to have Medicare Parts A and B.
Medigap coverage is not Medicare Advantage, which is offered by private companies contracting with Medicare.[viii] Medicare Advantage includes:

Health Maintenance Organizations
Preferred Provider Organizations
Private Fee-for-Service Plans
Special Needs Plans
Medicare Medical Savings Account Plans

3. Medigap only covers one person per policy. You and your spouse have to get separate policies.

4. Any state-licensed insurance company may offer Medigap coverage.

5. Renewal of standardized Medigap coverage is guaranteed. Your provider cannot cancel your policy if you’re paying your premiums.

6. Some Medigap policies sold before January 1, 2007 provided prescription coverage. Those sold after that date are legally prohibited from providing drug coverage. Medicare’s Part D plans cover prescription drugs.

7. You are not permitted to buy a Medigap policy if you already have a Medicare Advantage Plan, unless you’re dropping the plan to go back to Medicare.

8. If you’d like more information about your financial options or to learn more about your financial needs, we’re happy to help. Contact us at 800.929.1001.

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. This material has been prepared for planning purposes only and is not intended as specific tax or legal advice. Tax and legal laws are often complex and frequently change. Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.medicareresources.org/basic-medicare-information/brief-history-of-medicare/

[ii] https://www.investopedia.com/terms/m/medigap-insurance.asp

[iii] https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance

[iv] https://www.medicare.gov/your-medicare-costs/part-a-costs

[v] https://www.gomedigap.com/blog/medicare-supplement-trends/

[vi] https://www.investopedia.com/terms/m/medigap-insurance.asp

[vii] https://www.medicare.gov/supplements-other-insurance/whats-medicare-supplement-insurance-medigap

[viii] https://www.medicare.gov/sign-up-change-plans/types-of-medicare-health-plans/medicare-advantage-plans

Which is Better: Renting or Owning?

December 5, 2018
Budgeting, Financial Planning, Life, Wisdom

You’re moving. You’ve found greener pastures, and are looking forward—a little excitedly, a little nervously—to your new surroundings. You’ll be asking a lot of questions during this time. One of the biggest is, where will you live? To be a little more specific, should you rent or buy?

Here are some questions to ask yourself as you’re weighing your options:[i]

Can you afford to buy a house right now? How much money do you have saved?
How long do you plan on staying in the area?
Are you looking to settle down or do you want the flexibility to travel or move frequently?
Are you handy? Are you inclined or willing to do home repairs or renovations?
What are your goals involving your career and your family?

What are the advantages of renting? What are the benefits of owning? Let’s explore both sides.

Here are reasons why renting is good:[ii]

As a renter, you may have fewer maintenance costs and repair bills. If something that is part of the rental property breaks, it may be the landlord’s responsibility to fix it.
You may have access to amenities, such as swimming pools or fitness centers, that may cost homeowners bundles.
The taxman doesn’t cometh. You won’t get a property tax bill.
A tough housing market may spell bad news for homeowners, but renters are mostly immune to shifts in the real estate market.
You can jump ship relatively quickly as a renter and move elsewhere. You’re responsible for selling your home if you want to downsize or move. If you’re not committed to living in one spot for at least three years, renting may be your best choice.[iii]
If you fall into dire financial straits, you’re not saddled with a hefty mortgage.
As a renter, you don’t have homeowner’s insurance, you have renter’s insurance that is usually relatively inexpensive.
Apartment renters usually have lower utility costs.

Here are reasons why owning a home is good:[iv]

Owning a home is generally a good investment. If you own your home for many years, it may increase in value.
You’re able to create equity. Equity is the difference between what you owe and your home value. With each payment, you build equity. With your house, you can borrow against your home’s equity to meet other financial needs.
You may be able to reduce the amount of income taxes you may owe. Federal rules may allow you to deduct mortgage interest. Tax law has changed so you should consult with a professional tax preparer to learn more.[v] You may be able to deduct more during the early years of your mortgage with higher portions of your monthly payment going to interest.
Making consistent, on-time mortgage payments builds your credit history and may bolster your credit score. Lenders view you as a responsible borrower with a lower-default risk.
You have the freedom to decorate or renovate your home as you envision. You can paint your walls whatever color you want. You can knock down walls, redo floors, lay new carpeting, and design your home to fit your tastes or personality—without seeking permission from a landlord.

As you weigh your options, you can use rent-versus-buy calculators to determine your best financial options. The calculators request you plug in specific information: zip code, target monthly rent, target home price, and available home price. The calculator then shows you which is less expensive, buying or renting. Go to https://www.trulia.com/rent_vs_buy/ for a sample calculator.

Bankrate asks you a series of questions to help you determine your best choice financially. These questions include:

How much of a down payment are you able to make?
How much debt do you have?
What percentage of a home’s value would you be willing or able to make as a down payment?
What is your credit history?
How long do you plan to stay in your new home?
What are the average home prices in the area you’re considering?
Do you plan to itemize your mortgage interest?
What is the state of your budget?

To learn more, go to https://www.bankrate.com/calculators/mortgages/rent-or-buy-home.aspx.

We can guide you in making the tough financial decisions. Working with an independent financial professional can help you build a strategy for the pursuit of your future goals.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.bankrate.com/mortgage/renting-vs-buying-a-home/

[ii] https://www.investopedia.com/financial-edge/1112/reasons-renting-is-better-than-buying.aspx

[iii] http://time.com/money/collection-post/2792045/rent-or-buy-my-home/

[iv] https://www.discover.com/home-loans/articles/advantages-of-homeownership

[v] https://www.irs.gov/newsroom/interest-on-home-equity-loans-often-still-deductible-under-new-law