Blog - The Christiansen Group

April 12, 2018 by Neil Christiansen Leave a Comment

When You Need Life Insurance… And When You Don’t

If someone would likely suffer a financial setback if you died, you probably need life insurance. It provides for your family financially after your death, replacing your income and helping your family pay for everything from funeral costs to college to daily living expenses.

Who Needs Life Insurance?

While most people could use some form of life insurance, there are a few classic scenarios in which you should never consider going without it.

1. Married Couples
What would happen if you or your spouse died? Would the income from the surviving spouse be enough to pay off credit card balances, car loans, monthly rent, and more? If there’s any question, you should consider life insurance.

2. Families With Kids
These days, most families rely on two incomes. If you passed away could your family continue their standard of living based solely on your spouse’s income? How would their plans change for large financial investments like college? Life insurance helps you makes sure those plans stay in motion, even on the surviving spouse’s income alone.

If you’re a stay-at-home parent, you also make a huge financial contribution to your family, even without bringing home a salary. Childcare, transportation, cleaning, cooking, and other household activities are all important tasks, and the cost of replacing them is often underestimated. With a life insurance policy in place, your family can preserve their quality of life.

3. Couples With Debt Or Mortgage
When you die, your debts are paid out of your estate, often greatly reducing what you’ll pass on to your spouse. If you have joint accounts with debts, your spouse will be responsible for them. Life insurance can make sure your spouse isn’t knocked off course financially.

Who Usually Doesn’t Need Life Insurance?

You might not need to worry about life insurance if:

1. You Have Plenty of Assets
Have you and your spouse amassed enough assets and income to independently care for yourselves? You might not need to worry about life insurance.

2. You Children Are Self-Sufficient Adults
It’s helpful to remember that the primary purpose of life insurance is to replace the future income of a primary breadwinner. This may not apply if your dependents have grown out of relying on you financially.

3. Estate Taxes Are No Longer A Concern
Your estate might be too small to owe estate taxes – or maybe you have enough liquid assets to pay any estate taxes. In these cases, you might be able to skip purchasing life insurance.

How To Assess Your Life Insurance Needs

1. Start With Your Longer-Term Needs
If you’ve decided you might need life insurance, ask yourself these questions to determine whether it would serve you in the long term.

How much money would my dependents need to cover their living expenses?
Add up the earned income you bring to your dependents on a regular basis, then subtract the worth of property they would inherit from you and any funds from public sources, like social security or private insurance plans. You might also subtract any other likely sources of income, such as help from wealthy grandparents.
How long would it take for my dependents to become self-sufficient?
If your kids are almost out of college, for instance, they may not need much additional income. If they’re younger, remember your dependent spouse can usually return to work at some point, and some children may get at least partial scholarships. You may determine that your dependents may not need much help from life insurance after all. On the other hand, if you have young children you may decide to purchase a reasonably-priced amount of life insurance.

2. Think Through Your Short-Term Needs
Now it’s time to assess whether you need life insurance for short-term needs. Ask yourself these questions:

What assets are available to cover my dependents’ immediate financial needs?
Consider keeping some money in joint accounts or pay-on-death bank accounts. You might place marketable stocks in joint tenancy or register them on beneficiary (transfer-on-death) forms.
After I die, how long will it take for my property to be turned over to my beneficiaries?
If most of your property will bypass probate and you have cash assets, you might have little need for insurance for short-term expenses. However, if most of your property is transferred by will and could be stalled in probate for months, your family and other inheritors could likely use the immediate cash from life insurance.
Will my estate owe substantial debts and taxes after I die?
If your estate consists mostly of “non-liquid” assets (real estate, a share in a small business, jewelry, etc.), your survivors may lose a significant amount of money if these assets must be sold quickly to raise cash to pay bills.

Decided To Purchase Life Insurance? Keep 3 Things In Mind

1. Shop Around
This is a big life decision so take your time, get educated on the options, and speak to a licensed agent. Age, health, credit history, driving records, hobbies and lifestyle can all have big impacts on the cost of your policy.

2. Costs May Increase As You Age
Your premiums may increase as you get older. Although your situation may vary, the ideal time to purchase life insurance may be right now, while you’re as young and healthy as you’ll ever be.

3. Your Needs May Change
Review your life insurance policy on a yearly basis and as milestones come up in your life. Big life events such as getting married, purchasing a home, and having children are all factors in determining which amount of coverage is right for you.

^{*Disclaimer: Citywide Home Loans does not provide life insurance services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.}

April 5, 2018 by Neil Christiansen Leave a Comment

Last Minute Tax Tips: For This Year and Next

Still haven’t filed your tax return? You’re certainly not alone! According to the IRS, between 20-25% of taxpayers file in the two weeks before tax season ends. This year Tax Day is Tuesday April 17th.

While we’ll discuss a few last-minute ways to cut this year’s tax bill, surprisingly, the most important tax tips we can recommend…Start planning for next year’s taxes!

Since most provisions on the biggest tax overhaul in three decades took effect January 1st, learning the changes’ effects—especially on paycheck withholding and deductions—now could spare you from a surprise tax bill next spring.

Here are the most important steps to ensure a surprise free 2018 tax season, as well as some last-minute tax tips for this year.

Tax Tips For Your 2018 Returns

1. Project Your Taxes For 2018

Now is the perfect time to estimate your taxes for 2018 since you already have the necessary information right in front of you! If your income will stay about the same next year, plug the information from your 2017 return into one of the many online calculators. Many tax preparers are also providing clients with projections.

According to the Tax Policy Center, the majority of tax filers (about 65%) will see a lower tax bill in 2018, 6% will see a raise, and the rest will maintain the status quo.

2. Look At Withholding & Estimated Payments For 2018

Have you noticed a bump up in your paychecks this year? If so, it’s because U.S. officials have revised the tables employers use to withhold taxes from paychecks.

Since these changes are broad-based and imprecise, you’ll want to do some investigating for your specific situation. Even if you’re getting an overall tax cut, your withholding may need to be adjusted so you don’t owe a lot more than expected next year. You can use the new IRS withholding calculator to determine if you need to adjust your take-home pay.

If you make quarterly payments of estimated taxes, you should also see where you stand. See the IRS’s new Form 1040-ES for 2018.

3. Rethink Charitable Deductions

The huge changes in charitable giving laws altered exemptions, deductions and credits. Specifically, the number of taxpayers who are able to deduct charitable donations on Schedule A will go from about 36 million in 2017 to around 16 million in 2018.

If you don’t see yourself filing Schedule A every year, tax tips you may want to consider include “bunching” two or more years of charitable giving into one year to more easily qualify for your tax write-off.

Last Minute Tax Tips For 2017

1. Open Or Add To Your IRA

You’re able to make an IRA (Individual Retirement Account) contribution right up until the deadline of April 17, 2018. You can contribute up to $5,500 for the 2017 tax year. If you’re over 50 years old, you can throw in an additional $1,000 as a catch-up contribution.

Remember, whether you’re able to deduct IRA contributions on your tax return depends on the type of IRA you have, your participation in your employer’s retirement plan and your income.

2. Make Final Contributions To Your HSA

If you haven’t completely funded your HSA (Health Savings Account) for 2017, there’s still time. You can make contributions up until April 17 – and still deduct it on this year’s return. Remember, this only applies to you if you set up your account by the end of 2017.

Need An Extension?

Finally, if you’re unable to meet the April 17 deadline to file your federal return, you can request an automatic six-month tax extension from the IRS. Use Form 4868 and file it electronically via the Free File link on IRS.gov.

Remember: An extension to file is not an extension to pay. You must pay 90% of your total tax bill by April 17, to avoid any late-payment penalties. An underpayment will incur an interest charge, which rose to 5% annually as of April 1.

4 Tax Law Changes You Should Know

^{*Disclaimer: Citywide Home Loans does not provide tax planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.}

March 29, 2018 by Neil Christiansen 1 Comment

Create An Estate Plan For Your Digital Assets

Last week here on the blog we mentioned that, incredibly, over 63% of Americans don’t know what will happen to their digital assets when they die!

While federal law regulating access to digital property does not yet exist, Colorado is one of many states that has enacted the Uniform Fiduciary Access to Digital Assets Act. The Act defines a digital asset as “an electronic record in which an individual has a right or interest,” which includes:

Social networking sites
Email
E-commerce accounts
Photo sharing sites
Music and video accounts
Electronic access to store accounts, credit cards, bank accounts, etc
Online gaming
And more

How can you make sure all these digital assets are part of your estate plan?

1. Keep Login & Passwords In A Secure Location

You may choose to store this important information with an attorney, using an online storage service (like Everplans), or in a locked file cabinet or safe.

No matter which method you choose, make sure someone close to you knows where the plan is located and how to access it. This person might be your spouse, your adult children, or your personal representative or trustee. Give them your attorney’s name or the name of the online storage company you’ve used. You might tell them the location of keys or perhaps the combination to your safe, depending on the storage method you’ve chosen.

2. Create A Plan For Your Digital Assets

Depending on the details of your digital assets, your plans for each of them may vary.

You may decide to have some digital assets archived. Other digital assets might be erased, while still others should be given over to family members, close friends, or even business colleagues.

For each of your digital assets or accounts, specify how you’d like it handled. Note that there may be some conflicts between your wishes and some companies’ terms of service, but it never hurts for your Executor or loved ones to know what your wishes are.

If any of your digital assets have monetary value, you might leave instructions to handle them in a specific way. For example:

Digital assets that generate revenue might be transferred to people who can continue to manage the accounts.

Your credits, points, or cash values might need to be redeemed.

Any online stores you’re in charge of might need to be closed right away, shut down after every item is sold, or even transferred over to someone who can continue to manage the store.

For digital assets that generate revenue, give some thought to where the money is going, and who can access it after you’re gone.

3. Select Your Trustee, Executor Or Representative

When designating your trustee or executor for your digital assets, keep in mind that the information embedded in your digital assets can be highly personal and confidential.

You may choose to appoint the same executor for your physical and digital property, or you can select someone else to follow the wishes laid out in your digital estate plan. At the very least, this person can assist your Executor.

4. Make Your Digital Estate Plan Legal

Las, but not least, formalize your digital estate plan in a legally binding document such as your Will or a codicil to a Will. You can do this by specifying who your traditional Executor should work with to settle your digital estate. Then specify the location of your digital assets so that when the time comes, your Digital Executor can find and access your plan.

Never include your passwords or other access information to your other digital assets in your Will. Many people don’t realize that when you pass away, your Will transitions into a public document that anyone can read! A great solution to this is to refer in your Will to an additional document with all the necessary information necessary put your digital estate plan into action. You’ll be able to add to, change, and update the document without going through the process of changing your will.

Finalize Your Digital Footprint

These days, such a large amount of our personal and financial lives are online. If you don’t account for your digital assets in your estate plan, you run the risk of stranding your family or friends as they try to get access to your online accounts. Add your digital assets to your estate plan, and encourage your loved ones to do the same!

^{*Disclaimer: Citywide Home Loans does not provide financial planning services or any other service apart from lending. You should always consult with your legal, tax and financial advisors to determine which strategy is the most suitable for your specific circumstances.}

March 22, 2018 by Neil Christiansen Leave a Comment

A Will Or Trust: Which Is Right For You?

If you own a home, are planning to buy one or have other investments, it’s important to protect your assets in the event something happens to you. Estate planning designates more than who will get your stuff after you die; it also allows you to choose guardians for your children and provides instructions in case you’re incapacitated for any reason. You can’t predict the future; however, you can provide guidance for your loved ones to help them know and understand your final wishes.

How Complicated Is Your Situation?

DIY estate planning, such as LegalZoom or Quicken Willmaker Plus, can work well for folks with simple estate situations who don’t require trust or tax planning.

However, those with significant and more-complicated assets, complex family situations or other out-of-the-ordinary circumstances likely need more sophisticated advice than online sites provide. In these cases always consult with an attorney who specializes in estate planning to make sure you have the correct estate planning documents for your situation. Do not rely on the DIY method to create your own trust document.

A Basic Will

A will outlines all of your property and financial assets, and may also designate who will receive those belongings, who will care for your dependent children (if you have them) and other important long-term decisions. Since you won’t be around to ensure that your wishes are carried out, you’ll appoint an executor, a person you trust, to do so. A will may also outline instructions for transferring your business, if you have one, at retirement, disability or death.

While 95% of Americans want to choose who receives their property and assets when they pass away, only 45% of people have a will or estate plan in place.

Although many people don’t draw up a will until they’re older, you shouldn’t wait. If there’s no will in place when you die, (intestate) that state will determine how your assets are distributed.

The Downside Of Not Having A Will

Forty-one percent of baby boomers (aged 55-64) don’t have a will. Don’t think you need one? Here’s what happens if you don’t…

The state becomes your partner and has a stake in how to divide up your money and property.
You lose control over who takes care of your minor children should something happen to you and your spouse.
Your assets could be tied up in court for years as the court sorts through your property.

Living Wills

Also known as a health care directive or an advance directive, a living will allows you, while you’re healthy and able, to outlive your wishes regarding life support, organ donation and overall end-of-life medical care.

You can also designate a durable power of attorney to carry out your health care decisions, should you ever be incapacitated or otherwise unable to make those decisions yourself. This shouldn’t be confused with a traditional will, which becomes enforceable after death.

Living Trusts

Livings trusts are similar to a will in that you can express your last wishes, designate someone to carry them out and name a guardian for your dependent children. A trust, however, gives you the flexibility to transfer your assets while you’re still alive, meaning they’ll pass to your beneficiaries upon your death without having to go through the potentially expensive and time-consuming probate process. Trusts allow you to be more specific about what will happen to your assets once you’ve passed. For example, you can designate when your children will receive money or what should be done with your property.

What’s more is your successor trust, the person you’ve chosen to carry out your instructions, may also be able to manage your health care, legal and financial affairs if you become incapacitated. Setting up a living trust is often more expensive than the other options because you’ll continue to manage it after it’s created; however, it’s more comprehensive and flexible.

Benefits Of A Living Trust

Your assets will be distributed to your heirs faster – Unlike wills, living trusts avoid lengthy court proceedings. In Colorado, the average estate spends 9-24 months in probate.
Your estate may save money at the time of your death since you’ll avoid expensive court fees.
Living trusts are private. Since they’re not public record, all of the information therein is kept private upon your death.

What About Your Digital Assets?

More than 63% of American’s don’t know what will happen to their digital assets when they die. This includes more than the passwords to your favotie online shopping sites; it also encompasses your music library, online photo albums, email, social media or any files and photos you have stored in a cloud-storage program.

Help your executor or other designated individual manage your digital footprint by storing the credentials for your accounts with an encrypted electronic vault app, life Master LockVault and Google Vault. Remember to include instructions for your appointee to access the electronic vault when the time comes.

March 15, 2018 by Neil Christiansen Leave a Comment

5 Steps To Hiring The Right Financial Planner

Last week we talked about how to decide whether you should bring in a financial planner to help you make the best decisions about your financial future.

Once you’ve decided you want to pursue hiring a financial planner, what’s next? Today we’re breaking down the process of hiring a financial planner into just five simple steps.

Before we dive in though, let’s review the differences between a financial planner (or advisor) and a broker, as well as the different obligations they have when it comes to making decisions about your investments.

Fiduciary Responsibility vs. Suitability

A financial planner is a professional you hire to choose your stocks, bonds, real estate investment trusts, and more. These planners are fiduciaries, meaning they’re legally obligated to act in your best interest. Normally you’ll pay your financial planner a flat fee or or he’ll take about 1% of the assets under management (we’ll discuss this in more detail below). This means these financial planners often have fewer conflicts of interest than brokers.

Meanwhile, a broker works for an investment firm. Her job it is to persuade clients to buy or sell stocks, bonds, mutual funds, and other financial products. Paid on commission, brokers have an incentive to sell. The broker’s standard is suitability, meaning he or she isn’t a fiduciary. While a specific investment is appropriate for you as a client, it might not be conflict-free.

If you’ve decided hiring a financial planner is most compatible with your goals, follow these 5 steps to find the best one for you.

1. Get Referrals

What could be better than getting referrals from friends, family and the trusted professionals in your life? If possible, try asking contacts with similar income/asset levels for referrals to make sure the financial planner will be comfortable with your situation.

You should interview at least three candidates, preferably at their offices. This will give you a good comparison of the candidates, their office staff and size as well as their business practices.

2. What Type Of Advisor Do You Want?

Are you looking for an investment manager or a long-range financial planner? A investment manager or broker will be solely focused on your portfolio, where as a long-range financial planner will help you create a more comprehensive financial plan. This might include considerations like insurance, retirement, and college tuition.

3. Look For CFPs & RIAs

Did you know that anyone can call herself a financial planner? Other designations like Certified Financial Planner (CFP) is the highest standard in the field. CFPs complete coursework, pass regular exams, and uphold a code of ethics along the way.

Your CFP should also be a registered investment advisor (RIA) because they must register with either the Securities and Exchange Commission (SEC) or state securities authorities. Keep in mind that RIAs have a fiduciary duty to their clients.

4. Do Your Due Diligence

When hiring a financial planner, checking references, credentials, accreditations and business practices is one of your most important steps. Ask each potential advisor for at least three references of clients with a similar financial profile to yours – and call them!

Ask for a copy of the Form ADV – this will disclose possible conflicts arising from securities trades and answers a lot of other questions. Also request a risk-adjusted performance record (in writing) going back at least five years.

Be sure to ask which custodian would hold your money. It should be an independent company and be well-known.

5. Get Clear On Compensation

A fee-only method is the most commonly-recommended way to pay a financial planner. Your financial planner is paid either a flat rate, an hourly rate, or a percentage of your assets, meaning your financial planner’s success ebbs and flows along with yours.

Another compensation option is to pay your financial planner by commission only. The financial planner takes a commission of every product they sell (stocks, annuities, insurance, and more). It doesn’t matter how well your investments do – they still get paid.

You might also consider a fee-based arrangement, which is a combination of the fee only and compensation methods.

And while you’re on the topic of compensation with your potential financial planner, don’t forget to ask if there are any hidden fees that haven’t been discussed yet!

A Financial Planner Can Provide Peace Of Mind

Now might be the perfect time in your life to bring in proven, professional expertise to map out all aspects of your financial future, taking a huge burden off of you. Follow these five steps to get you started, and remember that peace of mind is always worth investing in!