Financial Literacy Month – April – Help Employees Understand Their 401(K)

By Marc Aarons

April is Financial Literacy Month, a perfect time to help employees better understand their 401(k) benefits. With that in mind, I am sharing several key terms that all employees should know. Please feel free to share this more broadly with your team and reach out with any questions or needs.

1. 401(k) Plan

Let’s start with the very basics. A 401(k) plan is an employer-sponsored retirement plan that allows employees to contribute a portion of their wages to individual retirement accounts. Contributions are typically made on a pre-tax or Roth (after-tax) basis, depending on the plan design, and invested for long-term growth.

For employees, understanding what a 401(k) is and how it fits into overall retirement planning is the foundation of financial literacy.

2. Plan Participant

A plan participant is an employee who meets eligibility requirements and has enrolled in the employer’s retirement plan. Eligibility is defined by the plan document and may include age and service-hour requirements.

Employees often assume participation is automatic. In fact, a study found that 59% of employees surveyed who were not participating in their 401(k) plan believed they were. This misconception can lead to missed savings opportunities if enrollment steps are not completed.

3. Pre-Tax Contributions

Traditional 401(k) plans have pre-tax contributions, which are deducted from an employee’s pay before federal income taxes are applied. These contributions reduce current taxable income, but withdrawals in retirement are generally taxed as ordinary income.

Understanding pre-tax contributions helps employees evaluate the immediate tax benefits of participating in their 401(k) — as well as potential tax impacts after retiring.

4. Roth Contributions

Roth 401(k) contributions are made after taxes are withheld. While there is no upfront tax deduction, qualified withdrawals in retirement, including earnings, are generally tax-free.

This option can be especially valuable for younger employees or those who expect to be in a higher tax bracket later in life.

5. Employer Match

An employer match is a contribution made by the employer based on employee deferrals, often expressed as a percentage of employee contributions up to a certain limit.

Many employees leave money on the table simply by not contributing enough to receive the full match. Educating employees on how the match works can significantly improve participation and retirement outcomes.

6. Vesting

Vesting refers to an employee’s ownership of employer contributions over time. While employee contributions are always fully vested, employer matching or profit-sharing contributions may vest according to a schedule.

Employees who understand vesting rules are better equipped to make informed decisions about job changes and retirement savings continuity.

7. Contribution Limit

The contribution limit is the maximum amount an employee is allowed to contribute to their 401(k) each year, as set by the IRS. Clear communication around contribution limits helps employees plan contributions effectively and avoid excess deferrals.

8. Catch-Up Contributions

Catch-up contributions allow eligible employees aged 50 and older to contribute more than the standard annual limit. This provision is designed to help workers accelerate retirement savings later in their careers.

This term is particularly relevant for employees nearing retirement or coordinating savings alongside Medicare and Social Security planning.

9. Beneficiary

A beneficiary is the individual or entity designated to receive a participant’s 401(k) funds in the account in the event of the participant’s death. Beneficiary designations typically override wills or estate plans.

Explaining what these designations do and encouraging employees to review and update beneficiaries are critical steps for employers.

10. Required Minimum Distributions (RMDs)

RMDs are mandatory withdrawals that must begin at a certain age, as defined by IRS rules. Failure to take RMDs can result in significant tax penalties.

When employees understand their 401(k), they’re more likely to participate consistently, take full advantage of matching contributions, and make informed decisions that reduce confusion and administrative questions.

If you’d like to discuss your 401(k) plan or retirement education, don’t hesitate to respond to this email or give the office a call. I’d be happy to connect.

Please don’t hesitate to reach out with any questions or concerns.

Marc Aarons may be reached at 714-887-8000 or Email Marc

Money Managers inc. Website

Investment advisory and financial planning services are provided by Money Managers, Inc. a registered investment advisor.  Money Managers, Inc., is registered in the required states with the state regulatory authority. Our CRD Number is 151602.  To access our most recent version of our Form ADV, Form ADV Part 2A and privacy policy, visit https://adviserinfo.sec.gov/. This information is for educational purposes only.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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Inherited 401(k)s and IRAs: A General Guide

Presented by Marc Aarons

Recently, I’ve had several clients reach out, unsure of what steps they need to take with a recently inherited 401(k) or IRA. It can be a difficult process to navigate, especially since a retirement account is usually inherited after losing someone special.

With that in mind, I thought I’d send a few general steps your way in case you or someone in your network find yourself in this position. I’m also always a phone call away, should you need additional guidance on this or other financial matters.

Step 1: Inform Yourself

When inheriting a retirement account, the first step is to take the time to fully understand what you can and cannot do. Various rules apply depending on your relationship with the deceased—and some are relatively new.

The 2019 SECURE Act limited how long beneficiaries can hold on to inherited accounts. Previously, beneficiaries could take distributions from inherited IRAs and inherited 401(k) plans across their entire lifetime, as long as they were fulfilling the required minimum distribution each year. Now, it’s generally a requirement that the balance in the inherited account be withdrawn fully over ten years.

There are some exceptions, including for spouses of the deceased. Other exemptions include those who are minors, chronically ill or disabled, or who are 10 years (or less) younger than the original owner.

Step 2: Consider Your Options

If you are the spouse, you will have the most leeway:

• You can roll the money into your own IRA. Once completed, you would follow the new required minimum distribution (RMD) rules. It’s important to note that if you reach the age of 72 in 2023, the required date for your first RMD is now later. If you are the surviving spouse and do not have an immediate need for cash, this can be a wise choice, as the money could continue to grow in the account.
• You can name yourself as the owner of the inherited IRA, deferring distributions until your first RMD.
• You can treat yourself as the beneficiary, withdrawing funds within the 10-year timeframe.

There are various tax and RMD implications for each choice, which I am happy to discuss with you in more detail.

If you are a minor child of the deceased:

• Annual required minimum distributions must be taken until the minor reaches the age of majority according to the state of residence—usually 18 years old.
• The 10-year depletion rule then takes effect, meaning all funds must be withdrawn by the time the beneficiary is 28 years old (if 18 is the age of majority).

Beneficiaries that are chronically ill or disabled can qualify for an exemption from the 10-year depletion rule, which would allow them to take distributions over their entire lifetime.

If you are a non-spousal beneficiary:

You will need to satisfy the 10-year depletion rule. The bottom line: the inherited funds must be withdrawn fully over the 10-year period.

• This process involves opening an inherited IRA and transferring the funds from the inherited Traditional IRA or 401(k) into it. The exact process differs if the account you inherited is a Roth IRA.
• Funds can be withdrawn unevenly over different years in this situation—it does not have to be an identical amount over a set schedule.
• Of course, there will be tax implications when withdrawing from a traditional IRA or 401(k). These distributions can require some careful planning, depending on your tax bracket and income outlook. Taking distributions from Roth IRAs, on the other hand, will not come with tax implications.

Step 3: Talk Your Options Over With a Qualified Professional

The fact is that we have barely scratched the surface here when it comes to the plethora of options and choices that beneficiaries need to consider.

While this gives you a starting point, such decisions are best made in consultation with a financial planner, particularly when grieving the loss of a loved one, family member, or friend.

If you find yourself in this position or are navigating other difficult financial situations, please know that I am always here as a resource. Give me a call or send an email my way whenever I can be of assistance.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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The 4 Pillars of Estate Planning

Presented by Marc Aarons

I wanted to quickly touch base with you regarding your estate planning, which is easy to overlook but incredibly important.

While an estate attorney should be your primary resource on this topic, I see these oversights financially impact my clients so often that I wanted to be sure I shared some guidance. As always, I’m here to answer any questions you may have.

1. Beneficiary Designations and Updates

Make sure your beneficiaries are up to date on your financial accounts. These can include brokerage accounts, IRAs, life insurance policies, bank accounts, and more. Consult with your attorney about ways to transfer accounts to your beneficiaries (known as TOD – Transfer on Death) – this could enable funds to skip the probate process. Moreover, updating your beneficiaries will ensure that your assets are distributed to the right people later on. While your will may name certain people, be sure that your beneficiaries are updated on your investment accounts to avoid confusion down the road. Again, consult with your attorney for your estate plan, but please reach out to me if you would like to make a beneficiary designation or update with your account(s) on file with us.

2. Financial Power of Attorney

If you become incapacitated or unable to handle your affairs, having a durable financial power of attorney can help. It will ensure that the person of your choice has the authority to act on your behalf. Consult with your attorney to ensure your plan is in place.

3. Take Inventory of Your Assets

Regardless of how much you think you have, it is a valuable financial exercise to take an inventory. You can start by looking around your house–it may be surprising when you tally up the total of your finds! During the process, some things to consider are your primary residence, other properties, collectibles, art, coins, vehicles, boats, and any other valuable, tangible possessions.

Next, consider the intangibles. These can include life insurance policies, retirement accounts (RA, 401(k)s, 403(b)s, SEP IRAs, pensions, etc.), checking accounts, savings accounts, stocks, bonds, mutual funds, health savings accounts, and more.

Once you have all of these things accounted for, it’s time to put a value on them. You can do so for things like real estate or coin collections by ordering appraisals. At a minimum, do your research so that you can have an approximate value on each asset. By doing so, you can obtain peace of mind knowing that your assets will be distributed according to your wishes.

After you have a complete inventory of your assets, you should make sure that your documents are well-organized and stored securely. These documents include insurance policies, deeds to real estate, titles to vehicles, boats, wills, trusts, bank account information, retirement account information, safety deposit boxes, debt statements, funeral plans, and anything else relevant to your situation.

4. Consult with an Attorney

Estates come in all different sizes. Regardless of the size of your estate, consulting with an estate attorney is always suggested. At a minimum, consulting with a tax professional can provide value. Taking these steps can alleviate any doubts you may have about the probate process, taxation, or distribution of your assets. An estate attorney can help you create a plan or determine if your planning is adequate for your circumstances.

Living trusts, your will, revocable trusts, business succession arrangements, inherited properties of minors, and POAs are all additional things that you should discuss with your attorney. If your estate is on the smaller side, or if you are young, there are online tools that can help guide you through the process at little cost and provide you with peace of mind.

It is never too early or too late in life to make these prudent financial arrangements!

If you need to verify or update the beneficiaries on the accounts you have with us, please feel free to reach out to me. This message is for informational purposes only and is not legal advice or opinion. Consult with an attorney for your estate planning needs. As always, I am here when you need me.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

This communication is from Money Managers, Inc.; a Securities and Exchange Commission registered investment advisor.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results.  Investments involve risk and are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

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Managing Probate When Setting Up Your Estate

What can you do to help your heirs?

 Provided by Marc Aarons 

The probate process can be expensive for some estates. Settling an estate through probate can cost you both time and money. It could take up to a year for the estate to be settled, plus attorney’s fees, appraiser’s fees, and court costs may eat up as much as 5% of a decedent’s assets. Probating an estate valued at $400,000 could cost as much as $20,000.¹

What can you do to help your heirs have as smooth of a transition process as possible? There are a few steps that may help you along the way:

Joint accounts. Married couples may hold property as a joint tenancy. Jointly titled property includes a right of survivorship and is not subject to probate. It simply goes to the surviving spouse when one spouse dies. Some states allow a variation called tenancy by the entirety, in which married spouses each own an undivided interest in property with the right of survivorship (they need consent from the other spouse to transfer their ownership interest in the property). A few states allow community property with right of survivorship; assets titled in this way also skip the probate process.²

However, joint accounts can still face legal challenges. A potential heir to assets in a jointly held bank account may claim that it is not a “true” joint account but a “convenience account” where a second account holder was added just for financial expediency. Also, a joint account arrangement with right of survivorship may not match what’s detailed in an estate strategy.²

POD & TOD accounts. Payable-on-death and transfer-on-death forms permit easy transfer of bank accounts and securities. If the original owner lives, the named beneficiary has no right to claim the account funds or the security. When the original owner passes away, all the named beneficiary needs to do is bring their ID and valid proof of the original owner’s death to claim the assets or securities.²

Gifts. For 2022 the IRS allows you to give up to $16,000 each to as many different people as you like before owing taxes. By doing so, you reduce the size of your taxable estate. Gifts over $16,000 may be subject to federal gift tax (which tops out at 40%) and count against the lifetime gift tax exclusion. The lifetime individual gift tax exemption is currently set at $12.04 million. For a married couple, the lifetime exemption is now $24.12 million.³

Revocable living trusts. In a sense, these estate vehicles allow people to do much of their probate while alive. The grantor—the person who establishes the trust—funds it while they’re alive with up to 100% of their assets and designating beneficiaries. A “pour-over will” may be used to add subsequently accumulated assets to the trust at your death, yet those assets “poured into” the trust at that time will still be probated.⁴

The trust owns assets that the grantor once did, yet the grantor can invest, spend, and manage these assets while they’re alive. When the grantor dies, the trust lives on, becoming an irrevocable trust, and its assets should be able to be distributed by a successor trustee without having to be probated. The distribution is private, as opposed to the completely public process of probate, and it can save heirs court costs and time.⁴

Using a trust involves a complex set of tax rules and regulations. Before moving forward with a trust, consider working with a professional familiar with the rules and regulations.

Are there assets probate doesn’t touch? Yes, there are all kinds of non-probate assets. The common denominator of a non-probate asset is a beneficiary designation, which allows these assets to pass either to a designated beneficiary or a joint tenant, regardless of what a will states. Common assets that won’t involve probate include jointly owned assets with the right of survivorship.²

Make sure to designate/update retirement account beneficiaries. When you open a retirement savings account, you are asked to designate eventual beneficiaries. This stipulates where these assets will go when you die. A beneficiary designation commonly takes precedence over a will.²

Consider reviewing your beneficiary designations regularly to see if they need to be updated.

If you are married and have a workplace retirement plan account, your spouse is the default beneficiary of the account under federal law unless they decline in writing. Your spouse is automatically entitled to receive 50% of the account assets should you die, even if you designate another person as the account’s primary beneficiary.²

To learn more about strategies to avoid probate, consult an attorney or a financial professional with solid knowledge of the estate process.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

www.ocmoneymanagers.com

MMI Disclosure: 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, 2022}
2. ^{Forbes.com, March 28, 2022}
3. ^{IRS.gov, February 4, 2022}
4. ^{SmartAsset.com, August 4, 2022}

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What Happens When There Are No Beneficiaries
Where do those accounts and policies end up?

Provided by Marc Aarons

Some accounts have no designated beneficiary. Rarely, the same thing occurs with insurance policies. This is usually an oversight. In exceptional circumstances, it is a choice. What happens to these accounts and policies when the original owner dies?

The investment or insurance firm gets the first chance to determine what happens. On many retirement plans, for example, a spouse is often the default beneficiary, even if not named on a beneficiary form. If the deceased has no spouse, then the plan assets may just become part of that person’s estate. Brokerage accounts without any designated beneficiaries are also poised to become part of the estate of the decedent. The next stop for these assets could be probate.¹

The state may end up deciding where the assets go when beneficiary forms are blank. If the deceased failed to name account or policy beneficiaries but had a valid will or other valid estate documents, this will influence the path from here – but it may not exempt the assets from probate court.  

If no legally valid estate documents exist, then the deceased party dies intestate, and the state determines the destiny for the assets. Most states go by the same ladder of potential inheritors – surviving spouse at the top, then kids, then grandkids, then parents, grandparents, siblings, nephews or nieces. If absolutely no legitimate heir can be found, then the assets become property of the deceased’s state of residence.²

What about life insurance policies? A life insurance policy usually has at least two levels of designated beneficiaries, and it is rare when a policyholder outlives them and even rarer when a policy has none. In such a circumstance, the proceeds of the life insurance policy become part of the estate of the policyholder upon the policyholder’s death.³

Several factors will affect the cost and availability of life insurance, including age, health, and the type and amount of insurance purchased. Life insurance policies have expenses, including mortality and other charges. If a policy is surrendered prematurely, the policyholder also may pay surrender charges and have income tax implications. You should consider determining whether you are insurable before implementing a strategy involving life insurance. Any guarantees associated with a policy are dependent on the ability of the issuing insurance company to continue making claim payments.

What if a person simply lacks possible heirs, or sees no worthy heirs? Occasionally, this happens. Some people remain single for life, and others are estranged from relatives or heirs who would otherwise be beneficiaries.

A person in this situation has a choice: charity. Perhaps a charitable or non-profit organization deserves the assets. Perhaps a college or university would be a worthwhile destination for them. Choices exist, and those who are single can explore them as they consider their estate.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

ocmoneymanagers.com

MMI Disclosure: 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. ^{Kiplinger, June 6, 2022}
2. ^{Schwab.com, September 24, 2021}
3. ^{SmartAsset, April 28, 2022}

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Couples Retiring on the Same Page

Agreeing about what you want from retirement is crucial.

Provided by Marc Aarons

What does a good retirement look like to you? Does it resemble the retirement that your spouse or partner has in mind? It is at least roughly similar?

The Social Security Administration currently projects an average retirement of 18 years for a man and 21 years for a woman (assuming retirement at age 65). So, sharing the same vision of retirement (or at least respecting the difference in each other’s visions) seems crucial to retirement happiness.¹

What kind of retirement does your spouse or partner imagine? During years of working, parenting and making ends meet, many couples never really get around to talking about what retirement should look like. If spouses or partners have quite different attitudes about money or dreams that don’t align, that conversation may be deferred for years. Even if they are great communicators, assumptions about what the other wants for the future may prove inaccurate.

Are couples discussing retirement, or not? According to a recent survey by Fidelity, seven in ten couples say they communicate at least very well with their partner about financial issues. Couples that do communicate with each other are more than twice as likely to report that they expect to live a comfortable lifestyle in retirement. They are also more likely to report their financial household’s financial health as “excellent” or “very good.”²

If you’re having trouble building a retirement strategy with your significant other, working with a financial professional may help. According to the same survey, couples that work with a financial professional are more likely to talk about money with each other, feel confident about their finances, and agree on their visions of retirement. This may explain why nearly half of all Baby Boomers work with a financial professional.²

Be sure to talk about what you want for the future. A few simple questions can get the conversation going, and you might even want to chat about it over a meal or coffee in a relaxing setting. Dreaming and strategizing together, even on the most basic level, gives you a chance to reacquaint yourselves with your financial needs, goals and personalities.

To start, ask each other what you see yourselves doing in retirement – individually as well as together. Is the way you are saving and investing conducive to those dreams?

Think about whether you are making the most of your retirement savings potential. Could you save more? Do you need to? Are you both contributing to tax-advantaged retirement accounts? Are you comfortable with the amount of risk you are assuming?

If your significant other is handling the household finances (and the meetings with financial professionals about a retirement strategy), are you prepared to take over in case of an emergency? When one half of a couple is the “hub” for money matters and investment decisions, the other spouse or partner needs to at least have an understanding of them. If the unexpected occurs, you will want that knowledge.

Speaking of knowledge, you should also both know who the beneficiaries are for your retirement plans, workplace retirement accounts, and investment accounts, and you both need to know where the relevant paperwork is located.

A shared vision of retirement is great, and respect for individual variations on it is just as vital. A conversation about how you see retirement today can give you that much more input to prepare for tomorrow.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com.

ocmoneymanagers.com

MMI Disclosure: 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 – SSA.gov, 2022}

^{2 – Fidelity.com, 2021}

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Major Risks to Family Wealth

Protect your family assets for future generations.

Provided by Marc Aarons

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

Often, families fall prey to serious money blunders, making classic mistakes, or not recognizing changing times.

This article is for informational purposes only and is not a replacement for real-life advice. Make sure to consult legal and tax professionals before modifying your overall estate strategy. 

Procrastination. This is not just a matter of failing to create a strategy but also failing to respond to acknowledged financial weaknesses.

As a hypothetical example, say there is a multimillionaire named Alan. The designated beneficiary of Alan’s six-figure savings account is no longer alive. He realizes he should name another beneficiary, but he never gets around to it. His schedule is busy, and updating that beneficiary form is inconvenient. Alan forgets about it and moves on with his life.

However, this can cause significant headaches for those left behind. If the account lacks a payable-on-death (POD) beneficiary, those assets may end up subject to probate. Using our example above, Alan’s heirs may discover other lingering financial matters that required attention regarding his retirement accounts, real estate holdings, and other investment accounts.¹

Minimal or absent estate management. Every year, some multimillionaires die without leaving any instructions for distributing their wealth. These people are not just rock stars and actors but also small business owners and entrepreneurs. According to a recent Caring.com survey, 58% of Americans have no estate preparations in place, not even a will.²

Anyone reliant on a will alone may risk 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 a greater degree of estate management. If they want to endow charities or give grandkids an excellent start in life, the same idea applies. Business ownership calls for coordinated estate management with consideration for business succession.

A finely crafted estate strategy has the potential to perpetuate and enhance family wealth for decades, and 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 who supervised a family’s entire financial life. While traditional “family offices” have 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 far too complex to address on your own, this could be a wise choice for your family. 

Technological flaws. Hackers can hijack email and social media accounts and send phony messages to banks, brokerages, and financial advisors to authorize asset transfers. Social media can help you build your business, but it can also expose you to identity thieves seeking to steal both digital and tangible assets.

Sometimes a business or family installs a security system that proves problematic—so much so that it’s silenced half the time. Unscrupulous people have ways of learning about that, and they may be 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 will want to understand the how and why, and be on the same page. If family communication about wealth tends to be more opaque than transparent, then that communication may adequately explain the mechanics and purpose of the strategy.

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

Horizontal decision-making can help multiple generations commit to the guidance of family wealth. Financial professionals can help a family make these decisions with an awareness of different communication styles. In-depth conversations are essential; good estate managers recognize that silence does not necessarily mean agreement.

You may attempt to reduce these risks to family wealth (and others) in collaboration with financial and legal professionals. It is never too early to begin.

Marc Aarons may be reached at 714-887-8000 or marc@ocmoneymanagers.com

www.ocmoneymanagers.com

MMI Disclosure: 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. ^{SmartCapitalMind.com, February 4, 2022}
2. ^{Yahoo.com, January 18, 2022}

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A financial checklist for the most difficult of times.

 Provided by Marc Aarons at Money Managers, Inc. 

 The passing of a loved one irrevocably alters family life. After a death, there is so much to attend to; it is better to do it sooner rather than later. Here, then, is a list of what commonly needs to be looked after.

Request copies of the death certificate. Depending on where you live, you have two or three places to turn to for this document. You can phone, email, or personally visit the office of the county recorder (or county clerk, as the term may be). Alternately, you can contact your state’s vital records department (sometimes called the state registrar or department of health); it may take a little longer to get the document this way. In addition, some large and mid-sized cities maintain their own registrars of births and deaths.

Call advisors, executors, & business partners as applicable. The deceased’s lawyer and CPA should be quickly notified along with any business partners and the executor of his or her estate. You must have a say in the decision-making. The tasks of protecting family assets, carrying out your loved one’s bequests, and determining the next steps for a business will follow.

  Call your loved one’s current or former employer(s). Notify them, even if your loved one left the workforce years ago, as retirement savings or pension payments may be involved. As the conversation develops, it is perfectly appropriate to ask about pertinent financial matters – say, 401(k) or 403(b) savings that will be inherited by a beneficiary or what will happen to unused vacation time and/or unpaid bonuses.

Funds amassed in a qualified retirement plan sponsored by an employer (or an IRA, for that matter) commonly go to the primary beneficiary who has been named on the most recent beneficiary form filled out by the account owner. That sounds simple enough – but certain rules and regulations can make things complicated.¹

As a general rule, if the late 401(k) or 403(b) account owner was your spouse, then you are the presumed beneficiary of the 401(k) or 403(b) assets. Under the Employee Retirement Income Security Act (ERISA), workplace retirement plans are directed to abide by this guideline. If someone else has been named as the primary beneficiary of the account, with your consent, then the assets will go to that person.²

If the late 401(k) or 403(b) account owner was single, the assets in the account will go to whomever is designated as the primary beneficiary. The beneficiary designation will override other estate planning documents.³

To arrange and confirm the transfer or distribution of such assets, the beneficiary form must be found. If you can’t locate it, the employer and/or the financial firm overseeing the retirement plan should provide access to a copy. The financial firm should ask you to supply:

*A certified copy of the account owner’s death certificate

*A notarized affidavit of domicile (a document certifying his or her place of residence at the time of death)

If you have been widowed, call Social Security. If you already receive benefits, you may now be eligible for greater benefits.⁴

If your spouse received Social Security and you did not, you may now qualify for survivor benefits – and you should let Social Security know as soon as possible, as these benefits may be paid out relative to your application date rather than the date of your loved one’s death.⁴

If this is the case, you may apply for survivor benefits by phone or by visiting a Social Security office. You will need to have some extensive paperwork on hand, specifically:

*Proof of the death (death certificate, funeral home documentation)

*Your late spouse’s Social Security number
*His/her most recent W-2 forms or federal self-employment tax return

*Your own Social Security number & birth certificate

*Social Security numbers & birth certificates of any dependent children

*Your marriage certificate, if you have been widowed

*The name of your bank & the number of your bank account, for direct deposit purposes

If you have reached full retirement age, you will likely get 100% of the basic benefit amount that your late spouse was receiving. If you are in your sixties, but haven’t yet reached full retirement age, you may receive anywhere from 71% to 99% of that amount. If you have a child younger than 16, you will get 75% of your late spouse’s basic benefit amount and so will your child.^4,5

Contact the insurance company. Assuming your loved one had some form of life insurance, contact the policyholder services department of that insurer and confirm the steps for claiming the death benefit. A claim form will have to be filled out, signed, and presented to the insurance company (one for each named adult beneficiary of the policy), and a certified copy of the death certificate must also be sent. If the primary beneficiary of a policy is deceased, the contingent beneficiary can usually claim the death benefit with a claim form, plus the death certificates of the policy owner and the primary beneficiary. Some insurers simply have you submit a form reporting the death of the policyholder first, and then follow up by mailing you forms and instructions for the next steps.⁶

Death benefits are generally paid out within 30 to 60 days of a claim. Presumably, they will be paid out in a lump sum. Some insurers will let a beneficiary receive a payout as a stream of monthly income or in installments.⁷

It isn’t unusual for people to own multiple life insurance policies. The AARP, AAA, and myriad banks and non-profits market group life coverage to members/customers, and mortgage lenders and credit issuers offer forms of life insurance for borrowers. Tracking all this coverage down is the problem, and canceled checks and bank records don’t always provide ready clues. Not surprisingly, websites have appeared that will help you search for life insurance policies, and you may be able to locate policies with the help of your state insurance commissioner’s office.⁸

If the family member was a veteran, call the VA. Your family may be entitled to funeral and burial benefits. In addition, the Veterans Administration offers Death Pensions and Aid & Attendance and Housebound Pensions to lower-income widows of deceased wartime veterans and their unmarried children.⁹

These pensions are needs based. To be eligible for the Death Pension, a widow or child’s “countable” income must fall below a certain yearly limit set by Congress. (A “child” as old as 22 may be eligible for the Death Pension.) The deceased veteran must not have received a dishonorable discharge, and they must have served 90 or more days of active duty, at least 1 day of it during wartime. If they entered active duty after September 7, 1980, then in most cases, 24 months or more of active duty service are necessary for a Death Pension to eventually be paid. The Aid & Attendance and Housebound Pensions provide some recurring income to pay for licensed home health aide or homemaker services.⁹

It is wise to contact a Veterans Services Officer before you file such a pension claim, as they can be a big help during the process. You can find a VSO through your state veterans’ affairs department or through the VFW, the Order of the Purple Heart, the American Legion, or the non-profit National Veterans Foundation.⁹

A final individual income tax return may be required for the deceased. You or your tax professional should consult I.R.S. Publication 17 for more detail. Also, search for “Topic 356 – Decedents” on the I.R.S. website. Deductible expenses paid by the deceased before death can generally be claimed as deductions on such a return.¹⁰

   If you have been widowed, consider the future. In the coming days or weeks, you should arrange a meeting to review your retirement planning strategy, and your will, beneficiary designations, and estate plan may also need to be updated. The passing of your spouse may necessitate a new executor for your own estate. Any durable powers of attorney may also need to be revised.

Marc Aarons may be reached at 714-887-8000 or Marc@ocmoneymanagers.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 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.}

MMI Disclosure

^Citations.

^{1 – thebalance.com/review-401-k-plan-beneficiary-designations-2894174 [11/4/18]
2 – nolo.com/legal-encyclopedia/if-you-don-t-want-leave-retirement-accounts-your-spouse.html [12/10/18]
3 – cnbc.com/2018/04/16/out-of-date-beneficiary-designations-are-a-common-and-costly-mistake.html [4/16/18]
4 – thebalance.com/social-security-survivor-benefits-for-a-spouse-2388918 [10/28/18]
5 – ssa.gov/planners/survivors/onyourown.html [12/11/18]
6 – nolo.com/legal-encyclopedia/beneficiaries-claim-life-insurance-32433.html [12/11/18] 7 – investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp [12/4/18] 8 – thebalance.com/finding-a-lost-life-insurance-policy-4066234 [4/15/18]
9 – nvf.org/pensions-for-survivors-of-deceased-wartime-veterans/ [2018] 10 – irs.gov/taxtopics/tc356.html [1/18/18]}

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