​As Bankrate.com noted, 43% of Americans have no life insurance. Some view it as optional; some have simply procrastinated when it comes to buying a policy. Others believe that they can’t afford it.1
   
In reality, life insurance is cheap today. If you just want term life coverage – essentially, life insurance that you “rent” for X number of years – you may find it quite affordable wherever you live. Plugging in some sample variables, a little comparison shopping online reveals that a 40-year-old, non-smoking woman in excellent health who lives in New Hampshire would pay premiums of just $380-420 a year for a 20-year level term policy with a $500,000 death benefit. (She would have several providers to choose from.)2
 
If you choose permanent life insurance rather than term life, new possibilities emerge. In addition to a benefit for your heirs at your death, an insurance policy capable of building cash value gives you more capability to address financial needs during your lifetime.
 
Permanent life insurance allows you the opportunity to build cash value. The premiums on a whole, universal, or variable life policy are higher than for a term life policy, but there is a reason for that – as you pay into one of these policies, the policy, itself, accumulates cash value. That cash value grows without being taxed.3
 
In all probability, the cash value will continue to be available as long as you live. While it’s true that some insurance companies have gone under, the reality is that very, very few do. They guarantee the death benefit and the viability of the policy as long as you keep making the premium payments.3
 
If you need a loan someday, a cash value life policy may give you an option. Some of these policies allow withdrawals of the cash value, meaning that you can borrow against the cash value once you have funded the policy with a sufficient amount of premiums. (You can even tap the cash value to pay the premiums, if you like.) Naturally, loans taken from the policy will reduce the death benefit amount. The policyholder faces no requirement to pay back the loan, but the loan is subject to interest.3
 
Many of these policies come with degrees of flexibility. You may be able to transfer some of the cash value into another insurance product with the death benefit unaffected.
 
The death benefit may do much to preserve your loved ones’ quality of life. Life insurance death benefit proceeds are almost never taxed (only under rare circumstances does the IRS count them as gross income). So a permanent life policy will give your heirs money to address funeral and burial expenses and possible estate taxes, and those funds could also provide them with part of their inheritance.4
     
Cash value life insurance also means permanent coverage as long as the policy is in force. The death benefit will not be readjusted or diminished if you fall ill, and if you buy a policy in your thirties or forties, you save money compared to those who purchase a policy after age 50. 
 
Permanent life insurance is also highly useful in estate planning. Several kinds of trusts may be used in conjunction with permanent life policies, such as irrevocable life insurance trusts (ILITs), special needs trusts, spendthrift trusts, simple living trusts, and more. Often, a trust can be named as beneficiary of a permanent life policy, an estate planning step toward an eventual financial benefit to heirs.5
 
First and foremost, life insurance matters for its death benefit – but those considering it should not overlook its financial utility in other situations during the course of life.
 
Tom Chancellor is a Certified Financial Planner Professional helping clients enhance their financial peace of mind. Tom spent 20 years as a marriage and family therapist and now incorporates resources from psychology, communications, and relationship studies in financial planning for people who experience life-changing events. Tom helps his clients and other financial professionals respond to life transitions such as divorce, death of a spouse, retirement, receipt of an inheritance and legal settlements. Contact Tom with questions at tom@teaktreecapital.com.
​
​Securities offered through Comprehensive Asset Management and Servicing, Inc. (“CAMAS”), 2001 Hwy 46, Ste. 506, Parsippany,  NJ 07054, 1-800-637-3211.  Member FINRA/SIPC. Teak Tree Capital Management, LLC,  is independent of CAMAS.
 
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 - bankrate.com/financing/insurance/how-painful-is-the-life-insurance-talk/ [9/15/15]
2 - term4sale.com/cgi-bin/cqsl.cgi [8/9/16]
3 - investopedia.com/terms/c/cash-value-life-insurance.asp [8/9/16]
4 - irs.gov/Help-&-Resources/Tools-&-FAQs/FAQs-for-Individuals/Frequently-Asked-Tax-Questions-&-Answers/Interest,-Dividends,-Other-Types-of-Income/Life-Insurance-&-Disability-Insurance-Proceeds/Life-Insurance-&-Disability-Insurance-Proceeds [1/1/16]
5 - aol.com/article/2015/05/07/how-to-supercharge-trusts-with-life-insurance/21173793/ [5/7/15]

​An estate plan has three objectives. The first goal is to preserve your accumulated wealth. The second goal is to express who will receive your assets after your death. The third goal is to state who will make medical and financial decisions on your behalf if you cannot.
 
Over time, your feelings about these objectives may change. You may want to name a new executor or health care agent. You may rethink how you want your wealth distributed.
 
This is why it is so vital to review your estate plan. Over ten or twenty years, your health, wealth, and outlook on life may change profoundly. The key is to recognize the life events that may call for an update. 
 
Have you just married or divorced? If so, your estate plan will absolutely need revision. For that matter, some, or all, of your will may now be legally invalid. (Some state laws strike down existing wills when a person is married or divorced.) If your children or grandchildren marry or divorce, that also calls for an estate plan review.1
 
Has there been a loss or serious illness within your family? If so, your named executor or health care agent may have to be changed. If one family member has now become physically or financially dependent on you, that too may be an occasion for a second look at the plan. 
  
Has your net worth risen or declined substantially since the plan was first implemented? If you have become much wealthier in the past five or ten years (or much less wealthy), that circumstance may have altered your vision of how you want your assets distributed at your death. Maybe you want to give more (or less) to charity or your heirs. A large inheritance can also prompt you to rethink your wealth protection and wealth transfer strategy.
 
Have you changed your mind about what your wealth should accomplish? Today, you may view your wealth differently than you did when you were younger. New purposes may have emerged for it – new roles that it can play. Following through on those thoughts may lead you to reconsider aspects of your estate plan.
 
Have your executors or trustees changed their mind about their roles? If they are no longer interested in shouldering those responsibilities, no longer alive, or no longer of sound mind or reputable character, it is revision time.
  
Have you retired, moved to another state, or bought or sold real estate? All of these events call for an estate plan check-up.
 
The first step in revising an estate plan is to update essential documents. Not just your will or your trust, but also your financial power of attorney and health care proxy. Review all the names: your executor; your trustee; your health care agent. Changes in your personal (and even your business) relationships may call for alterations to those choices.
 
The second step is to review your risk management. Does language in your will need revision? Does a trust created years ago need to be modified or replaced? Do new estate planning vehicles need to enter the picture in order to help you adequately transfer wealth, counter estate taxes, or endow charities?
 
What about your life insurance? Do beneficiary forms of life insurance policies need updating? Is corporate-owned life insurance coverage you once counted on now absent? Will policy payouts be sufficient enough to help your loved ones address financial issues after your death?
   
The third step is to make sure your assets are in sync with your plan. For example, if you have a revocable trust, have you transferred ownership of all the assets that are supposed to go into it? Have you acquired new assets that need to be “poured in?”
 
If you are married and it appears certain that your estate will be taxed, you may want to own some assets and have your spouse own others. Yes, the federal estate tax exemption is portable, so any unused estate tax and gift tax exemption is allowed to pass to a surviving spouse. At the state level, though, there are different rules. So if all assets are in your spouse’s name and your home state levies an estate tax, that scenario may mean higher estate taxes for your heirs than if those assets were alternately owned by either you or your spouse.2
       
Even if nothing major happens in your life, review your plan every five years or so. While your life may be uneventful over five years, tax law, the financial markets, and business climates may change significantly. Those kinds of shifts can impact your estate planning strategy.
            
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 - 360financialliteracy.org/Topics/Retirement-Planning/Estate-Planning-Basics/How-often-do-I-need-to-review-my-estate-plan [8/4/16]
2 - time.com/money/4187332/estate-planning-checkup-items-review/ [1/20/16]
 

​When we go to the grocery store, we seldom shop on logic alone. We may not even buy on price. We buy one type of yogurt over another because of brand loyalty, or because one brand has more appealing packaging than another. We buy five bananas because they are on sale for 29 cents this week – the bargain is right there; why not seize the opportunity? We pick up that gourmet ice cream that everyone gets – if everyone buys it, it must be a winner.
 
As casual and arbitrary as these decisions may be, they are remarkably like the decisions many investors make in the financial markets.
 
A degree of emotion also factors into many of our financial choices. There is even a discipline devoted to how our emotions affect our financial decisions: behavioral finance. Examples of emotionally driven financial behaviors are all around us, especially in the investment markets.
 
Behavior #1: Believing future performance relates to past performance. In truth, there is no relation. If an investment yields 8-10% for six consecutive years, that does not mean it will yield 8-10% next year. Still, we may be lulled into expecting such performance – how can you go wrong with such a “rock solid” investment? In behavioral finance, this is called recency bias. Bullish investors tend to harbor it, and it may lead to irrational exuberance.1
      
Similarly, investors adjust risk tolerance in light of past performance. If their portfolio returned spectacularly last year, they may be tempted to accept more risk this year. If they took major losses in the equity markets last year, they may become very risk-averse and get out of equities. Both behaviors assume the future will be like the past, when the future is really unknown.1
 
Behavior #2: Investing on familiarity. Familiarity bias encourages you to make investment or consumer choices that are “friendly” and comfortable to you, even when they may be illogical. You go with what you know, without investigating what you don’t know or looking at other options. Another example of familiarity bias is when you invest in a company or a sector largely because you are attracted to or familiar with its “story” – its history, its reputation.2
 
Behavior #3: Ignoring negative trends. This is known as the ostrich effect. We can ignore the reality of a correction or a bear market; we can ignore the fact that our credit card debt is increasing. Studies suggest that investors check in on their portfolios with less frequency during market slumps – they would rather not know the degree of damage.3
  
Behavior #4: Wanting decisions to pay off now. Patience tends to be a virtue in both equity investing and real estate investing, but we may suffer from hyperbolic discounting – a bias in which we want a quick payoff today rather than an even larger one that might result someday if we buy and hold.3
 
Behavior #5: Falling for a decoy. When given a third consumer choice, instead of two consumer choices, we may choose a different product than we originally would, and perhaps make a choice we would not have otherwise considered. Once, an ad in The Economist offered three kinds of subscriptions: $59 for online only, $159 for print only, and $159 for online + print. The $159 print-only option was an illustration of the decoy effect – the choice existed seemingly just to make the $159 online + print option look like a better deal.3
    
Behavior #6: Seeing patterns where none exist. This is called the clustering illusion. You see it in casinos where a slot machine pays out twice an hour, and people line up to play that “lucky” machine, which has, in fact, just paid out randomly. Some investors fall prey to it in the markets.3
 
Behavior #7: Following the herd. The more consumers or investors that subscribe to a particular belief, the greater the chance of other consumers or investors to join the herd, or “jump on the bandwagon,” for good or bad. This is the bandwagon effect.3
 
Behavior #8: Buying the amount of something that we are marketed. In our minds, we believe that there is an optimal amount of something per purchase. This is called unit bias, and when marketing suggests the ideal amount should be larger, we buy more of that product or service.3
 
There are dozens of biases we may harbor, temporarily or regularly, all subjects of study in the discipline of behavioral finance. Recognizing them may help us to become a better consumer, and even a better investor.
      
  
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 - marketwatch.com/story/a-financial-plan-to-help-you-simplify-and-succeed-2016-09-23 [9/23/16]
2 - abcnews.go.com/Business/stock-stories-fairy-tales/story?id=42529959 [10/3/16]
3 - businessinsider.com/cognitive-biases-2015-10 [10/29/15]
 

Wise moves to make before things are finalized

Before your divorce goes through, it will be wise to check up on financial matters. It will be better to assess the state of your financial life before the split rather than after.
 
Find out where you stand financially. Beyond your salary and your bank accounts, how much do you have in the way of retirement savings? What will your monthly income be? What investments do you hold? Will you retain ownership of any real estate, and assume the mortgage payments yourself? Will you be selling any assets or ownership interests?
 
You should document everything about your personal finances. Everything you can think of. Whether you scan it or copy it, you should have as complete a picture of your financial life as possible.
 
The picture of your financial life should also detail your credit & insurance. Do you know your credit score? Today, a good credit score is considered anything north of 690. If you have a score in the mid-600s, you have fair credit. Below 630, you have poor credit.1
 
Track your credit before & after your divorce. There are three major credit reporting agencies that assign you credit ratings: Equifax, TransUnion, and Experian. Through Credit.com, you can see two of these three credit scores for free, updated each month. You may also request a copy of your credit report every 12 months from the three reporting agencies; you are entitled to it, by law. Ask all three for such a report, if you haven’t already. If your ex-spouse attempts to add some unauthorized debt in your name, this is one way to know about it.1
      
Do you have your own health insurance? If so, how much do you pay for it per month? If not, you may have a challenge to secure it – hopefully, your health or employment situation allows you to get coverage without many obstacles. Apart from health coverage, other types of insurance have no doubt protected other people and important items in your household. Who owns these policies? The beneficiary designations on the policies will undoubtedly need to change.
 
What should you do about taxes? If you are divorcing after April, should you and your spouse file one more joint return? This calls for a chat with your tax professional. Filing jointly could of course save you money compared to filing singly, but it also means you are jointly responsible for everything on that 1040 form.
 
If you remain legally married and living with each other when a calendar year ends, the two of you must file your federal tax return for that year as a married couple – your filing status will either be married filing jointly or married filing separately. If you think you will receive a refund, you and your former spouse will have to communicate to see how it will be divided – the IRS does not allocate refunds to divorced spouses by any kind of formula.2   
    
If you will have primary custody of your children, the IRS expects that you will claim the exemption for dependent children on your 1040 form. If you have multiple children, it is allowable for you and your former spouse to divide the per-child exemptions as you see fit. If you paid some or all of the medical expenses for one of your children, you can deduct those expenses even if your ex-spouse has primary custody of that child.2
  
Most importantly, assess what your financial potential will be after the divorce. An “equal” settlement is not always an equitable one, as one spouse may be left with much greater potential to build and retain wealth than the other. That is the most important long-term issue to address, and it should be addressed well before a divorce is finalized.
     

   
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 - ajc.com/feed/business/personal-finance/the-important-financial-lesson-you-wont-learn-in/fCRRNr/ [8/21/16]
2 - irs.com/articles/filing-your-taxes-after-divorce [9/15/16]

The Department of Labor is introducing an important new rule regarding retirement plan accounts, which will be phased in during 2017 and fully implemented by 2018. Under this new rule, financial professionals who consult retirement savers will be held to a fiduciary standard. In other words, they will have an ethical and legal obligation to always act in a client’s best interest.1 
    
Many financial professionals already abide by a fiduciary standard. Thanks to the new rule, even more will. In fact, the fiduciary standard may soon become the “new normal” in the financial services industry.
 
It has not always been so. Historically, investment professionals have been asked to uphold a suitability standard when making recommendations to their clients. Under the suitability standard, financial products are recommended considering a client’s age, income, net worth, and savings goals. Many in the brokerage industry believe this standard has worked well.1
 
The Department of Labor disagrees. In its view, the suitability standard leaves an open door for conflicts of interest to affect client-advisor relationships. In theory, many investments or products could be found suitable for an investor, and the one most recommended could be the one that results in the largest commission for the financial professional offering the advice.1,2
 
So, which financial services professionals uphold a fiduciary standard and emphasize fee-based or fee-only planning?
  
Registered Investment Advisers (RIAs) work by a fiduciary standard. They are regulated by the Securities and Exchange Commission and/or state securities authorities, and charge their clients fees for most or all of the services they provide. Both individuals and firms can be RIAs.2
 
Certified Financial Planner™ practitioners also uphold a fiduciary standard. These individuals abide by the code of ethics and rules of conduct articulated by the Certified Financial Planner™ Board of Standards in Washington, D.C. They are directed to provide their financial planning services as fiduciaries.3
    
Sometimes, the decades-old compensation structure of the financial services industry can impact even those financial professionals serving as fiduciaries. For example, a CFP® practitioner or an SEC-regulated investment adviser may also sell insurance products that provide commissions, and help clients invest in certain brokerage accounts linked to commissions.1,2,3
 
In short, the financial services industry is not perfect. The new Department of Labor rule demanding a fiduciary standard from the professionals advising retirement accountholders takes a big step toward remedying some of its imperfections.

Tom Chancellor is a Certified Financial Planner Professional helping clients enhance their financial peace of mind. Tom spent 20 years as a marriage and family therapist and now incorporates resources from psychology, communications, and relationship studies in financial planning for people who experience life-changing events. Tom helps his clients and other financial professionals respond to life transitions such as divorce, death of a spouse, retirement, receipt of an inheritance and legal settlements. Contact Tom with questions at tom@teaktreecapital.com.
​
​
Securities offered through Comprehensive Asset Management and Servicing, Inc. (“CAMAS”), 2001 Hwy 46, Ste. 506, Parsippany,  NJ 07054, 1-800-637-3211.  Member FINRA/SIPC. Teak Tree Capital Management, LLC,  is independent of CAMAS.
​
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 - cbsnews.com/news/merrill-lynchs-landmark-move-to-end-broker-commissions/ [10/17/16]
2 - investopedia.com/terms/r/ria.asp [10/25/16]
3 - cfp.net/about-cfp-board/ethics-enforcement [10/25/16]