Author: Holly Donaldson

This author has written 421 articles

Graduation Gift Idea: Legal Documents

Graduation gift idea: legal documents. What's the best graduation gift idea for an 18-year-old? Legal documents! They're not quite as bad as coal in a Christmas stocking. But not quite as much fun as a MacBook Air, either. Think about it - an 18-year-old is a legal adult.   “What this means to each of us is the only individuals that can make financial or health care decisions for us are the individuals we legally appoint.  Mommy and Daddy are no longer the legal guardians,” says Clearwater, Florida attorney Linda Chamberlain in her own blog post on the topic: The Best Gift for the Graduate. But They Don't Own Anything! You might say, "But my 18-year-old doesn't own anything. Why do they need a will?" Other documents become important upon reaching adulthood. For 18-year-olds who don't own anything, they still have rights, such as: to private medical records, to make their own health care decisions, to sign their own lease or to open, close or pay bills on a bank account. If the young adult is incapacitated, parents can no longer legally do those things for them. One worst-case scenario is an accident where the young adult is hospitalized. This is when documents like: a HIPAA designation (allows consent to share medical records), Health Care Surrogate (consents to have health care decisions made), Durable Power of Attorney (for managing money and accounts), and Living Will could be crucial. A financial planning colleague in California shared a wild example: A couple's son attended college in Arizona. The son was in an accident with his girlfriend. The girlfriend was ok but the son was in serious condition. In the time it took for the parents to get to Arizona, the son gave the hospital staff permission to share his medical information with the girlfriend, but did not name (or was not asked about) the parents. He went into surgery and when the parents arrived, the staff would not immediately share information about his condition with them, but would do so with the girlfriend. So the parents had to ask the girlfriend for information about the condition of their own son. Ask Your Own Attorney In Florida, most estate planning attorneys will provide a set of documents for a young adult for a small flat fee, especially for children of their established clients. If it's about time to get your own set of documents reviewed (every 3 - 5 years is good), ask your attorney about preparing a simple set of documents for your adult child. Or, check your local estate planning council directory, or ask your professional advisors for referrals. What other financial concerns might you have for someone becoming a newly-minted adult? Comment below or schedule a call with the online calendar button at our page: Contact.

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A CFP® Wrote a Bad IRS Check

A CFP® wrote a bad IRS check. That would be me. Yes, I bounced a check to the IRS. Accidentally, of course, but still. Behind my name are the initials "CFP," for CERTIFIED FINANCIAL PLANNER™, so supposedly I'm some kind of financial expert. And yet, I did a very un-expert thing that even most financial non-experts do not do. Brain Fog The bad check was written in April 2014. The tax year in question was 2013, which was the same year I got an unexpected biopsy (which came out clean after several weeks), an unexpected audit by state regulators (which came out clean after several weeks), and an unexpected divorce (which took "only" several weeks and much of it wasn't clean). All of these - the biopsy, the audit, and the unexpected divorce - happened between August and November. If you've ever been through one or more of the above, perhaps you can relate to the feeling of going through the rollercoaster of life, trying to act like a rational person, but constantly getting hijacked by these human things like emotions. Wishing you could concentrate better, focus like you used to, but the brain just won't cooperate. I wasn't aware I was in that much of a fog. I thought I was keeping it all together pretty well, considering. Until the IRS notice showed up. "Check Payment Not Accepted By Bank: The bank did not accept the enclosed check for the following reason: INSUFFICIENT FUNDS. Please return the bottom portion of this form with a certified check...The PENALTY amount is...The current Interest Charge is..." Shock and Shame "Wut?" I thought. My first reaction was to get mad at the bank. It only took a few minutes, though, to research there was no mistake. Shock, embarrassment, humiliation, shame. My jaw and knees dropped to the floor simultaneously. I bounced a check to the IRS?!? That's when it dawned on me that the events of 2013 were still affecting me or I wouldn't have written a check on one of my new post-divorce checking accounts without putting any money in it first. So, the next paragraph caught my eye. "You can request penalty relief by explaining why you believed the bank would accept the Check and by providing any supporting evidence." My backbone straightened up. Although it was not the bank's error, I needed to plead my case to keep my sanity. Making the Case for Penalty Relief It turns out the IRS (back then) would seriously consider applications for relief, although that doesn't mean they will grant them. First, I immediately deposited more money in the account and had the cashier's check, including the penalty and interest, sent. Then, I sat down to write to the human who would be reading my request. I crossed my fingers that it would be a 40- or 50-something who had been unexpectedly divorced after a 20+ year marriage and perhaps had a biopsy scare plus an audit of some kind. I fell on my…

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Featured Fee-only Fiduciary Planning Practice

As the featured fee-only fiduciary practice, it was an honor to be profiled in December's NAPFA Advisor magazine. https://www.naylornetwork.com/napf-nwl/articles/index.asp?aid=857106&issueID=102206 NAPFA stands for the National Association of Personal Financial Advisors (www.napfa.org). It's the largest nationwide network of financial planners who are strictly fee-only. In order to become a member, advisors must: have the CERTIFIED FINANCIAL PLANNER™ designation (see https://www.cfpboard.net); have a peer review of their ADV disclosure document to ensure all compensation comes strictly from clients, never from third parties such as mutual funds or insurance companies; have a sample financial plan reviewed and approved by a peer review committee; and take a fiduciary oath to always put clients' best interests first. What exactly does fee-only mean? The term "fee-only" means that an advisor only receives compensation directly from clients. It's currently estimated that out of over 1 million professionals who call themselves financial advisors, roughly 11,000, or .1%, are truly fee-only. The rest also accept compensation from third parties, such as insurance or mutual fund companies. Commonly confused with "fee-only", the term "fee-based" typically means that an advisor receives compensation from both clients and third-party companies. Due to the similarity with the term "fee-only," CFP™ certificants are no longer allowed to use "fee-based." Instead they must describe themselves as "commission-and-fee" when they are compensated by both methods. What about other terms used to describe advisor compensation? Fee-only advisors may charge a few different ways: fees as a percentage of the investments they manage (called "AUM" for "Assets Under Management); as a fixed fee for investment management, financial planning, or both; or hourly. "Fee-based" as it was formerly used, and for those advisors who still use it, means that an advisor can charge a fee to the client while also making commissions on products they select for those clients. Usually the client is charged a "planning fee" for planning services, and then the advisor makes commissions on products sold or money managed. Sometimes it can mean that the advisor charges a fee for managing money, while also receiving compensation for products purchased in client accounts. Often this type of program is called a "wrap fee" program and is required to be disclosed in an advisor's ADV. If you see an advisor advertising they are "fee-based," or "commission-and-fee" ask them directly about all the ways they are compensated. To help out, you can ask them to complete this compensation disclosure form. If you are not sure whether an advisor is fee-only, the National Association of Personal Financial Advisors (https://www.napfa.org) is the nationwide association that vets financial advisors for true fee-only business models. If an advisor is a member of NAPFA, you can consider them to be fee-only. If they are not a member, you might ask the reason why not, or, review their ADV Disclosure Brochure found at https://brokercheck.finra.org/ to check for compensation from third parties. How is advice-only different from fee-only? A fee-only advisor may manage a client’s investments. An advice-only advisor is a type of fee-only advisor who only gives…

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Retired Husband Syndrome (RHS)

What is retired husband syndrome (RHS)? I first heard of Retired Husband Syndrome at a book signing in 2013. From across the book section in the exhibit hall, I saw a young man with jet black hair staring at the back of my newly-published book, The Mindful Money Mentality: How to Find Balance in Your Financial Future. He turned it over, opened to the table of contents, flipped a few pages, and turned it over again. Until that point, he acted like other book-browsers: look at the back, flip to the front, open to the table of contents, flip to the back, flip it again. Some would then take the book to the register. Others set it back on the shelf. The whole decision took less than 2 minutes. But this young man took so long reading, I wondered if he might consume the whole book right there. Then I got distracted by conversation with another attendee. When I turned back to look for him, he was gone. Figuring he had decided against it, I was surprised a couple of hours later to see he was the first in line at the book signing. Retired Husband Syndrome – in South Korea Approaching with an enthusiastic smile, he said “Hello” in a heavy Asian accent. He was from Seoul, South Korea, (which, considering English was his second language, might explain why he took longer examining the book). He said that he thought the book would be helpful to his male clients. Unsure why he was excluding the female ones, I readied my pen to sign, but asked him to tell me more. “In Asia, we have Retired Husband Syndrome (RHS),” he said. “I’ve never heard of that. What is it?” I asked, putting the pen down. “Some husbands spend their whole lives working for a company, and when they retire, they are at home, and it is not good for the marriage. The husband loses his identity because he is not in his job anymore, and he wants to be home with his wife. The wife has been at home her whole life, but she doesn’t like the husband being there, doing nothing.” “So sometimes the retired husbands do…nothing? They don’t have hobbies or hang out with their friends?” “Yes, that’s right.” “Wow. So you must see a lot of marriage problems in your practice?” “Yes! And it is too bad. They have a pension, but the couples never spend time planning what they will do.” He explained more about the strain on the marriage; the sadness he sees at a time when there could be great joy and celebration; and the effect on their children and the families. "This makes me sad. Sometimes I am going to be the only person outside of the family who might see it. All of the financial advisors in Seoul could help people with this. This is preventable.” Retirement Planning Is About More Than Money I once heard a financial planner say, “We spend…

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New Year: What’s In Your Notebook?

It's a new year: what's in your notebook? You know, that one with all of your passwords, account numbers, doctor names, and that very important song that must be played at your funeral. Yeah, that notebook. Where is it? It might reside digitally on your computer or in the cloud, or it might be a pile of papers in a file cabinet, or it might be in an old-fashioned 3-ring binder. The new year is a good time to ask: how easily can someone who needs it find it? Who Might Need the Notebook and When? Everyone needs a someone in mind for the notebook. Your someone (Kate Hufnagel, the Digital Wrangler, calls this "Your Person") is who will step in for you and help to handle things when you can't. If an immediate someone does not spring to mind, consider asking a professional to be that someone - an attorney, accountant, or professional fiduciary, for example. When will someone step in? At a time when you need the notebook, but can't get to it. We can imagine all kinds of accidents and tragedies that might bring about a need for the notebook. Rather than dwell on those, let's imagine that you are suddenly swept away on an all-expenses paid trip out of the country to a remote island with spotty cell coverage. While you are whale-watching and snorkeling the reefs for an indefinite period, things still need to be handled back home. Bills to be paid. Taxes to be filed. Gifts to be given. People to be notified of your absence and introduced to Your Person who is handling things. What Goes in the Notebook? In essence, the Notebook is a central place you keep information that Your Person will need in case something happens to you. Common and essential items in the Notebook include: Your five basic estate planning documents: original will (drafted by an attorney in the state where you reside), living will, health care power of attorney, durable power of attorney, and HIPAA designations. Advanced estate planning documents: trusts, partnership agreements, business buy/sell agreements, shareholder agreements, etc. Insurance policies. ALL of them: life, long term care, health, property, car, boat, liability, and any others. Contact information for professional advisers: attorneys, bankers, accountants, investment advisers, insurance agents, and (of course) your CERTIFIED FINANCIAL PLANNER™. Also, if your advisor has an assistant or paraprofessional who knows you and your situation, write down their contact information and a little note to that effect. (“Sharon is the assistant and she runs the whole place.”). All of your health care providers – doctors, dentist, optometrist, veterinarian (who is going to take care of Fluffy?) Put similar information by each one – what they helped you with and if any office or nursing staff know you and your history. Important to remember also, anything handled online: digital password manager, online user ids and passwords, bank statements, investment accounts, real estate deeds and mortgages. So much of our financial lives nowadays keys off…

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The Retirement Answer? A Blank Stare

The Retirement Answer? A Blank Stare I had just asked a 59-year-old, "You said you can retire in 3 years. How will you spend your time after that?" Expressionless, all he gave was a blank stare. "I never thought about it," he replied. Unfortunately, he wasn't the first 59-year-old with that answer. "I don't know" is a more common answer than most think.  More To Retirement Life Than Money  According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing. Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of "financial independence." Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to dial up a financial planner and ask, "Am I there yet?"   Are You "There" Yet? To which the answer is usually, "That depends." That depends...on where "there" is. "There" = how, with whom, and where you will find purpose, meaning, and happiness in life after your Work-Spend-(Save)-Repeat chapter. Once that's known, "there" can be translated into real financial goals. If you don't know what "there" looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don't know, you're not likely to enjoy that supposed nirvana time nearly as much.   There are many thought leaders contributing to discoveries about the time of life past "Working" and before "Old." That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life's Next Chapter. Examples of such leaders include Dori Mintzer and Mitch Anthony. According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well, potential paths lead to boredom and, in the worst cases, clinical depression. Real Retirement Planning  Many people think "retirement planning" means "IRA investments" or "401K rollovers" or "pension options." Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It's found inside of you.  Begin with a blank stare, and build your "There." That's real retirement planning. Not sure where to begin? Check out this free download: https://www.hollydonaldsonfinancialplanner.com/wp-content/uploads/2018/11/Beyond-the-Numbers-Whats-Retirement-Money-For.pdf for a questionnaire about what kind of retirement lifestyle choices are ideal for you.   Or subscribe to the award-winning monthly letter, "The View From the Porch," at https://bit.ly/3t2uwfn.

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5 Identity Theft Types of Pain

5 identity theft types of pain. Yes, identity theft is a pain. Before a family member's recent experience, my thinking was "pain in the neck." It's a nuisance, for sure. However as experienced by this family member recently and by me as the power of attorney holder, it's more than just a nuisance. It can induce shame, violation, hypervigilance, and eventually isolation. Pain Type 1: Shame The family member fell victim to a spoofing scam. The bad guys called her pretending to be AT&T. They convinced her to share the Multi-Factor Authentication (MFA) code which allowed them to steal her phone number through a SIM swap. Although they were unsuccessful with her multiple times at first, it only took one convincing moment that they were really from AT&T and trying to help for her to cave in to their pressure. Three days later, they called me too. The AT&T logo appeared on my screen. I answered it, thinking it was AT&T calling about her phone. Fortunately when I heard the man with the Eastern European accent ask for her, I was hesitant. But not suspicious. Just wondering why AT&T was calling my number (surely they know this number belongs to me?) and asking instead for her. The reason was that my phone number was on a few of her accounts as the MFA device. So her stolen number wouldn't work for those accounts. They needed mine, and were calling to attempt the same ruse that had worked with her. The call lasted all of 26 seconds before he abruptly hung up. Only then I thought, "Hey, wait a minute. I don't think that was AT&T." I felt like an idiot at that point. I even called the number back and it played an AT&T greeting. Fortunately I had not given them any information. Since that time, I have read that a cybercriminal ring bribed AT&T employees which allowed them to impersonate AT&T to conduct their operations. Being a victim is nothing to be ashamed of. Professional criminals are skilled. Yet many victims feel shame at being duped. Pain Type 2: Violation Three days prior to that call, I received multiple email alerts that changes were being made on her USAA profile. It was a Saturday night. I called her to confirm she had not spoken with USAA. She had not. "Hmm," I thought, "We will have to call about this when they're open." I wasn't alarmed. Two days later, a holiday, email alerts began coming from her bank account. The password and mailing address were changed. I knew she had not done this. I certainly had not done this. Who is doing this? Someone is breaking into the bank account and changing information? How did they even know where she had a bank account? How did they get the username and password? Is this connected to USAA? When someone is in your bank account changing personal information, it feels violating. Despite the bank's assurances via hours of calls and visits…

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Why is an IRS Form 5498 Arriving in May?

Why is an IRS Form 5498 arriving in May? You just gathered all your forms two months ago and now a new one arrives after the deadline. What gives? Do you have to call your accountant again? Hold the calls. You may remember reporting to your accountant (or TurboTax) that you made some contributions to an HSA or IRA. Perhaps you made them last year, or perhaps you made them before the April 2024 deadline and had them count for 2023. Or, you took money out of these accounts, or are getting ready to start your required minimum distributions (RMDs). These are reasons why you are receiving the form. What's Form 5498 for? One purpose of the Form 5498 is for the financial institution that holds your account (called a “custodian”) to verify to the IRS that you did indeed make the contribution that you claim you did on your tax return. Since everyone usually has until the tax filing deadline to make contributions, the IRS gives custodians until May 31 to send Form 5498 to account holders. Another is to verify distributions. If you are over the age for required minimum distributions (RMDs), Form 5498 also tells the IRS what your RMD will be for the current year. The RMD is determined by the account balance on the final day of the previous year (December 31, 2023 for 2024). What you need to do with the form is check that what's reported on the form matches up with what actually happened and also with what you actually reported on your return. Check Form 5498 For Errors Seriously, make sure it’s correct. Mistakes are common. In 2018, my husband and I both received erroneous 5498’s for our Health Savings Accounts (HSAs). Mine showed $0 contributions for 2017 and his showed 2 years’ worth. What the....? So we called the bank, got the records straight, and had them send corrected 5498s to the IRS. Why go to the trouble? If your 5498 contribution or distribution differs from what you reported on your 1040, at some point it could get noticed. One fantastic sunny day after skipping down to your mailbox, you may find inside a skinny white envelope with “Internal Revenue Service” in the return address. Fantastic day ruined. More than likely, all the letter will say is, “Hey, we noticed your 5498 doesn’t match your 1040. Whassup?” But still. It will be in IRS-Speak and look and sound and feel serious, with a deadline for giving them an answer. Save yourself the trouble of having to answer (or pay your accountant to answer for you) and do a quick check now. It only takes a few minutes. Does your contribution amount for 2023 look correct? Did you take any 2023 HSA or IRA distributions, and if so, do those look correct? (If not, make sure the distributions say $0.) Does the reported year-end account balance look accurate? Is your SSN correct? How about your name, including your middle initial? If…

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Graduation Gift? How About Legal Documents?

Graduation gift - How about legal documents? Arguments have been made that a set of legal documents are the best gift for a high school graduate. Now that's not quite as bad as coal in a Christmas stocking. But not quite as much fun as a MacBook Air, either. . Think about it - an 18-year-old is a legal adult.   “What this means to each of us is the only individuals that can make financial or health care decisions for us are the individuals we legally appoint.  Mommy and Daddy are no longer the legal guardians,” says Clearwater, Florida attorney Linda Chamberlain in her own blog post on the topic: The Best Gift for the Graduate But They Don't Own Anything! You might say, "But my 18-year-old doesn't own anything. Why do they need a will?" There are other documents that become important upon reaching adulthood. For 18-year-olds who don't own anything, they still have rights, such as: to private medical records, to make their own health care decisions, to sign their own lease or to open, close or pay bills on a bank account. If the young adult is incapacitated, parents can no longer legally do those things for them. The most common worst-case scenario described is an accident where the young adult is hospitalized. This is when documents like: a HIPAA designation (allows consent to share medical records), Health Care Surrogate (consents to have health care decisions made), Durable Power of Attorney (for managing money and accounts), and Living Will could be crucial. In Florida, most estate planning attorneys will provide a set of documents for a small flat fee, especially for children of their established clients. Ask your attorney, check your local estate planning council directory, or ask your professional advisors for referrals. Contact us if you need referrals for Tampa Bay area attorneys or if you have other financial concerns for someone becoming a newly-minted adult. Schedule a call with the online calendar button at our page: Contact.

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