A Matter of Finance - February 2002

Plan It! Family Financial
Thoughtfulness Month
By Jack Lewis Ludwig, CFP

I have just declared February as "Family Financial Thoughtfulness Month" (FFTM). That means that by Valentine's Day, you should have opened and/or deposited monies into everyone's ROTH IRA. That's for you and all of the relatives you are financially responsible for. You may, if you are financially able, deposit monies for friends as well.

For example, whenever I discuss bequests with wealthy clients and they say they would like to gift more than the legal limit ($10,000 per year per donor per donee), in kidding, I say that I am available for adoption. So please consider me as a friend, for whom you do not need to deposit any monies, just e-mail me thanks for my articles, if you like them. If you are displeased, tell me what you do not like so that I may be able to make them better for you and other readers. Your input is greatly appreciated.


Since FFTM cannot succeed without a valid plan, here are a few of my thoughts with regard to family financial essentials. Oh! Do not be upset or surprised by the fact that some items that do not deal in dollars may be more important than money. A good example is specifying in your will a guardian of your choice for the raising and loving care of your children and the responsible oversight
of their funds, in the event of your demise or incapacity. You do have a will, don't you?

Your Will
If not, get thee to a professional immediately to draft a will - and don't drive too fast to get there. Statistically, the number of people who do not have a current will is said to exceed sixty percent. That includes lawyers, estate planners, and people in bank trust departments.

Keep good, current, complete and accurate records of your finances, assets, accounts, policies, and advisors. Choose the latter carefully. They will help you determine which assets to use, how to structure them (IRA or taxable), how to allocate them, how to diversify them, how to best determine goals and objectives, and how best to protect them with insurance and/or inherent features or other means.

With regard to allocation and guardianship, if you have dependents with special needs or fewer capabilities, considered allocating more resources for them in the form of guidance and funds. If some of your children are already through college, did you make separate college tuition provisions from the "equal share" distributions to them all?

Are you participating in all of the retirement plan options available and affordable to you? If not, which ones are you missing (e.g., IRA, ROTH IRA, 401(k), 403(b), SEP, Deferred Compensation, SIMPLE, Profit Sharing, Money Purchase, etc.)? Are you aware of the new opportunities for those over age 50 to make catch-up contributions over and above the current year higher deposit limits? If you need more information, please read my column in last month's issue of Auto Laundry News.

Available since 1998, the ROTH IRA is the best tax-advantaged investment structure our revenue hungry government provides to some of us. If you or any member of your financial-support family is eligible for a ROTH IRA, you should be doing whatever needs to be done to get those accounts opened
and funded. Again, please read my article in last month's issue of Auto Laundry News. The ROTH is the best, if not the only, legal way to "never" have to pay taxes on investment income when qualified to take totally tax-free distributions, regardless of amount or personal tax bracket.

Check with your advisor to learn if you or any other family member is eligible to participate in this beneficial program.

Allocation and Diversification
These are two frequently confused terms that investors need to clearly understand to gain the essential benefits of both techniques. Allocation is the process of using different investments in appropriate proportions to provide safety in style or character and accomplish goals of yield and return on assets. In other words, the percentage of your assets you are comfortable with being invested in stocks, real estate, savings accounts (including Certificates of Deposit), government and/or corporate bonds, mortgages, business interests, and collectable assets like stamps, coins, antiques, or art works.

Based on a person's age or risk tolerance, there are industry standards of recommendation, e.g., 25 percent each in stocks, bonds, savings, and real estate. Where a business is involved, those percentages vary greatly.

Diversification is the use of different issues within each category of allocation, the proverbial "eggs in one basket." For example, owning stock in a variety of companies such as GE, IBM, Amgen, Home Depot, Penna Power & Lite, and Wal-Mart for the allocation of large cap stocks. In bonds, diversification would be provided by owning T-Bills, T-Notes and T-Bonds with a variety of different maturity dates so that a dramatic interest rate change, in any one period of time, would not permanently impact the entire bond portfolio as maturing issues are replaced by new.


Death, disease, and disaster are subjects we would all like to ignore, but September 11 has made us all more aware of our mortality and generosity. Preparedness is key to having these documents in place with the peace of mind that, should the need arise, those whom we want to protect are provided for, including ourselves.

Foremost among these documents is an up-to-date will, so that the distribution of assets, not protected through avoiding probate, is done in accordance with our wishes and influence. Refer to this column in the November 2001 and December 2001 issues of Auto Laundry News for more detail on estate planning.

A Power of Attorney will enable a person or persons of your choosing to tend to your banking and other financial affairs, if a serious illness, injury or other crisis left you incapacitated. This is often referred to as a Durable Power of Attorney. Single purpose Powers of Attorney usually enable someone to act in your behalf for only that particular purpose, regardless of your being able to do it yourself. Again, seek professional legal advice for wills, powers of attorney and other key documents.

A Health-Care Power of Attorney and Living Will authorizes someone to make medical decisions for you if you are temporarily or permanently unable, e.g., in a coma or otherwise unconscious. This proviso is usually coupled - sometimes in a single document - with a Living Will in which you indicate the type of care you would want if you were terminally ill or comatose.


A financial inventory is a crucial personal document that lists your professional advisors, insurance policies, investment and bank accounts. This provides survivors with immediate information they might otherwise have to scramble and search for in the event of death or a crisis. Don't add the aggravation of
wild goose chases to an already difficult situation. With a little forethought you can make all necessary information readily available.

Complete the inventory form and place it in a safe location at home. Do not keep it in a lock box or safety deposit box. Let family members know where it is kept. Review it at least once a year. Provide your spouse or primary heir with a copy and be sure he or she completes his or her own personal version.

Messages for Me and Those Who Follow Me
Full name and complete current address - if less than 5 years, indicate previous address(es); Social Security Number; Military Service Number; date, time and place of birth; parents complete names and mother's maiden name. Dated this _____ day of ______ 2002 (Add a complete signature to assure finder of accuracy of provided information).

I have done some lifetime planning. I have a will (and/or trust), an investment plan, retirement program(s), and life insurance coverage. However, I know three key facts:

1. Circumstances change and my wealth, benefits, and life insurance programs need to be reviewed periodically and modified or updated as necessary (e.g., Tax Reform Act of 2001, retirement programs).

2. My will alone does not give my surviving family members, friends and my personal representatives adequate information about my assets.

3. I have to provide for contingent beneficiaries, trustees, administrators, executors, and guardians. The purpose of these messages is to remind me of those facts and to provide essential
and appropriate information to those I leave behind so that they can have the benefits of my lifetime effort.

Message to Me - When Changes May Be Required
I may need to change my will (and/or trusts), investments, beneficiaries or estate arrangements, or change the amount or type of protection upon the occurrence of any of the following:

1. Death of my spouse, parent or child.

2. Marriage or divorce (my own).

3. My child's marriage or divorce.

4. Birth, adoption, or death of a child.

5. Birth, adoption, or death of a grandchild.

6. Major change in my financial structure, profession, or occupation (plus or minus).

7. Gift of a substantial portion of my estate.

8. Estate or inheritance tax-law changes.

9. Sufferance of disability or incompetence of a dependent.

10. Acquisition or loss of a business partner.

11. Change of organizations I wish to favor.

12. Deterioration of my or my spouse's health.

13. Death of personal executor or executrix as stated in my will, or of a trustee or the demise of a corporate trustee as stated in my trust(s).

14. Move from one state to another as domicile (e.g., number of witnesses required for my formal documents).

15. Change of persons I wish to favor regarding need or accomplishment (college, occupational pursuit or child adoption or heroic deed).

16. Purchase, creation or sale of business interest; include patent or copyright or franchise.

17. Placement of a mortgage on property.

Message to My Family
1. Funeral arrangements (personal wishes as to funeral home, services, method of internment or cremation, expense, burial plot memorials, etc.) and location of "to be notified" list:___________

2. Anatomical gifts are recorded on a card (driver's license) carried in my wallet, which was signed before two witnesses. I have given permission for these gifts, at my death, to go to: _____________

3. My executor's or executrix's name and current address: __________

4. Other comments: (personal, fraternal and/or business club and organization memberships, etc.: __________

Message to My Executor/Executrix and/or Administrator
Provide list of will and/or trusts (include details), advisors, investment and wealth accumulation plans and programs, real property, safety deposit box(es), intangible property, bank and brokerage accounts, credit cards debts.

Pet name(s) and pedigree paper location, veterinarian information including telephone number.

Current copy of this form is also in the possession of: ______________ and ______________.

Getting things in order is a process that makes the efforts of your survivors a less daunting task. Be as specific as you can to minimize searches.

Neither Jack Lewis Ludwig, CFP nor Nathan and Lewis Securities is a professional tax advisor.

Jack Lewis Ludwig, CFP, is a registered representative with Nathan & Lewis Securities. Call (610) 416-0419, e-mail jludwig@nlfs.com or write to Jack at 422 Dorothy Drive, Suite 200, King of Prussia, PA 19406 to discuss your own Investment and Estate Plans. You can still get a free copy of "Vital Documents" reprint, "Messages" brochure and IRA kits (ROTH and/or regular) made available at no charge or obligation.

AUTO LAUNDRY NEWS is published by EW Williams Publications Company
2125 Center Avenue, Suite 305, Fort Lee, NJ 07024-5898, USA Phone: 1-201- 592-7007 Fax: 1-201-592-7171