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
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.
MAKE A PLAN
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?
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
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
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
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
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
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
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: ______________
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
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,
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.