In This Issue
Featured Article
Beneficiary Designations
Curt's Quick Comment
Beneficiary Rights
From the Financial Presses
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Featured Article
I just heard some stats on the radio.  40% of Financial Advisors actually do Financial Planning and only 14% will openly discuss their fees.  Wow...Where does your advisor fall on the spectrum?  I do both and would be happy to talk you about my services and fee transparency.
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Financial Strategies
Planning Techniques, Procedures and Guidance for Military Professionals

Are you ready for some football?  It is my favorite time of the year...fall.  Great weather and Packers Football. 
Welcome to the September issue of Financial Strategies.  This issue has a distinct estate planning flavor.  Not a favorite topic for most people but something everyone needs to do.
The issue starts out with information on designating beneficiaries for different accounts and how you need to understand what the ramifications of your actions are.
My quick comment has a few suggestions for reducing your Auto Insurance bill.  Sometimes Insurance Companies load us up with coverage that we might not need when we PCS.
The third article describes another side of estate planning/execution...your rights as the beneficiary of a trust.
The last section includes an article on how you can use Charitable Trusts to reduce your estate, reduce your current taxes and support a worthy charity.  I wrap up with an article that covers some actions you can take now to reduce your 2013 Income Tax Bill.
Enjoy really is my favorite time of the year.

See you in October!


Curtis L. Sheldon, EA, AIF®
C.L. Sheldon & Company, LLC
(703)542-400 or (800) 928-1820
Beneficiary Designations:  Make Sure You Understand What You Are Doing 


I recently was trying to help a woman whose sister had passed away.  The deceased sister had named the woman as the beneficiary for her 401(k).  But what the deceased sister really wanted to happen was for the 401(k) proceeds to go into a trust for her son.  The deceased sister inadvertently set up a couple of potential and actual problems in relation to settling her estate.

  • First, the woman who is the beneficiary has no legal obligation to deposit the funds into the trust for the deceased sister's son.  Instructions in a will have no sway over the distribution of fund that are designated for a beneficiary.  The deceased woman was lucky her sister was true to her expressed wishes.
  • When the sister who was the beneficiary contributes the funds into a trust for the deceased woman's son, she could be liable for gift taxes (depending on the size of he 401(k)).

A good estate planning attorney might be able to fix a problem like this through post-mortem techniques (for instance, the sister might be able to "disclaim" her status as beneficiary).  But this can be a very expensive proposition. 


You can avoid a situation like the one above with a good financial and estate plan.  To help get you started, let's start by making sure you understand a few key points.

  • Your beneficiary designations for Life Insurance, Qualified Retirement Plans, Trusts, IRAs and TODs/PODS are not affected by your will.  So the first thing to check is to see if your will and beneficiary designations both support your ultimate goals.
  • Using beneficiary designations will reduce your probate expenses and hassles.  Since the assets that transfer by contract (beneficiary designations) are not controlled by your will, you don't pay probate fees on those assets.
  • You need to think about second and third order effects.  I'm pretty sure when I was a Lieutenant (shortly after the Earth cooled) I named my parents as the beneficiaries of my SGLI policy.  My contingent beneficiary was "My Estate".  If I had died and my parents had pre-deceased me the proceeds would have gone to my estate, been distributed in accordance with my will and been subject to probate expenses unnecessarily.
  • Naming a "non-person" such as a trust as a beneficiary of retirement funds can be very tax inefficient.  Normally if a person inherits retirement funds (401(k), IRA, TSP and others) they can take distributions based on their expected lifespan...which could be a long time.  However, a non-person must empty-out the account in 5 years or based upon the original owner's calculated life-expectancy.

Many of you have heard me say, "Don't do estate planning without a net".  Start with a solid financial plan that includes the goals and potential techniques to make sure the people who get your stuff are the ones you want and they get as much of it as possible. Then, bring in a good Estate Planning Attorney to QC the plan and draft the appropriate documents.

Curt's Quick Comment
Have you checked your Auto Insurance Policy lately?  I routinely find policies with low deductibles even though the client has substantial assets. Or they carry medical coverage they don't need because they have TRICARE or other insurance.  The other common thing I see is roadside assistance that actually provides little "insurance".  Take a look at your might save some money.  Remember, insurance is for losses you can't afford. 
What are Your Rights as the Beneficiary of a Trust?


If you have been named as a beneficiary of a trust, you probably have many questions about what comes next. Trust beneficiaries are usually entitled to income from the trust. The trustee who is in charge of the trust is responsible to make sure that assets from the trust are invested well and productively. The following are some of your rights.


  • The right to an accounting of investments: Trustees typically decide how the principal of the trust will be used. As a result, the law requires that trustees act prudently with investments, diversifying so that all the assets of the trust are not in one place, which would put them at risk and could limit returns. If you have questions or concerns about the trustee's decisions for the investments, you have the right to request an accounting of investments. This accounting report will detail every investment and its gains and losses.
  • The right to receive annual trust reports: Trust reports contain information that includes the income that was produced by the trust and expenses and commissions paid out. Traditionally, these reports should be mailed out annually.
  • The right to request a new trustee: If a trustee is being difficult, uncooperative, or refusing to do the job, you can request a new trustee. This requires a legal filing and a ruling by the court. If the reason for the request is because of large losses of principal, the trustee will also be required to repay the trust.
  • The right to sue the trustee: The trustee can be held liable for loss of trust assets and for income that would have been earned but for the wrongful conduct by the trustee. The trustee has a fiduciary duty to manage the trust with due care and caution and must be loyal and impartial to the beneficiaries.  
  • The right to terminate the trust: If all the beneficiaries on a trust are "adults of sound mind," the trust can be terminated if the court determines that the intent of the creator of the trust has either already been accomplished or cannot be accomplished for reasons such as impossibility. All the trust beneficiaries must agree, including those beneficiaries of the trust that are entitled to the remainder of the trust assets after the trust would have naturally ended. Some trusts are difficult to terminate, such as spendthrift trusts where the settlor clearly intended that the trust assets be withheld and protected from the beneficiaries and their creditors.


Being named as a beneficiary of a trust is indeed a welcome event, but not without its complications and, if handled improperly, unfortunate consequences. For help understanding your rights and protecting your inheritance, it may be wise to engage the services of an experienced trust attorney.


The information in this communication is not intended to be legal advice and should not be treated as such. Each individual's situation is different. You should contact your legal professional to discuss your personal situation.


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Because of the possibility of human or mechanical error by S&P Capital IQ Financial Communications or its sources, neither S&P Capital IQ Financial Communications nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall S&P Capital IQ Financial Communications be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content.


© 2013 S&P Capital IQ Financial Communications. All rights reserved.
From the Financial Presses


For Charitable Trusts, The Tax Icing on the Cake  


A good estate planning idea may have become even better, thanks to the latest changes in the tax code. If you already were inclined to set up a charitable remainder trust (CRT) to protect assets from estate tax and support a favorite philanthropic cause, there now are several extra tax incentives to consider...(Read More Here)


13 Mid-Year Tax Planning Moves to Make for '13


Now that you've put your 2012 tax return to bed, it's time to focus on 2013. Because of tax rate increases for upper-income taxpayers and a new surtax on investment income, it is especially important to get an early jump on tax planning. If you wait until the end of the year, it may be too late...(Read More Here)
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