Don’t Leave Your Family with a Mess!

“Time is the most valuable asset you don’t own.” – Gary Vaynerchuk

The future is something most of us take for granted. But the truth is we generally never know what tomorrow will hold. And when it comes to financial planning, perhaps there is nothing more important than keeping our families and loved ones in the most secure position as possible.

As outlined below, we have included planning issues which we believe ALL people should consider doing now!

1. Honest Conversations with Family

Financial topics that seem straightforward to some—e.g., cash flow, taxes, probate, investing, insurance and retirement accounts—can be confusing for others. However, regardless of who handles these matters currently, all involved (interested) parties should have an adequate base of knowledge.

An easy way to start this process is to begin a conversation with a family balance sheet containing a summary of all assets and liabilities. This outline should include where assets are held (custodian), account type, the current owner, beneficiary & value. Your family may find it helpful if you provide them with a summary as to what each account/asset should be used for. For example, you could explain that the savings account should be used for living expenses, while IRA’s should be used for retirement.

Next, consider including personal financial goals that your family may wish to honor; for example, funding a specific charity or continuing to hold a family vacation residence as a legacy. Lastly, make introductions to the financial professionals in your life: i.e., your Financial Planner, Accountant, Attorney, Banker, Insurance agent and any other important relationships, as these trusted individuals can reduce the strain on your family after you pass.

2. Simplifying Finances

Here are a few other areas that generally always can use streamlining. Here are a few strategies worth considering:

Closing unnecessary accounts and consolidating funds to one custodian and/or bank, where possible.

Updating beneficiary designations and making your spouse a joint account holder with right of survivorship – maybe even consider using a revocable trust to avoid probate!
Revisiting your will and other important estate planning documents to make sure they are up to date and represent your wishes.
Create an outline of important day-to-day financial management steps that can be completed by your family in your absence. This outline can be as simple as… “I pay the mortgage to XYZ Bank on the first day of the month from our joint checking account.”

3. Staying Financially Flexible

One of the biggest lessons is the value of financial flexibility…or “staying liquid.” By flexibility, we mean having access to capital which is free from redemption fees, lockups, tax liabilities and any other constraints which may create a time or financial boundary to access capital. You should be careful with private investments, real estate and/or insurance products, which could create these hurdles. Instead, look to build flexibility into your finances by saving funds in separate accounts for which you have separate goals (as discussed above.) With this in place, you can create an investment strategy for each bucket knowing that you can take more risk in your retirement bucket than you can in your emergency funds.

4. Giving While You Can

Consider your ability to give funds away. The best way to do this is to create a retirement cash flow plan, which can be used to test your financial capacity for giving. From there, you can take advantage of the Annual Gift Tax Exclusion, which allows you to give up to $18,000 in 2024 ($19,000 in 2025) to anyone without requiring any formal tax filing.

Retirement accounts can be a great gifting source, also. For those who are currently required to take Required Minimum Distributions (RMDs), you can actually gift up to $100,000 directly from your retirement account to a qualified charitable organization (501c3) and this distribution avoids income taxes! When doing this, please be sure to alert your accountant, so he/she can make sure this is correctly reported on your tax return. Additionally, you may wish to advise your spouse and/or children to take advantage of the tax-free growth offered by any Roth IRAs.

5. Tax-Efficient Cash Flow Planning

In retirement, your regular paycheck will be replaced by various income sources, such as Social Security, pensions, required minimum distributions (RMDs), and investment earnings. Your primary financial goal should be to minimize the taxes owed on these funds while ensuring they meet your living expenses.

Managing this effectively can be complex and often benefits from professional guidance. At its core, however, the strategy involves creating a comprehensive cash flow plan that evenly distributes your taxable income throughout retirement. Key tactics might include taking IRA withdrawals earlier than required, delaying Social Security benefits, generating tax-free income through options like municipal bonds or Roth IRAs, managing capital gains, and timing charitable contributions strategically.

While this can be a lot of information to communicate to family, you may wish to simply just outline which funds should be spent first in retirement and which funds should be used last.

6. Decluttering and Organizing

Lastly, most people somehow find ways to keep a lot of unnecessary paperwork on hand. This includes old tax returns, outdated financial statements, and more. While keeping a certain level of current info is generally recommended, today with online access and electronic record capabilities by most brokerages, it may be wise to limit how much you keep. You want to avoid leaving family members with the burden of sorting through too many things with which they may be unfamiliar.

Conclusion: Reflecting on Legacy

This type of comprehensive financial review---and the family discussions that may arise from it--can be a challenging reminder of life’s fragility. However, it underscores the importance of intentional financial planning as far ahead as possible. By simplifying your finances, openly communicating with family, and sticking to your values, you will ensure that you leave behind more than just a well-organized estate.

Disclosures: This is not an offer or solicitation for the purchase or sale of any security or asset. While the information presented herein is believed to be reliable, no representation or warranty is made concerning its accuracy. The views expressed are those of NCM Capital Management, LLC and are subject to change at any time based on market and other conditions and NCM does not undertake to update or supplement its newsletter or any of the information contained therein. Past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable. There is no guarantee that the investment strategies discussed above will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision. Investment advisory services are offered through NCM Capital Management, LLC, an SEC-registered wealth advisory firm domiciled in New Jersey. This communication is not to be construed or interpreted as a solicitation or offer to sell investment advisory services. For additional information about NCM Capital Management, LLC, you may request a copy of our disclosure statement as set forth on Form ADV. Readers are encouraged to consult with their own professional advisers, including investment advisers and tax/legal advisors. NCM Capital Management, LLC does not provide legal or tax advice. NCM Capital Management, LLC can assist in determining a suitable investing approach for individuals, which may or may not resemble the strategies outlined herein.