InSight

Divorce Playbook: Adequately insure any payments in the divorce settlement

Financial Planning Dentist

Often overlooked during the divorce, and somewhat difficult to remedy after the divorce is using insurance to back up any financial agreements you come to. Alimony, child support, college tuition, and property settlements are all insurable interests you have in your ex-spouse after a divorce. It’s important to confirm in the divorce settlement some insurance recourse is covered in the event of death and disability. Life and disability insurance policies can guarantee that these payments will continue despite an unexpected loss or injury.

If you are mid-divorce these policies can also be made a part of the agreement and you can request verification for these policies being in force. These policies can help you rest assured that the payments will be made regardless. 

If you are the party required to make these payments, there are several options available that will make varying financial sense. If your child is young, or the timeline for your payments is long you may consider whole life insurance as the cash value will have retirement strategies should the policy go unused.

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Boulder Wealth Building
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Peter Locke

Welcoming You to Financial Planning: A Simple Guide

Embarking on your financial planning journey might feel like a giant leap, but remember: every expert was once a beginner. Let’s take this step together, ensuring your financial stability and prosperity with some essential tips: 1. The Safety Net of an Emergency Fund: Begin by establishing an emergency fund, aiming to accumulate at least three months’ worth of living expenses. This fund provides a safety net for unexpected situations, protecting your financial stability. 2. Maximizing Employer Benefits: Your employer might offer various benefits like 401k matching, Employee Stock Purchase Plans (ESPP), and Health Savings Account (HSA) contributions. During open enrollment periods, please don’t hesitate to reach out to us if you need assistance in understanding or selecting your benefits. 3. Balanced Saving for Your Future Home: Begin by allocating savings to both your employer 401k and an investment account, ideally striving for 20% of your gross income. If home ownership is on your horizon, consider adjusting your strategy 1-2 years ahead of the purchase by directing savings to a more liquid account. 4. Renting or Buying Within Your Means: A thumb rule is to ensure your rent or mortgage doesn’t exceed 30-35% of your income. And, don’t forget to account for potential maintenance costs, ensuring your emergency fund remains robust and separate. 5. Crafting a Viable Budget: Encourage a simple budgeting approach: Income minus Savings equals Your Spending Budget. Aiming to save around 20% of your income can be a stable starting point. 6. Navigating Through Debt: Steer clear of problematic debt, such as high-interest credit card balances, while recognizing that some debt, like education and mortgages (accretive debt), can potentially work in your favor. Let’s work together to devise a strategy that balances debt management and future savings. 7. Smart Vehicle Purchases: When it comes to purchasing vehicles, consider Certified Pre-Owned options, particularly those known for low maintenance and high resale values, like Toyotas and Hondas. 8. Evaluating Debt Strategies: Always prioritize accretive debt (like mortgages and student loans) over erosive debt (like car loans and credit card debt) but be sure to consider the interest rates and potential returns from other investment opportunities when planning payoffs. 9. Bank Offers? Let’s Chat First: Banks are in the business of profit-making. If you’re considering a bank’s offer, let’s discuss it together first to ensure it’s in your best interest. 10. Optimizing 401k Contributions: If you’re earning at or below a specific income bracket, consider contributing to a Roth 401k for potential future tax benefits. Navigating between Roth and Traditional 401k contributions can be nuanced, so let’s explore the best approach for your unique situation together. A Note for Young Adults on Investing: Investing can be a powerful tool for wealth accumulation. Consider exploring Total Stock Market ETFs (Exchange Traded Funds), which track the entire stock market, offering a low-cost and diversified investment option. Your financial journey is personal and unique. We’re here to guide you through it, ensuring you’re equipped with the knowledge and strategies to navigate through each stage confidently. Let’s build your financial future together!

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Boulder Financial Planning, Financial Expertise
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Peter Locke

What is an Estate Plan?

Estate planning is one of the most skipped parts of peoples’ financial lives. Whether you’ve put it off because you didn’t know anything about it, it’s boring, expensive, or because you don’t think you have enough assets, I hope this guide will help you understand why you need a plan, common terms, and how to get started. What is an Estate Plan? Your estate is everything you own. It ranges from your business, house, money, and any other personal belongings. Even if you don’t own a lot of stuff, you still need a plan for where all of these things will go. However, your estate plan is more than just a map of where all your possessions will go. It helps dictate where your kids will go, who will take care of you if you’re unable to, who will handle all your affairs if you can’t, who will take your loved pets, etc. It’s a combination of how to pass down assets, to how the end of your life will be managed, and who will handle everything. Documents Included In An Estate Plan Everyone’s estate plan is slightly different, but there are a few specific documents that most have in common. Last Will & Testament – The goal of a will is to lay out your wishes for who will receive what after you pass away. Designation of Guardianship – This document designates who will look after and care for your children in the event you’re unable to. Living Trust – Very similar to a will where you outline the instructions of who gets what. The difference with a trust is that these assets are placed in there while you are still alive. Once you pass away, these assets will be moved without needing probate. Living Will – This document focuses on your preferences concerning medical treatment if you develop a terminal illness or injury that causes you to lose brain activity. Includes things like, feeding tube, assisted breathing, resuscitation, etc. It may also outline your religious or philosophical beliefs and how you would like your life to end. A living will is only valid if you are unable to communicate your wishes Financial Power Of Attorney* – The financial POA is a document that allows an individual to manage your business and financial affairs, such as signing checks, filing tax returns, and managing investment accounts when and if the latter becomes unable to understand or make decisions. Healthcare Power of Attorney* – Designates another individual (typically a spouse or family member) to make important healthcare decisions on your behalf in the event of incapacity. *Power of Attorney’s can be divided into several different categories. General power POA (gives the agent the power to act on behalf of any matters), Limited POA (gives the agent the power to act on behalf of specific matters or events for a specific amount of time) and Durable POA (remains in control of certain legal, property, or financial matters specifically spelled out in the agreement, even after the principal becomes mentally incapacitated.). What actually happens to an estate after you die? Most people have no idea what the process looks like after someone passes away. Those that do, typically understand why these documents are so important. So let’s dive into this so you get a real-life understanding. Everything you own at the time of your death is part of your estate. Your estate then goes through probate. Probate is the process where the court decides what happens to your assets now that you are gone. This is where having estate planning documents becomes so helpful. If you have a will, the court uses this as their guide to splitting up your estate. If for some reason you don’t have one, you are considered to have died intestate and the court uses local laws to decide who gets your assets. Honestly, you don’t want them deciding who gets your stuff! Not only that, probate can cost anywhere from 2-5% of the value of your estate so having a will helps ensure everything goes to the right people. The best way to avoid probate is by naming beneficiaries on all your important accounts like life insurance, retirement accounts, transfer on death accounts (investment accounts), Payable on Death (bank accounts), beneficiary deeds (real estate). Who handles your estate? When you create your will, you get to name someone as the executor of your estate. This person manages your estate through the probate process. They handle unpaid bills, taxes, debt, and anything else that relates to your estate. They also help distribute your estate to all the right people. Typically, people pick their kids, spouse, or siblings to do this for them as it is not a quick and easy job. You definitely want someone you trust to be your executor. If you do not name someone before you die, the judge will choose someone as your administrator (usually spouse then parent or next in kin) Taxes On Your Estate Many people worry about estate taxes, but it only really applies to people with significant wealth. In 2023, the first $12.06 million of your estate is exempt from federal taxes. The only way you have taxes is if you have more wealth than that or if you live in one of the 12 states that have a state estate tax. These states are: Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington. Some of these states have a lower exemption than the federal one so you may have to pay state tax even if none is due federally. You definitely want to be aware of this and plan for it! Your executor is the one who will help handle all the tax bills that could be due. They will use money in the estate to help pay these bills and if they need to liquidate to help pay for taxes, they will. When Do I Need A Trust? Most people have heard

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Kevin Taylor

Tax Mitigation Playbook: Who can use 1031 Exchanges?

Section 1031 of the tax code allows property owners to defer taxes on the sale of their real estate held for business or investment purposes. At InSight, we use this for several strategic and preference-based reasons for clients (See What is a 1031 Exchange for more)  This is Key: The only requirement for a person or entity to be eligible for an exchange is that it is a US tax-paying identity. All taxpayers qualify as individuals, partnerships, limited liability companies, S corporations, C corporations, and trusts. There are no citizenship requirements for an exchange, meaning that you are eligible for an exchange as long as you pay taxes to the US.  This requirement includes DACA recipients or foreign companies. Keep in mind that the same taxpayer that sells the relinquished property must also purchase the replacement property. The same taxpayer requirement refers to tax identity, not necessarily the name on the property’s title. A taxpayer can preserve tax identity without holding title under their name by holding title under a “tax disregarded entity,” which is not considered separate from its owner for tax purposes. Entities such as a single-member LLC, a trustee of a revocable living trust, or a tenant in common are examples of a tax disregarded entity.  Taxpayers may also hold title under a Delaware Statutory Trust (DST) which is a real estate investment vehicle that provides investors with access to investment-grade real estate that is generally larger than they could have acquired on their own. The Taxpayer acquires a fractional interest in the property. The use of DSTs in 1031 exchanges was approved by the IRS in Revenue Procedure 2004-86. Delaware Statutory Trust (DST) or Illinois Type Land Trust beneficiary. The tax gain can be deferred if tax‐deferred exchange requirements are satisfied and the sale proceeds are reinvested in like‐kind property.

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