Last Will and Testament

PLANNING AHEAD: Where There is a Will…

This is the second posting from Stockman Wealth Management on Estate Planning. Understanding the process and putting a plan together, leads us to the topic of a will.

Estate planning can be complex, but it doesn’t have to be complicated.

The best place to begin is with a document nearly everyone knows about, even if they don’t have one: a will. Otherwise known as a Last Will and Testament, a will is the central axis around which estate planning revolves.

Last Will and Testament

Your signed will (by you, the testator, and two witnesses) legally states your wishes concerning who receives your personal property and assets as well as who cares for your minor children when you die. In certain states, you do not need a notary public to authenticate your signature, but it can be helpful. For example, in the state of Montana, notarizing your will makes it “self-proving.” This allows the court to accept the will as valid without contacting witnesses, thus speeding up probate.

Also, in Montana the witnesses must sign your will within “a reasonable time” (Mont. Code Ann. § 72-2-522). Perhaps this statute is purposely vague, but it points to the job of the witness. Their job is to actually observe you as testator sign and date your will, and promptly (not six months later) sign and date as witnesses.

Signature

David Morgenroth, CFP Missoula

David Morgenroth, CFP Missoula

If your will is not witnessed, but is handwritten, dated and signed by you, it is called a “holographic will.” This is a valid will to varying degrees in 25 states, including Montana. Holographic wills are subject to scrutiny by the courts and contestation by disgruntled heirs, and should be avoided.

You should also avoid dying without a will.

In this circumstance, you are deemed intestate (literally, “one who has not made out a will”), and the state gets to make the decisions regarding your children and property for you.

In our next blog, we will provide a short list of things you should consider when drawing up a will.

If you have any questions, or would like us to address a specific topic, please let us know. Our Stockman Wealth Management CFP® professionals are always available to guide you through the estate planning process.

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Estate Planning

PLANNING AHEAD: An Estate Planning Blog Series

This is the first posting in a new blog series from Stockman Wealth Management (SWM) on estate planning, the process of planning for passing assets on to loved ones.

Why you should plan ahead

Estate planning has the connotation of being only for “high net worth individuals” or “one-percenters.” But even those of us with a modest amount of assets (such as a house, car, furniture, or boat, not just cash) can find use and even comfort in an estate plan.

David Morgenroth, CFP Missoula

David Morgenroth, CFP Missoula

It’s not rocket science

Developing a plan is not rocket science; in fact, it demands more emotional intelligence than grey matter. The steps toward planning for the future are fairly simple and straightforward in most cases, but taking action is often the problem.

Jennifer Hemphill, CFP Great Falls

Jennifer Hemphill, CFP Great Falls

An emotional factor

Ultimately, you have to confront your own demise when estate planning, and the unconscious urge to avoid thoughts of mortality is enough for many to put the whole thing off as long as possible. This is the emotional factor – in essence, you must plan for your passing while you are still alive. In large part because of this conundrum, more than half of all Americans who own property die without a will (see www.caregiverslibrary.org.).

Brenda Hittmeier, CFP Billings

Brenda Hittmeier, CFP Billings

Encourage and support

Financial planners, especially those with the CFP® (CERTIFIED FINANCIAL PLANNER™) designation, have the background to help with the emotional and organizational processes of planning. They can define and clarify the process and can make recommendations of qualified professionals (such as attorneys and accountants) for specific legal and tax concerns.  The CFP® professionals at SWM are well-versed in the estate planning process, and can encourage and support you in all stages of planning.

Hannah Santa Cruz, CFP Missoula

Hannah Santa Cruz, CFP Missoula

This series will continue over the next few months with discussions on a variety of estate planning issues, such as property ownership and rights, powers of appointment, trusts, beneficiaries and giving, executors and guardians, succession planning (for businesses, farms, ranches, etc.), probate and how to avoid it, and many more. There is a lot to cover!

If you have a specific topic in mind, please let us know and we’ll write about it. Also, we welcome questions and comments any time!

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Missoula Group Photo

Questions to Ask When Choosing Your Financial Advisor

By Eric George, Executive Director, Stockman Wealth Management

We all have a need to build our wealth. By this, we mean saving for retirement, college, and investments. At Stockman Wealth Management, our group is here to help you achieve your personal financial goals and objectives.

Missoula Group Photo

Choosing a Financial Advisor

Choosing a financial advisor is not all that different from choosing a doctor. We seek out doctors to guide our healthcare decisions and we trust that they use their expertise in our best interests. Specifically, we expect that the treatments they prescribe are the best solutions to our individual ailments.

Finally, we expect that these doctors are not paid by the creators of those treatments (usually drug companies) to prescribe one treatment over the other and not to prescribe any unnecessary treatments.  Of course, we are willing to pay a fee for this trusted service as healthcare is a critical aspect of life. When the decisions are critical enough, we may seek a second opinion because not all doctors are the same.

In the end, healthcare typically works because physicians have a fiduciary duty to their patients. This duty is defined as a legal obligation for one party to act in the best interests of another. Financial advisory services are similar to the medical model.  You seek an advisor to diagnose and treat your individual financial situation.  You also trust that advisor to place your best interests ahead of his or her own.

This analogy breaks down because unlike physicians, not all financial advisors are required to act in a fiduciary capacity. Additionally, financial advisors may have different certifications, forms of compensation, and widely varying philosophies. Unfortunately, you can’t expect a full breakdown of fees from all advisors like you can on the bill and insurance statements from your doctor.

This means that the burden of finding the right financial advisor is on you. I have written some questions that you can take to your next financial advisory meeting or even if you are seeking a second opinion!

SWM Group Photo

Questions for your next financial advisory meeting:

  1. Will you clearly outline all of your fees in writing? Transparent fees are preferable in any business but are especially important in the financial services industry (where products and services may be laden with multiple levels of fees).  Be certain your advisor can provide detailed cost explanations associated with any services or products.  Common examples are the commissions and internal operating expenses often associated with mutual funds.  These fees may be in addition to your advisor’s fee.
  2. If you are paid by anyone else to give investment advice to clients, then are you paid to recommend certain products or services? Understanding who (besides you) pays your advisor helps you ascertain if their recommendations are in your best interest or are the result of a specific compensation arrangement with another party.
  3. Do you receive commissions or transaction fees as part of your compensation? Again, if someone is incentivized to sell investments then you must delve deeper in to how they manage accounts in order to make certain they put your interests ahead of their own.
  4. Is your fee schedule negotiable? Some advisors may have the latitude to customize their fee schedule based on your specific needs. It certainly never hurts to ask!
  5. Do you have an hourly rate or flat-fee option as an alternative to an annual fee? Some financial services like financial planning can operate efficiently under an hourly rate or flat-fee arrangement, other services work better under an annual fee arrangement. The downside considerations are that flat fee advisors have an incentive to spend as little time as possible on your project while hourly rate advisors have an incentive to drag it out.

Choosing the right financial advisor is a big step into investing in your future. Give us a call at Stockman Wealth Management if you have any questions. We’re here to help!

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Volatility: Rolling with the Tide

David Morgenroth

David Morgenroth

Post written by David Morgenroth, Stockman Wealth Management Advisor in Missoula

It seems like yesterday everything was smooth sailing in the stock market. On January 26, the Dow Jones Industrial Average hit its 11th record close of 2018 – that’s 11 out of a total of 18 trading days.

On the same day, the S&P 500 Index (of the best large U.S. companies) hit its 14th record close of the year. And this was an extension of a virtually uninterrupted move up throughout 2017.

Then things changed:

Source: www.telegraph.co.uk

OK, so the stock market hasn’t quite morphed into a horror movie, but things sure are choppy (no ax required; pun intended).

But what is volatility, exactly? Merriam-Webster defines stock market volatility as “a tendency to change quickly and unpredictably.”[1] For most people, that would be a good way to describe the stock market in general. But the market is a bit like life – easy going for a while (like most of last year), followed by pockets of turbulence (like now).

Sometimes it’s hard to figure out why the market moves and media outlets like CNBC are happy to supply reasons and pontifications, not to mention forecasts. There are a lot of things in the larger world that carry the potential to affect markets, such as changes in the economy, interest rates, major legislation, or on a micro level the fortunes of an individual company. But the market has its own narrative, and for events to have an impact, the market has to digest the news and figure out how it fits into the narrative.

When I use the term “market,” I mean market participants, including everyone from mom-and-pop investors to big financial institutions. That’s a pretty sizeable range of players, encompassing all levels of skill, knowledge, and experience. And not everyone comes to the market with the same intention – well, most want to make money, of course, but some are hedging risks they have elsewhere, and some are just gambling (with no risk management whatsoever). In the end, everyone brings their own story to the market.

And that’s where the market story or narrative comes in. The market is a conglomeration of all of our emotions, beliefs, and behaviors, and together we create a collective narrative that dictates not only the direction of the market but how the market will react to the news.

President Trump’s election offers an excellent case study. On election night in November of 2016, when it began to look like Trump would win, the Dow Jones Industrial Average stock futures plummeted to minus- 900 points at one stage. The election surprise caught the market flat footed, but by the next morning the market had latched onto the positives of the President-elect, and the bull market reignited. The market proceeded to ignore Trump’s tough trade talk for over a year until the administration established tariffs recently on a multitude of products, including $50 billion of Chinese products. The market took notice.

Ultimately, the market lives on an old adage: Things don’t matter until they matter. In a long bull market like we have experienced, a lot of bad news is ignored (such as the North Korean nuclear threat) and buoyant sentiment allows the rising tide to lift many if not all boats. Value investor extraordinaire Warren Buffett famously said, “Only when the tide goes out do you discover who’s been swimming naked.” The tide just might be going out now, so look out!

Managing risk is the key to avoid being caught skinny dipping. This is where we at Stockman Wealth Management come in. We are here to help you define your personal financial goals and create a long-term plan to achieve those goals. Remember: It is our collective human emotional volatility that creates volatility in markets, and the fact that money is involved just intensifies that volatility. We as advisors can help you stay focused on your plan by allowing you to take a step back, objectively review your situation, and relax knowing that you are on track to achieve your goals.

[1] www.merriam-webster.com/dictionary/volatility

Building a Better Future for your Child

TannaBy: Tanna Yerger, Digital Media Coordinator for Stockman Bank and former Stockman Wealth Management employee

The financial planning process at Stockman Wealth Management is designed to address questions regarding planning for your future retirement, tax situations, estate issues, insurance coverage and even debt analysis.

One of the most frequently asked questions during the planning process is “how can I give my child their best chance at a successful future?” College or further education is essential to many families.

In fact, it is almost crucial to get a degree or certification in order to level the playing field for many career paths. In a 2017 study from the Bureau of Labor Statistics, the average unemployment rate for young adults with high school as their highest level of education was set at 5.3%.

This compared to 3.8% for those with some college education and 2.5% with at least a Bachelor’s degree speaks volumes about the importance of higher education beyond high school. With that said, college is expensive. Many students require assistance in some form or another. Saving for college does not feel like a pressing issue until high school graduation starts to become tangible.

There are several different paths that can be taken to alleviate the stress of saving for the future of your children. Financial planning helps to choose the right one for you.

Then, the sooner you begin saving, the less anxiety you will feel when graduation day finally arrives. Read on to discover the various college savings avenues to consider when determining your overall financial roadmap.

UTMA Account

One college savings option is called a Uniform Transfers to Minors Act, or UTMA account. An UTMA is a type of custodial account that is used solely for the benefit of the child that has been named beneficiary. This means that anything contributed to the account is considered an irrevocable gift to the child, and withdrawals from the account must be made for their benefit. Once your child has reached the age of 21 the custodianship ceases and the child becomes the sole owner of the account.

One of the major benefits to an UTMA is that the proceeds of the account do not necessarily have to be used for higher education. Withdrawing from an UTMA account is relatively flexible. The only stipulation is that the proceeds be used for the benefit of the beneficiary. For example, the funds can be used to satisfy basic livings costs or purchasing a home. Funds can also be used for something less practical such as going on a trip or attending a concert.

UTMA accounts have a unique tax treatment that was substantially modified under the recently passed Tax Cuts and Jobs Act.  We strongly recommend seeking the advice of a tax professional to ascertain the tax ramifications of your unique situation.

This type of account allows flexible investment options. The funds in an UTMA account can be invested in anything, including CDs, bonds, stocks, or mutual funds. An UTMA account is a flexible way to save for higher education.

529 College Savings Plan

Another college savings plan to take into consideration is a 529 College Savings Plan. This plan is designed in a way that can provide a tax advantage while saving for higher education. A 529 plan works similar to an IRA or 401K plan.

The account owner selects a specific 529 plan, dependent upon the state, and is given a prescribed list to choose how funds of the account are to be invested. Investment options are limited to a list of mutual funds provided.

Because the proceeds of a 529 plan are intended to be used for college, it is important to be prepared for the possibility that the beneficiary may not have an interest in attending college. For this reason there is an option to transfer the 529 plan to certain relatives of the existing beneficiary.

The 529 plan allows the owner to have full control of the account regardless of the age of the beneficiary. This means that the owner (typically a parent or guardian) determines when the withdrawals are made. 529 plans also have federal tax benefits. Although you are not able to deduct the contributions on your federal income taxes, the investment will grow tax-deferred.

Any distributions used to pay for college expenses are federally tax-free. The 529 plan also allows you to deduct up to $3,000 a year per tax payer on your Montana State Income taxes. This means that if two parents each contribute $3,000 to their child’s plan they are able to take a total deduction of $6,000 for their household.

On the other hand, if a single parent contributes $6,000 to their child’s fund they are only able to take a $3,000 deduction. A 529 College Savings Plan can be a tax efficient way to prepare for college.

high school graduates Coverdell Education Savings Account

Coverdell Education Savings accounts are also an option for saving for a child’s educational future. This plan limits the total contribution per year to $2,000. Similar to the 529 plan, Coverdell contributions are not federally tax deductible.

The contributions do, however, continue to grow tax free until distribution. The Coverdell account proceeds must be used for the beneficiary’s education. Expenses can include tuition and necessary supplies.

A Coverdell account is the only option that can be used for private school tuition prior to college. One major stipulation for a Coverdell plan is annual household income.

If the parents of the beneficiary have an annual income above the designated threshold, they will not be eligible for this program.

Due to contribution limits, this is a longer-term option for college savings and is less frequently used than the UTMA or 529 options.

How to Choose?

College savings plans that fit properly into a financial plan are available in several forms as described in this article. The difficult part is determining which plan is right for your circumstances and gives your child the greatest level of support.

This is why the comprehensive financial planning services provided by Stockman Wealth Management create a complete view of your current financial situation as well as a roadmap to reach all future financial goals in a coordinated fashion.

One commonality exists among all the college savings plans, the sooner a plan is in place, the quicker money can begin to grow into a financial safety net for your child’s education.

Contact Stockman Wealth Management today to determine if a comprehensive financial plan to coordinate solutions to the many challenges of planning for education, retirement, taxable investments, taxes, estate issues, and even insurance will help you stay on the road to your brightest financial future.

Consumer Confidence Chart 600 x 450

Consumer Confidence…Not Quite So Confident

Eric VermulmPost written by Eric Vermulm, CFA | Chief Investment Officer | Stockman Wealth Management

Consumer Confidence is one of the best leading indicators. Before every recession of the last 50 years, confidence has dropped. In December, it was weaker than expected.

Is this reversal a warning flag, or just a temporary bump in the road?

Through last fall, Consumer Confidence was hitting new highs for this economic cycle.

We were seeing some of the strongest readings since the late 1960s and late 1990s, both themselves at the end of long economic expansions.

Consumer Confidence Chart

This has us on alert – from these heightened levels, any sustained reversal will be a significant warning flag that the average consumer is becoming more cautious. The good news is that this was just a one-month downturn, hardly a negative trend.

Also, in past cycles, the peak in Consumer Confidence has come (on average) 12 months before the next recession and about 8 months before the peak in the stock market, so there should be some lead time.

While this recent downturn is not an outright warning flag yet, we will be closely watching Consumer Confidence in the coming months.

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