A grand slam in legacy planning

Frederik B. Wilcox left a multi-layered legacy when he died in 1965. A champion of both risk and prudence, he famously wrote, “Progress always involves risk. You can’t steal second base and keep your foot on first.” Thanks to those oft-quoted words, Wilcox will be remembered for his wit, and, based on his financial wisdom, he’ll also be remembered for his will. Two years ago, a bequest by Wilcox granted the largest unrestricted gift to the Rhode Island Foundation in its 100-year-history. An investment banker who forged his way from humble beginnings, Wilcox left a trust of about $1 million, to be overseen by his daughter, Nancy W. Mattis. He specified that 60 percent of whatever it had grown to at the time of her own passing would be given to the Rhode Island Foundation. Due to her careful stewardship, the trust grew to $48 million by the time she died in 2016 at age 95. Based on his foresight and her care, the foundation received $28 million in unrestricted funds, a grand slam for the smallest state in the union and a testament to the lasting power of estate planning. The Wilcox plan worked beautifully for several reasons. First, he set up his legacy plan carefully and designated beneficiaries based on his own passions and beliefs. Then, he chose a capable (turns out gifted) trustee to manage the account. Lastly, he vetted his beneficiary carefully and understood that the Rhode Island Foundation would be solvent and prepared to handle his generous bequest a half century after he made it. Mr. Wilcox began his life impoverished, but he’ll be remembered for generations thanks to astute estate planning. At Winch Financial, we don’t just recognize exceptional legacies, we help build them.  If you or anyone you know has any questions regarding estate planning, please contact us. We’re always glad to help.

The Da Vinci code for crafting a legacy

According to the Snapple Fact I found under the cap of my peach iced tea yesterday, it took Leonardo da Vinci 12 years to paint the lips of Mona Lisa. Of course, Snapple Facts occasionally require further research. For instance, if, as many historians believe, da Vinci painted the Mona Lisa between 1503 and 1506, how could he have taken 12 years to paint the lips? I dug a little deeper and concluded that, while it didn’t take him 12 years to paint her lips, it did take him at least that long to finish tweaking them until he handed the painting over to his patron, Francois I, sometime after 1514. It’s an admirable approach to crafting a legacy and one we can all apply to our own efforts. The Da Vinci Code for legacy planning – build, study,  tweak —  works. The first step is to build your masterpiece and, for this, like Da Vinci, you’ll need to work with a mentor. Choose your estate planner carefully. He or she needs to be both well-versed in tax laws and effective planning techniques, and well-connected to equally skilled attorneys. This phase requires the most effort. You have to analyze your assets and the manner in which you’d like to pass them on. You should communicate your goals to both your advisor and your family. Think hard about the legacy you’d like to leave, and then work to achieve it. Once you’ve built your legacy plan, you should take a step back and study it. Does it address the opportunities and obstacles you foresee? Will it withstand economic and familial pressure? Most importantly, does it accurately reflect you? Properly constructed, a legacy plan lasts forever. However, it may still be important to tweak it every now and then. Tax laws and family situations change. Charitable goals can shift as well. Check in with your advisor for periodic reviews. Remember, a will… | Read More »

In the clients’ best interest

We applaud the Department of Labor’s fiduciary rule, which demands all advisers act in their clients’ best interest. That this ruling, which takes effect today, has been so hotly debated speaks volumes about how far the industry still has to go to achieve real transparency. The ruling charges advisors with the task of giving advice in their clients’ best interest. Previous, advisors who did not fall under the fiduciary standard, those selling commissionable products under a broker/dealer, only had to adhere to a suitability standard.  They had to offer advice that was suitable for their clients, but could be in the advisor’s best interest. Specifically, if two suitable products were suitable for a client, but one resulted in a higher commission for the advisor, the advisor was under no legal obligation to offer the lower commissioned product. Today, according to the DOL ruling, all advisors must act with prudence and loyalty.  “Prudence” means the advice must meet the professional standard of care as defined by the Employee Retirement Income Security Act (ERISA).  “Loyalty” means advice must be “based on the interests of the customer, rather than the competing financial interest of the adviser or firm.” Additionally, advisors must charge no more than reasonable compensation. They are also prohibited from making misleading statements about investment transactions, compensation, and conflicts of interest. This includes material omissions as well as material misstatements. We spell these terms out because we believe in them. We value our fiduciary relationship with our clients. We enjoy sitting on the same side of the table with them, and we look forward to doing so for many years to come. If you have any questions regarding the DOL ruling, which will require a little more paperwork for us and our clients but no change in our valued relationship with them, please don’t hesitate to ask.

When your fiduciary is your friend

As I have mentioned before, one of the greatest blessings of a long career in this field is that my clients become my friends. With this and all great blessings comes a deeper responsibility: I want to do right by my friends. Last week I had a meeting with a friend who has been a client for nearly 40 years. We have seen each other through many of life’s sweetest and most challenging moments – the college graduations and marriages of our children, the deaths of our spouses. Through those times I supported my friend the same way you support your friends – I sent and received cards of congratulations and condolence, I attended and hosted both heart lifting parties and heart breaking funerals. But, as her financial advisor, I also remained keenly aware of our fiduciary relationship. Together, we set goals and designed a plan to achieve them. We allocated her resources in a way that we hoped would both protect her and allow her to achieve her investment and legacy planning goals. When her husband unexpectedly lost his job at a paper mill, we met immediately and they left my office assured that they would be okay financially. Given their age and risk tolerance, we positioned their retirement account with an eye towards growth and a baseline of protection in an annuity. We tweaked that allocation through the years as their risk tolerance changed, and took a close look at it years later when her husband died unexpectedly. So last week, we reminisced about all we had been through and how well we had worked together. That small annuity we purchased in 1990 will provide her with an income stream through 2020. Because of the tweaks we made when her husband passed away, she has other sources of protected income that she can turn on in 2020. Meanwhile, her investment portfolios continue to grow. It’s especially sweet when… | Read More »

Roth may not be perfect for everyone

Like many, I have certain expectations of camping.  Hard ground.  Hot food.  Cold drinks.  The simple things in life.  I certainly do not expect an eye-opening conversation about tax codes and retirement policies.  So, when the topic came up this last weekend around a campfire, I was quite surprised. One of my friends, generally very astute, was convinced that there was no reason to invest in a traditional IRA.  A Roth, she told us, was just plain better.  Why pay taxes when you don’t have to? I tried to interject to give an even-handed comparison.  “They are different plans,” I protested, “for different circumstances.  Neither one is always better.” My friend ignored me.  She continued.  And I was amazed. A Roth, it turns out, is no mere retirement account.  It can hold stock in Apple and Microsoft.  It compounds in value every nanosecond.  It’s gluten free.  Bluetooth compatible.  Standard and metric.  Faster than a speeding bullet. My account is slightly exaggerated.  Well, borderline untrue.  Fine – a complete and utter fabrication.    But hearing the way many people, my friend included, talk about Roths, it doesn’t seem all that far-fetched Let’s be clear: there are many advantages to a Roth.  The funds can be withdrawn or transferred with relative ease.  It is more flexible in estate planning.  It is not subject to a required minimum distribution at age 70.  And it can save money in the long run, depending on your tax situation. But that is the key: depending on your tax situation.  Roth IRA contributions are included in your taxable income, while traditional IRA contributions reduce it.  All else being equal, the person who uses a traditional IRA will be able to invest more in their plan than the person who uses a Roth IRA, because their tax load is lower.  Assuming both plans are invested identically, with similar tax brackets in retirement, the traditional IRA will have exactly as… | Read More »