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Do You Know Which Financial Road to Take?

If you set out to go to a friend’s house for dinner and you had never been there before and you never got the address or location, would you just drive around aimlessly until you happened (hopefully) upon their neighborhood, then maybe located their street, and then walked up to each door to knock and ask if they lived there? It sounds crazy, doesn’t it? If someone asked you to come over, but they refused to tell you where they lived or how to get there, you would probably never agree to leave your house. You would want to know where you were going before you started out to get there.

It sounds so obvious – and yet, too many investors make investment decisions with no idea about where they are trying to go and what they want to find once they get there. At United Capital we talk about the “two eternal truths about decision making,” and the first one is that lack of clarity and understanding of yourself and the situation at hand will lead to poor decisions.

Without taking the time to be clear and specific about what you want, and to understand your biases toward money, your experience is most likely one of aimless wandering in the hope that you will get close to the financial end you seek.

While some investors might know they want to save for college, retire comfortably, support a loved one or pursue philanthropic interests, few think about the journey required to get to these end goals. You will need to make a lot of big decisions and trade-offs along the way.

We all have a viewpoint of money that is an accumulation of what we’ve learned and experienced over time. A bias could be that “You can never have enough money saved” or “If I die tomorrow, at least I have lived life to the fullest” and hundreds more like this.

When we combine our biases with our lack of specific direction, we have a potential for making bad decisions that don’t lead us anywhere, much less where we want to go.

Before you make another financial decision, be sure you are clear about what you want to accomplish and why it’s meaningful to you. Have a process and a checklist each time you make a financial decision.

To learn more about your biases and how they affect your financial decisions, visit www.honestconversations.com to discover your Money Mind®.

And don’t ever accept an invitation to go to dinner somewhere without getting an address beforehand!

United Capital

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A Matter of Trust

Do you avoid looking into trusts because you think they are only for large families or the wealthy? Many people don’t give trusts due consideration because they think they are for certain groups of people. To dismiss them, however, could be a mistake.  You may miss an opportunity to accumulate and protect assets for your own financial wellbeing and for the benefit of your loved ones. We hope this brief article sheds light on whether further inquiry into trusts might be beneficial for you.  

Without planning ahead, especially by utilizing the benefits that come exclusively from creating a trust, your family could face some harsh financial realities after you are gone. They will have to pay federal and state taxes on your assets.  This could dilute your legacy more than you realize or intend. Your assets will also become open to public scrutiny through the probate process. 
Trusts can alleviate both these concerns. 

The Basics

A trust is a legal entity that holds assets to benefit a third party.  The assets held in a trust pass to your beneficiaries free of estate taxes.  A trust could also help you shelter assets from creditors and allows you to continue to maintain influence over the distribution of your assets after death. 

Unlike Wills, trusts do not go through probate, a public legal process that typically takes time and costs money (e.g., legal fees).  With a trust, your private financial matters stay private, and your assets go directly where you provided.

A trust involves a grantor (you), a trustee and beneficiaries.  As grantor, you determine the provisions of the trust.  You also provide the assets and name your beneficiaries.  Beneficiaries don’t have to be family members.  You can name individuals or groups, such as church, charities or colleges, as beneficiaries.

A critical step in the process is determining who will carry out your wishes.  This person serves as trustee and manages the assets in the interests of your beneficiaries.   It can be a relative or friend, but many people have a professional trustee act as either sole or co-Trustee with a family member.

After death, the trust distributes your assets according to your wishes.  For example, the trust could distribute your assets immediately at your death to your beneficiaries.  Alternatively, the trust could continue to invest and monitor your assets until your spouse dies or until your children reach a certain age, or they could remain in the trust for future generations.  Another option involves distribution of just the income generated by trust investments.  

The Specifics

Trusts are intentionally flexible to meet individual objectives.  They typically serve as a key element in a comprehensive estate and wealth transfer plan or otherwise to direct the management and distribution of your legacy.  They can also be created to accomplish specific goals and can be combined to address the needs of multiple families and generations.  For example, if you have a loved one with special needs a Special Needs Trust can ensure they receive proper care after you die.  Likewise, a Charitable Remainder Trust could transfer some or part of assets to the charity of your choice.  

A Trust can also provide asset management, estate planning consultation and tax services, like investment oversight, financial reporting, asset disbursements and bill payment.  If you are your family’s CFO, these services may be of great value to your family when you die. 

Is a Trust Right for You? 

If you want the lion’s share of your legacy to pass to your loved ones and not the government, then you may want to consider establishing a trust.  You should also consider a trust if you know how you want your legacy managed, preserved, and distributed.

United Capital

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Do Women Invest Differently Than Men?

It’s a popular pastime to identify the differences between men and women. There are many generalities – some could even be accurate, and some just misconceptions. So, when it comes to money and investing, are women really that different from men?  Actually, the research shows that women and men do differ in a variety of ways when it comes to financial decision-making and investing.

For example, bankrate.com reports that “Men are more self-directed learners, using the Internet more than women. Women rely more on personal networks with friends, family (and) financial planners, and (they) take a networking approach to gathering information.” And dailyfinance.com reports, “Multiple studies have shown that female investors tend to be more risk-averse than their male counterparts. Because of this, women consistently do more research than men before making an initial buy, trade less frequently, and hold longer.”

We have seen through the years that women may benefit greatly from having a safe place to talk about their Money Mind® and their financial concerns. Many times a woman cares about family or giving back, and an adviser who wants to talk only about “a retirement number” isn’t really listening to her needs.

In other cases, a woman may be asked to set her goals and objectives for the long term, but without a guide to talk about what matters – really matters – this can be hard to do. Many women have not been taught that there are many different emotions and responses around money, and that all of them are legitimate and need to be considered when making financial decisions.

This isn’t because women need to be coddled and made to feel good. It’s because no one can make a solid financial decision for the short-term, or for their future, without knowing how they feel and what matters to them about their money. Money is a means to an end. Defining the “end”– and the beginning, and the middle –is so important.

Because the financial industry can be complex and unpredictable, we believe that helping individuals feel good about taking action is key. Women often want to connect – with others and with information. Understanding the connections, and the implications, of the decisions you make can offer better overall results toward life goals – and the confidence to go with it.

Here’s an interesting twist on the differences between men and women –The Wall Street Journal reported, in 2009, “Finance professors Brad Barber and Terrance Odean have found that women’s risk-adjusted returns beat those of men by an average of about one percentage point annually. In short, women trade less frequently, hold less volatile portfolios and expect lower returns than men do.”

Women might inherently be better investors, even though the perception is that they don’t understand financial complexities as well as men. We like to think that we can put this natural proclivity to making good decisions together with insight and awareness that many investors never have.

Information, insight and awareness – we believe those combine to give women investors the power to own their financial decisions.

United Capital

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