
Insights
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Why Every Financial Plan Should Include a Power of Attorney
When we think about financial planning, most people focus on the fun parts — investing, retirement, buying a home, or leaving a legacy. But one of the most critical pieces of a sound plan is often overlooked: having a Power of Attorney (POA) in place.
A POA gives someone you trust the legal authority to act on your behalf for financial matters if you become incapacitated — even temporarily. It’s not just for older adults or those with serious health issues. In our experience, it’s a core tool for anyone who wants to ensure their finances are protected in an emergency.
Here’s why it matters:
1. Emergencies are unpredictable
Whether it’s a car accident, medical event, or overseas travel delay, a POA ensures that someone can step in and manage your financial obligations — from paying bills to handling investment decisions — without legal red tape.
2. Financial institutions are getting stricter
Most custodians now require a valid POA on file before they’ll allow even a spouse or adult child to act on your behalf. Without it, accounts may be frozen, creating unnecessary stress and complications.
3. It protects your wishes — and your loved ones
If something happens and there’s no POA, your family may be forced to go to court to establish guardianship or conservatorship. This process is expensive, slow, and emotionally draining. A POA helps avoid all that.
4. It’s not permanent
A POA only becomes active when and how you choose — and you can revoke or revise it at any time. It simply gives you peace of mind and your family a clear legal framework if they need to step in.
At Berkshire Wealth Group, we now encourage all clients to have a POA on file. It’s a simple step that can prevent complex problems. If you already have one, let us know so we can ensure it’s up to date and stored with our custodian. If you don’t, we’re happy to help guide you through the process or connect you with a trusted estate planning attorney.
As always, our goal is to make sure your plan is comprehensive and ready for whatever life brings.
Have questions? Reach out — we’re here to help.
Navigating Tax Benefits: Life Insurance Loans vs. Surrendering Policies
Understanding the Nuances of Life Insurance Decisions
For high-net-worth individuals, making informed financial decisions is essential. Today, we'll explore a topic particularly relevant to those with permanent life insurance policies. These policies, often held for years, may no longer serve their original purpose as a death benefit but could offer significant living benefits through their accumulated cash value. It's crucial to understand that only permanent life insurance policies—such as whole and universal life—provide the financial flexibility we'll discuss. Term life insurance policies do not offer these strategic options.
Benefits of Policy Loans vs. Surrendering Policies
Tax-Free Loan Benefits
Policy loans present a unique opportunity for financial management. No Immediate Tax Consequences means you can access your policy's cash value without triggering taxable income. This approach helps you avoid potentially substantial upfront tax bills. The flexibility of these loans is particularly attractive. Unlike traditional loans, policy loans offer:
Flexible repayment terms
No impact on the policy's cost basis
Lower interest rates (typically 5-8%)
No effect on personal credit reports
Perhaps most importantly, continued policy growth ensures that even with an outstanding loan, your policy's cash value continues growing tax-deferred, enhancing its long-term value.
Considerations When Surrendering Policies
Surrendering a policy is not a decision to be made lightly. Taxable Gains can create unexpected financial complications. If the policy payout exceeds its cost basis, you could be pushed into a higher tax bracket, increasing your overall tax liability. Moreover, by surrendering your policy, you forfeit the potential for future tax-deferred growth. This lost opportunity can significantly impact your long-term financial returns, especially for high-net-worth individuals who benefit most from strategic tax management.
Additional Critical Considerations
Outstanding Loans and Policy Management
Policy loans require ongoing attention. You may need to:
Continue premium payments to keep the policy active
Pay interest on outstanding loans
Monitor the potential risk of policy lapse
Policy Lapse Risk is a critical concern. If the cash value growth doesn't keep pace with loan interest, your policy could be at risk. A loan balance exceeding the cash value can lead to unexpected tax consequences, underscoring the need for proactive management.
Death Benefit Implications
It's important to recognize that outstanding loans will reduce your policy's death benefit. This reduction can have significant implications for estate planning and intended beneficiary protection.
Moving Forward: Strategic Decision-Making
Navigating life insurance policy decisions requires careful planning and professional guidance. Whether you're considering leveraging your policy's cash value through a loan or evaluating the tax implications of surrendering it, informed decision-making is crucial.
Alternative Strategies to consider include:
Partial policy surrenders
Targeted cash value withdrawals
Comprehensive estate planning integration
Conclusion
The complexity of life insurance policy management demands a nuanced approach. Each decision carries potential financial implications that can significantly impact your long-term wealth strategy. Recommendation: Consult with a qualified financial advisor who can provide personalized advice tailored to your specific financial landscape.
Disclaimer: This guidance is informational. Individual financial situations vary, and professional consultation is always recommended.
Any opinions are those of Katherine Reisfeld or Berkshire Wealth Group and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of RJFS, we are not qualified to render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation.
The Psychology of Investing: How Behavioral Finance Shapes Financial Success
Behavioral finance is a fascinating field that delves into how psychological factors influence the financial decisions of individuals and investors. At Berkshire Wealth Group, we understand that emotions and mental biases can significantly impact how our clients approach their investments.
From fear during market downturns to overconfidence in bull markets, and even the influence of herd mentality, these psychological tendencies can often lead to irrational decision-making. Recognizing and addressing these challenges is key to achieving long-term financial success. At Berkshire Wealth Group, we recognize that understanding these tendencies—and having a well-structured financial plan—can help clients make sound decisions and achieve long-term success.
8 Common Behavioral Finance Biases
Overconfidence
Many investors overestimate their knowledge or ability to predict market movements, leading to excessive trading or risky decisions.Loss Aversion
The pain of losing money often outweighs the joy of gaining it, causing investors to hold onto losing investments too long or avoid necessary risks.Herd Mentality
Following the crowd can lead to buying at market highs or selling during panics, undermining long-term strategies.Confirmation Bias
Seeking information that supports pre-existing beliefs can blind investors to risks or alternative perspectives.Anchoring
Fixating on a specific reference point, such as a stock's purchase price, can distort decision-making and prevent objective evaluation.Recency Bias
Overemphasizing recent events, like a market rally or downturn, can skew investment decisions and lead to short-term thinking.Mental Accounting
Treating money differently based on its source or intended use can lead to inefficient allocation of resources.Status Quo Bias
A preference for maintaining the current situation can prevent investors from making necessary adjustments to their portfolios.
The Role of a Financial Plan
A comprehensive financial plan is the foundation of any sound investment strategy. It provides:
Clarity: Defining goals and outlining the steps needed to achieve them.
Discipline: Establishing a roadmap that helps avoid impulsive decisions driven by emotions or biases.
Flexibility: Allowing for adjustments while staying focused on long-term objectives.
By adhering to a well-crafted financial plan, you can mitigate the effects of behavioral biases and remain focused on your goals, even during market volatility.
How We Help You Stay on Course
At Berkshire Wealth Group, we integrate behavioral finance principles into our approach to help clients:
Identify Biases: We work with you to recognize and understand the psychological tendencies that may influence your decisions.
Promote Rational Thinking: Through education and open dialogue, we guide you in making informed, objective choices.
Stick to the Plan: We ensure your financial plan aligns with your goals and encourage disciplined adherence, keeping you on track despite external noise.
Achieving Long-Term Success
Investing isn’t just about numbers—it’s about managing emotions and staying committed to a strategy. With a solid financial plan and a clear understanding of behavioral finance, you can navigate challenges, avoid common pitfalls, and achieve lasting success.
The 2024 Periodic Table of Investment Returns
One of my favorite charts has always been the Callan Periodic Table of Investment Returns. This visual masterpiece is a powerful reminder of the unpredictability of financial markets and the critical importance of diversification.
The chart beautifully illustrates the annual performance of key asset classes from 2005 to 2024, showcasing how dramatically returns can shift from year to year. Just look at the wild swings - one year an asset class might be at the top of the chart, and the next, it could be languishing at the bottom.
What makes this chart truly special is how it demolishes the myth of consistently picking market winners. Emerging Market Equity, for instance, has seen returns ranging from a staggering 78.51% to a devastating -53.33%. It's a humbling visualization that underscores why a well-diversified portfolio is crucial for long-term investment success.
“It’s very difficult for any particular segment of the stock market to sustain superior performance. The watch word for our financial markets is, “reversion to the mean” i.e. what goes up must come down, and it’s true more often than you can imagine.”
The Callan Periodic Table isn't just a chart - it's a financial storyteller that reveals the inherent uncertainty in capital markets. It shows that no single asset class consistently dominates, which is why spreading your investments across different sectors and regions is so critical.
This chart is more than just numbers - it's a powerful tool for understanding market dynamics and making informed investment decisions. It's a reminder that successful investing is about patience, diversification, and avoiding the temptation to chase last year's top performers.
*Investing involves risk and you may incur a profit or loss regardless of strategy selected, including a long term holding period, diversification, and asset allocation. Raymond James is not affiliated with The Callan Institute.
When Setting Goals, Use The Time To Reflect On What Is Most Important To You
One of my favorite things about starting a new year is the feeling of a clean slate. It's a time to re-evaluate how things are going and what you might like to shift or reprioritize. And it’s a great time to revisit your financial plan or create one.
Goal setting is the first step in any financial plan. When setting goals, use the time to reflect on what is most important to you.
The Wheel of Life is a powerful tool to help you take a holistic approach to financial planning by aligning your goals with all areas of your life. It encourages you to look beyond numbers and balances and assess how money impacts your relationships, career, health, personal growth, and more.
As we step into a fresh year, it's the perfect time to revisit your financial goals. Use the Wheel to evaluate where you're thriving and where you need balance. By considering all aspects of your life, you'll be better equipped to make financial decisions that serve your long-term happiness and well-being.
2025 is your year to create balance in your financial life — let the Wheel be your guide in your goal setting. Here is how to use it:
1: Choose 8- 10 life areas, such as career, health, relationships, finances, and personal growth.
2. Rate Satisfaction: Score each category from 0 (center) to 10 (outer edge) based on your current satisfaction.
3. Visualize Balance: connect the scores to form a shape. A balanced wheel is circular; imbalances appear uneven.
4. Set Goals: Identify gaps and create actionable goals to improve low-scoring areas. Re-assess periodically to track progress.
Black Swans
I've had a number of clients who've expressed concerns about the markets and total economic calamity lately. I don't share these concerns but this post from the folks at Dimensional about how to avoid black swans says it better than I've been able to... https://www.dimensional.com/us-en/insights/how-to-avoid-black-swans
Embracing Longevity: Planning for a Fulfilling Future
As life expectancies continue to increase, the concept of retirement is evolving. At Berkshire Wealth Group, we understand that longevity planning is not just about financial security—it's about creating a comprehensive strategy for a fulfilling and purposeful life that may span several decades beyond traditional retirement age.
Living Longer and Living Well
It is exciting to have more time to pursue passions and to spend with loved ones, and it also requires careful planning to ensure your resources last as long as you do. This is where longevity planning comes into play.
Comprehensive Longevity Planning
We are committed to helping our clients navigate the complexities of longevity planning. Our approach goes beyond mere financial calculations, encompassing various aspects of life to ensure a holistic strategy for your extended future. Through our affiliation with Raymond James we have a wealth of resources available to our clients[1]:
Financial Resources
Our robust platform of financial tools and services is designed to support your long-term goals:
- Advanced portfolio management strategies
- Tax-efficient investment options
- Retirement income planning tools
- Social Security optimization analysis
Health and Wellness Support
We recognize that health is wealth, especially in later years. Our resources include:
- Long-term care insurance options
- Healthcare cost projections
- Wellness program partnerships
- Lifestyle and Purpose Planning partnerships
Retirement is no longer about slowing down—it's about redirecting your energy. We offer:
- Career transition planning
- Volunteer and philanthropy planning
- Travel and leisure budgeting tools
Technology at Your Fingertips
To keep you connected and in control of your financial life, Raymond James provides cutting-edge technology solutions:
Client Access: Our secure online portal allows you to view your accounts, track your investments, and access important documents anytime, anywhere[2].
Mobile App: Stay connected on-the-go with our user-friendly mobile application, offering a customizable dashboard and streamlined navigation[3].
Personalized Guidance
While we offer a wealth of resources, we believe that personalized guidance is irreplaceable. Our team is dedicated to understanding your unique situation and aspirations. We're here to help you:
- Develop a tailored longevity plan
- Adjust strategies as your life evolves
- Navigate complex financial decisions
- Coordinate with other professionals (e.g., attorneys, CPAs) for comprehensive planning
Empowering Your Future
We are committed to empowering you to live your best life, no matter how long that life may be. Our longevity planning resources are designed to give you the confidence and flexibility to embrace the future on your terms.
Remember, it's never too early—or too late—to start planning for a longer, more fulfilling life.
To explore how we can help you create a personalized longevity plan that aligns with your unique vision for the future.
Citations:
[2] https://www.raymondjames.com/client-resources
[3] https://www.raymondjames.com/client-resources/client-access-tour/client-access-mobile
What Stock Investors and Roger Federer Have In Common
Stocks are like tennis: Even having just a marginal winning percentage can lead to long-term success. You don't have to win every point to win a match. And you don't have to be up every day, month, or year (and you won’t be) to be a successful investor.
Strategic Charitable Giving: Leveraging the Power of Donor Advised Funds
With over 25 years in wealth management, I’ve observed various approaches to charitable giving. Donor Advised Funds (DAFs) consistently prove to be one of the most effective tools, especially for those seeking the benefits of a private foundation without the associated complexities and costs.
With over 25 years in wealth management, I’ve observed various approaches to charitable giving. Donor Advised Funds (DAFs) consistently prove to be one of the most effective tools, especially for those seeking the benefits of a private foundation without the associated complexities and costs.
Understanding Donor Advised Funds
A DAF is a charitable investment account that lets you make tax-deductible contributions, grow the funds tax-free, and recommend grants to charities over time. It offers many advantages of a private foundation with significantly less administrative burden.
Key Advantages of DAFs
1. Tax Efficiency
DAFs provide immediate tax deductions for contributions, even before you decide which charities to support. This feature is particularly valuable in high-income years.
2. Simplicity
Unlike private foundations, DAFs require no setup fees, board meetings, or separate tax filings. The sponsoring organization handles administrative tasks.
3. Privacy
While private foundations must disclose detailed information about grants and investments, DAFs offer greater privacy.
4. Higher Deduction Limits
Contributions to DAFs have higher tax deduction limits compared to private foundations (60% of AGI for cash donations to DAFs vs. 30% for private foundations).
5. Flexibility
DAFs accept various assets, including cash, securities, and in some cases, real estate or other complex assets.
Stacking Charitable Gifts: A Strategic Approach
One of the most powerful features of DAFs is the ability to “stack” multiple years of charitable gifts into a single tax year. This strategy can be particularly beneficial in high-income years, such as when:
Selling a business
Disposing of appreciated real estate
Receiving a large bonus or windfall
Exercising stock options
How Stacking Works
Let’s say you typically donate $10,000 annually to charities. In a year where you’re selling a business and expect significantly higher income, you could contribute $50,000 (representing five years of giving) to a DAF. This allows you to:
Take a larger tax deduction in the high-income year when it’s most valuable
Continue supporting your favorite charities over the next five years using the DAF
Potentially reduce your tax burden in the year of the business sale
This approach maximizes the tax benefit of your charitable giving while providing a steady stream of support to your chosen causes.
Considerations for High-Income Years
When facing a high-income event, consider:
Projecting your income and tax liability
Estimating your charitable giving for the next several years
Evaluating appreciated assets that could be donated
Consulting with your tax advisor to determine the optimal contribution amount
Is a DAF Right for You?
If you’re charitably inclined, seek tax efficiency, and desire a streamlined approach to giving, a DAF could be an excellent option. It’s particularly valuable for those experiencing high-income years or looking to create a lasting philanthropic legacy without the complexities of a private foundation. Schedule a call to learn more. With proper planning, a Donor Advised Fund can be a powerful tool to maximize both your tax benefits and charitable impact.
Estate Planning: Trusts vs. TOD Designations – Benefits and Drawbacks
Setting up a trust can be a powerful estate planning tool, but it’s important to consider both its advantages and drawbacks. Additionally, Transfer on Death (TOD) designations offer an alternative method to achieve some similar goals.
Setting up a trust can be a powerful estate planning tool, but it’s important to consider both its advantages and drawbacks. Additionally, Transfer on Death (TOD) designations offer an alternative method to achieve some similar goals.
Benefits of Trusts:
Probate Avoidance
One of the primary advantages of establishing a trust is bypassing the probate process. Assets held in a trust can be transferred directly to beneficiaries without going through court proceedings, saving time and money.
Privacy Protection
Unlike wills, which become public record during probate, trusts offer greater privacy. The terms and distribution of assets remain confidential, shielding your family’s financial matters from public scrutiny.
Control and Flexibility
Trusts provide significant control over how and when assets are distributed. You can specify conditions for asset distribution, ensuring your wishes are carried out precisely. Revocable trusts offer additional flexibility, allowing you to make changes during your lifetime.
Asset Protection
Certain types of trusts can protect assets from creditors, lawsuits, or divorce proceedings, safeguarding your wealth for future generations.
Tax Benefits
Some trusts offer tax advantages, potentially reducing estate, gift, and income taxes. For example, irrevocable trusts can help minimize estate taxes for high-net-worth individuals.
Disadvantages of Trusts:
Complexity and Cost
Establishing and maintaining a trust can be complex and expensive. It requires legal expertise to draft, and ongoing management may involve administrative fees and regular tax filings.
Time and Effort
Setting up a trust requires significant time and effort. Assets must be retitled in the name of the trust, which can be a tedious process, especially for those with numerous assets.
Limited Asset Protection for Revocable Trusts
While some trusts offer asset protection, revocable living trusts provide minimal protection if you retain control as the trustee.
Potential for Family Conflicts
Trusts may lead to disagreements among beneficiaries, particularly if they perceive the distribution as unfair or if there are concerns about the trustee’s management.
Transfer on Death (TOD) Designations: An Alternative
TOD designations offer a simpler way to achieve some of the same goals as trusts, particularly probate avoidance:
Probate Avoidance
Like trusts, TOD designations allow assets to pass directly to named beneficiaries upon the owner’s death, bypassing probate.
Simplicity
Setting up TOD designations is typically straightforward, often requiring only a form from the financial institution or a properly executed TOD deed for real estate.
Flexibility
TOD designations can be changed or revoked at any time during the owner’s lifetime, providing flexibility as circumstances change.
Retention of Control
Unlike some trusts, TOD designations allow the owner to retain full control of the assets during their lifetime.
Cost-Effective
TOD designations are generally less expensive to set up and maintain compared to trusts. Transfer on Death (TOD) accounts can be used for minors, but there are important considerations and potential complications to be aware of:
TOD Accounts and Minors
TOD accounts allow assets to be transferred directly to named beneficiaries upon the account owner’s death, bypassing probate. However, when it comes to minors, special provisions are necessary.
Age Restrictions: A TOD beneficiary must typically be 18 years of age or older. This means that if you have minor children under 18, they cannot be directly named as recipients of a TOD account.
Options for Minors: If you want to use a TOD account for a minor beneficiary, there are a few approaches you can consider:
Custodian Designation: You can name an adult “as custodian for” the young beneficiary under the Uniform Transfers to Minors Act (UTMA). The custodian will manage the assets until the minor reaches the age specified by your state’s UTMA law, which ranges from 18 to 30 depending on the state.
Trust: Instead of a TOD account, you might consider creating a minor’s testamentary trust through your will to receive the funds. This can provide more control over when and how the minor receives the assets.
Guardian: If a minor is named as a TOD beneficiary, the assets would typically go to the guardian of the young child until they turn 18.
Considerations
State Laws: UTMA laws vary by state, so the age at which the minor gains control of the assets can differ. It’s important to check your state’s specific regulations.
Management of Assets: Consider whether the person who would manage the assets (custodian or guardian) is capable of handling potentially significant funds or property on behalf of the minor.
Flexibility: TOD accounts offer less flexibility than trusts in terms of controlling how and when the minor receives the assets.
Debt and Creditors: Be aware that TOD accounts may still be subject to the deceased’s debts and creditors’ claims.In conclusion, while it is possible to use TOD accounts for minors with proper planning, it’s crucial to carefully consider the implications and alternatives. Consulting with an estate planning attorney can help ensure you choose the best option for your specific situation and goals.
Considerations When Choosing Between Trusts and TOD Designations
Complexity of estate: For complex estates with numerous assets or specific distribution requirements, a trust may offer more comprehensive control.
Asset protection needs: If protecting assets from creditors is a priority, certain trusts may be more suitable than TOD designations.
Tax considerations: For those with significant estates, the tax benefits of certain trusts may outweigh the simplicity of TOD designations.
Privacy concerns: While both options offer more privacy than probate, trusts generally provide a higher level of confidentiality.
Long-term management: Trusts can provide ongoing management of assets, which may be beneficial for minor beneficiaries or those with special needs.
In conclusion, both trusts and TOD designations offer valuable tools for estate planning. The choice between them depends on your specific financial situation, estate planning goals, and family dynamics. Consulting with an experienced estate planning attorney can help you determine the best approach for your circumstances.