Wednesday, 16 July 2014 08:32
Here's the scenario: Homeowner reads an article in the newspaper and decides to create a revocable living trust ("trust"). In the article he learned that a trust can transfer all of his assets to his heirs upon his death without requiring his heirs to pay expensive fees in a court probate proceeding. He contacts a reputable attorney, creates a trust and transfers his assets, including his home, to himself as trustee (manager) of the trust. He then has the assurance that if something happens to him, the person he has designated as his successor trustee will in effect "step into his shoes" to continue to manage his assets through the trust. Since the trust never dies, no probate would be required if he passes away.
Fast forward a couple of years. Homeowner reads an ad in the newspaper which claims that he can reduce his house payment substantially if he refinances his mortgage. He looks into it and, lo and behold, it is true! He refinances his mortgage. Unfortunately, unbeknownst to him, in the huge stack of papers he was given, he signed a deed transferring his home from himself as trustee of his trust back to himself in his individual capacity. As it turned out, the mortgage company he used was unfamiliar with California law relating to trusts and therefore required him to remove his property from the trust so that the loan could be made to him in his individual capacity. If the Homeowner had known that his property had been taken out of his trust, he could have put it back in the trust once the loan was complete; however, he didn't know.
Wednesday, 16 July 2014 08:27
Financial Experts Explain When It's OK to Play It Safe –and When It's Not
As people get closer to the age when they hope to retire, traditional wisdom calls for moving into more conservative – safer – investments, such as Treasury bonds and many fixed-income mutual funds.
"The problem is, what is 'safe' for one person may not be 'safe' for another, given the amount of money in their portfolios, how their investments are allocated, and what their retirement lifestyle goals are," says financial advisor Haitham "Hutch" Ashoo, co-founder with advisor Chris Snyder of Pillar Wealth Management, LLC, (www.pillarwm.com).
"Some investors believe Certificates of Deposit and U.S. Treasury bonds are safe investments because of their backing, but the income they generate is so low, they may not be safe in terms of producing the income you need for 30 years of retirement."
A better approach is to analyze how much investment risk you must assume to achieve what's important to you, says Snyder.
"Your lifestyle goals determine your risk level, and your portfolio should be an allocation of stocks, bonds and cash that correlates directly with the risk level you need to assume."
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