Our client came to us in her late twenties as a newly engaged young woman. She had a built a comfortable investment base for her age, was enjoying success in her career, and had managed her finances to date with the help of a robo-advisor. She correctly assessed that her financial planning opportunities were about to get more complex as she looked ahead to marriage and children. She also recognized that her time would become more constrained as well if she and her fiancée decided to pull the trigger on a new home they were considering (they both had been previously renting). And wisely, coming from a blended family herself, she had an appreciation for how money can become a source of tension between all family members. She knew she needed a plan, as well as a second opinion on her current investments.
How Did We Help?
We had several areas we could provide assistance to our client, but we recognized the new home decision was pressing. Not yet having had the opportunity to build a baseline plan, understand her and their goals, his and her risk assessment, or even begun to address her and their cash-flow, we were not in a position to responsibly comment on this purchase. We could and did, however, walk through the basic numbers of the home and mortgage itself, as well as discuss the emotions surrounding her perceived urgency of their decision. (Would this really be the only “perfect” house? Would a minor movement in lending rates really sway their decision)? By quickly looking at some common debt to equity ratios and pausing to look at the large number of decisions that she had ahead of her, our client agreed they could hold off on the immediate home purchase. She was, in fact, even visibly relieved.
We continued then with our normal on-boarding process. Before we looked at any combined planning, we looked at her situation independently. We suggested her fiancée do the same so that each of them could come to the marriage with their own financial houses in good-order. During the process, we were able to:
- Consolidate, simplify and summarize her financial position (including, after careful analysis, to roll two old 401(k)s she had all but lost track of).
- Identified immediate planning opportunities to help her tax responsibility and investment concentration risk. She had accumulated large capital gains from her company stock positions; we were able to offset those gains with losses from her other investments. This resulted in a lower tax bill and a more diversified portfolio.
- She did not have a strong investment knowledge base, but had always been a good saver. Her job and lifestyle keep her busy, but she was truly appreciative of the time we took to educate her throughout the whole process. She also welcomed the opportunity to delegate some of the investment management tasks (always first with her approval).
- We met with her CPA to plan and execute the most tax-efficient strategies as her income and bonus structure continued to increase.
- Identified any financial goals or assets that she wanted to maintain as independent property (a possible inheritance, retirement accounts accumulated to date, and her own philanthropic goals).
- We confirmed that she had adequate and affordable life, disability and health insurances in place. We did, however, suggest an umbrella policy to cover any unforeseen litigation.
- Initially she felt her estate plan was in order. She had listed her parents as beneficiaries on her accounts. Through our education process and review of her estate plan, she learned of many opportunities to add contingent beneficiaries and include other family members and charities of her choice. In addition, she updated her will, Power of Attorney and Medical Directives.
Once our client’s plan and investments were in good-order, (and her fiancée had done the same), we met with them together to look at scenarios for creating a blended plan, shared goals, resources, and strategies for having money not become an issue in their marriage. They were a well-matched pair – their core value systems were the same, and although they had some differences about money, we offered suggestions and synergistic strategies that allowed them to create a plan they both fully supported.
Our single client became our married client. The worked diligently to update their estate plan in accordance with the financial plan we created with them. They ended up buying a home that turned out to be perfect still. They continue to work, save and spend with a balance that is just right for them. She has maintained separate assets that she had accumulated prior to their marriage. As she is now expecting, we have adjusted their plan to accommodate for their child’s education and recommended updates to their estate plan. Best of all, they are reaping the benefits of haven take the time to plan. To date, have avoided any big mistakes or emotional struggles over money that can drive a wedge even into the best of marriages.
Posted on Mon, May 9, 2016
by Kimberly Pauley filed under