September 1, 2023
Equity markets pulled back in August, as the S&P 500 was down -1.59%, US small caps -4.14%, US mid-caps -2.89%, international developed -3.76%, and emerging markets -5.50%1. The US Aggregate Bond Index declined -0.64% in August1.
Ready to brush up on something new? We've got more to read right this way.
September 1, 2023
Equity markets pulled back in August, as the S&P 500 was down -1.59%, US small caps -4.14%, US mid-caps -2.89%, international developed -3.76%, and emerging markets -5.50%1. The US Aggregate Bond Index declined -0.64% in August1.
When you have an employer-sponsored retirement account, like a 401(k) or 403(b), it is important to know your options if you leave your job. After all, you want to keep and manage your investments without having to pay a penalty for making the wrong choice. Your options include:
Charitable Donation Accounts (CDAs) give credit unions the opportunity to give back to the very communities they serve. With the goal of better fulfilling its charitable mission nationwide, Firefighters First Credit Union (FFCU) established a charitable donation account with Members Trust Company in 2018. Since then, Firefighters First has been able to fund its foundation through investment returns, rather than operating income — by making more with their charitable donation account, they have been able to give back more to communities.
In 1935, a group of firefighters established Firefighters First Credit Union to serve firefighters and their families through quality service. Firefighters First has used its charitable donation account’s investment returns to fund the Fire Family Foundation, a nonprofit organization dedicated to providing support and financial assistance to firefighters, volunteer firefighters, and families in need.
Every year, the Fire Family Foundation provides grants, funds, and scholarships to individuals and fire charities across the country.
Through the Firefighter Relief Fund, the Foundation provides monthly grants for medical care, financial assistance, and other resources. In the summer of 2020, the Foundation partnered with the New Mexico Fire Protection Grant Council to donate 500 infrared thermometers. The donation allowed firefighters and paramedics to quickly assess their potential risk for COVID-19 exposure while responding to emergencies.
“Our firefighters were experiencing high call volumes that placed members at increased risk of exposure to the virus,” said Robert E. Larrañaga, Chairperson of the New Mexico Fire Protection Grant Council. “We express sincere gratitude to the Fire Family Foundation for their efforts in protecting our firefighters.”
One of the biggest programs of the Foundation, the Fire Family Scholarship Fund, awards $50,000 in scholarships to biological or adopted children of firefighters. The Foundation selects ten students annually based on merit, including GPA, past achievements, community involvement, and an application essay.
In 2019, the Fire Family Foundation launched its disaster relief program to provide immediate relief to the emergency needs of firefighters in federally declared disaster areas. Through this program, firefighters impacted by natural or man-made disasters, such as wildfires, earthquakes, hurricanes, or floods, are eligible to receive disaster relief kits. Each kit includes a $250 Visa gift card, a fleece blanket, hand sanitizer, notebook and pen set, and a reusable toiletry bag filled with essentials. The first kits were sent in 2020 to firefighters battling the record-setting wildfires in Northern California.
“Firefighters First established this CDA investment for the purpose of having it fund the Foundation, instead of a direct expense every year. This is the spirit of what a charitable donation account is permitted to do. Normally, credit unions can’t invest in certain securities, but through a CDA, we can get a higher return, and thereby help fund the foundation.” – Richard Dillion, Chief Financial Officer at Firefighters First Credit Union.
By making more through charitable donation accounts, credit unions give back more. For more information about Charitable Donation Accounts, please contact Jason Ritzenthaler at (813) 386-8705 or jason.ritzenthaler@memberstrust.com.
Trust and Investment products are not federally insured, are not obligations of or guaranteed by the credit union or any affiliated entity, involve investment risks, including the possible loss of principal. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
A trust is a legal document that allows a third party, or trustee, to handle your assets in the event of death or incapacity.
People set up trusts to help manage their assets during their lifetime and after death. In the event of death, trusts make sure that your beneficiaries receive your assets according to your wishes. They can assist you in caring for dependents that may struggle with financial inexperience, addiction, or illness. In the event of incapacity, they also ensure that you get the type of care you need.
A grantor is a person or institution that has assets and creates a trust.
A trustee is appointed by the grantor to manage the trust for a beneficiary or beneficiaries. The grantor can choose a corporate trustee, relative, or other person to manage the trust. (See How to Choose A Trustee). If the trustee is a financial institution, a trust officer will be assigned to administer the trust account. Trustees should have the expertise, time, and objectivity to properly manage your assets.
A beneficiary is a person or institution that receives distributions of trust assets. Beneficiaries can be children, spouses, other relatives, charities, or any other entity named by the grantor.
HEMS is a standard often used in trust documents to define when certain distributions are appropriate for the beneficiary. Some examples of HEMS include:
If your beneficiary needs help managing money, you can decide to limit how much money they receive each year. You can also customize distributions for charitable organizations, universities, or any other institution named as beneficiary.
A Charitable Lead Trust names one or more charities as the primary beneficiary to receive distributions. A Charitable Remainder Trust provides some distributions to other beneficiaries, like children or spouses, while preserving a balance for charity.
Assets can include more than your financial savings; they can include your home, business, or personal property.
After you decide which valuable assets to include, you can choose who will receive distributions and set parameters for management and administration.
In preparing for the future, trusts can be an essential part of your long-term financial plan. It’s important to meet with a qualified estate planning attorney or trust officer about how to best protect your assets and beneficiaries.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
Research shows that people who receive an outright inheritance often squander the money.1 One study found that people of ages 20-40 lost half of all money inherited due to spending or bad investments.1 Another study found that one third of people who received an inheritance had negative savings within two years of the event.2
Special needs trusts offer a solution for those who want to provide assistance to someone with special needs, while maximizing the benefits of government programs.
Living with special needs involves many challenges to ensure proper care. Predicting medical expenses and evaluating resources for long-term support can be tricky and overwhelming. Regardless of age, a family member with special needs is likely to require help for a long time, if not for a lifetime.
A special needs trust is a fiduciary and legal arrangement that provides financial assistance to someone with special needs, without affecting eligibility for government programs. Public assistance benefits, like Supplemental Security Income (SSI) and Medicaid, have strict eligibility requirements.
For example, if a beneficiary with special needs receives more than $2000 in assets, through a direct transfer, court settlement, or inheritance, he or she will not qualify for SSI or Medicaid benefits.
By creating a special needs trust, the beneficiary will remain eligible for state and federal assistance.
Third-party special needs trusts can also benefit additional beneficiaries. For example, the trustee has the power to authorize payments for family and friends to encourage travel, activities, and relationship building with the beneficiary.
To learn more about trusts, see What is a Trust?.
Given the complexity and longevity involved with administering a special needs trust, one of the most important decisions you can make is selecting a trustee.
The rules surrounding eligibility for government programs are complex and ever-changing, and a mistake could compromise eligibility for supplemental care. For more information, see How to Choose a Trustee.
Fortunately, you don’t have to take this journey alone. At Members Trust Company, we have developed best practices to support you and your family.
We specialize in administering Special Needs Trusts and strive to provide accessible support to those caring for loved ones with special needs. There’s a reason trust is our middle name.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not federally insured, are not obligations of or guaranteed by the credit union or any affiliated entity, involve investment risks, including the possible loss of principal. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
An estate plan defines who you want to manage or receive your assets in the event of your incapacity or death.
Did you know that “estate” is a Middle English word derived from the Latin term for status? Since the 13th Century, this archaic word has been used to describe a person’s social standing or rank. Another definition for the word estate is a large house situated on an extensive area of land in the countryside. Maybe it’s these exclusive definitions for the term “estate” that mislead people into believing that estate planning doesn’t apply to regular people. The truth is that there is also a legal definition for the term “estate” and it simply refers to all the property you own.
A comprehensive estate plan typically includes four important documents:
1. Revocable Living Trust
A revocable living trust is a legal document that includes two different plans, describing what you want to have happen: (1) to your property after you’re gone; and (2) to you, if you become incapacitated.
2. Pour-Over Will
A pour-over will is a legal document that ensures any remaining assets will automatically transfer or “pour over” into an established trust. If the creator of a trust forgets to title an asset in the name of the trust, the pour-over will informs the probate court that the asset should be distributed to the trustee and beneficiaries according to the terms of the trust.
3. Financial Power of Attorney
A financial power of attorney (POA) is a legal document that authorizes someone to act upon your behalf in financial matters.
4. Advance Healthcare Directive
An advance healthcare directive is a legal document that specifies what actions should be taken for your health if you are no longer able to make decisions because of illness or incapacity.
If you do not create an estate plan, the state has an estate plan for you.
The law of intestate succession is your state’s default estate plan for those who fail to plan ahead. According to the laws of your state, a court will distribute your property after death. State laws vary, but generally, the property will be passed to a surviving spouse and/or other bloodline relatives.
By failing to draft an estate plan, you may disinherit an unmarried partner, friends, and charities.
A will allows you to name who you want to receive your property after your death, so it is better than not planning at all. However, planning with a revocable living trust is ideal.
A revocable trust lets you define what you want to have happen: (1) to your property after death; and (2) to you, if you become incapacitated. It is established during your lifetime, typically to avoid probate and conservatorship proceedings and to exert post-death control over trust assets.
Since a Revocable Living Trust is revocable, you can change it as your circumstances or wishes change. See What is a Trust?
Probate is the court-supervised process of administering a deceased person’s estate. The primary purpose of probate is to distribute your assets to the correct people, beneficiaries identified in your will or heirs as determined by state law.
Probate has other purposes as well:
Before the court distributes your estate, creditors and taxes must get paid. Many states require that the probate process lasts for a minimum of a year, in order to give creditors time to present their claims. In the meantime, your money will not be available to loved ones.
Probate varies by state and country, but the following factors are universally true:
1. Public Process
Your will is recorded in public records. If you don’t have a will, a list of your heirs is recorded publicly. Many jurisdictions require a listing of assets, so people can find out just how much your children will receive from your estate, putting them at risk for solicitation.
2. Time-consuming Process
Typically, probate is more time-consuming than necessary. Many jurisdictions require you to wait weeks or months for the appointment to open your estate. These jurisdictions also have set timeframes, often a year, that your executor must wait before distributing money to your heirs or beneficiaries. Courts continue to supervise the process through completion, which can add significant time due to the detailed requirements of estate accountings.
3. Expensive Process
Court fees and probate taxes are an extra cost to your estate. A probate tax of 0.1% may not seem like much in the abstract, but it would be calculated on your gross estate. For example, if your house is worth $500,000 and your mortgage balance is $400,000, your estate must pay $500 just to initiate probate. Often, your heirs or executor would have to pay out-of-pocket because they do not have access to your money until after probate has been officially started by the court. In addition, most courts impose various filing fees on the documents that your estate is required to file: one filing fee for your will, one for the list of heirs, one for the executor’s affidavit, one for the inventory of your estate, and one annually for each accounting until the probate is closed – totaling to several thousand dollars.
Assets owned by a trust are not subject to probate, which is one benefit of including a trust in your comprehensive estate plan.
You may want to consider creating an estate plan that includes a trust if one or more of the following circumstances or priorities apply to you and your family:
1. Preserve Family Harmony
By designating an objective third party trustee, you can relieve loved ones of the burden in dealing with legal complexity during a difficult time.
2. Benefit Loved One with Special Needs
A trust can provide an inheritance to a loved one with special needs while preserving his or her eligibility for government benefits like Medicaid and Supplemental Security Income.
3. Support Children From a Former Relationship
If you’re married with kids from a previous relationship, a trust can help you protect your biological children from potential disinheritance.
4. Cater to Financially Inexperienced Beneficiaries
By setting up a trust, you can restrict trust distributions, reducing the likelihood that your loved ones will squander their inheritance.
5. Include Distant Children
If you live far from loved ones, it’s important to plan ahead to ensure a trustee is designated to manage your financial affairs upon your incapacity or death.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not federally insured, are not obligations of or guaranteed by the credit union or any affiliated entity, involve investment risks, including the possible loss of principal. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
Married people with kids from a former relationship, a blended family, tend to set up QTIP trusts. A QTIP trust allows people to leave inheritance to both the surviving spouse and children from a former relationship after death.