Estate Planning For Digital Assets In 5 Steps

Estate Planning For Digital Assets In 5 Steps

We Live In A Digital World

Yet, most of us don’t prepare wills (only 46% do, according to a recent poll), and if we do, we may not fully address these assets in our estate planning documents. As a result, a more significant proportion of our net worth is in our digital assets. Simply defined, a digital asset is content stored in a digital format that provides monetary or sentimental value.

Estate planning for our digital assets follows a similar process as planning for the distribution of our physical assets, but there are unique challenges. The legal landscape is still unsettled, outpaced by technological advances that produce a myriad of digital assets.

Take banking, for example. If we do our banking online exclusively, there is no paper trail for our loved ones to easily locate these accounts after we die. Getting access requires security questions and passwords that may not be readily available. Historically, we could find the latest financial statements to guide us to the assets at the bank.

Types of  Digital Assets We Own

  • Content, including images, books, logos, illustrations, photos, videos, documents
  • File-sharing and cloud accounts
  • PowerPoint presentations, Excel, Word, and Google documents
  • Digital tokens (i.e., cryptocurrencies and country-created coins)
  • Non-fungible tokens (NFTs)
  • Licensed domain names for websites and their blog content
  • Digital rights to intellectual property, including music, film, theatrical rights
  • Email, apps, and online community accounts
  • Social media accounts such as Facebook, Instagram, Twitter, Pinterest, and LinkedIn
  • Online bank, financial, and utility accounts
  • Seller’s accounts on Amazon, Etsy, and eBay
  • Online Gaming and betting, such as DraftKings
  • eSports Teams
  • Digital backups to important documents that were scanned (e.g., birth certificates, tax records, insurance policies)

Related Post: Guide to Estate Planning in 6 Steps

Creating A Plan for Digital Assets In 5 Steps

I will guide you through five steps (see below) so that your digital assets, those of value, monetary and sentimental, can be properly addressed for your loved ones.  How have we accumulated these various digital assets? The Internet of Things (IoT) has been extending our connectivity in our homes, at work, and socially. The line between work and home has increasingly blurred, resulting from technology and the effects of the pandemic. We are nearly all online using broadband, mobile and social media.

Take A Look At How We Use Technology:


    • 90% of US households have high-speed broadband connections (NCTA)


  • 97% have a cellphone, with 85% owning a smartphone (Pew Research); and



  • 70% are engaged in social media and social networking (Pew Research).





  • The typical person has over 100 digital accounts, ranging from email to social media, maintaining 100 passwords. Most (86%) of people commit their online passwords to memory. NordPass, multiple sources)




We devour digital technology, which creates our digital assets. These assets are part of our net worth. The average person in the US has over $55,000 in digital assets, but that is likely an understated number.

Cryptocurrencies Pose Unique Challenges

As much as 14% of Americans own cryptocurrencies, people have grown more comfortable with these assets. Cryptocurrency ownership poses unique challenges for your heirs who may not want these risky assets. Even so, cryptocurrencies are extremely difficult to access. Industry experts say millions of bitcoins (billions in value) have been lost.

By their virtual nature, cryptocurrencies are extremely secure, held in digital wallets by their owners. To access these assets, you need to know a private password and an especially encrypted private key known only to its account holder.

There is no central authority that tracks these keys as of yet, so without heirs having knowledge of how to access your crypto ownership when you are gone, significant value can be lost forever. Your loved ones may in luck if you hold your cryptocurrencies in a Coinbase account as they will help your family after you pass.

We May Not Be Fully Accounting For These Assets In Our Estate Planning

Digital assets refer to different forms of content stored in a digital format. A digital estate consists of digital media rights that may pass onto our heirs. If we fail to plan, we may frustrate our family’s ability to recover important photos, videos or pay our bills after we pass away.

In the past when you died, an executor of your estate, or a personal representative (if there wasn’t a will), would be responsible for the distribution of assets to loved ones.

They would sift through your paper records and physical mail recently received by the deceased to find bank accounts, insurance policies, or bills to determine monetary value.

Family members would also go through their assets at home or wherever to find their physical objects like photos, phone books with their contacts, videos, letters, all in the search for items of sentimental value.

However, a lot of that stuff is likely in a digital form now. There may be years worth of data, and it may be more challenging to find.

Finding Our Legacy Assets

In the days before the Internet, the family and the executor of the estate would likely have been granted access to the mail and the deceased person’s home. However, the amount of information we now generate online, stored in cyberspace indefinitely, has created significant privacy concerns.

If the executor or family  can’t quickly identify digital monetary and securities account ownership, those assets may end up in the state treasuries as “unclaimed funds.” Not only can these valuable assets remain hidden, but personal debts for the estate may also rise as bills go unpaid. Dormant bank accounts are particularly vulnerable to identity theft.

Ajemian v Yahoo! A Major Court Battle

Tech companies erected gateways to stall or prevent access to online accounts by loved ones and their legal representatives.  Access to online accounts has become more restrictive due to legislation, leading to a lot of lawsuits. One prominent court case, Ajemian v Yahoo!, reveals the difficulties families face when requesting access to emails.

John Ajemian had tragically died in 2006. He left a Yahoo! email account but no will or instructions for his account. Using privacy concerns, Yahoo refused the family access to their brother’s email. His siblings wanted to find information to invite friends to their brother’s memorial. Later, they sought access as a means to finding their brother’s assets.

The Supreme Judicial Court of Massachusetts decided on a lengthy court battle in 2018. It held that personal representatives might provide lawful consent on a decedent’s behalf even without the express authorization in the decedent’s will.

As a result of this case, tech companies like Facebook are getting better at dealing with digital assets on death. They are providing ways for account holders to create and provide access to legacy accounts after they die. Loved ones would be able to look after the  “memorialized” account or have it deleted from Facebook. Some believe that Facebook may have more “dead people” accounts by the year 2050 than the living accounts. Apple recently announced a new digital legacy service to pass on information stored by them though details are not yet out.

We Spend Our Lives Online, But We Don’t Always Own It

Each online service provider has its respective terms of service (TOS), making it very difficult for families to easily find access to those accounts, which may contain personal content dear to them. The Ajemian decision may promote legal change for streamlining the process. You should review and understand these terms when you sign for new accounts.

Still, you should have a plan so your loved ones can secure your digital property after you die. Sometimes you think you own a digital asset, but you purchased a nontransferable license to use the asset.

Your Estate Plan For Digital Assets


Step 1: Create A Digital Asset Inventory

Make a list of all of your digital assets, those with monetary and sentimental values. They should be categorized and referenced in a document. If you want to provide passwords associated with the accounts, you may want to store the list in a safe deposit box or use a digital asset manager. There are inexpensive password management apps such as 1Password or NordPass you can use. Make sure your digital asset list is in a secure place.

Besides passwords, there may be data encryption or another protective layer protecting access. This list would need to be updated periodically for new and closed accounts.

You can customize your list in the following categories:

Devices. Computer hardware, such as computers, external hard drives, flash drives, tablets, smartphones, digital music players, e-readers, home security systems, medical devices, smart television, digital cameras, and other digital devices like Nest and Alexa;

Online storage at home and work. Any information or data stored electronically, whether stored online, in the cloud, or on a physical device. Examples would include your Dropbox accounts;

Any online accounts. Email and communication accounts (e.g., iPhone, Skype, and Facetime), online banking, insurance, and other financial sites (e.g., PayPal, Square), cryptocurrency accounts, seller’s accounts (e.g., Etsy), social media accounts, shopping accounts, photo and video sharing, video streaming accounts (e.g., Netflix, YouTube), video gaming, online betting, and esports;

Points, Coupons, and Loyalty Rewards programs. Shopping, travel, hotel, airline, grocery, and shopping accounts are exceptionally loyal and have a monetary value on apps or cards.

Websites and blog accounts that you manage for personal and business;

Licenses domain names that exist and are owned by you and by your own business;  and

Intellectual Property, including copyrighted materials, trademarks, patents, and any code you may have written.

Cryptocurrencies include better-known Bitcoin and Ethereum, but there are thousands of different types; and NFTs. These assets should be on your digital asset list to give notice to your heirs. Separately, you can make reference to the essential passwords or private keys which should be in a secure place.

Step 2:  Decide How To handle These Accounts

You may want to divide the list into monetary and non-monetary accounts. The latter may be more personal or sentimental. You may wish to provide specific instructions on whether you have a legacy account for your social media accounts. 

Monetary Value

Digital assets with monetary value can pass through your will or a trust (more on that later). For example, websites, blogs, and domain names may have significant value as standalone businesses or, in combination and estate documents should reflect them.

Domain names can be sold for prices in the six digits, while the most expensive names have commanded millions.

Step 3: Estate Planning Documents: Powers of Attorney, Wills, and Trust

There should be a legally binding document that reflects your plans for digital assets. It could be a will, codicil (an attachment to your will), or refer to a letter of instructions mentioned in your will. Your will should not contain any passwords. You may want to consider a trust instead.

You should consult with an attorney who could help you decide what document is best and what sample language to use in your powers of attorney, wills, or trust.

Step 4: Powers of Attorney (POA)

Each state has its own Statutory Short Form of Power of Attorney, where your attorney can include language to limit or supplement authority granted to the agent you have chosen.

You can ask your attorney to spell out the agent’s power. The agent can have powers that allow them to do certain things such as use, manage, terminate, transfer or have full access to digital accounts, and name the type of accounts.

The specific accounts may be email accounts, digital music, video, photos, software licenses, e-commerce accounts, and bank/financial accounts.

Does the agent have access, including passwords and access controls?

Your attorney can inform the designated agent whether they will handle the digital property or if there is a specific digital agent with respective powers for those assets.

Step 5: Distribution of Digital Property: Wills or Trusts

Traditionally, some assets go through your will to your heirs.  Distribution of other property may be by operation of law or designated beneficiary. A life insurance policy is such an example.

Distribution of Valuable Digital Assets May Be through Wills or Trusts

Just think about how you access your accounts now. The nature of accessing online accounts requires knowledge of your usernames, security questions, passwords,  and possibly additional encryption layers. That is challenging for those not familiar intimately with your accounts or digital assets.  That information should not be in a will, mainly because it will become part of the public record if it has to go through probate.

Trusts May Be Better Than Wills For Digital Assets

Trusts are more desirable for digital ownership and account information because a trust does not become part of the public record like wills.

You may grant authority to a trustee as to how to handle this property. If the digital property in question is of significant value, you can create a Digital Asset Trust. Alternatively, your attorney can create a testamentary trust pertaining only to the digital assets that can be folded into a will.

If You Want Digital Assets In Your Will

You can guide your attorney by providing your digital inventory list and distribution of digital assets. When you die, the executor of your estate has the responsibility of distributing all of your assets to your intended recipients.

You can pass some of your digital assets through your will, but many of these assets cannot be passed through a will. 

Examples of Distribution of Digital Property 

  • Funds that are in your bank, investments, PayPal accounts.
  • Travel reward points and frequent flyer miles.
  • Stored photos or videos on your hard drive.
  •  Business websites, blogs, products that you sell in an online store.

If you don’t own the property or have sentimental rather than financial value, it isn’t likely to qualify as a testamentary asset distributed through your will.

Examples of what may not get quickly passed onto heirs (although changes are emerging) 

  • Email, apps, and social media accounts generally have terms of service agreements that often ask you to agree that your account is “non-transferable.”  In recent years, the tendency has been to give heirs the ability to terminate these accounts upon showing a death certificate.
  • Downloaded music from iTunes usually comes with a limited set of rights, and you don’t own digital music.
  • Licensing agreements, such as domain names that you don’t own.
  • Streaming subscriptions like Netflix are services to download movies you don’t own.

Consider Naming A Digital Executor

Your attorney can add language to enable the executor (or digital executor) to have authority to manage, handle, access, use, distribute, control, and dispose of digital property, including and not limited to all named digital assets. You can assign a separate executor in the will to have authority for all digital assets.

What the digital executor does:

  • Transfers money, points, and credits from online accounts to your heirs.
  • Closes social media accounts unless you left instructions for a memorial site.
  • Archives owned electronic files that contain owned photos and videos.
  • Cancels subscriptions to online services.
  • Transfers or closes blogs, websites, or any online businesses.

Letter of Instructions

The will should never contain passwords or sensitive information because of the risk that the will may become part of the public record if the will goes to probate. Instead, you should have your attorney consider referencing in your will an external list of digital properties with relevant usernames, access codes, security questions, and passwords maintained in a separate document.

A letter of instructions is the best way to contain sensitive, detailed information about accessing your digital property. These letters have been used with traditional wills for a long time. This letter can be referred to in the will but is a separate document.

Have A Safe Place To Keep Sensitive Information

You should store information like accounts and access data in a separate location from your will. Given its sensitivity, you probably want to put your document into a safe deposit box or another secure place.

Review Your Digital Inventory List Periodically

We are often opening, closing, or changing our online accounts, along with their access information.

Monitor Income-Generating Accounts

Keep track of essential accounts, particularly income-generating accounts such as fledging small businesses, with customer lists and their websites. That is where most of the digital assets’ monetary value resides. If you are changing your passwords frequently, you will need to record that information.

Keep Track Of Your Assets

Review your estate planning documents periodically every few years and when there are life-changing events. If these documents have been completed but are largely silent concerning digital assets, you should update your plans to include them.

Final Thoughts

I have been writing about digital assets for years as mass changes occur. Our digital lives are changing so rapidly with technological advances that it is not easy to predict what we may store online in the future. Many of the laws predate the explosion of the Internet. They have not kept pace with these rapid developments balanced with our need for privacy.

Therefore, we need to be proactive about staying on top of what we own digitally. Digitization helps us in so many ways, but it is messy for those we leave behind.

Do you have an estate plan that addresses your digital property? Do you keep track of your property with an inventory list?

Thank you for reading! We hope this guide helps you in your estate planning. Please visit us at The Cents of Money. We would love to hear from you about different ways to keep track of your online accounts to save time and effort.















Your Guide To Basic Estate Planning In 6 Steps

Your Guide To Basic Estate Planning In 6 Steps

“Death is not the end. There remains the litigation over the estate.”

Ambrose Bierce

Have You Created An Estate Plan?

Most of us want to avoid litigation, especially over an estate. Having a plan helps you do that. The best time to think about your plan is when you don’t have a compelling reason to do. Keep your family’s best interests at heart with a well-developed estate plan. Estate planning will give you control over your asset distribution during your lifetime to your loved ones.

A significant portion of your assets can be easily transferred to your intended heirs, avoiding often painful and lengthy probate court procedures. It is a good idea to sit down with an estate planning attorney or a tax attorney who is familiar with asset protection and tax planning. You may have questions about federal estate taxes. You can consult the American Bar Association for estate planning articles or find an estate planning attorney.

What Is Part Of Your Estate Plan?

To design your estate plan in 6 steps, we address the following:

  • Organize your assets into the non-probate property.
  • Know who your designated beneficiaries.
  • Determine if you have joint ownership with rights of survivorship.
  • Set up your will for probate property.
  • Have a letter of instructions to loved ones.
  • Consider a trust if appropriate.
  • Donate assets to your charity.
  • Health care proxy or advance directives documents are essential.
  • Testamentary Letters.


Having a plan is essential for your family and is in their best interests. Yet, only 40% of US adults have created a will or a living trust. Even younger people, especially if they have young children, can benefit from putting together an estate plan.

6 Reasons Why You Need An Estate Plan

#1 Assure financial support for your surviving spouse, children and grandchildren, and even later generations. The passing of a loved one is stressful and often traumatic. Adding financial stability is helpful.

#2 Write out your wishes while you are of sound mind. We never know when our mental capacity diminishes through tragedy, or of aging.

#3 Avoid litigation for your family in the future. Make your intentions for distribution known, so your loved ones don’t have to fight out in probate court. That path takes time and is costly.

#4 Arrange your estate plan with capable professionals to steer away from the potential publicity that can sometimes accompany the passing of a loved one.

The Great Aretha Franklin died in 2018 without a trust or will, forcing her sons to file documents in a probate court in Michigan. Prince’s estate was not covered by a plan when he died in 2016, and the distribution of his assets will likely take more time and more public scrutiny. Just recently I read there are questions arising about Nina Simone’s estate, and she passed away in 2003.

#5 Minimize estate taxes and costs when it is time for asset transfers.

#6 Support a favorite charity, address pet care and consider digital assets.

How To Start Your Basic Estate Planning

Start discussions with your estate planning attorney, tax accountant, and financial advisor. Through frank discussions, your goal is to put together the most beneficial plan for your situation at the most effective cost. Make sure that you consider your digital assets in your will, which we fully address in this post.

You built your wealth. Now you want to distribute your assets according to your wishes properly.

Carry out estate planning for your family, make sure your assets go where you intend them to go and that the person you expect to be the executor of your will, will be the one responsible for administering your estate will be that person. Pick your potential executor.

A Simple Estate Planning Guide In 6 Steps:


Step 1

Set up most of your assets as non-probate property. These assets outside the will and, for many of us, are the bulk of our estate. 

This property will automatically transfer to your designated beneficiaries upon your death rather than through your will. One of the most important assets you will need to address is your home (e.g., house, condominium, cooperative, vacation home) unless you rent only.

Your non-probate property is an asset that will transfer to survivors by contract based on your designated beneficiary. Name beneficiaries for all of the assets that you can.

Your Non-Probate Assets Will Include:

  • retirement accounts, including 401(k) plans,
  • IRAs, pension plans,
  • payable-on-death clauses in bank accounts, investment portfolio(s),
  • life insurance policies or
  • by owning accounts with another person, usually a family member,  through rights of survivorship.

These assets are generally transferred directly to those beneficiaries that you designated. At the time you opened these accounts, you likely wrote out your beneficiaries on a legal form.

Review Beneficiary Designations Periodically

You may want to change your beneficiaries as you go through life.  For example, if you designated your mom when you first set up your accounts, it is probably a good idea to refresh your beneficiaries. Often, after life changes such as a divorce, remarriage, or the passing of a loved one, we want to update our beneficiaries. Sometimes we can provide for a contingent or secondary beneficiary. To understand the importance of designated beneficiaries, please read here.

Joint ownership with rights of survivorship

Husbands and wives (or parents and children) may have joint ownership of assets called joint tenancy with the right of survivorship.

Make transfers by property ownership designation. These assets can include bank accounts, investment accounts, cars, and home(s). Upon the death of one owner, the surviving owner(s) will receive this property by operation of law rather than through the will.

These assets will be a majority of our assets, and their transfer is simple.

In most cases, your intended recipient need only present an official death certificate, and the bank, for example, will transfer funds or property to his or her name in the ordinary course of business. These assets do not pass through the will or the probate process.

Step 2


Set up your will for probate property

A Will, or often known as “Last Will and Testament” is a formal written document that directs how assets not addressed in Step 1.  Upon the death of an individual, the distribution of these assets occurs. 

The individual making the will is called the testator. He or she decides who gets their remaining assets after their death.

Appoint a personal representative, commonly called an executor, and give the executor the powers necessary to fulfill your wishes. Without a will, your state’s intestacy laws will dictate how your assets are to be distributed.

Don’t have co-executors

Sometimes people opt for co-executors, such as a  spouse and an adult child they believe can work in unison. Relatives and friends are not great choices to perform the executor’s duties.

Choose one trustworthy executor. While co-executors may sound harmless, acting in unison, in reality, can be more difficult. Executors may be called on to pay off debts, liquidate assets, file tax returns and estate tax returns. They may need to get the court’s permission to distribute the balance of the remaining assets, including money.

Spouses have legal rights to each other’s estates

State laws presume that married couples share their fortunes equally.

Sharing your property with your spouse is a right. This property sharing is called “the partnership theory of marriage rights.” Property acquired during the marriage and titled in one partner’s name (except for property acquired via gift or inheritance) becomes property of both spouses typically. Any spousal rights to claim an inheritance from the other spouse under the law are void upon divorce.

The estate assumes any debts of one spouse, not personal liabilities of executor or the beneficiaries.

There are nine community property states where all the money, assets, and debts acquired during the marriage are legally part of the joint property of both spouses. The rights of husbands and wives are equally protected.


What A Will Does:

  • Decide what property, including personal property that has sentimental value.
  • Determine who will inherit the assets.
  • Designate a trustee and guardian to manage assets if there are children under 18 who may be beneficiaries under your will.  The trustee and guardian can be the same.
  • Handle digital assets that may need you to designate access to family members to see your social media accounts. Digital assets are a broad category and include new types of assets like cryptocurrencies and non-fungible-transfers (NFTs).

For your will to be effective and valid, the will must be signed according to your state’s law.

Generally, a will must be in writing, signed before a minimum of two witnesses who can attest to your mental capacity and soundness at the time of signing the will.

You want a valid will 

You should challenge-proof your will with your attorney’s guidance. The will becomes effective upon the death of the testator. Up until that time, you can change a will as often as you want. The original (not copied) version of the last will should be kept intact and often stored in a safe deposit box or safe place.

Step 3


Leave your letter of instructions.

Write a letter of last directions, separate from your will, that may provide your preferences regarding funeral and burial arrangements, who speak at your funeral, contact information for family, friends, colleagues, and such.

There may be items that weren’t part of your will but are essential to you to let your surviving family members know of their existence. If any instructions conflict with the direction provided by the will, typically, the will overrides the information in this letter.

Leaving Guidance For  Family Is Helpful

Organize financial information, people to contact, essential papers (this could be in the form of a memoir, for example), and provide the location of where your family may find these things. This letter doesn’t have the legal force of the will but may amount to personal information that the family could use and you wish to share.

Step 4


Who Should Consider A Trust?


Trusts have additional features not found in wills.

Most people know what a will is, and it is the first place to handle probate property, but trusts are increasingly more popular in estate planning. Use trusts when you have a more complex estate, have less liquid assets, and desire privacy as trusts avoid probates. Trusts provide some features that a will won’t.

Living Trusts

Before death, you can use a trust as a living trust.  These instruments can take effect while the grantor is alive and can give the grantor the right to make changes. These are called revocable living trusts, and the grantor can be the trustee. However, if the grantor cannot serve because of becoming incapacitated, someone you appoint can name a new trustee.

Living trusts can also be made irrevocable, meaning no changes can be made by the grantor.

Irrevocable Charitable Remainder Trust (CRT)

People who have significantly appreciated assets may want to consider setting up a charitable remainder trust. A CRT is an irrevocable trust that generates a potential income stream for you as the donor to the CRT or other beneficiaries. The remainder of the donated assets goes to your favorite charities. There are several benefits, substantial income tax deductions while preserving the value of your assets. You can read more about it here.

Donating Assets To a Charity

CRTs are tax-exempt irrevocable trusts that reduce the taxable income of the donor during their lifetime. The irrevocable donated assets go to the trust. Distributed income moves from the assets to you and your spouse for a set period or life. The charity you designate will receive the CRT assets when you or your spouse die.

Testamentary Trusts

A different kind of trust is the testamentary trust, usually contained in wills that go into effect after the grantor’s death.

Step 5

Living Wills and Medical Powers of Attorney

 Prepare health care proxies, often called advance medical directives, that is, a living will and your durable powers of attorney.

Write a living will detailing a person’s desires regarding medical treatment when they may no longer express their wishes. The living will provides informed consent.

A living will is separate from your will made in consultation with your attorney and signed by you. This medical directive can help reduce ambiguities during a difficult time using feeding tubes, for example, and keeping a loved one alive unnecessarily.

The Terri Schiavo case

Does anyone remember the legal battle in 2005 surrounding Terri Schiavo? Terri Schiavo was a legal case that spurred a right-to-die movement. As a result of her family’s tribulations, many people recognized a living will as an important document. While challenging, it provided urgent awareness of why you need to address these possibilities. Health care directives are critical parts of your estate plan.

Use the durable power of attorney to appoint someone you trust as your agent, do certain things, and take actions in your name if you cannot do so. This agent is also called “attorney in fact.”

When the grantor is incapacitated or disabled

Under a power of attorney, the agent can bind you to contract obligations, sell, buy or close title to real property in your name, conduct banking, or other transactions. Every state has its requirements for ensuring valid powers of attorney. These powers are “durable,” which means that the agent’s authority survives any incapacity or disability of the grantor. The point is not to go and buy a form online or at a store. You need to designate someone trustworthy.

These powers come into use when the grantor cannot physically appear at a bank, through injury, confinement, or frankly just does not want to go. This instrument is crucial when caring for a person with dementia, Alzheimer’s Disease, or other limited mental capacity diseases. The most common uses of this power of attorney are in banking and real estate transactions.

Step 6

Upon your death, your executor will become the administrator and fiduciary of the will effectively.

After appointing an executor, the probate court will confirm the appointment upon your death. The executor’s role is to be effective and he or she can be expressly relied upon by financial institutions and insurance companies.

This executor will submit a petition to the probate court in the jurisdiction where the testator passed away. Assuming no challenges, the court will formally appoint the executor by issuing Letters Testamentary.

Testamentary Letters

Usually, third parties require original letters, so you have to get these directly from the court. They are not available online. These letters are court documents that allow the executor to act as a fiduciary under the supervision of the court.

These testamentary letters, along with the legally binding death certificate, are the essential documents that give the executor the force to deal with potentially numerous parties that have an interest in your estate.

Final Thoughts

Estate planning decision-making can be complex. However, it provides peace of mind by reducing some of the uncertainty that may arise for your family. Estate planning is in your family’s best interests.

Protecting your assets and having a plan to distribute them to loved ones should reduce potential angst that may follow. Engage a tax accountant with a CPA to help you realize tax efficiencies, an important component of estate planning.

Have you started thinking about estate planning? It is usually easier to do when you have no urgent reason to do so but are thinking of your family’s best interest. This guide should move you to think about your plan but you need careful consideration and professional guidance.

Please share any thoughts or comments you may have. We would love to hear from you! Please visit The Cents of Money for other articles of interest.



Your Guide To Basic Estate Planning In 6 Steps

How to Choose A Financial Advisor

“A goal without a plan is just a wish.” 

Antoine de Saint-Exupery, The Little Prince


“When it is obvious that the goals cannot be reached, don’t adjust the goals, adjust the action steps.” 


When you are seeking a financial professional, you may be confused by your choices. Many professionals help you with planning when giving you financial advice, whether making investment recommendations for your portfolio or providing tax-efficient savings.

“Financial planner” or “financial advisor” are terms often used interchangeably. They may provide similar financial planning services. However, their level of education, certifications, designations, and standards may be quite different. This post discusses how to choose a financial advisor that is right for you.

The Main Differences When Seeking A Financial Advisor


1. Type of Personal Financial Services You Are Looking For

You may be looking for someone to advise you for a single purpose like debt management or a comprehensive plan. Here, we will focus on how to choose a financial advisor or planner. This type of advisor can handle various services (discussed below) to guide you towards your goals strategically. At the end of this article, you should be able to hire a financial advisor.

You may turn to accountants and attorneys for setting up a new business, debt management, bankruptcy, taxes, and estate planning.

2. The Fee Structure

Generally, your fees range from the fee-based only, commission-based, flat fee, or a blend of fees and commissions. However, there may be extra costs for additional services such as insurance.

3. Education, Certification, and Designation Requirements Vary

Financial advisors or planners have a bachelor’s degree with an accounting or finance focus as the minimum requirement. Advanced educational degrees are not uncommon. Their course of study distinguishes certified financial planners (CFPs), with a rigorous exam, required experience, and high standards.

Consider your candidate’s soft skills such as adaptability, communication, and problem-solving and if you have good chemistry. We have a list of questions below you should ask your candidate when choosing your financial advisor.

 4. How They Are Regulated

Different regulators play a role according to the primary designation. Regulation of financial planners may be according to their professional title. Planners with CFP credentials are subject to the requirements of the Certified Financial Board of Standards.

The Securities Exchange Commission (SEC) and the state where they do business regulates investment advisors who provide financial planning.

The  State Board of Accountancy regulates the accountant preparing a financial plan.

Key Financial Services


1. Money and Debt Management

Consider a money coach or credit counselor when you need help saving money, setting up a budget, reducing expenses, and debt management. You can often get free assistance from a certified credit counselor by searching on the website.

Accredited financial counselors or AFCs can aid you in money management through their organization 


Related Post: How To Pay Down Your Debt For Better Financial Health

2. Investment Advice and Trades

Investment advisers and brokers provide all manner of investment services, from do-it-yourself online trading to full-scale investment advice and money management. Generally, investment advisors and broker-dealers need to register with the SEC and the Financial Industry Regulatory Authority (FINRA), and state regulators. They are subject to the suitability standard, less demanding than the fiduciary duty.

A Registered Investment Advisor (RIA) advises high-net-worth individuals on their investments and manages their portfolios. They have a fiduciary duty to their clients, which means they provide investment advice by acting in their clients’ best interests.

3. Financial Planning

Financial planners are financial advisors who provide clients with a range of personal financial services. They can help you create a simple one-time financial plan if you are just starting, grapple with a specific financial objective, or provide a comprehensive goal-based plan. The latter may encompass savings, investments, college savings, insurance, retirement, tax planning, and estate planning.

Each plan should be tailored to your needs and provide a disciplined approach to achieve your financial goals. Financial planners will want to gather data from your personal and financial life and make forecasts to achieve wealth. Hiring a financial planner is a good starting point when you are in the early stages of accumulating assets or already have substantial assets but need guidance in their complex financial situation.

A core financial plan includes:

Cash flow management will look at the specifics of your current and projected budget and net worth, debt management, creating an emergency fund, savings for a house, vacations, college tuition, and retirement.

Risk management will consider life, disability, and medical insurance protection for you and your family.

Wealth management will address investments, diversification, risk tolerance, and asset allocation.

Related Post: 10 Tips To Diversify Your Investments

Tax and retirement planning should provide strategies to minimize your tax burden using capital gains strategies, charitable giving, tax-free and tax-deferred retirement savings. Advisors should speak with their clients about what kind of lifestyle they expect for their retirement years.

Estate planning involves questions about wealth transfer to loved ones most appropriately and efficiently.

Related Post: Your Guide To Basic Estate Planning

This Designation Is Preferable

Certified Financial Planners, or CFPs, have an essential designation issued by the Certified Financial Planner Board of Standards. This designation is difficult to obtain. It requires passing rigorous exam testing in specific personal finance areas. The CFP certification is distinct from CFAs, also or certified financial analysts who are highly respected in the investment analysis field.

CFPs must commit to continuing education on financial and ethical matters. They need at least three years of experience and must adhere to pretty stringent standards to earn and maintain their title. Before hiring a financial planner, you should verify the status of anyone claiming to be a CFP and whether he/she has undergone a disciplinary process.

When choosing a financial planner, CFP credentials may provide added comfort and confidence in your choice. However, it is not a guarantee of excellent performance. You want to pick the right financial advisor or team with the right fit for your needs.

Look For A Fiduciary

At a minimum, you want planners who are experts, professional and trustworthy. You should pick your planner who adheres to the fiduciary standard. The fiduciary standard is a higher standard requiring the planner or investment adviser to act in the best interests of their clients at all times.

Fiduciary duty standard is the highest standard of care referring to the financial professional.  A fiduciary is someone who holds a legal and ethical relationship with clients. They manage people’s money in their clients’ best interests rather than in their interests.

Registered Investment Advisors or RIAs help you manage your assets, mainly by way of your investment portfolio. These professionals are knowledgeable about market patterns, investing in stocks, mutual funds, and other securities. They are fiduciaries making similar recommendations to a CFP. Their pay structure is fee-based but earns commissions from the sale of financial products. CFAs or chartered financial analysts are highly respected in the investment analysis field, distinct from financial advisors.  

Don’t Paint Advisors With A Broad Brush

Investment advisers and brokers who work for broker-dealers and offer investment advice are primarily commission-based. They may have obtained CFP credentials through the hard work required.

From my experience, you cannot paint these individuals with a broad brush. Many are product salespeople interested in selling the latest service from their firm, yielding commission dollars. Other advisors are problem-solvers for their clients, helping them to manage their assets as a business. If you are fortunate to find one of these value-added professionals, grab them.

In contrast to the stricter fiduciary standard, FINRA requires the suitability standard for financial professionals who work for broker-dealers. Suitability is a lower standard than the fiduciary standard, which means the financial professional should only make recommendations suitable for their clients. A recommendation doesn’t have to be consistent with the individual’s objectives and profile.  For example, buying risky securities would not be suitable for retirees.

Financial Planners With Specialities

You may be seeking a financial planner for a specific goal like buying a house, retirement planning, or estate planning. Some planners specialize in particular areas such as addressing families with special needs, women executives or planning for single people.

Related Post: 10 Ways For Women To A Financial Independence

Look For Fee-Based Only Planners

The pay structure differs for different financial professionals from fee-based-only or charging flat fee, commission-based only, or a blend. When you want to develop a financial plan, I recommend seeking a fee-based adviser with more incentives to help with your financial goals. Fee-based structures can be fees by the hour, a flat fee for your plan, or a percentage of your annual assets.

Hourly rates may be in the $100-$400, with one-time financial plan costs of $1000-$3000+, and annual fees of percentages ranging 1%-2% of assets under management (AUM). Finding a planner that charges a flat rate or by the hour is best for those just starting to make money, who want a simple financial plan, and don’t yet have many assets.

Alternatively, you may want to consider Robo-advisors, such as Betterment, Wealthfront, Vanguard Personal Advisor Services, and  Schwab Intelligent Portfolios. Robo-advisors are an excellent option for those seeking low-cost financial advice and zero account minimum.

These providers have a range of investment and retirement planning services, digital planning tools and may provide access to human financial advisors. Their management fees vary from 0.25%-0.50% or flat annual fees. Some people prefer a human financial advisor for a specific part of their financial plan and several Robo-advisors offer blended services for a higher fee.

It Depends On Your Needs

You may be seeking a one-time financial plan after getting a sizable bonus or an inheritance. Others want to have a planning team to be able to work with them on an ongoing basis. There are a plethora of financial strategies to handle for a family moving through changing life cycles.

Trustworthy financial planners can help you build wealth with a disciplined approach. They may help you alleviate the financial stresses that you encounter when saving for a house, college tuition, insurance, and retirement using the most tax-efficient strategies.

When you have a busy career earning a high income, it may be challenging to wrestle with these personal finance specifics. Paying $10,000-$20,000 annually on a $1-$2 million portfolio that may produce savings isn’t bad.

Many traditional financial planners require a minimum of assets to invest, usually in the $250,000 range or significantly higher, and may not work with you. Other planners may prefer to grow with beginner clients to add a lot of value, particularly as clients have expanding family needs.

Where To Find The Right Financial Planner

The National Association of Personal Financial Advisors (NAPFA)  are fee-only planners who adhere to the fiduciary standard. They accept no commission-based planners. Their standards are high and generally meet or exceed the requirements needed for CFP credentials. Ask your friends and colleagues if they would recommend someone to you.

If you are just starting with fewer initial planning needs, you may consider the Garrett Planning Network. They are certified financial planners or persons working towards obtaining their credentials. They tend to focus on smaller projects for an hourly fee.

XY Planning Network is relatively new, focusing on young professionals looking for fee-based financial planners with the CFP designation. Their organization serves Generation X and Millennials. Their fees appear to be within the ranges of hourly rates or flat fees.

There are great Facebook Groups to visit, such as Females And Finance, run by Sheryl Hickerson, to help you find the right person for you. Women, in particular, have distinct needs for financial planning.

Do I Need A Financial Planner?

You can develop a simple financial plan on your own as you are starting. Even if you do not work with a financial planner, you need to consider your short-term and long-term goals. Managing money well is time-consuming and requires expertise in many areas.

As your assets grow, you may need guidance and assistance in developing financial strategies.

 10 Questions You Should You Ask When Seeking A Financial Advisor

Professional Caliber

  1. What are your qualifications, credentials, and experience?

You will want to know who you are dealing with in terms of expertise, education, certifications, and experience.

  1. Do you work with a team, and how do you work together?

Financial planners often have their specialties and overlap with others who can complement their skills.

  1. Are you a fiduciary?

A fiduciary standard is a more stringent duty of care. When speaking to a professional financial candidate, you want to understand how they view their role to you. It is your money and your financial future. You want your advisor to be working on behalf of your best interests, not theirs.

What Does This Cost

  1. What are your fees, and what are my costs all-in?

Understand their fee structure. Be clear about the extra costs you may incur, such as buying an insurance policy.

  1. How will I be communicating with you and your team?

Biannual plan reviews are common. How often will they be reviewing your financial plan with you?  If you will have an ongoing relationship with your financial planner, it is essential to understand how you will review and update your plan. What kind of communication should you expect, particularly when you are making changes.

  1. How will they work with you?

Will they take the time and have the patience to explain complex concepts to you. This information does matter, and it may take time to build confidence and a good rapport.

Characteristics of Your Financial Planners

  1. What is your investment philosophy? You want to understand your planners’ fundamental beliefs regarding growth and value investing. Markets can be turbulent, so you need to know how they may address investments during recessions.
  2. How should I measure success in our financial plan?

You need to understand the benchmarks that will provide you with results relative to your financial goals. There may be different measurements for various aspects of your plan.

  1. What added value may I expect from you as our financial advisor?

This question is tricky. Of course, you should expect expertise, professionalism, and trust. You want to know what kind of relationship you will have. When you want to make an investment that advisors believe is not a sound one, will they tell you “No”? They must have your back.

  1. What are some of the criticisms your clients say about you and your team?

No one person is perfect, so knowing those criticisms will help you measure your prospective financial planner and how he/she fits with your needs.

Final Thoughts

Prudent financial planning is vital to achieve your short- and long-term goals and to support your family values. We outlined the characteristics of a financial planner or advisor, the varying fee structure, and how to pick the right financial advisor for you.

What are you looking for when seeking out a financial advisor? What traits are essential to you? We would like to hear from you!

Thank you for reading! Please consider subscribing to The Cents of Money blog and get our weekly newsletter.





















6 Tips How To Better Handle Beneficiary Designations

6 Tips How To Better Handle Beneficiary Designations

“Bear in mind the wonderful things you learn in schools are the work of many generations. All this is put in your hands as your inheritance in order that you may receive it, honor it, add to it, and one day faithfully hand it on to your children.”

Albert Einstein


Did you know many assets pass by beneficiary designations just by filling out a form?

Create your estate plan so that you have control over your asset distribution to your loved ones during your lifetime. Aim for your plan to be as litigation-free as possible. Beneficiary designations are an essential way to distribute most of your assets quickly and effectively.

You will avoid the often painful and lengthy probate court procedures. Your will doesn’t control who inherits all of your assets. In reality, the average person may transfer the majority of their assets by contract.

Transferring Assets Outside Of Your Will Is More Efficient

Many of our assets are non-probate property. As such, they are transferable to survivors by contract immediately upon death rather than under a will.

The advantages of contract transfer over the distribution of assets by a will are less time, cost, and privacy. Transfers to loved ones by a will could take six months to a year if there is no probate. If contested in court, the distribution could take longer. Even worse, your will would be made public through court documents.

We will explain how to make proper beneficiary designations to carry out your intentions. are carried out.

Three Ways To Transfer Non-probate Property: 

1.  Designated Beneficiaries Upon Your Death

A beneficiary is a person or organization designated to receive a benefit. You can and should also select a contingent (or secondary) beneficiary. Sometimes the first-named or primary beneficiary dies after filling out the form. Most of you have seen one, but here is an example of a form to select your beneficiaries for those who want to take a look.

We usually get the form from our employer insurance or a financial company. It takes only a few minutes to fill out yet carries significant repercussions if incorrectly filled out or ignored. That will be part of our upcoming discussion. You should name beneficiaries for all of the assets that you can.

Your non-probate property is assets that are transferred to survivors by contract upon your death to your designated beneficiary.

Check With A Professional On Legal And Tax Issues

There may be legal and tax ramifications to be aware of, especially your designated beneficiary is already receiving governmental benefits. Estate distributions to a beneficiary may require an inheritance tax payment in certain states but not from the federal government.

 Your Non-Probate Assets:

  • retirement accounts, including 401K  plans, 403b plans, SEPs, solo 401Ks, Keough plans, Roth IRAs, pension plans
  • 529 college savings plans
  • investment accounts, mutual funds accounts
  • payable-on-death clauses in bank accounts, credit union
  • life insurance policies or
  • by owning joint accounts with another person, usually a family member,  through rights of survivorship.

These assets are generally transferred directly to those beneficiaries that you designated 

When you first opened these accounts, you received a legal form to complete that provide you with the opportunity to designate your beneficiary.

Review Beneficiary Designations Periodically

For example, if you designated your mom when you first set up your accounts, it’s probably a good idea to refresh your beneficiaries. Often, life changes such as a divorce, remarriage, or the passing of a loved one happen, so update your beneficiaries. 

2. Property Ownership Designation

Husbands and wives (or parents and children) may have joint ownership of assets called joint tenancy with the right of survivorship.

Each person owns 100% of the asset. These include bank accounts, investment accounts, and cars. They can dispose of these assets without the approval of the other owners. However, in the case of jointly owned real estate, most states restrict the ability of a co-owner to sell or burden the property without the consent of the other.

Upon the death of one owner, the assets transfer on death (TOD). The surviving owner(s) will receive this property by operation of law rather than through the will.

3. Payable-on-death (POD) designation

Like TODs, the designated beneficiary has no right to this property, usually a bank account, until the owner has passed away. Once the owner has died, the beneficiary will provide a copy of the death certificate and show proper identification to access the account.

6 Tips to Ensure Your Designated Beneficiaries Are Proper:



1. Don’t Forget To Name A Beneficiary

We live busy lives. We get a ton of forms when we start a new job or open new accounts.  We may lose them or forget where we placed them. Worse yet, we honestly want to fill them out, but we are unsure or procrastinate over making such decisions. The form truly takes a few minutes, and it is better to reasonably identify a loved one rather than leaving the form blank.

The absence of a designated beneficiary may result in the respective assets going to the estate itself to be shared among several people rather than the sole designee.

2. Name A Contingent Beneficiary

Besides naming a primary beneficiary, it is essential to name a contingent beneficiary if the primary beneficiary has either passed away before the asset owner or has become incapacitated. It may have been several years since the designated beneficiaries were selected.

3. Reviewing, Changing, and Updating Your Beneficiary Forms

When you first start a job or open an account, you may have been idealistic about who you wanted to receive your assets. I have had friends select their boyfriends. Our lives go through many changes such as marriage, having children, divorce, and our interest in varying social causes.

If necessary, we need to periodically review, update our beneficiaries to who we intend our assets to go.

My First Designated Beneficiary

When I first started working after college, I named my brother Mark as a beneficiary. I was 20 years old, and he was starting high school. As a “big sis” starting work right after college, I wanted to do something special for him. Being naive, I thought he would like the gesture. I left the job 18 months later, so it didn’t have a lasting effect. However, many of our decisions do.

Common Mistakes: An Ex As Your Beneficiary But Your Youngest Isn’t Designated

Your former spouse may still be listed as a primary beneficiary even though you haven’t talked to that person in years.  If you are working at your company for a long time, you may leave out your youngest child or the children of your second spouse.

Review your beneficiary choices quickly online or through the investment account statements you receive in the mail.

Another reason to review your form may be that you have been at the same firm for 35 years (congratulations!). However, are you sure your company still has the form on file?

A True Story

Someone recently told me that a family member had newly been diagnosed with a severe illness. They wanted to make sure they had insurance for the upcoming surgery.  The company told him that there were no records of designated beneficiaries on file for the years he began working there.

Forms get lost when companies move, especially during the pre-digital age (after dinosaurs), and the company may not always convert the paperwork. 4. Be Careful When Designating Those With Special Needs

Three possibilities that need special consideration and requires the expertise of an estate attorney or accountant to consider:

Minor Children: Differences Between Probate And NonProbate Properties

We often may name our children as designated beneficiaries on forms and in our wills, for probate assets. Be aware of legal ramifications.

It is relatively common for parents to have testamentary trusts within their wills that assert minimum ages for our children to get assets. They may want to restrict their children well past the age of majority (usually 18 years of age) to 25 or 30 years. Testamentary trusts, traditionally contained in wills, are trusts that effective upon the death of the grantor.

A trustee is often used to administer the assets at their discretion until the beneficiary reaches that appointed age. That works for probate property.

Outright Distribution To Beneficiaries: Consider Age 

However, beneficiary designations for non-probate property, trump the will’s contents which may carry a parent’s intentions. That means if a parent passes while the children are of minor age,  property, such as an insurance policy or a bank account, will pass to them automatically at 18 years. Most young adults cannot handle significant funds without supervision. Although research shows an inheritance lasts five years, it can be much shorter in a younger individual’s hands.

Therefore, you may want to name the estate as your designated beneficiary rather than your children outright or create a living trust which can specify your children’s age. Your estate attorney can provide help in this area.

Background on Living Trusts

Living trusts are legal documents created during an individual’s lifetime. These trusts are standalone, that is, independent of the will. These instruments can take effect while the grantor is alive. The grantor is the one conveying the property to the heir. It can give the grantor the right to make changes.

These trusts are revocable living trusts, and the grantor can be the trustee. However, if the grantor cannot serve because of incapacitation, a spouse or child may become successor trustee. 


The Irresponsible Adult May Need Special Consideration

An adult child who is known for being irresponsible with money may need different treatment. In that case, you should speak to an attorney regarding the setup of a spendthrift trust.

A spendthrift trust benefits a person that is unable to control their spending. It gives an independent trustee full authority to make decisions on allocating money to the beneficiary.

Individuals With Disabilities

You need to be careful about naming a disabled individual as a designated beneficiary. You may jeopardize that person if they are already receiving governmental benefits, such as social security benefits. If they were to receive assets from your designation upon your passing, it might inadvertently prevent them from receiving further governmental aid.

5. Make Sure You Have Correct Spelling of Intended Beneficiaries

When designating an intended survivor, they may have a commonly misspelled name or a title like Junior, Senior, or the III after their name. Check that you are indicating the correct person. It is always wonderful to give to others but make sure it is the person you intend.

6. If In Doubt, File A New Form

Having correct and updated forms is very important, especially when you have retirement accounts, life insurance, bank, and investment accounts. If you think about the changes in your life in recent years, you may just want to go the easier route of filing a new form to transfer each of your assets outside of your will.

Final Thoughts

By keeping your beneficiary designations, and all of your estate planning documents current, you provide the best protection for those you care about the most. A small amount of your time and effort may cover the vast majority of your assets.

Protect your assets and have an excellent plan to distribute them to loved ones. You don’t want to add potential angst to their grief. Engage an accountant to help you realize tax efficiencies and estate attorneys for special situations.

Thank you for reading!

Have you started reviewed your beneficiary designations recently? It is usually easier to do when you have no urgent reason to do so but are thinking of your family’s best interest. Start thinking about your assets and which ones are non-probate property and consider reviewing them or file new ones.

Related Post: Your Guide To Basic Estate Planning In 6 Steps

Please share any thoughts or comments you may have. We would love to hear from you!



A Guide For College Grads On Your Company Benefits Plan

A Guide For College Grads On Your Company Benefits Plan

Congratulations, Graduate!

“Find a job you enjoy doing, and you will never have to work a day in your life.”

Mark Twain

Hopefully, there will be a commencement season this year. It is one of my favorite times of the year, and I don’t even have a child going to college yet. As a professor and a hopeful nerd, I enjoy college grads getting all kinds of accolades and advice on life and read as many commencement speeches as I can. Some of those speeches through the years have become legendary.

For one of the most inspiring, read or listen to the commencement speech of Steve Jobs, co-founder of Apple, at Stanford University in 2005.

Enjoy This Moment of Sunshine

After years of toil at your college and most likely working hard in high school to land at your top college choice, you have earned the chance to enjoy this moment. The time between college and starting your first job is an excellent time to take a breather. And travel time to visit family, friends, and possibly part-time employment.

The value of obtaining your bachelor’s degree remains a significant factor in your lifelong income and financial well-being.

Your First Job After College

On average, most graduates believe the benefits of their education meet or exceed the costs. Likely you are either starting your first job soon or are engaged in your search.  According to its survey, the National Association of Colleges and Employers (NACE), the average annual salary for college grads is about $50,000. Those who majored in computers, engineering, mathematics, health sciences, and business were the highest earners, with salaries ranging between $52,000 and $71,000. 

 Tips For Making The Most Of Your First Job:


1. Perfection Is The Enemy Of The Good

You are beginning your professional life. You don’t know what to anticipate in your new environment. Expect to make mistakes and learn from them.

Prepare for your job interview for the job. Start by reading their annual report and articles to understand the company. Competence is what you are aiming for when you first get started in your new job.

2. Paying Your Dues

Initially, you are not likely to get the “cool” assignments. You will be doing a lot of the grunt work or doing something you believe is beneath you. Everyone goes through this feeling. Remain enthusiastic as your co-workers and boss may want to see how you handle the easy work before giving you more tasks.

3. Volunteer To Help Others But Complete Your Work

When I hired associates to work with me I often had “eager beavers” wanting to do everything everyone else was doing, leaving behind the work I asked them to complete. Instead, they would rush their work, doing a shabby job.

4. Seek Opportunities To Learn New Skills

As you get deeper into the swing of your job, complete tasks on or ahead of schedule, become a sponge. Learn as much as possible and take advantage of any company-sponsored training offered to you. Strengthen your existing skills and build your abilities to be a problem solver. 

 5. Do More Than Asked

I heard a great story from a now successful executive at a major newspaper firm. She elevated herself from the entry-level job, by completing her work efficiently, then helping others.  Along the way, she picked essential skills to make herself invaluable. As a result, she is now a senior manager of the firm.

6. Understand Your Company Benefits Package

According to the Bureau of Labor Statistics, the combined benefits plan adds about 30% to your total compensation. In a tight employment market, companies often become more generous with their benefits. Besides the standard vacation days, your benefits package may vary widely.

A recent Glassdoor survey said 4 out of 5 employees prefer benefits to a raise.

Your Company Benefits Package:


Retirement 401K Plan

As soon as you begin to work at your new firm, you need to set up an account to start saving in your 401K plan. Better yet, automate contributions directly from your paycheck. You need to understand the dollar amount or percentage of company matching contribution with any defined cap amounts on employee contribution.

For example, Discover, the credit card company, has a generous company match up to 7%.

What is the vesting period of the company’s matching contribution for the 401K? If vesting is partial or two years, you will more likely keep the company’s match amount than if the vesting period is 5 years or more. Many companies have partial vesting.

As this is your first job, you may not expect to stay the five years required to earn the company’s contribution. People no longer stay in the same company for years. However, you should still begin to put money in your 401K. If you leave your job, you have options for your 401K. You can leave it in the old plan or roll it over to your new employer or roll this 401K into an IRA. 

Student Loans Repayment

Student loan repayment as an employee benefit is in its infancy period. It could grow into a core part of a company’s benefits package. According to SHRM’s 2019 survey, about 8% of employers repay student loans as an attractive benefit.

More companies are helping with student loans, especially since the IRS ruling a few years back. Abbott Laboratories was a pioneer in addressing student loan repayments giving employees the option. Employees can contribute toward their student debt rather than to the 401K plan. However, they still get the 401K employer’s match contribution even if the worker didn’t contribute themselves.

Company Stock Ownership Plans Differ Widely

They are a desirable benefit for the employees to participate in the company’s growth and may offer tax deductions.

For closely-held or private corporations, Employee Stock Option Plans or ESOPs means that the company is owned partly or entirely by employees. Publix, the supermarket company, is among the largest owned.

Employee Stock Purchase Plans or ESPPs are offered by 52% of most public corporations through employee participation is relatively low at 42%.

The ESPP plan is usually offered as a tax-qualified plan. All employees may participate based on a minimum number of years at the company. These employees may buy stock during “an offering period” over  3 months-to-27 months, set at a discount up to 15% from the market price.

Employees can profit immediately or over a longer holding period. If holding more than a year and a day, your income is taxed at the capital gains rate. Make sure you diversify your investment portfolio beyond holding any concentrated positions.

A Word of Caution

Sometimes employees can expand their stock ownership on a tax-advantaged basis, even buying the shares inside their 401K plans. I have significant concerns about employees using their employer’s stock in their 401k for three main reasons:

  • Owning too much stock of the company you are working for is too much risk no matter how great the company is as your employer. Too many eggs in one basket are hazardous, and you need diversification.
  • WorldCom and Enron’s financial scandals were devastating for those company employees who received an excessive amount of compensation in their company stock for bonuses and 401K plans. There was little heads up of the calamity coming.
  • Many lost their life savings along with the devaluation of their homes due to their proximity to corporate headquarters. I knew many of the WorldCom folks.

 Health Insurance

Not surprisingly, 58% of new college grads want 100% employer-paid medical insurance but only 7.5% of employers provide that. You need to understand the premiums, deductibles, and co-pays you are responsible for and your plan covers.


If there is a high deductible, determine whether your employer contributes to health savings accounts (HSAs). An HSA is a tax-advantaged account for individuals covered by high deductibles, not subject to federal income tax at the time of deposits.  HSA funds are used to pay for qualified medical expenses and may cover over-the-counter medications with a doctor’s prescription.

FSAs – Health Care Flexible Spending Plans 

 A flex plan allows employees to pay for specific unreimbursed healthcare and dependent care expenses with pretax dollars. This plan helps to offset some of the costs not met with the main health insurance up to a capped amount (e.g., $2,000).

Dental and Vision insurance is offered by about 62% of employers and is considered a desirable perk for college grads. Vision insurance is part of the more significant health insurance, allowing regular eye exams and some employer contribution for glasses.

Disability Insurance

According to Social Security Administration, 25% of all 20-year-olds will be disabled by the age of 67. Disability insurance is an essential part of any package, but few believe they need this insurance. 42% of private sector companies offer this insurance.

This insurance plan replaces a portion of an employee’s gross income, usually up to 50%-60% to you, while you are disabled subject to a physician’s approval. You buy this insurance on a short-term and long-term basis. The employer may pay the premium in part or in whole. The employee will pay the rest.

On a short-term basis, the disability benefits extend up to 52 weeks, kicking in 1-14 days after the employee cannot work and has applied their sick days.

Life Insurance 

Usually, employers offer a relatively small amount of life insurance rather than enough to protect you and your family fully. The employee can increase its coverage amount by paying the premiums on a monthly or quarterly basis through its company’s group term life plan at reduced rates than what they would pay on their own.

Tuition Reimbursement 

Most employers are often willing to provide tuition reimbursement for advanced education rather than lose the employee. The refund can correlate to grades. An “A” would 100% reimbursement, “B” gets 75%, and so on.

Increasingly, companies are offering online courses to employees to complete their degrees for high school and college, as well as “English as a Second Language.”

Unique Lifestyle Benefits  

There is a long list of excellent benefits often found to be high quality among the best companies. Flexible work options are becoming more standard after given the broad experience many have had during the pandemic. Here are some of the best I found:

  • egg freezing for female employees
  • adoption and surrogacy assistance and reimbursement
  • employee relief fund for national disaster victims
  • doctor’s office or medical clinic onsite
  •  counseling sessions to reduce stress
  • high-quality dining
  • leave of absences to care for family members or newborns
  • financial aid coaches
  •  career planning
  • discounts or full paid courses for high school, undergraduate degrees, yoga, and ESL
  • flex hours or work from home
  • dry cleaning on-premises
  • paid time off for volunteering
  • pet insurance
  • onsite gym
  • personal or professional time off
  • child daycare or  day elder care

Maybe There Is A Free Lunch

Take advantage of your company benefits plan by reading it thoroughly. Ask questions of human resources to understand it better. Work diligently and convey a positive attitude. Whether this is your first job or your fifth job, your company benefits package is a meaningful part of your compensation.

Thank you for reading! What is in your company benefits package? What are the benefits you value the most? Please share your thoughts with us!






Best Personal Finance Tips You Should Know

Best Personal Finance Tips You Should Know

This time of year is always a good time and place to see where you stand regarding your financial goals. Build and strengthen financial habits to achieve financial success. Use these personal finance tips as a checklist to become more financially organized at the beginning of the year. No matter what your situation is, your financial success doesn’t happen without work. Careful planning, often with professional guidance, requires that you look at a wide range of your finances and how you handle money.

We cover major tenets of personal finance and relevant tips you should know to have better financial health and success.

Evaluate Your Monthly Budget

Track your monthly income and expenses. Break your expenses into fixed or non-discretionary expenses and variable or discretionary expenses by category on an excel spreadsheet. Think of your budget as your household’s income statement. Your budget will help you to control your spending.

Use the 50/20/30 budget rule as a rule of thumb. Essentially, you are allocating your after-tax income into three budget buckets:

  • 50% of your spending are for your needs, notably housing, utilities, groceries, car payments and other needed fixed or non-discretionary expenses.
  • 20% for savings that can be used for paying down debt, emergency fund, and  investing or combination.
  • 30% are for your wants, that is discretionary or flexible spending for entertainment, vacations, and shopping. This what is left after your allocations are made for priorities, notably needs and savings.

Adopt a disciplined strategy as early as possible when you have fewer items to track. Use budget apps readily available or create your own excel spreadsheet.

Update Your Net Worth

Keep track of your net worth which is your household balance sheet. To calculate net worth, add all of your assets that you own less all liabilities that you owe. When you are young, you may have more liabilities because you are just starting out and may have college loans. However, over time, through accumulation of assets that grow at rates faster than your debt, you should have amassed comfortable net worth.

Net worth is an important benchmark to compare against your short and long term financial goals. Are you where you want to be in your 20s, 30s, 40s and thereafter? The fastest way to build wealth is through good financial habits that require saving, spending less, managing debt wisely and investing.

Build An Emergency Fund

Save for emergencies in a separate account that is readily available money. A common mistake made is not saving money for unexpected events like losing a job, pet surgery or a flood in your basement. Plan for 6 months of essential living costs to take care of rent, mortgage, uitlities, credit card bills and any other fixed monthly costs. Make sure your emegency fund is liquid in either cash or cash-equivalent (also known as money market) securities.

This fund should be used for emergency purposes not necessarily your wants for a high priced vacation. If you like to travel a lot, it may be worthwhile to have a separate vacation fund to set aside for those purposes.

Make Savings Your Mantra

Spend less than you earn so that something is left over to put in savings. Part of your savings should be allocated to investing. Growing your money in investment accounts is your best path to a comfortable financial life and to achieve wealth. Alternatively, spending more than you earn will result in more debt.

Automate your finances from your direct deposit paycheck so that some portion goes into your emergency fund, 529 college savings and retirement savings. Even with automation, review your amounts periodically. It is easy to set up withdrawals from your earnings and forget about it. However, you may be able to afford higher amounts than what you set up initially and can sock some more money away now.

College Savings Planning Should Be Started Early

Set up a 529 college savings fund as soon your newborn arrives. There are several ways to save for college besides a 529 plan like a Coverdell Education Savings Accounts and UTMA. Saving for college early gives you a headstart in growing funds through the power of compounding  while enjoying deferred tax benefits. Virtually all states have their own plan though you are not limited to your home state. There are a variety of funds to choose from including target date funds.

Retirement Savings And Earn Company Match

Save for retirement as early as possible. By setting money aside early you benefit from compound growth, that is, interest on interest. You may defer tax payments or reduce tax costs long term. Learn how your employer-sponsored 401 K plan works with respect to matching contributions which can be quite valuable. A company 401 K match may be a certain percentage like 6% of your salary with the firm matching dollar for dollar (or 100% which is generous) or something less of the amount you saved.

These contributions are like “free money” so don’t leave these dollars on the table. Open up a Roth IRA account to complement your 401 K retirement plan. You want to max out these amounts. Invest this money in a variety of investment choices offered by the plan.

Don’t delay savings for your 529 plan or retirement plan because of you are overwhelmed by the various options. Opt-in to a plan. You can make changes later on.

Health Care Savings Accounts

Find out if you have a flexible savings account (FSA) or a health savings account (HSA) available through your employer. Both plans can help you purchase qualified healthcare costs through pre-tax earnings contributions. The HSA is available either through your employer or if you are self-employed. You cannot have both plans.

The FSA plan sets lower contribution limits than HSA, and if you don’t use it by year-end, you forfeit what’s left in the account. The employer controls the FSA, while the individual controls the HSA.

The HSA plan has higher contributions, covers a broad range of medical expenses, and is more flexible. Unlike the FSA, it does not have a “use or lose” feature. Instead, if you don’t spend the remaining amount that year, it rolls over. The HSA is portable, so if you leave your company,  you can bring the account. You can earn interest on your HSA like any savings account. However, if you use those funds on unqualified items you will pay a penalty, and, if you are below 65 years, you may need to pay taxes as well.. 

Managing Debt Wisely

Pay your bills on time and in full so that your balances are not being charged interest. When you pay only the minimum amount required by the credit card companies, you are paying far more in interest for what you charged on your card. Give your cards a rest until you can pay it all every month.

Use shorter borrowing periods for car, student loans and home loans to lessen the interest amount.The shorter the time frame on your car,  home mortgage or student loans, the lower your total respective cost will be  Yes, you are paying more per month but over a shorter period of time. Perhaps you can increase your down payment.

Know your respective interest rates, fees, penalty rates and terms on all borrowings: mortgage, car, student loans, and credit cards. When interest rates decline as they did in 2019, refinance your rates.

Use Credit Cards With Care

Credit cards provide an essential convenience and help us to build our creditworthiness. However, if you only pay the minimum on those balances, you are incurring high interest rates on what you owe. This is when compound interest becomes your enemy, and you are paying interest on interest. Keep your balances as close to zero as possible.

Use cash more when possible. It can be a motivator to spend less and help us negotiate lower prices when bargaining. You feel the burn instantly as to seeing it on your monthly bill.

When using payment provider services like Venmo and Zelle, know the differences in your liabilities. Credit card holders are usually liable up to $50 for unauthorized charges if you report your card as stolen. User protections for P2P vary so check carefully for coverage.

When working on debt payoffs, eliminate debt with highest interest rate first. I understand the psychological benefits of the snowball method and if it that is an effective motivator for you, go for it.

Avoid payday loans should go without saying. however, if this is your only choice, work with a financial counselor as soon as you can.

Control Your Spending

Comparison shop for everything you buy or sign up for: groceries, clothes, cars, homes, applicances, and services such as financial advisors,  insurance, banks ,credit cards. Be as informed as possible about points, rewards and cash-back offerings that encourage more spending than necessary.

Negotiate when and wherever possible. This goes for shopping and the interest rates on loans. However, learn to negotiate for higher compensation as well.  Opportunties are sometimes waiting for you to be more proactive in the bargaining process.

Know your wants versus needs. You don’t need everything to survive. Many items we say we need are really wants we desire like a long vacation or luxurious clothes.

Don’t go grocery shopping without a detailed list. This was a game-changer for us when my husband would come home with loads of unnecessary items all the time. Use per-unit pricing to compare items. Find coupons online.

Window shop with friends and buy when alone.

Be aware of numerous biases playing with your decision making.

When car shopping, buy certified pre-owned cars which have been completely inspected, repaired and may have original factory warranties remaining on its life. Do your oil changes and maintenance check ups as required.

Building And Managing Your Credit

Review your credit report periodically. It is available for free from on an annual basis. You can also get one free report every 12 months to review your credit reports from each of the credit bureaus: Equifax, Experian and TransUnion. Then you can review your report more often especially when there are issues.

If and when you find errors, have the issues corrected as quickly as possible. Here’s how you do it.

Your creditworthiness is essential for more than just borrowing. Your prospective employer, landlord, utility provider and potentially significant other may want to know how you handle money too. By the way, background inquiries are usually soft inquiries that do not affect your score. However, hard inquiries happen when you are signing up for a new credit card or trying to refinance your mortgage loan  and will negatively  impact your score.

Know how the five key categories impacts your credit score. Your FICO scores are based on the following percentages:

  • Payment History – 35%
  • Credit Utilization – 30%
  • Length of Credit History – 15%
  • Credit Mix – 10%
  • New Credit – 10%


Your Child As Authorized User

Parents can help their children build up their credit by authorizing them as users on their cards. Think carefully about your own credit score. If it is low, it may actually hurt their score and defeat the purpose of being on your card. Know your child’s age and maturity, their ability to be responsible and setting up spending limits. There are virtually no age limits so it is up to parents to decide when their child is ready to have access to a credit card.

Yes, it is worthwhile for kids to get a credit boost. However, make sure you are not exposing them to fraud or identity theft, one of the downsides of children having a credit card. You will need to monitor their credit report along with yours.

Before getting them a credit card, talk to your children about money, spending and saving as a means to convey the need for good financial habits. The card is for their needs, not for paying for their friends’ needs and wants.

Raise Your Credit Score

The better the credit score, the lower your borrowing rate and the better on getting credit card deals regarding rewards and cash back. There are a variety of ways to raise your credit score or avoid inadvertently lowering it.

Don’t close any credit card accounts as this will ding your score. Instead, put these cards in a safe place like a drawer and don’t use them.

Keep your credit utilization rate well below 30% of total available credit. It may be beneficial for you to open an home equity line of credit(HELOC). If you have equity in your home you can take out a line of credit up to that value. This will expand your available credit, improving your utilization rate.

Certain programs are becoming popular that may help you boost your score for free or a low monthly amount. For example,Experian Boost, launched in late 2018 counts on time household payments for services such as telephone utilities tpwards your score. RentTrack And Rental Kharma report on time rent payments to credit bureaus.

If you have poor credit or in need of building up your credit, apply for a secured credit card as a means of boosting your creditworthiness. Become an authorized user on a close family member’s card for a period of time.

Applying To College

Fill out FAFSA, Period

If you are seeking funds for college, there is no downside to filling out the FAFSA (Free Application For Federal Student Aid) form other than your time spent. The form is necessary for federal loans, grants, work study programs and merit based scholarships. Don’t lose these opportunities by bypassing FAFSA. Federal loans tend to have better loan rates than private loans.

Be aware of your respective terms, grace periods, due dates and repayment options. Automate where possible so you don’t miss any payments. Try to target paying back your loans in a shorter time frame than the standard 10 year terms especially if you get bonuses or are getting nice raises.

Consider community or two year colleges which can be cost effective, for those who wish to work while going to school or want an interim step.

Save Money In College

When in college, look for ways to save and make money. College students tend to be better budgeters and track spending based on having less money to spend. As students living in a close environment, you are sharing similar tight money circumstances over the four years at school. College students eat ramen noodles, take public transportation and enjoy more experiences.

Keeping up with the Jones comes later on, after you get your first job and start making money. Try to remember your frugal days at college. Resist lifestyle inflation by having  good financial habits.

Understand Your Company Benefits Plan

Whether you are working at your first job or at the same firm for years, review your company benefits package. What may not have been of interest to a 20 plus year old, may be desirable now. Companies are increasingly adding to their compensation plans that can be customized for your life stage. Among the standard benefits plans are retirement plans, health care insurance, tuition reimbursement, insurance, flexible spending accounts (FSAs) or health savings accounts, paid vacation, sick time, medical or family leave.

You may need to add more coverage to parts of your benefits offerings such as life insurance. Typically, companies provide you with a starter package which will likely not be enough protection for a growing family. Company plans vary and may be a good reason to choose between two competing offers.

How To Start Investing Early

You can only reduce spending and save so much. Learning how to invest is the best way to outpace inflation, save money for college tuition and retirement, and accumulate wealth. According to a Gallup poll in 2019, 55% of Americans own stocks either individually, in mutual funds or in retirement accounts. This rate is below pre- 2008 recession levels of 62%.

Inflation refers to increases in prices resulting in reduced purchasing value of money. As prices go up say 2%, your money will get less units than it did in prior periods. Through  investing in stocks, you can better maintain your purchasing power. Stocks  tend to generate better returns (based on higher risks) than other securities, outrunning inflation. Stocks grow at a compound growth rate of 9% over the long term (over 90 years), though 2019 has been a banner year with S&P index, including dividends,  registering one of best gains since the 1990’s at roughly 30%.

Stock Market Games

Playing a simulated stock market game is a great way to learn how to invest and get familar with relevant terminology without losing real money. There are a number of free games  available and easy to set up that mirror realistic trading and investing with friends, family or on your own. Many of these sites have tutorials, videos and articles to educate you on the basics and provide strategic tips.

Start Investing With Small Amounts

Put small amounts  like $25-$50 per month into your investment account that you can afford to lose. That is, don’t invest your rent money. Starting small is a good way to get started as you gain a better understanding and confidence. Many large online brokers have lowered or eliminated commissions and initial minimum amounts designed to encourage small investors. Be aware that there may be management fees on your balances.

Buy Exchange Traded Funds or ETFs  which do not have minimum requirements, are available at low fees and provide you with diversification. Most mutual funds require a minimum initial investment between $500-$3000 and higher. For beginner investors, that may be a steep amount. You have many choices of ETFs and low cost index funds. Start with Vanguard’s offerings.

Some Investing Basics

When you begin buying stocks, have a long term outlook. Although commissions are reduced, you can realize better returns with long term investing (over a year or more) rather than trading. There are tax benefits when holding a stock more than one year by way of capital gains and capital losses.

Have some discipline strategies in place for when you should sell or exit a position. If you have a stock that is up 20%-25%, it is a good idea to sell a portion of your gains. A useful rule is “bulls make money, bears make money and pigs get slaughtered.” That is, don’t get too greedy.

Another good rule when investing in stocks, courtesy of Investor’s Business Daily (a great resource!) is to always sell a stock if falls 7%-8% below what you paid for it. The premise of this principle is that by selling at that level you are capping your downside potential. It has worked well for me. On the other hand, another strategy investors use is to buy small portions of stock initially and then buy opportunistically at lower prices to reduce cost basis of your stock.

I consider that all investors, including beginners, should have a basic knowledge about the Federal Reserve and their impact on interest rates, money supply and financial markets. We a have a primer on the Fed for those who want some insights.

Compound Growth And CAGR

One of the most important terms in finance to understand is compound growth. It can work against you when you are referring to a long term debt such as a fixed mortgage when you are paying interest on interest which increases your loan. Here, when investing, it can work in your favor when you are referring to the growth rate of your investment in your portfolio. Keep in mind, while stocks have above average returns, they have down years which can be sharp like during the 2008 recession.

The most accurate way to calculate returns is the compound annual growth rate or CAGR which smooths out returns over a longer period of time. Investors like to compare CAGR S&P 500 index (commonly referred to as “the market”) to their savings account or to that of a specific mutual fund or to their portfolio. This how investors can see how they are doing relative to the market. The formula for the compound annual growth is here. Thankfully, there are CAGR calculators to use.

If you are investing without a financial adviser, you need to do research. There are a lot of publicly available resources available to learn about the company and its businesses, its industry and its risks. You need to understand trends in the market. Expect stocks to be volatile and they may bounce back quickly after a fall in the market. BLOG POST

Diversification And Asset Allocation

Diversification of your stock holdings is important. Don’t put all your money in one stock or one sector of the industry. That is a recipe for greater losses. The best way to achieve diversification is through buying ETFs or low cost index funds which contain baskets of different securities. You want to minimize your risk as best as possible based on your own tolerance.

Not only do you want to have different stocks in your portfolio, you should aim to have different types of investments. This can include money markets, Treasury, municipal and corporate bonds, foreign securities and real estate. You can use ETFs and mutual funds to gain diversification within each asset class. Asset allocation is a means of diversifying these different investments. How you allocate your assets is based on your preference, age and lifestyle. Use a financial advisor or planner to talk through your planning and goals.

How To Choose A Financial Advisor

Meet with a financial planner or advisor to review your financial goals periodically and discuss how to achieve them. A financial planner does much more than selling you securities. Look for someone with a CFP designation. However, that should not be your only criteria. You should feel comfortable with this person and/or team.They should understand your household’s financial situation, lifestyle and your plans regarding children and college, career, retirement, insurance needs and estate planning. Here is how to choose a financial advisor.

Protect Your Family Financially

We love our families. Take proper steps to financially protect them. Providing financial security–besides making a good income, saving, paying off debt and investing– requires protective measures like buying essential insurance coverage and estate planning.

Insurance Coverage Is Essential

Your employer may provide you with some types of insurance as part of your benefits, including life, health and disability but often it is not enough. As your family grows you need to make sure you are adequately covered to take care of your family’s essential living costs and their future plans, including college. There are 8 types of insurance that you need to have proper coverage: auto, homeowners, renters, life,  disability, health, long term care, and  umbrella insurance.

Estate Planning

Prepare for the worst for your family’s sake. There are a number of steps to take for estate planning. Create a will and/or trust according to your wishes. You also need advanced medical directives and a living will as essential documents for your loved ones and health care providers.  Most people resist dealing with estate planning as a difficult topic. However, not dealing with it may leave your loved ones in a confused state during their time of grief. Think of estate planning as a plan of action that you are taking for your family.

Review And Update Your Designated Beneficiaries

An effective and efficient way to distribute our assets is by designating our beneficiaries outside the will through our bank accounts, insurance policies and such. Many of our assets are nonprobate property. As such, they are transferable to survivors by contract immediately upon death rather than under a will.

The advantages of contract transfer over the distribution of assets by a will are less time, cost and more privacy. Transfers to loved ones by a will could take 6 months-1 year if probate is not required. If contested in court, the distribution could take longer. Even worse, your will would be made public through court documents. At a minimum, be aware of the need to have designated beneficiaries for all assets. Review and update your beneficiaries based on life events such as having a new child or other necessary changes.

Invest In Yourself

Education does not end at the schoolhouse door. Embrace learning so you can master skills that are valuable to you. Read more and acquire knowledge so that you are competitive at work, have wider and diverse social circles and can teach others. Avoid procrastination which can be costly and cause unnecessary mistakes. Use time as the precious resource it is so that you may live everyday to its fullest.

Final Thoughts

To achieve financial success in life you need to have a game plan combined with good financial habits. Measure how you are doing with a review of your budget and net worth. They are key documents that help pinpoint where there may be some improvements needed. Financial planning should be discussed among family members. Calculate certain financial ratios, benchmarking your financial health. These ratios are tools designed to evaluate financial strength. As a companion to this article, see our post: 18 Financial Ratios You Should Know.

We hope this has been helpful to you. Thank you for reading and share it if you found it as valuable. Let us know what your thoughts are! Wishing you much prosperity and health in the coming year!