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Couple has to-do list after financial planning meeting

Updated: May 3, 2013 12:14PM

Originally published: January 19, 2003

How does the financial planning process work in real life?

Joe and Terri Long were delighted to volunteer. I met Terri when she won a lunch with me at RL Restaurant at a charity auction. During that lunch, we talked about their rather complicated financial situation.

Joe, 49 and a former banker, was fulfilling his dream of starting a new business in the residential construction industry.

Terri, 42 and a managing director of a consulting firm, once worked at the same bank. Both owned significant amounts of bank stock and stock options, as well as retirement rollover assets. Obviously, taxes and asset allocation would be big considerations in their investment decisions. And the uncertainty of Joe’s future earnings made the outlook even more cloudy.

The Longs have two young children, and they support Joe’s college-age daughter from a previous marriage. That means they need an estate plan to cover a lot of contingencies.

Terri assured me they did have an estate plan and insurance, but she said she wasn’t quite comfortable that she understood all the details or that they had enough insurance.

And so an idea was born. I would introduce her to Bruce Weininger, head of the personal financial planning practice for Deloitte & Touche in the Midwest, in return for the Longs’ agreement to allow me to relay their story, minus a few personal details, to Sun-Times readers.

It’s fair to say the Long family assets fall below the minimum $5 million that Weininger usually handles, but he put his full team to work on it. A meeting was set up to go over the Longs’ goals and objectives. Then, Liz Rosenthal, a senior manager, did much of the actual number crunching and sat in on our meeting last fall to present the findings.

The advice was separated into categories, but Weininger pointed out that the key to a successful planning process is to coordinate each aspect of finances:

Retirement and cash flow planning: Several retirement scenarios were presented, including the amount of capital they would need to retire when Joe reaches age 60.

Even with the most conservative investments, as well as some planned additional savings, Weininger projected an 80 percent to 89 percent probability of reaching their retirement goals.

Investments: Weininger helped the Longs create a target asset allocation and a plan for future changes in those targets. He pointed out that targets are reconsidered for regular planning clients as part of an annual update.

Weininger also noted that they had way too many mutual funds in their retirement plans--about 25 in all.

By rolling over those funds into IRA accounts, the Longs had an opportunity to choose fewer, better-performing funds with lower fees. He provided a list of specific alternatives. (Because Deloitte is compensated by fees, not commissions, all the funds were no-load, no-commission mutual funds.)

Company stock: Diversification was imperative. But selling would involve paying taxes on gains.

Instead, Weininger suggested they gift some stock to a charitable gift fund offered by Fidelity or Vanguard [see my column of Dec. 26], thus avoiding taxes and funding future charitable giving.

Estate planning: Although the Longs had a current estate plan, Weininger provided a long list of improvements. There were tax opportunities as well as flexibility issues.

Some assets needed to be retitled to make sure Joe and Terri each had enough separate assets to fund their credit shelter trusts. And, in a subject dear to my own heart, Weininger pointed out that there was no reason for their documents to contain restrictions on how the surviving spouse (typically the wife) could use the assets in the marital trust. It’s a restriction routinely written into documents by estate planning attorneys--and it can have uncomfortable consequences later in life.

Life insurance: Surprise. Weininger determined that the Longs have too much life insurance! I wonder how their insurance agent felt about that analysis.

Weininger suggested they look into both disability and long-term care insurance, as well as an umbrella liability policy, excess major medical coverage, and small-business liability insurance for Joe’s new business.

The Longs looked relieved after the meeting, which took place in mid-October, and vowed to take action. So what are the results?

I talked to Joe and Terri this month. Scorecard: one mission accomplished, many left to do.

They did set up an account in the Vanguard Charitable Endowment Program fund and made a contribution by year-end so they could get the deduction on their 2002 tax return. But the Longs have yet to redo sections of their estate plan and are still mulling over their investment options.

Says Joe: “The problem is sitting down and doing it. Other things keep getting in the way!”

Adds Terri: “I work a 70-hour week and have two little kids. And then the holidays came along. It’s my New Year’s resolution to check off everything on that to-do list Bruce gave us.”

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