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Author Archives: LarsonFinancial

Sell or Rent? Making the Most of Your Prior Home

If you’ve made the call to move—whether you’re upgrading, downsizing or simply looking for a change—you need to do something with your previous home. But what do you do? Sell it? Rent it as an income property? Keep it as a second home? In this article, I’m going to try to give you answers to some common questions that may come up when it’s time to move.

  • I’m planning to move to a different area. Should I sell my home or rent it?
    • Generally speaking, I recommend you sell unless doing so would cause you to take a significant loss that could be mitigated by holding the property for a period of time or you want to be a landlord and own a home in an area where you do not live. Real estate is a great investment; however, there are other ways to own real estate that alleviate you of the responsibility of day-to-day management.
  • What are some unique challenges that can accompany renting vs. selling a property?
    • Being a landlord is not for everyone. There are various challenges, including advertising for tenants, handling leases and deposits (In some states interest must be paid on a rental deposit) and the big one, especially if you live far from the property; maintenance. It is advisable to hire a property management firm if the owner does not want to handle these responsibilities; however, it comes at a cost. Another potential negative to renting your property; the tenants are unlikely to treat your former home with the same care you would.
  • Why would renting be advantageous?
    • If you own a property in an area with significant appreciation, renting your property can generate a significant gain long-term. And even in areas where appreciation isn’t significant, if you can generate enough rental income to cover you costs, someone else is paying off your asset for you.

Finally, do not be afraid to take a loss on a property to get out from underneath a mortgage, especially if you do not want to be a landlord or if holding the property as a rental makes it difficult or impossible to obtain a mortgage on a property where you are living next.

The debt on the rental property impacts your debt-to-income ratio, a factor in obtaining a mortgage and banks in general do not consider the rental income in total or at all in their calculation of your ability to pay both mortgages.

It is important to remember that three months—or worse, a year—without a tenant can dramatically increase your monthly expenses and impact your own financial independence goals.

Any plans to move? Are you considering an income property? We can talk through it together and determine how best to put your previous home to use.

Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.
The views and opinions expressed in this article are those of the author, are for educational purposes only and do not necessarily reflect the official policy or position of Larson Financial Group, LLC or any of its affiliates.
Not all Related Services are offered directly from Larson Financial Group, LLC or Larson Financial Securities, LLC but may be available through the Doctors Only network of companies.

Strategies to Protect Your Assets Against a Lawsuit

Medical malpractice insurance is something you’ll need as a doctor, whether it comes from your employer or you buy a policy yourself. When it comes to the specifics of which approach to take, there are multiple factors to consider.

One such consideration is something called “damage caps.” There are a few select states that have place a cap on all forms of damages in medical malpractice cases, including compensation for the costs of long-term medical care and disability. So it would make sense to only cover yourself up to the cap amount with your policy, right?

Not necessarily. Most states that have caps in place only cap non-economic damages, such as pain and suffering. There is rarely a cap on economic damages, so you’ll still likely want to cover yourself for more than the cap amount.

In terms of policy, there are two main forms: Occurrence and Claims Made policies. Both have advantages in different situations.

Claims Made policies are terrific for situations where there is a lot of turnover, or uncertainty as to how long the policy will be needed. Occurrence policies can be beneficial with long-term employees.

You have a vested interest in your medical malpractice coverage and you should know the carrier and coverage limits that are in place, regardless of who pays the premiums for the policy (you or your employer). To figure out what levels of coverage you need, talk to your insurance broker to create a plan that fits your needs.

Lastly, there are ways to protect yourself outside of medical malpractice insurance. Continually work to improve your communication skills and bedside manner. A healthy relationship between providers and patients and managing expectations go a long way to reduce blame when something goes wrong.

Is your medical malpractice coverage in a good spot? We can talk through your strategy together.

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.
 
Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.
 
Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.
 
Professional liability services offered through MedInsure Group, LLC, a Larson Financial Group affiliated company.

The Importance of a Sound Asset Protection Strategy

Let’s say you’ve got your retirement strategy down. You have an idea of how much you’re saving, the ideal age you’re retiring, everything is planned out. Suddenly, you are involved in a fender-bender and suddenly you’re looking at a lawsuit. Are your assets protected, or is there a gap in your insurance coverage?

Accidents can start as small as swerving to avoid a squirrel crossing the road and quickly build to a lot of damage if other cars or pedestrians are involved. In these cases, insurance companies and attorneys could target you, as doctors typically have a variety of assets, whether it’s a savings account, equity in your home or future earning ability.

Regardless of whether you’re covered or not, don’t fall victim to a common mistake: letting your coverage lapse or not updating your plan. As you go through changes in income growth as you progress in your career, make sure you make it a priority to re-evaluate your coverage as you go.

Another good idea is to talk to an agent to discuss total coverage, rather than shopping for coverage at a policy level. Consolidating your coverage with one company can help keep your support consistent and could even save you money.

If you’re worried about your coverage, or need a place to start, consider having a chat with your insurance agent. Talking through your lifestyle and assets can help your agent find the right coverage for you to keep you protected from a broader range of threats. You can also talk to your agent to easily change or update your policies, should your needs change.

Are there gaps in your insurance coverage?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.

Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

Professional liability services offered through MedInsure Group, LLC, a Larson Financial Group affiliated company.

Are You Properly Managing Your Debt?

Doctors can end up in unique situations regarding their professional lives. They often enter their high-earning years later in their career than other professions and can have much higher student loan debts. Plus, the cost of opening a practice, along with other expenses like homes or vehicles, can really add up to an intimidating amount of debt. The key to debt management is being proactive.

Planning for the debt that you know is incoming, like student loans, can help you get a start on your savings. Something to consider, though, is exactly how concerned are you with debt?

If debt is causing you a lot of stress or keeping you up at night, you may want to pay it down as quickly as possible. If you’re a little more comfortable with the debt you have, you can work with a financial professional to determine the strategy that works best for you.

A common answer to managing debt is to keep a budget. Budgets can be a great way to track your spending and make sure you have enough set aside to pay your bills and cover other necessary expenses each month. However, budgets may not work for everyone and if you have a busy schedule, setting aside time to balance and monitor your budget may be more difficult than creating the budget itself.

For a doctor in that position, a “pay yourself first” approach may be a better alternative. With this method, you set aside an amount of your income—either a percent or flat dollar amount—to save or invest each month. That leaves you free to spend the remainder guilt-free, as you’ve already put money aside to cover yourself.

Another unique angle doctors have is taking advantage of Public Service Loan Forgiveness (PSLF), which is a strategy whereby your student loan debt could be forgiven a period of working for a government or not-for-profit organization.

There are some caveats to this system. There have been efforts to defund or eliminate it completely, though they’ve been unsuccessful so far. If you’re a doctor pursuing PSLF, it could benefit you to begin or continue saving like the program may not exist in the future. Saving as though you’ll have to pay will help you avoid being blindsided, should something happen to the program.

Whether you’re a debt-managing wizard, you need some help or you’re unsure of the resources available to you, we can talk through your financial plan and make sure you’re on track.

Do you want a second opinion on your debt management strategy?

Advisory services offered through Larson Financial Group, LLC, a Registered Investment Advisor.

Securities offered through Larson Financial Securities, LLC, member FINRA/SIPC.

Larson Financial Group, LLC, Larson Financial Securities, LLC and their representatives do not provide legal or tax advice or services. Please consult the appropriate professional regarding your legal or tax planning needs.

The Top 7 Questions for an Effective Beneficiary Audit

By Denise Appleby, APA, CISP, CRC, CRPS, CRSP

The question of who inherits your assets becomes more important as you age. A good beneficiary audit can reassure you that the right people will inherit the right accounts and that the applicable tax and investment issues are carefully considered. When was the last time you did a beneficiary audit for your retirement accounts? If you don’t remember, have never done one, or haven’t done one in more than a year, now might be a good time. A beneficiary audit is one of the most critical check-up processes for IRAs and other retirement accounts, as it ensures that people you want to inherit your retirement accounts actually do. A good beneficiary audit can reassure you that your “designated beneficiaries” (i.e., individuals or qualified trusts named on the IRA agreement or employer plan document) avoid the limited distribution options available to “nondesignated” beneficiaries (i.e., non-person entities or beneficiaries not named on the form). The effectiveness of a beneficiary audit largely depends on the questions that are posed to you – the account owner.

Ask the Right Questions

Sometimes it helps to use a Beneficiary Audit Form so you can easily identify your accounts and beneficiaries: Medical School Loan Repayment

Source: Denise Appleby, APA, CISP, CRC, CRPS, CRSP

But identifying the accounts is only the beginning. This is also a good time to make any changes you’ve been considering. Ask yourself these questions:

1. Have you completed a beneficiary designation form for all of your retirement accounts?

Usually, you, as the account owner, would provide the beneficiary information when you established the IRA or retirement account. But there are other factors to consider:
  • Some IRA owners do not complete the beneficiary designation section of the IRA agreement because they intend to complete a separate beneficiary designation form at a later date.
  • Some IRA owners mistakenly think that when they transfer an IRA to another IRA, the beneficiary designation carries over to the new IRA.
  • When it comes to employer-sponsored retirement plans (qualified plans, 403(b) plans, and governmental 457(b) plans), the beneficiary designation is not part of the plan establishment or account-opening process. Instead, participants are usually provided with a “benefits package,” which includes forms and instructions for designating the beneficiaries of their retirement accounts and insurance policies.
If a beneficiary designation form is not completed for a retirement account, the default provisions of the IRA agreement or employer plan document apply. The default provisions might not be consistent with your objectives and could adversely affect your beneficiary’s distribution options.

2. When was the last time you reviewed/updated your beneficiary forms?

Beneficiary designation forms should be reviewed often. The ideal frequency will vary based on your needs. For some, an annual review may be necessary, while a review every three years could be enough for others. You should also review your beneficiary forms whenever there is a life event that could affect your beneficiaries. This includes marriages, divorces, new family additions (births and adoptions), and deaths. Important note about divorce: Some plan documents include provisions that automatically remove a former spouse from the status of beneficiary when the divorce is effective. Some do not. A new beneficiary form should be completed regardless of whether you want your former spouse to remain as beneficiary of the account. Completing a new beneficiary form will ensure your wishes are clear, which could help prevent friction among your heirs.

3. Do all of your retirement accounts have designated beneficiaries?

While every designated beneficiary is a beneficiary, not every beneficiary is a designated beneficiary. This distinction is important for purposes of determining the life expectancy over which distributions from an inherited account can be stretched. An account has a designated beneficiary if the primary beneficiary is a person or a qualified trust named on the form. This determination is made on Sept. 30 of the year that follows the year of your death. If only individuals and/or qualified trusts are beneficiaries on the Sept. 30 deadline, the account is treated as having a designated beneficiary. If a nonperson, such as an estate, charity, or nonqualified trust, remains as a primary beneficiary on the Sept. 30 deadline, the account is treated as not having a designated beneficiary. If a retirement account does not have a designated beneficiary, it could shorten the period over which distributions from the retirement account can be stretched. The following is a summary of the distribution options available to the various types of beneficiaries: Medical School Loan Repayment

Source: Denise Appleby, APA, CISP, CRC, CRPS, CRSP

An individual can be a designated beneficiary only if she is a beneficiary on record at the time of your death or becomes a beneficiary under the default provisions of the plan document.

4. Have you named contingent beneficiaries for all of your retirement accounts?

A contingent beneficiary steps into the role of primary beneficiary in the event the primary beneficiary dies before you do, or if the primary beneficiary properly disclaims the retirement account. If the primary beneficiary disclaims only a portion of the account, the contingent beneficiary becomes the primary beneficiary for that amount. Generally, a contingent beneficiary becomes a primary beneficiary only if there are no remaining primary beneficiaries. If there are two primary beneficiaries and one dies before you or disclaims his share, the remaining primary beneficiary usually becomes the primary beneficiary for that share. If a retirement account does not have a contingent beneficiary and the primary beneficiary predeceases the account or disclaims the account, the default provisions of the governing plan document apply.

5. Are the default beneficiary provisions for your retirement accounts consistent with your objectives?

Ideally, all retirement accounts would have primary and contingent beneficiaries when the account owners die. But, in the real world, beneficiaries are often determined under the default provisions of retirement accounts. The default provision would also apply if all primary and contingent beneficiaries properly disclaim their share of the account. The default provisions should be considered as part of the beneficiary audit because they activate when “what if” scenarios become “what is.” For example:
  • What if you did not get around to replacing primary beneficiaries who died and you are not survived by any other named primary or contingent beneficiaries?
  • What if your account is part of a mass transfer, under which the new beneficiary’s forms are mailed to you, but you missed a line or forgot to return them to the custodian/plan sponsor?
  • What if the beneficiary designation form is determined to be invalid?
For these and other what-if scenarios, consider whether the default beneficiary provisions are acceptable. They include, but are not limited to:
  • Surviving spouse. If none, the surviving children
  • Per stirpes. If none, the decedent’s estate
  • Surviving spouse. If none, the surviving children; if none, the decedent’s estate
  • Surviving children. If none, the decedent’s estate
  • Decedent’s estate.
For IRA owners with multiple options, the default beneficiary provisions should be one of the factors that determine which IRA is chosen. Because employer-sponsored retirement plans are governed by one plan document, there is no flexibility. It is even more critical, therefore, that beneficiary forms for these accounts are updated when needed.

6. If you named a trust as your beneficiary, is the trust qualified?

Generally, only an individual can be a designated beneficiary. An exception applies to a trust, if the trust is qualified. Under this exception, the life expectancy of the oldest beneficiary of the trust is used for required minimum distribution (RMD) purposes, including calculating RMD amounts for beneficiaries. The following is a list of the requirements:
  • The trust must be a valid trust under state law or one that would be valid if that there is no corpus.
  • The trust must be irrevocable or become irrevocable upon the death of the account owner.
  • The beneficiaries of the trust who are beneficiaries with respect to the trust’s interest in the retirement account are identifiable.
  • A copy of the trust instrument is provided to the administrator of the retirement plan (IRA custodian), and the trustee agrees that if the trust instrument is amended at any time in the future, the account owner will, in a reasonable time, give the IRA custodian a copy of each amendment. If certain requirements are met, a list of trust beneficiaries can be given instead
  • If the trust is not qualified, the account is treated as not having a designated beneficiary.

    7. Does the beneficiary form include anything that could result in it being invalid?

    A seemingly innocuous mistake can, at worst, invalidate a beneficiary designation form. At best, it can cause frustration for your beneficiaries and other involved parties. These mistakes include, but are not limited to:
    • Percentages do not add up to 100. Generally, the percentage allocated to each beneficiary must be indicated on the beneficiary form. Some documents default to a pro-rata share if no percentages are indicated. However, the matter gets complicated if percentages are provided and they do not equal 100.
    • The form is not signed.
    • Absence of spousal consent. Spousal consent is required if a married participant designates someone other or in addition to his spouse as primary beneficiary for a retirement account under certain employer-sponsored plans, and for some IRAs where the owner’s residence is in a community or marital property state.
    • A witness is a beneficiary.
    Some beneficiary forms and governing plan documents include language to indicate whether and what type of mistakes will result in invalidation. Generally, an invalid beneficiary form will result in the default provisions of the IRA agreement being applied. Ideally, the beneficiary form should be reviewed annually, with steps taken to ensure that your beneficiaries inherit what you intended. An annual beneficiary review with your financial advisor can ensure your heirs are taken care of as you had planned. Denise Appleby runs a firm that provides a wide range of retirement products and services to financial, tax, and legal professionals. She also founded the consumer education website: retirementdictionary.com. Denise Appleby is not affiliated with Larson Financial Group. IMPORTANT NOTICE: This reprint is provided exclusively for use by the licensee, including for client education, and is subject to applicable copyright laws. Unauthorized use, reproduction or distribution of this material is a violation of federal law and punishable by civil and criminal penalty. This material is furnished “as is” without warranty of any kind. Its accuracy and completeness is not guaranteed and all warranties expressed or implied are hereby excluded. The opinions expressed by featured authors are their own and may not accurately reflect those of Larson Financial Group. They do not necessarily imply any affiliations, sponsorships, endorsements or representations whatsoever by us regarding third-parties. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice. This material is not to be construed as an offer to buy or sell securities or other products and services of Larson Financial Group or its affiliates. Before taking action on a financial plan, please review any offering documents available, including prospectus and consult an appropriate investment professional regarding your specific needs. Advisory Services offered through Larson Financial Group, LLC, a Registered Investment Advisor. Securities offered through Larson Financial Securities, LLC, Member FINRA/SIPC.

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