Don’t Forget Beneficiary Designations With Valerie Hogan

What's most important to you when it comes to choosing your financial advisor? Someone who's aligned with your biblical values. How about someone who will take the time to explain your options? Certified Kingdom Advisors are professionals who meet high standards in competence and integrity and have been trained to offer biblical financial advice.

To find a Certified Kingdom Advisor in your area, visit faithfi.com and click Find a CKA. A will is the usual tool for passing assets onto your heirs when you die. But for some things, you don't need a will at all.

Hi, I'm Rob West. It's true. You can ensure that certain assets go straight to your heirs without passing through probate. Valerie Hogan joins us today with a crash course on beneficiary designations and why you want to use them. Then it's onto your calls at 800-525-7000.

That's 800-525-7000. This is faith and finance, biblical wisdom for your financial decisions. Well our guest, Valerie Hogan, is an attorney, a Certified Financial Planner, and a member of Kingdom Advisors, so she has all the bases covered. Valerie, great to have you back. Thanks so much for having me, Rob. Absolutely.

Valerie, let's just dive right in. Why are beneficiary designations important? Well, very few things in estate planning are quick, easy, and free, so this is one of the very few that we can actually say that about. Using a beneficiary designation, believe it or not, is an easy way to transfer accounts and assets and even insurance benefits when you pass, but they're important to keep up to date and they take priority over or transfer before or outside of the estate planning documents like a will and a trust. They do skip probate, but they do also remain private like a trust would.

Yeah, and that's a really important distinction. Now what are some of the keys to remember about designating beneficiaries? I think the first one is where you look to do these things. You're going to look at all kinds of accounts like your checking account, savings account, maybe IRA-type assets, 401Ks, 403Bs, and even life insurance policies, so you'll want to make sure you look at all these types of accounts that allow making a beneficiary designation. Many times you'll find them by being able to log into that account and look for, can I make a beneficiary designation, and many times you'll even be able to change that or add it online. So you're going to want to name primary and contingent beneficiaries and you're going to want to keep these things updated whenever there's a birth, death, marriages, divorces. You'll want to read the fine print.

Don't just fill in names. You're going to want to see if you're making a primary beneficiary designation or a contingent beneficiary designation in that slot. Then you want to coordinate that with your will or trust. You want to be aware of naming individual beneficiaries for particular assets because those accounts could grow unevenly. You don't want to name your estate necessarily as the beneficiary. That could require the account to go through probate.

You're going to want to check on that. Many times it's efficient to name it as a successor beneficiary or contingent beneficiary. You're going to want to consult your attorney or CPA before naming that trust as beneficiary.

You want to understand what's going to happen with the tax implications. Now Valerie, you mentioned that assets may grow disproportionately and that's a key point here because if we name a beneficiary and one asset grows quicker than another, we may no longer be honoring our wishes as to how we want our estate distributed. Is that right? Yes. For example, if you had that designated, you have, for example, three children and you named one third, one third, one third, or maybe a fourth to charity and one fourth to each of the rest of the children, but you start naming this account for one and as of this time they're all even, those could grow very differently if one has, let's say a public stock in it versus maybe bonds or is more like a savings type account.

One could grow a whole lot bigger and so if your wishes were to divide that up evenly, it may not end up that way in the end. Yeah, which is why to coordinate with your overall estate plan as well as to keep those updated. Now, is there ever a reason Valerie, not to designate beneficiaries?

I just did a simple answer, no, I don't believe there ever is a good reason to do that because that's going to leave this open to interpretation and it could be a bit confusing and it's going to let someone else decide. Sometimes that would be the courts. At the very least, you would want to point that toward your documents.

Ideally, you'd like to name a person. Well, that makes a lot of sense and I expect the biggest mistake here is just setting it and forget it, so maybe one more time we'll mention keep these updated. Valerie, this was so helpful. Thanks for that crash course on beneficiary designations. We appreciate your time. Thank you for having me.

That's Valerie Hogan, attorney, CFP, and member of Kingdom Advisors. Your calls are next. The number, 800-525-7000.

That's 800-525-7000. I'm Rob West and we'll be right back. Absolutely free. We know you've learned to be suspicious of those words, but really, you can get biblical financial wisdom delivered to your inbox each week absolutely free. Articles, videos, podcasts, and special offers on biblical resources. Nearly 60,000 people receive our free weekly wisdom email and you can too. Get your free Faith Buy account by going to faithbuy.com and click sign up to begin receiving weekly wisdom in your inbox. Have you downloaded the Faith Buy app yet? You need to do that today because this is going to make your life easier. Yes, you can manage your money through the in-app envelope feature, but also plan out future goals. I want to buy a house in five years and I'm on track to do that.

Here's also what I like. You can connect with people around the country. It's like social media, but better. Ask a question, get an answer, and share what you're learning about money and investing. So why don't you grab your phone right now and download the Faith Buy app? You're listening to Faith and Finance, where we talk about how we handle God's resources.

How are you using God's resources? We're talking about it and the lines are open to take your calls and questions. 800-525-7000 is the number to call. Please head to Tennessee K. You'll be our first caller.

Go right ahead. Thank you for taking my call. My question is about the tax lien option. If someone purchases that property and then the person that's originally responsible for that property and they have a year to get it back and they don't pay it, what happens to that mortgage? Was the person who acquired the tax lien through the auction, would they be responsible for the mortgage or they just own it flat out? You're responsible for any liens on the house when you purchase a home. So you would have to get, of course, tax advice and legal advice, depending on your specific situation.

But that tax lien imposed on real estate or personal property after the owner fails to pay is something that the new owner will be responsible for. So something you need to be aware of whenever you're purchasing a house. Is this something you've done or are considering doing? No, considering, but when I say considering, it's like in the newborn stages. I recently heard about it and I was just curious about it. Okay.

Yeah, very good. So definitely something you would want to check into. You can buy houses that owe taxes, but it's not advisable. So you need to be really careful there if there is a lien on that property as you're considering that.

And of course, that's where title insurance comes in, in case there's a lien that's undisclosed or you don't know about. But if you do know about it, you certainly want to plan for that in advance. Thanks for your call, Kay. Let's head to Indiana. Winnie, thanks for calling today.

How can I help? Thanks for taking my call. My husband and I are retired. We both work part-time, but we have about $200,000 in retirement. And I'm wondering, I would like to use some of that money while I'm still alive and enjoy it with my family. So I would like to take like maybe $10,000 out a year and spend that on a vacation for my family, grandkids, and then my husband to use part of that money for vacation for just us. And I'm wondering, am I making a smart decision or not?

Yeah. Well, I certainly appreciate that. Money is a tool, and part of that tool is for us to enjoy it and build memories with our families.

So there's nothing wrong with taking a vacation. At the same time, we want to use it to save for the future and provide and even to give. And so we've got these competing priorities that we have to navigate. And I think that's one of the challenges of being a steward, which is great.

As we go before the Lord and we say, Lord, what would you have me to do? But let's talk through this for a second. So you said you have $200,000. What is the source of these funds, Winnie? They're from our retirement.

We got them like some with, we put money aside and then also our employers matched it. Okay. So is this current 401k? Okay. And then what is your age?

If you don't mind me asking. We're both 66. Okay. And so you're both fully retired at this point? We both are part time and we make about $35,000 between the two of us. Are you taking social security yet?

Yes, we are. Okay. Got it. And the 35,000 plus social security, does that just cover your bills or do you have something left over at the end of the month? We probably have three or $400 extra at the end of the month. Okay.

Got it. So what about when you, let's say at some point down the road, you guys are unable to work for pay. What other assets do you have besides the 200,000 and 401ks, anything? We have a house that has a small mortgage on it and we recently got it. A realtor friend came by and told us how much it would be worth.

So if we sold it, we're expecting clear about $100,000. Okay. And then do you have what I would call an emergency fund?

Do you have some liquid savings? No. Okay. All right.

Yeah. And so I would just be careful here in the sense that this 200,000 is a great nest egg. It's a significant sum of money.

But it's really all you've got other than your home. Right now you're in a great spot because you've got three or $400 extra per month because you're working part time. But let's say that part time where income were to go away, one of you or both of you are no longer able to work or whatever it might be for health reasons or otherwise, you'd be really tight because I would typically advise somebody in their retirement years to only withdraw about 4% a year.

So 4% a year on 200,000 is $8,000. So that's almost that 10,000 that you said you'd love to set aside to be able to enjoy. And so perhaps you say for the next few years, we are going to take that 8,000 and just enjoy it. This is a season of life where we're healthy. We've got things we want to do.

We want to travel and that's great. But I think the question is just given the fact that you don't have any emergency reserves and in this season of life, I'd love for you to have at least six months worth of emergency reserves. So if you're living on 4,000 a month, that's $25,000 that I'd love for you to have in savings.

You don't have that. So if something comes out of the left field unexpectedly, you don't have anything to fall back on apart from withdrawing from your 401k. So I would just be a little careful there because it seems like you guys wanted to retire a little bit earlier and move to part time pay.

That's fine. I mean, that's your call, but we don't have a lot in the way of assets and we don't have anything in the way of liquid assets that don't generate a taxable event when we withdraw them. So I guess for that reason, I would just say go really slow and let's try, especially while you all are still working, let's try to limit your lifestyle in such a way that you really can sock some money away in savings to get up to that goal of $15,000 to $25,000 in emergency reserves as quick as you can because by the time you all fully retire, whenever that comes, and that's something you'll have to pray through and think through, you definitely need that emergency reserve there that you can fall back on for the unexpected. And then every bit of that $200,000 is going to be important to be able to make up for any income that goes away when you stop working. And right now, if you all stop working tomorrow, you draw that $200,000 down.

If the Lord tarries and you're in good health and you live another 20 years, that $200,000 wouldn't last if you had to pull $40,000 a year out of it. Does that make sense? It totally makes sense, yes.

Yeah. So I think what would be good here, Winnie, is for you all to connect with an advisor and just do some retirement planning. I'm not trying to scare you in any way. I just want you to be thoughtful and when we're managing God's money, it's a combination of we want to be wise and faithful stewards and we want to trust the Lord as our provider and we want to set goals in light of our values as believers. And so where is God taking us and what is he doing in our life and how can we use money as a tool and enjoy it and provide and give it away and also save it to be appropriate, save it for that day where we need to rely on it. So I think by sitting with an advisor, doing some retirement planning and really thinking through that and actually looking at some projections and kind of running some scenarios would be really helpful and probably give you some peace of mind. And then the freedom, when you do spend, to know that you're doing it in light of the plan and not just wondering, well, I hope all this works out.

So I hope all that makes sense to you. The place I would go to connect with an advisor, Winnie, is our website. We recommend the certified Kingdom Advisor designation. So I'd interview a couple of CKAs there in Indiana and just say, can you do some retirement planning for me? And they would actually help you, you know, probably on an hourly basis or just for a fee, you know, help you do that planning to look at all sides of this. Just go to faithfi.com.

We'll be right back. As the leading advocate for the Christian financial industry, Kingdom Advisors serves the public by promoting the integration of a biblical worldview across every aspect of the financial services industry. And we serve a growing network of thousands of Christian financial professionals, equipping and empowering them to carry biblical financial wisdom to their clients, peers and community. For more information, visit kingdomadvisors.com.

That's kingdomadvisors.com. We are grateful for support from Praxis Mutual Funds. Praxis Mutual Funds has seven impact strategies that are designed to create positive real-world change. More information is available at praxismutualfunds.com. The fund's investment objectives, risks, charges and expenses are contained in the prospectus and summary prospectus. This and other information is available at praxismutualfunds.com. Investments involve risk. Principal loss is possible, Fourside Fund Services, LLC. Welcome back.

This is Faith and Finance. I'm Rob West. We're taking your calls today, 800-525-7000. That's 800-525-7000. To Cleveland we go.

Hi, Andrew. Go ahead. I'm in my full retirement age. I've started getting my Social Security and I'm continuing working full-time and I plan on working at least another year or so. Just wanted to know if the money that's taken out of my check for Social Security, will that affect my future of Social Security as far as the increase go or I only get the COLA? Yeah, so once you start taking it, the only two ways you can see an increase in that Social Security, one is the COLA, as you said, the cost of living adjustment. The second is continuing to work, exactly what you're doing. Now, the way your continued work would affect you in terms of increasing, it can't drop it, but it can increase it, is if your, well, your benefits are based on what's called your high 35. So your highest 35 years of contributions into the system is what determines what your Social Security benefit is, up to a limit. So if by you continuing to work and let's say the amount you're earning right now and the amount of FICA taxes you're paying in, let's say that eclipses one of the highest 35 years from your working years, then it would replace that one that was lower and that would result in you having an increase in your benefits. So you continuing to work does have the potential to replace one of those high 35 and therefore increase that benefit over and above the COLA. Okay, great. That's what I was wondering.

And I believe it would because I know going back to 35, you know, I wasn't making as much as I'm making. Yeah, exactly. Yeah. Yeah. That's the typical approach.

You know, when you were flipping burgers back in the day, you probably weren't making a whole lot. And so, you know, maybe now you're making a bit more. So exactly right. Great.

Thank you. And now how about, when does that go? I mean, how long does it take for that to kick in? You know, once they, you know, they replace one of those 35 years.

Yeah, they would, they would look at that annually. Annually. Okay. Okay.

Great. And once we're real quick, another question, um, I put some money on my 401k plan that I'm still putting into with my job. I'm currently working with, I left some in there, but I pulled out a couple hundred thousand out of there and that was back in May and I got a financial guy kind of handling for me and, you know, invested in whatever. And since May, I got a statement in September and I'm, I'm down about, about 10. And I was just wondering, is that, is that, is that a lot, I mean, since May from now, you know, a couple, a couple of 152, I think it's like two 50 altogether is what I got in working with.

Yeah. On a quarter of a million, you being down 10% is only 4%. And I realized 10,000 is not an insignificant sum of money, but it happens to be a period where it's just a really challenging environment for both stocks and bonds.

So I don't think you can really evaluate the performance based on this window of time. Keep in mind when we're investing, we invest based on a long time horizon and we build that portfolio based on goals and objectives and a risk tolerance. But we really should always have a minimum of 10 years. And the good news is even when you get to retirement, let's say the Lord Terry's, I mean, life expectancy it's for a 65 year old male is still another almost 20 years.

And a lot of folks are living a lot more than that. So even when you retire, you have a 20 or 30 year time horizon and that's the way to think about investing. That's how I would measure the performance of your advisor, not on a very small window of time, especially in a challenging stock market and bond market like we've been in.

So I would say as long as your allocation is right and you have a good relationship with your advisor, I'd stay the course, keep the long term perspective and take those short term movements with a grain of salt. Thanks for your call, Andrew. The Chattanooga. Hey, Jerry, go ahead. Next year I will turn 65 and I'm looking at how much I guess how much I can make in that.

I know that the sort of threshold is like $21,000 on how much can make before they limit how much you get being that we'll start drawing in, in May or June. How does that fit? And I guess the calendar a year. Hmm. Yeah.

Yeah. So if you take it over in any year that you earn above $21,240, they would start to reduce your benefit a dollar for every $2 you go above it, but you're going to get it back once you get to full retirement age. So that's just temporary. And then in the year that you turn full retirement age, that limit jumps up in the months leading up to full retirement age to 56,250. So those figures change every year, but they won't be too different in a couple of years. But again, those limits, even though it's going to temporarily reduce that benefit, once you get to full retirement age, they're going to calculate how much they withheld from you because you earned over the limit, the 21,240 and then the 56,000 in the year that you turn full retirement age. And then they're going to bump up your check accordingly until you've been fully repaid. So eventually you're going to get all that back.

So it's not really a whole lot of a consideration here. I hope that helps, Jerry. Let's head to Florida. Susan is driving. Susan, you be careful.

But how can I help you? Yes. We have a mortgage. It's an adjustable rate. I just wanted to know what's the wisest thing to do right now if we have to refinance or what can we do about it?

Yeah. Well, so typically, you know, at least historically before the last couple of years, we would have advised people against an adjustable rate mortgage simply because we had rates that were just so low, I mean, in the twos and threes. That's not the case now. Of course, we just crossed over to 8% now for the average 30-year mortgage. And so although over the last hundred years, that's not too bad, just given the last couple of decades, it's obviously significantly higher, you know, almost three times higher than where we've been. So you're actually in a decent spot right now because we think we're close to the top end of these mortgage rates. You know, I would think although it certainly could continue to tick up, we're probably not going much higher than we are now. And if you were to refinance now and try to lock it in a fixed rate, well, you'd take this adjustable rate, which has the ability to go back down, and you'd lock it in at these high, high interest rates, again, compared to the last 20 years. So I'd probably stick with what you have and look to potentially refinance when rates are, you know, half of what they are today or less, which is probably one to two years down the road. I think we're probably going to end the year somewhere in the fives. That's at least the best estimate from economists who think about this kind of stuff, although it could be higher than that in that, you know, five handle could get pushed out into 2025.

A lot of it just depends on how quickly we see the recession come on, how quickly this economy slows, and therefore inflation comes down, resulting in the Fed, Federal Reserve feeling like they can drop interest rates. So I think you should sit tight right now. I realize that that mortgage payment has been going up with this adjustable rate.

You're probably feeling the squeeze on that, but there's really not another alternative because refinancing isn't going to solve anything. Thanks for your call today. We appreciate you checking in with us. I hope you'll make plans to join us again next time for another edition of Faith and Finance. Faith and Finance is provided by Faithfi and listeners like you.