Quitclaim Deed – Beware of the Risks

Quitclaim Deed

What is a Quitclaim Deed?

A quitclaim deed is also called a non-warranty deed. And for good reason. For instance, when you sign or receive a quitclaim deed, there is no guarantee provided that the property title is clean and free from any liens or other ownership interests.

A quitclaim deed doesn’t even ensure that the person has the legal right to sell or transfer the property. Consequently, a quitclaim deed is the least safe form of title transfer, while a warranty deed is the safest.

When is a quitclaim deed most commonly used?

Most Common Uses and Risks of a Quitclaim Deed:

  • Taxes  
    • You transfer or add someone to your deed; you have gifted that portion of the ownership. You now must file a gift tax disclosure on your tax return.
    • If you transfer or add someone to your deed, and you die first, they are subject to capital gains tax on the difference between your original purchase price and the value at the time of your death.  
  • Family
    •  “My mother already transferred the house to me.” I can’t count the number of times I heard those words. If you quitclaim your deed to your children, and you no longer own your home. Meanwhile, they might have other ideas of where you might live one day.
    • Your home (actually their home now) is subject to a future divorce proceeding as an asset they own.
  • Insurance
    • Your homeowner’s policy must now list each owner as an “additional insured” or any future claims may be excluded from coverage. 

Joint Tenancy and Quitclaim Deeds

If two or more people purchase property and hold the title together, they are considered ”joint tenants.” Consequently, by law, the title passes to the surviving tenant. However, when the survivor dies, there must be a Probate proceeding to pass the title to another person, regardless if the survivor had a Will.

It is for this reason that a surviving parent might add one or more children to the deed by quitclaim. Interestingly, people often think it is a called “quick” claim deed. Certainly, it is quick, no question. However, the issues that can result are anything but quickly resolved.

You should use this type of deed with extreme caution. Therefore, unless you are transferring your ownership to your corporation or LLC or adding your spouse to the title, there are much better alternatives that avoid the liability, tax, insurance, and future ownership risks outlined above.

If you are selling or purchasing property, use a warranty deed. Further, if you wish to pass your property to your children or another person as your death, use an estate plan. In conclusion, if you want to avoid the above Probate and taxes, ensure your estate plan is a Living Trust.

Living Trusts

At the end of your life or incapacitation, they risk Probate if you have property, investments, or bank accounts in your name.

  • A Will = Probate. The rule is that no one can legally sign your name. Therefore, all assets in your name are subject to the Probate process, which averages 18 months and is costly.
  • A Living Trust avoids Probate.
  • Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
  • A Living Trust estate plan includes Health Care and Financial Power of Attorney documents. It also consists of a Last Will and Testament.
  • A Will is necessary for the guardianship of minor children. It also transfers assets in your name out of Probate.
  • A Living Trust contains a No Contest provision and beneficiary Asset Protection clauses.
Tom Tuohy
Tom Tuohy

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of the information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice about your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Please do not use this blog as legal advice, which turns on specific facts and laws in specific jurisdictions. No reader of this blog should act or refrain from acting based on any information included in, or accessible through, this blog without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the reader's state, country or other appropriate licensing jurisdiction.

Financial Agents Importance

Financial Health
Financials

Financial Agent for Power of Attorney

The Illinois Power of Attorney Act provides, in part, that every individual has the right to appoint an agent to make property, financial, personal, and health care decisions for that individual.

However, this right cannot be fully effective unless the principal empowers the agent to act throughout the principal's lifetime. This right includes, during periods of disability, with confidence that third parties will always honor the agent's authority.

There are two legal Power of Attorney (POA) documents, one for health care decisions and the other for financial decision-making.

Each has its importance, and everyone over 18 should have both of these documents. For another person you choose to be able to sign your name and handle your financial affairs legally, you need to sign a Power of Attorney for Property and name an Agent.

Financial Agents Power

Considering the authority you are granting an individual to sign your name and handle your financial transactions, careful consideration should be made in choosing the right person. Periodic review is essential to ensure that person is still appropriate and, of course, is still available.

Your agent will have a legal responsibility that provides checks and balances, called a fiduciary responsibility. However, your bank accounts can be emptied and your finances in shambles before you can enforce that fiduciary conduct. So, choose wisely, and update when necessary.

 Scope of Financial Agents Power

  • When: For the duration, you have a choice; your agent's power begins immediately or only upon your disability s determined by a physician. Most couples choose to have each spouse's power to start immediately for the convenience of use in the document if one spouse is unavailable or chooses not to handle the household finances. Or maybe one spouse can't make the closing of real estate, and the agent can use the POA and could not do so if it was only activated on disability.
  • How: The agent can use the POA for such financial transactions as:
    • Pay bills, borrowing transactions, and business operations. Banking, investing, insurance and annuities, and real estate transactions act as a Digital Fiduciary to access and manage online accounts.
    • Dealing with the IRS, Medicare, Medicaid, credit card companies, Social Security, VA, employment, and military benefits. Supplemental Needs Trusts and caregiver agreements.
    • Hire agents, accountants, lawyers, and financial advisors.
  • Why: You can only appoint an agent and sign the POA while you have your mental capacity. It is too late to do so if you are severely injured or if illness limits your capacity. Now you are subject to a full court proceeding to have a Legal Guardian appointed Even if you are married, having your spouse established and operating under the court's control for the property and investments you own together is required You do not want that to happen.

As you can see, there is no reason not to have a valid POA. There are numerous reasons why not having one can lead to financially disastrous consequences.

POA of Property and Health Care should be part of a Living Trust estate plan. Ho ever, you can also obtain them separately. You can change or revoke a POA anytime while you still have capacity.

Living Trusts

At the end of your life or incapacitation, they risk Probate if you have property, investments, or bank accounts in your name.

  • A Will = Probate. The rule is no one can legally sign your name. Therefore, at your death or incapacity, all assets in your name are subject to the complete Probate process, which averages 18 months and is costly.
  • Living Trust completely avoids Probate.
  • A Living Trust estate plan includes Health Care and Financial Power of Attorney documents and a Last Will and Testament for guardianship of minor children and to "pour over" any assets still in your name at your death out of Probate.
  • Your life insurance policies and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.  
Tom Tuohy
Tom Tuohy

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of the information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Legal Capacity Consequences

Young male nurse holding hands of an elderly female patient in a wheelchair in a hospital

Legal Capacity  

The American Bar Association defines 'legal capacity' as "the ability to perform a task – or make a decision. State laws set out the standards of legal capacity for various tasks – consent to treatment, make a Will, Trust or Deed, and make a gift or contract."

In Illinois, legal capacity depends on the circumstances:

  • Every adult is presumed to have the capacity to make health care decisions unless proven otherwise. An example that is often confused is that the diagnosis of Alzheimer's or dementia will not necessarily prove a lack of legal capacity. However, a  diagnosis of advanced Alzheimers or dementia could likely prove that legal capacity is lacking.
  • Testamentary capacity: a person's mental and, therefore, legal ability to make or change a Will or Trust estate plan.     While you must be over age 18 to enter into any legal contract, Will, Living Trust estate plan, or Power of Attorney, you must also:

◦ Understand the nature and extent of your property.

◦ Remember your relatives and descendants.

◦ Be able to articulate who should inherit your property.       

While most people wait too long to make a Trust or Will estate plan or essential Health Care and Financial Power of Attorney documents, often people believe a relative needs more legal capacity to do so than they currently have. However, that, too, is objective. A Will, like a contract, requires the highest level of capacity, that you are of sound mind and memory.

The Consequences of Lost Capacity

Last week I received a call from a grade school classmate. Two years ago, he asked for my advice regarding his mother, who was in her late 80s.

He said she wants her real estate to go equally to him and his three brothers. They all agreed that his two brothers, who live with his mother, would remain in the house, as both have lived there their entire life and have special needs.

I made it clear to him that he needed to act quickly to protect the house and his brother's ability to live there at their mother's death. His mother needed to make a Living Trust that protects her two sons' interest in her estate in a Supplemental Needs Trust at her death, or they will lose their SSI and Medicare or be required to reimburse the government for benefits.

The family house would be sold, and 50% of the value would go to the government. And worse yet, his brothers would lose the only home they have known.

My old classmate was calling to update his mother's Power of Attorney. He said he 'dropped the ball' on the Trust but needs the POA for the long-term care facility where his mother now lives with advanced dementia.

I don't have to tell you the rest. It is too late, and the home is lost.

Don't be my old classmate. Please don't wait to do what you need and someday find out it's too late. Get a Living Trust estate plan while you have the legal capacity and are still here.

Tom Tuohy
Tom Tuohy

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of the information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Are Your Assets Protected?

Asset protection is more important than ever before. Today, you have risks at every turn. Lawsuits, high cost of long-term care, auto and home accidents, or years of Probate. We often settle and fail to consider the importance of comprehensive protection. In other cases, we only need the best legal document to protect what we own. It is not worth rolling the dice and sacrificing your savings or your hard-earned assets. And it is next to impossible to keep up with what you need for protection. Many changes you need come without warning.

Homestead Real Estate

Suppose you are married and currently working as the police. In that case, your principal place of residence should be titled in Tenants by Entirety. This form of legal title protects your marital property from the creditors of one spouse.

Firearms

With the growing availability of concealed carry laws, more citizens are choosing to carry firearms and to keep them accessible for defense in their homes.

However, even for justifiable acts of self-defense, a claim for monetary damages can be made against you by your assailant or innocent bystanders. You can also be held liable for gun-related incidents while hunting, in gun clubs, or while shooting at commercial or private ranges.

Check out the Benefits Plan website for more information.

Asset Protection with Automobile Insurance

The most common auto policy written today is the same as it was 25 years ago – $100,000/$300,000.  It means you have $100,000 in individual protection for damages caused by you or a covered driver on your policy. Similarly, you have $300,000 total coverage for all injured parties. 

Consequently, you are personally responsible for damages that exceed these amounts. Even a minor accident can result in hospitalization, extended medical care, or death. However, Umbrella Insurance only costs an average of $250 per year. The policy provides an additional $1 million in liability protection for each covered vehicle and your residence.

Investment Real Estate

If you own commercial property, your renters can sue you for various reasons. For example, claims were made for injuries resulting from property defects inside and outside the residence. First, be sure you have the right coverage and are not overpaying. Secondly, eliminate any personal liability concern for excess claims by holding title to any investment property in either a Corporation or an LLC.  Moreover, a Series LLC allows you to separate liabilities from each property if you own more than one investment property.

Long-Term Health Care

Will you need it?  Of those who live longer than age 65, 70% will need some long-term health care. To clarify, only 40% of people will require inpatient nursing care. However, all long-term health care is expensive. Fortunately, a hybrid insurance policy is offered exclusively to Benefits Plan members. This policy provides long-term care insurance; if not accessed, it can be converted to life insurance at your death.

Living Trusts and Asset Protection

At the end of your life, or if you become incapacitated, property or bank accounts in your name are at risk of Probate.

  • A Will must be probated. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the complete probate process at your death or incapacity. This court process averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents and a Last Will and Testament for guardianship of minor children and to “pour over”  any assets still in your name at your death, out of Probate.

A Revocable Living Trust is a written, legal document that allows you to privately pass your assets to your family, friends, or charities after your death. Assets in a properly funded Trust are not subject to Probate. These include real estate, bank accounts, stocks, and minor beneficiary policies and accounts. Your life insurance policies and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations. However, it is often recommended that adult beneficiaries be named as beneficiaries without legal or other restrictions.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan at the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/does not represent the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Firearms Transfer Rules Update

Firearms Transfer

Whether it is at your retirement or your death, an often overlooked issue can cause many problems. Whether you have two firearms or 20+, there is a process to transfer them to another person. I know you are fully aware of how someone did that a few months ago. However, like everything else, times have changed.

Firearms Transfer During Your Lifetime

During your lifetime, you may choose to acquire and later transfer any number of firearms. 

New FOID Rules        

On August 2, 2021, FOID rules changed. Many of the changes deal with record-keeping and identification procedures. However, as to firearm transfers, it is essential to know these rules:

Illinois State Police Firearms Transfer Rules

  • If a private party sells a firearm in Illinois to another private party, they must go to the Illinois State Police website and verify that the Buyer has a valid FOID card. Visit the ISP website, click on "Firearm," "Firearm Owner Identification (FOID Card)," and "FOID Person to Person Firearm Transfer."
  • Seller and Buyer must possess a valid FOID card.
  • Seller and Buyer must verify local firearm ordinance requirements.
  • Beginning January 1, 2024, the seller must initiate and complete an automated search of Illinois State Police criminal history record information files and those of the Federal Bureau of Investigation, including the National Instant Criminal Background Check System, and of the files of the Department of Human Services relating to mental health and developmental disabilities to obtain any felony conviction or patient hospitalization information which would disqualify a person from obtaining or require revocation of a currently valid Firearm Owner's Identification Card. 
  • The Illinois State Police website will generate an "Approval Number." You must list the Approval Number on the paperwork generated by the Sale of the Firearm. 
  • Buyers must abide by the State of Illinois waiting period before taking possession of the firearm. The waiting period for a long gun is 24 hours and 72 hours for a handgun.
  • The seller must keep a record of such transfer for ten years from the date of transfer. The record must contain the date of the transfer, the description, serial number, or other information identifying the firearm if no serial number is available.
  • It is required to unload and enclose firearm in a case for transport.

Firearms Transfer Rules Exemptions

  • Persons buying a firearm from a Federal Firearms License (FFL) are not covered by this law, as the records are generated under federal law. 
  • Persons buying or selling a firearm to family members are exempt under the law. Family members are spouse, son, daughter, stepson, stepdaughter, father, mother, stepfather, stepmother, brother, sister, nephew, niece, uncle, aunt, grandmother, grandson, granddaughter, father-in-law, mother-in-law, son-in-law, and daughter-in-law.  However, to legally possess the firearm, the family member must still have a valid FOID card.

Firearms Transfers at Death

This issue of disposing of your firearms at your death is an issue I cannot share enough.  

Suppose you own a registered firearm at your death. In that case, the Executor of your estate, or preferably the Trustee of your Living Trust, is responsible for legally transferring the gun to your chosen beneficiaries. However, if you have no estate plan, the Probate process determines your surviving heirs at law.

So what do you do now? Above all, start your estate plan. However, as an essential part of that plan, determine the ownership of your firearms after your death. Your Trustee can distribute them to a licensed gun dealer. However, any chosen beneficiaries must have a valid FOID card in the state in which they reside.

If the beneficiary does not have a FOID card, the law provides a sixty (60) day grace period. Indeed, do not put your Trustee or beneficiary in that position. For instance, it will delay the distribution of your estate and be a burden on your beneficiary during an already difficult time. Moreover, during those 60 days, the statute does not provide an exemption for your Trustee who has possession of the firearms. As a result, the Trustee is now subject to an immediate FOID requirement.

Living Trusts and Firearms

At the end of your life, or incapacitation, along with your firearms, they risk probate if you have property or bank accounts in your name.

  • A Will must be Probated. The rule is no one can legally sign your name. Therefore, all assets in your name are subject to the probate process, which averages 18 months and is costly.
  • A Living Trust completely avoids Probate.
  • Your financial accounts, life insurance policies, and deferred compensation accounts can name your Living Trust as beneficiary, subject to essential tax considerations.
  • A Living Trust estate plan includes both Health Care and Financial Power of Attorney documents. It also consists of a Last Will and Testament. A Will is necessary for guardianship of minor children. It also transfers assets in your name out of Probate.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Do You Have Umbrella Insurance?

Umbrella Insurance, the Most Important and Least Expensive Liability Insurance

The chances are you have the average vehicle policy coverage limits of liability - $100,000/$300,000.

Those figures represent the limits of your insurance protection for damages as a result of injuries you cause to others in an accident. However, if the damages exceed $100,000 per person or $300,000 per accident for all persons injured in the accident, you must pay the excess.

Umbrella Insurance Coverage

A standard umbrella policy covers all vehicles on your policy and your home for injuries caused to guests or visitors on your property. An umbrella policy also may cover libel or slander claims. For instance, posting a bad review or social media comment. You may also have coverage for malicious prosecution claims and overseas travels. Importantly, the policy limits begin at $1,000,000,00 and average only $230 per year.

Consequences of Inadequate Insurance Converage

A few years ago, someone I represented in my law practice neighbor's child tripped on a Play Station cord while visiting his home and struck her head on a table. Tragically, the child suffered brain damage. However, my client had only $100,000 liability coverage on his home. Consequently, nearly everything my client earned over 20 years on the job was lost.

Another client came to my office to discuss an accident. She was stopped at a stop sign in Park Ridge, Illinois, at dusk. This suburb has few street lights and short concrete posts for street signs. Moreover, while inching forward to see the street name, she did not notice an older woman who stepped off the curb simultaneously. As a result, my client bumped the woman who fell and struck her head on the sidewalk. The woman died that evening. My client had a 100/300 policy and approximately $600,000 in net worth. There was nothing we could do to protect her savings or the equity in her family home.

The Other Drivers

Consider the flip side of you not having adequate coverage - the thousands of uninsured or underinsured drivers you drive alongside every single day. You must protect yourself from damages another driver with too little or no insurance might cause to you or someone in your household.

Whether it is your home or vehicle, the time to ensure that you are adequately protected is now - before you drive again or invite a guest into your home.

Learn More

Contact CBA today for help finding the right Umbrella Insurance coverage.

Learn more about Umbrella Insurance by viewing this short video or reading this brief article.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The Young Person’s Guide to Investing

Narrowing down all the options and figuring out where to turn can be paralyzing. We’ve got you covered.

Credit...Jocelyn Tsaih

Investing doesn’t have to be that complicated.

But when you’re just starting out, it can be hard to knock it off your to-do list because you have so many competing demands — a budding career, rent and student debt, to name just a few. You also need at least some basic knowledge, which probably wasn’t covered in any of your classes in high school or college.

The good news: There are more attractive options for entry-level investors than ever before. Many mutual funds cost just fractions of pennies for every dollar you invest, and some firms are dangling them for free. Even getting advice from professionals is easier than it was for previous generations. And after you go through the motions once, you can set your plan on autopilot for a while.

But narrowing down all the alternatives and figuring out where to turn? That can be paralyzing.

This guide can help — consider it your road map to investing.

There are a couple of items you want to deal with first: preparing for a financial emergency and creating a plan to attack any high-cost debt you might have.

Building a financial cushion will help soften the blow should your money situation change, whether that’s because of the loss of a job or because of a giant unexpected expense. Most financial planners suggest keeping at least three to six months of living expenses in cash — to cover the basics like rent, food, utilities, loan payments, student loans, etc. — in a traditional bank account that’s backed by the Federal Deposit Insurance Corporation. That means your savings are insured by the federal government, up to certain limits, if the bank fails.

You can find the best interest rates at online banks, and the easiest way to get started is to set up regular, automatic transfers from your checking account. (Capital One 360, for example, lets you set up different savings accounts, which you can label for different purposes — emergency fund, annual vacation and so on).

If you have really high-cost debt — like credit card debt — you want to deal with that before investing significant amounts of money. If you’re earning 7 or 8 percent over the long term in the stock market but paying 15 percent on a card, you’re better off tackling the debt first.

That logic doesn’t necessarily apply to your student loans. Depending on the type of person you are — maybe you detest debt or like to tackle one big task at a time — it might feel better to pay down your loans first. But there’s a strong case to be made to both invest and pay down your loans simultaneously, if you can. (People with piles of high-cost student debt should seek help.)

Investing early and often puts you at a huge advantage, thanks to the magic of compounding numbers, which is illustrated below. Need we say more?

So you have some money to invest or are working and want to set up a plan for your long-term goals. Many financial experts recommend saving at least 12 to 15 percent of your salary to achieve a secure retirement, and others suggest even more.

But even 10 percent might seem like a laughable notion at this stage. There are ways to inch closer to that goal, however, without doing all of the savings on your own.

Much of how you get there will depend on whether you have access to a retirement plan through your employer, typically a 401(k) at for-profit organizations and often 403(b) plans at nonprofits.SMARTER LIVING: A weekly roundup of the best advice from The Times on living a better, smarter, more fulfilling life.Sign Up

If you do, then much of the hard work is done for you. Employers must vet and assemble the plan’s menu of investment options. On top of that, you contribute money that hasn’t yet been taxed, so it lowers your tax bill. The money then grows tax-free over time, and you pay tax on the money when it’s withdrawn in retirement.

The best part? Some employers will also provide a matching contribution for your savings. They might match every dollar you contribute, say, up to 4 percent of your salary. That matching money is a guaranteed return, regardless of what the stock market is doing. Save as much as you can to grab all of that free money.

Then, each subsequent year, you might crank up your savings by one percentage point (some plans have tools that can automate this), so within a few years you will be closer to that respectable goal of 10 percent of your salary (which includes what your employer kicks in).

Just remember: Not all employer-provided plans are good ones. Some are downright awful, stuffed with high-cost, low-quality investments. How do you know whether your plan is a winner? The costs you pay for the plan are typically a telltale sign — and paying too much can cost you tens of thousands of dollars, if not more, over the course of your career.

“If you see a bunch of funds that are charging more than 1 percent a year, that is a red flag,” said Christine Benz, director of personal finance at the investment research firm Morningstar, referring to investments that charge more than 1 percent of your total money invested. You can also ask human resources (or the person coordinating the plan) to see a copy of the summary plan description, which should list any other administrative fees that aren’t immediately obvious. (BrightScope also has a tool that ranks thousands of plans.)

If you’re in a high-cost plan, save enough to get any company match, but consider investing anything extra into another type of account.

For younger people, Roth I.R.A.s are often the preferable choice. That’s because you deposit money that has already been taxed, and you’re probably in a lower tax bracket now than you will be later in life when you’re earning more. In contrast, with a traditional I.R.A., investors get a tax deduction now, but pay taxes when the money is withdrawn. Your Roth I.R.A. balance is what you will actually have to spend; in a traditional I.R.A., it will be reduced by the amount of tax you will owe later.

Another upside to a Roth: In an emergency, you can withdraw contributions — but not any investment earnings — without penalty. (Not that you want to do that!) However, there are income ceilings that determine who can contribute, as well as other rules around withdrawals.

For a more comprehensive look at the various other types of plans, including traditional I.R.A.s, read our retirement guide here.

Resist the temptation to use the latest slick app promoting its ability to invest in single stocks or cryptocurrencies. You want to do the opposite: Own a collection of cheap and boring mutual funds that invest in different kinds of stocks from all over the world, with a helping of safe bond funds to cushion the inevitable swings of the stock market. That way, if anything goes wrong with a particular stock or sector of the market — say, technology or emerging markets — you’ve hedged your bets.

Some mutual funds are run by professional stock pickers who try to beat the broader market’s performance, but very few succeed consistently over long periods of time.

That’s why you’re better off in what’s called an index fund, whose investments simply mirror big sections of the stock market — the S&P 500 Index, for example, tracks the 500 largest publicly traded companies in the United States.

Investors paid an average cost — known as the expense ratio — of 0.48 percent of their assets, meaning 48 cents for every $100 invested, for mutual funds and exchange-traded funds in 2018, according to a Morningstar study. That’s down from 0.51 percent in 2017. (Exchange-traded funds, or E.T.F.s, are similar to index funds, but trade on an exchange like stocks. For most investors, the difference between a mutual fund and an E.T.F. is negligible. Since many providers have waived trading commissions on E.T.F.s, the ultimate decision on which to invest in might come down to whichever has the lowest expense ratio. But if you’re investing in a regular taxable brokerage account, E.T.F.’s might be preferable because they are more tax efficient, experts said.)

Funds that are actively managed by human pros often cost 1 percent of your assets annually or more — that’s $1 or more for every $100 invested.

That might not seem like a lot, but consider that index funds that track the entire stock market can be had for mere pennies for every $100 invested. Fidelity has gone even further — it offers four index funds that are free and do not require any minimum investment (More on that here.)

Paying rock-bottom prices can add many tens of thousand of dollars, or more, to your balance over the course of your career.

One of the more important decisions you will make — besides how much you pay for investments — is how you decide to divvy up your investments among stock, bond and other funds, something known as your asset allocation.

Younger people can generally afford to take more risks and invest more heavily in stocks — which have the potential to generate more growth over time — because they have many working years ahead of them. If the market tanks, their portfolio has time to recover.

But how much you ultimately decide to dedicate to stocks overall should also depend on the strength of your stomach to tolerate market swings.

One way to figure this out is to ask yourself a question: The stock market tumbled nearly 50 percent during the Great Recession. If you had most of your money in stocks at that point, how would you have reacted?

If the answer is, “I probably would’ve sold more stocks,” well, that means you probably had too much to begin with. Then you’ll need to figure out when to get back into the market — and you will most likely be wrong. You want an allocation that will allow you to stay the course, even if it’s a bumpy ride. But if you’re too conservative, you’ll have to save more because your portfolio probably won’t grow as fast.

Also consider the following: An investment portfolio evenly divided between stocks and bonds would have lost nearly 29 percent of its value in the Great Recession, but it would have taken only about a year to recover, according to an analysis by Vanguard. A portfolio that was 100 percent stocks — and lost about 55 percent — would have taken about three years to recoup its losses.

So how do you figure out what stock-bond mixture will work for your situation? One type of mutual fund, known as a target-date fund, does that job for you.

You pick a fund based on the year you hope to retire — so if you’re 40 years from retirement, you’d chose the 2060 retirement fund. As that date draws closer, its mix of investments slowly becomes more conservative.

A couple of 2060 funds — including Fidelity’s and Vanguard’s — now allocate about 90 percent of their portfolios to stock index funds (with roughly 55 percent in United States stocks and 35 in international) and the remainder in bonds. Schwab’s version is a bit more aggressive: it has 95 percent of assets in stock funds. Be sure to look under the hood so you know what’s inside: When markets plummeted in 2008 to 2009, many target-date funds with the same target date had returns that varied widely.

Another benefit of target-date funds: If you put all of your retirement money into one fund, you won’t have to worry about routine portfolio maintenance known as rebalancing. That’s when investors sell investments that have ballooned beyond their initial target (of, say, 90 percent in stocks) and reinvest the proceeds into the side of the portfolio that has shrunk, relatively speaking.

Other services, known as roboadvisers, can also do much of this work for you. More on those in a minute.

Shorter-term goals — buying a condo or a car or saving for a wedding — generally require a less risky approach.

If you’ll need to use the money in three years or less — say, for an emergency fund or a vacation — the answer is easy: Shuttle your savings into a high-yield savings account each month, one with a competitive interest rate, said Matt Becker, a certified financial planner in Florida. With such a short time frame, the amount of money you save is more important than any return you may earn — and you don’t want to risk losing anything.

If your goal is anywhere from three to 10 years away, you might take more of a hybrid strategy. If you want to buy a home in five years but can be a little flexible on timing, you might invest one half in a savings account and the remainder in a fund balanced between stocks and bonds.

“A good rule of thumb is to expect that in any given year you could lose half of whatever money you have in the stock market,” Mr. Becker said. “Of course, you would also expect to recover that over time, but over shorter time periods that may be harder to do.”

If you want to buy a home in five years from now or longer and know you’ll need at least $60,000, he said you might put half of your monthly savings into a savings account or a certificate of deposit, while the other half goes into a taxable brokerage account that holds something like Vanguard’s LifeStrategy Moderate Growth Fund, which is 60 percent stocks and 40 percent bonds. That means you’d have about 30 percent of your money in stocks — in other words, 15 percent of your savings could vaporize in a down market. For absolutely certainty your money will be there by a certain date, use a high-yield savings account.

Outside of a solid employer-sponsored retirement plan, the best place to get started is at one of the brokerages where you can gain access to index funds with ease — FidelitySchwab and Vanguard all provide solid options for entry-level investors, for example, depending on your personal preferences.

You might also consider a so-called roboadviser, which will ask you a series of questions before formulating an automated investment plan for a specific goal. Several of them also offer help from human advisers for an extra fee.

The Robo Report, which tracks and analyzes roboadvisers, ranked Betterment as its top pick for entry-level investors.

“Their platform is intuitive and simple, has a $0 minimum balance and has a high-interest savings account for cash reserves,” said Ken Schapiro, president at Backend Benchmarking, which publishes The Robo Report. “They have strong online features, and a client can easily graduate from their digital-only service to their service with live advisers as their needs grow.”

Many discount brokerages now also offer robo-type services of their own, but they have different strategies; it pays to compare them before you decide on any one.

Professional help can also be found for less money these days, though it will obviously cost more than a robot adviser.

A warm-blooded professional may be worth it, particularly if you’re having trouble getting your debt under control or need more hand-holding with a specific issue.

But you’ll need to find someone who is truly working in your best interest and not lining their pockets at your expense.

To increase your chances of finding someone like that, ask if they are acting as a fiduciary. The pros most likely to be fiduciaries are “certified financial planners” who are also “registered investment advisers.” Then, you probably want to find one of these individuals who charge you an hourly rate for their time or another type of flat fee; you want to avoid financial advisers who only earn money when they sell you a product.

Here’s where to find them: XY Planning NetworkGarrett Planning NetworkThe National Association of Personal Financial Advisors.

But most younger investors really don’t need all that much help. If your situation is relatively simple and you’re just looking to become more knowledgeable about money and investing, there are plenty of materials that can provide a solid foundation: “I Will Teach You to Be Rich, Second Edition,” by Ramit Sethi; “If You Can,” by William Bernstein; “Broke Millennial Takes On Investing,” by Erin Lowry; and anything by John Bogle or Helaine Olen.

Tara Siegel Bernard covers personal finance. Before joining The Times in 2008, she was deputy managing editor at FiLife, a personal finance website, and an editor at CNBC. She also worked at Dow Jones and contributed regularly to The Wall Street Journal. @tarasbernard

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

COVID-19 Stimulus Payments Round 2: What You Need to Know

Congress has finally reached a bipartisan deal on a $900 billion Coronavirus Relief stimulus package, and the President has signed it into law. This one also includes a stimulus payment, but there are big differences between this one and the Coronavirus Aid, Relief, and Economic Security (CARES) Act passed in March.

focus on money

Who qualifies for this round of stimulus payments?

The requirements are similar to the last round of payments with the upper income limits reduced.

To qualify for the economic impact payments you’ll need to meet each of the following requirements:

  • Have a social security number
  • You are a U.S. Citizen or U.S. Resident Alien
  • Make less than $87,000 filing single or $174,000 as a couple on your most recent tax return
  • You weren’t claimed as a dependent on someone else’s tax return

How much is the stimulus payment?

This COVID relief bill includes only up to $600 for qualifying adults, which is half of the amount offered by the CARES Act in March. 

If you made under $75,000 on your most recent tax return, you will be eligible for the full $600. Couples that filed together and made under $150,000 on their last return will be eligible for $1,200 combined. 

If you made over the income limit but less than $87,000 filing single or $174,000 as a couple and meet the other requirements, you’re eligible for a reduced payment.

You are also eligible for a flat amount of $600 per child dependent 16 or under.

How will I get my payment?

You will receive your payment through either check or direct deposit using the same method you requested filing your 2019 tax return. 

When will I get my stimulus payment?

Last week, Treasury Secretary Steve Mnuchin told CNBC that the first payments will go out before the end of the year.

While it will be a bit longer before everybody receives payments, they will probably be available much faster than last time since the Internal Revenue Service (IRS) already issued similar payments earlier this year.

How can I get my stimulus payment with Varo?

If you requested your 2019 tax refund as a direct deposit to your Varo Money bank account, you’ll receive your payment as soon as it’s issued by the IRS.

What can I do with my stimulus payment?

There is no limitation on how you can spend the money. These stimulus payments were issued by the federal government to help working class and middle class Americans who’ve been impacted negatively by the pandemic. If you need to spend it to cover basic expenses, you should.

If you don’t have immediate expenses to cover, it’s a good idea to save it. Sign up for Varo’s high APY Bank Account here

Will I get another stimulus payment?

Currently, the bill the President signed only allows for the $600 payments, but there is a move in Congress to raise these payments to $2,000.    While this raise in the stimulus payment passed the House, it has not yet come to a vote in the Senate.   Joe Biden has also said he’ll push for another round of checks when he’s in office.  There is no guarantee that the stimulus payment will be raised to $2,000 or that there will be another round of payments.

This COVID relief bill did extend the enhanced $300 a week unemployment benefits for up to 11 weeks, so if you qualify for  unemployment you will likely keep this benefit. Restarting unemployment benefits under the new law may take states 3 weeks or more according to experts. Be patient as states get in gear to provide these benefits. 

Apply for a Varo Bank Account today. No monthly fees or minimum balances.
Receive a $30 cash gift from Varo and up to 2.8% interest on a no-fee bank account.
Exclusively through CBA! Visit www.cbaplan for details!

By Editors at Varo

Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”) or Comprehensive Benefits of America, LLC, (CBA). The bank and CBA are not responsible for the accuracy of any content provided by author(s) or contributor(s).

Links to external websites are not managed by Varo Bank, N.A. Member FDIC, or by Comprehensive Benefits of America, LLC.

Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Cambridge and CBA are not affiliated.

Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

Everything You Need to Vote

Your Vote Counts!

November 3, 2020 is Election Day and it’s coming up on us quick.

We want to help you prepare. Here’s everything you need to do to make sure your vote counts this year.  

Make sure you’re registered

Don’t wait until late October to get ready to vote. In some states, the deadline to register to vote is 30 days before Election Day. 

Check your voter registration status today. 

To do that, you can head to the Can I Vote? webpage.

The National Association of Secretaries of State (NASS) runs this page, which helps you because each state’s voter registration process is different.

Head to their Voter Registration Page and choose your state. That will redirect you to your state’s voter registration check.

You’ll need to put in some personal information to check your status. Sometimes this includes your driver’s license number or the last four digits of your social security number.

If you find out you’re not registered to vote, don’t panic. As long as you’re 30 days out from the November 3 date, you can still register in every state. 

Check Your State’s Registration Date on This Calendar from When We All Vote

Figure Out How to Cast Your Vote

Once you’re registered, figure out if you’re going to vote in person or via mail-in ballot.

In-person voting

To vote in-person, you show up to a polling place on November 3. 

Pick your state on the NASS Find Your Polling Place. Then you’ll be sent to your state’s website.

Most states have tools that help you find polling places near you. 

On Election Day, you will probably need to bring some form of ID. Check your state’s laws on the National Conference of State Legislatures Voter ID Requirements page. 

You can also usually call your polling place and ask what you need to bring.

Types of documentation vary so make sure you read your state’s specific requirements. 

On November 3, show up to your polling place with your documents. 

The poll worker will guide you through the steps. That’s it.

Mail-in ballots

Most states also offer mail-in (also called absentee) ballots for people who don’t want to vote in-person.

Every state offers absentee ballots, but some states require a reason for needing to vote in this way.

Because of COVID-19, though, many states have loosened restrictions. Some states are even sending absentee ballots to all voters. 

In other states, you’ll need to request an absentee ballot if you want to vote by mail. 

NASS has more tools you can use here. Visit their Absentee & Early Voting page and choose your state.  

That should send you to your state’s webpage where you can access the application for an absentee ballot.

In most states, you need to request your absentee ballot a week or two before Election Day. 

Then, you need to send it in before November 3 in many cases.

To find out your state’s deadlines, you can use this chart from Vote.org.

Once you get your absentee ballot, make sure you fill it out accurately. 

Usually, you’ll need to sign the ballot in a couple of places, including on the outside of the envelope you send it back in. 

Educate yourself before you vote

There’s one more thing you need to do before you vote: research.

Even if you already know how you’re going to vote in the presidential election, remember there are many state and local issues on your ballot.

Ballotpedia has a helpful tool here. Use their Sample Ballot Lookup tool. 

Input your address to pull up your sample ballot.

Your sample ballot will show you what ballot measures you can vote on. 

Plus, you’ll see federal, state, and local government seats that are up for election so you can make your picks. 

Research the measures and people you’ll be voting on so you can make educated decisions on your ballot. 

Your vote counts.

by Kacie Goff Varo Bank

 

Is Taking a Gap Year This Fall a Good Idea?

The reality of COVID-19 has college students across the country planning to skip the upcoming school year, with some citing worry over personal finances and concern over online classes. Many students and their families lost income amid the pandemic, making it tougher to pay tuition and other educational expenses. And while college administrators are planning reboots that reduce the potential health risks of starting school this fall, students aren’t excited about the proposed instructional delivery options. Taking hybrid and online classes are unappealing to those who signed up for a traditional college experience.

But financial roadblocks and less-than-desirable learning environments may not justify putting your education on pause this fall, especially when considering some of the drawbacks. Let’s look at a few problems you might encounter if you take a gap year and skip college enrollment this coming semester.

Problem #1: No One Knows When or If We’ll Get Back to “Normal”

Lively student unions, packed dorm rooms, and full lecture halls are a thing of the past, at least for now. Whether we’ll return to a typical college experience anytime soon is seeming more unlikely. Even the possibility of having millions of students crisscrossing the U.S. to return to campus by spring isn’t guaranteed. Some would describe that scenario as an epidemiological nightmare in the making. But, waiting it out could mean unnecessarily delaying your education, especially when colleges and universities are bolstering their online instruction offerings for new and returning students.

Problem #2: The Typical Gap Year Benefits are Fewer

When students think of a typical gap year experience, it usually includes working a full-time job, traveling abroad, or exploring potential career interests. This year, those options might be off the table. Even though the unemployment rate declined to 11.1% in June 2020, finding full-time work may still be challenging. This is still nearly three times as high as it was in March 2020. Even then, unemployment rates were already creeping higher when compared to the prior year. Don’t forget that COVID-19 travel restrictions are still in place in many parts of the globe, and many in-person internships are being converted into virtual ones.

Problem #3: Re-Admission May Be an Issue

Whether you’re considering taking a semester off or the entire academic year, understand that each college has its policy for approving leaves of absence and re-admission. Some may be more lenient than others due to the coronavirus crisis, but that doesn’t mean returning to school will be easy. With an approved leave of absence, you can stop attending school for a maximum of 180 days within a 12-month time frame. But withdrawing from school or failing to return from your leave could have unwelcome consequences.

Colleges and universities are not required to re-admit students, even if they meet the requirements for re-admission. Each school and program is different, but know that some colleges may require you to:

  • Apply for re-admission and pay a fee
  • Meet updated re-admission requirements
  • Comply with revised graduation requirements due to changes within the program of study
  • Complete additional coursework based on changes to a program’s graduation requirements, thereby increasing the total cost of your education.

Contact your school for details on their specific re-admission requirements.

Problem #4: You Could Be Forced to Start Student Loan Repayments

Most student loan programs allow students a six month grace period before borrowers must make their first principal and interest payment. However, federal and private student loan grace periods differ by loan type and lender. Some student loans have shorter or no grace periods before you must begin repayment. Speak with your loan servicer or school’s financial aid office to confirm how this would apply to your specific situation. The length of time you stay withdrawn or are enrolled less than half-time will influence which loans you must start repaying and when.

Did You Know?

The cost of borrowing money for college is at an all-time low. Federal student loan interest rates for the 2020-21 academic year have dropped to 2.75% for undergraduate borrowers. This historically low-interest rate applies to Federal Direct Subsidized and Unsubsidized student loans. Graduate student borrowers can secure Direct Unsubsidized Loans at 4.3%. Parents of undergraduates and graduate students can obtain Direct PLUS Loans at 5.3%.

Add the automatic administrative forbearance that has put student loans at 0% interest and pauses payments thru September 30, 2020, and it seems like taking a gap year right now would be less than ideal from a financial perspective. Even private student loans are setting record lows of 2.99% variable APR or 4.99% fixed APR.

Pausing your education because you feel COVID-19 is undermining your college experience can create more problems than it might solve. However, the emotional and mental health benefits of taking a break from everything might be the best choice for some individuals. Carefully weigh your options and potential consequences before making a final decision. Only you know if taking a gap year is the right thing to do in your particular situation.


Comprehensive Benefits of America

For an expanded presentation of asset protection and financial wellness strategies and to receive regular updates on strategies to protect what you have earned, visit and register with CBAPlan on the link below. Registration is free.

Visit www.cbaplan.com or call 1-312-559-8444 for assistance with registering.

Tom Tuohy is the founder and CEO of Comprehensive Benefits of America, LLC, and Tuohy Law Offices.

The information being provided is strictly as a courtesy. When you link to any of these websites provided herein, Comprehensive Benefits of America, LLC/ makes no representation of the completeness or accuracy of information provided at these sites. CBA does not provide professional financial, investment, tax, or legal advice. You should seek certified financial planners, CPAs, and attorneys for advice relative to your personal needs. See complete Disclosures and the CBA Security and Privacy policies.

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