Estate Planning for College Students

by Jennifer Caruso

Senior year of high school can be quite overwhelming: college applications, final tours, winter formal, senior pictures, prom, graduation… It’s endless!  Once your child graduates, there is a short lull before the next major milestone – the day they move to college.  In the midst of the shopping and dorm room decoration, it’s highly likely you forgot something crucial – your child’s estate plan.  Wait, what?  Yes.  Your 18-year old needs a starter estate plan!

You may not be aware that once your child becomes a legal adult (at age 18), you are excluded from making important medical decisions for him or her. You no longer have the right to obtain basic information about their health or to make decisions about their medical care.  As the parent of two college students, I was alarmed when I first learned this.

There are three health documents which are essential for your son or daughter to sign when they turn 18 (or as soon as possible thereafter):

HIPAA Release

The 1996 Health Insurance Portability and Accountability Act (HIPAA) safeguards your child’s medical and dental records and protects their privacy. This is a good thing!  The problem is it also prevents you from accessing their medical records.  There is a simple, free fix for this.  Your child’s primary care physician and dentist can provide him or her with a HIPAA Release form.  This form allows your child to designate who they allow to obtain their medical records in the event of an emergency.   As your child ages, they can change or remove this designation.

Advanced Health Care Directive

The Living Will and Medical Power Of Attorney documents, when used together, are called an Advanced Heath Care Directive.

A Living Will is your child’s statement of decision. It tells doctors whether or not they want life-supporting measures stopped if there is no hope of recovery.  At the very least, this is a conversation you should have with your child.

The Medical POA allows your child to appoint you, or another family member or adult, to make healthcare decisions on their behalf should they be unable to. It is the most crucial document you need for your child.  When we think of a Medical POA we often think of physical incapacity – a car accident, a sports injury, a fraternity party gone wrong.  However, it more common for college-aged students and their families to deal with mental incapacity.  Mental illness is a topic no one wants to broach, but it is a very serious problem.  The National Alliance on Mental Health found that one in every five young adults under the age of 24 live with a mental health condition.  Even a mild mental illness can incapacitate your child from making good healthcare decisions.  It is important for you to be able to make these decisions for them while they are in school.

I cannot stress how important this document is, especially if you are divorced or separated from your child’s other parent. If the two of you cannot agree on healthcare measures, your child’s healthcare will be significantly delayed while you duke it out in court.  Ultimately, the State will be responsible for making this decision for you.  Avoid this at all costs!

Durable Power of Attorney

For those who want to remain actively involved in your child’s financial life while they are in college, there is a fourth document worth mentioning. Instead of having a joint bank account (control your adult child may no longer want), consider a Durable Power of Attorney.  A Durable POA is a simple way to allow you to manage your child’s finances in the event of an emergency.  It does not give you blanket permissions.  Instead, it itemizes specific powers given to you by your child in the event he or she becomes physically or mentally incapacitated.  It allows you to legally handle their financial affairs (pay bills, file taxes, make bank transactions, etc.) while they are temporarily incapacitated so their credit standing does not suffer.

Ideally, a trusted estate attorney should draft these documents for you. This person will guide you throughout the years as you and your family’s needs change.  A starter estate plan will cost significantly less than a full estate plan and the peace of mind is well worth the price.  However, if you have budget constraints, there are reputable online document services.  Firms like also offer access to third party phone attorneys who you can speak with.  Keep in mind that these companies are online document services only; they are not actual estate attorneys.  In most cases, their documents – once notarized – should suffice and hold up in court.  Just be sure to have the documents reviewed or re-drafted every two to three years by an estate attorney.

Jennifer Caruso is an Associate Financial Planner Manchester Financial, an Investment Counsel/Wealth Management firm located in Westlake Village. For more information call 800-492-1107.

This material is provided for general and educational purposes only, and is not legal, tax or investment advice. For each strategy or option mentioned, there are detailed tax rules that must be followed.

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It’s Expensive So Let’s Buy More!

by Robert Katch

Can a stock market rally built more on Price Earnings (PE) ratio expansion and low bond yields, rather than on earnings growth, be sustained?

This question highlights a precarious state of affairs and helps to explain the market’s recent ups and downs. While the major indexes like the Dow, S&P & NASDAQ have hit new highs, most stocks are struggling. It hasn’t bothered investors much that earnings for the S&P 500 peaked in 2014 and have stagnated since. Nor that American consumers are barely propping up our economy’s sluggish growth (struggling to stay over 1%), while European growth stalls and China’s economic spending continues to slow.

A recent study showed that 92% of the stock market’s returns over the past four years can be tied to the drop in the equity risk premium, which causes higher PE ratios. Thus, we have a stock market straining to trade at 19 times corporate earnings. This means that for every $19 you invest, the S&P 500 is only earning $1 – therefore creating a longer time horizon to earn back your investment. Contrast this with a few years ago when investors were only willing to pay $17 for every $1 of earnings. So while earnings growth has been tepid, investors have been willing to pay more for that same $1 of earnings. A PE moving from 17 to 19 drives the stock market up 12% (2 divided by 17 equals 12%). When was the last time you rushed out to buy something simply because it was going up in price?

Given these facts, why has our market stayed up for so long? Thank you TINA!  Investors feel “There Is No Alternative” and, in desperation, they are buying stocks.  This continues to push and hold the market up.

Central banks around the globe are running out of road to ease and stimulate the economy and will soon find themselves on an exit ramp leading to a place they’ve never been. The Fed’s balance sheet has quintupled in size since 2008 due to the creation of digital dollars.  Global bond markets support $12.3 trillion of bonds with interest rates below zero.  A Sub-Zero used to just be a refrigerator, but now it is a bond, too!

The condition of the labor market is also a concern and the monthly employment data is one of the most highly-anticipated sets of numbers. The Fed has hinted that further strong jobs growth would allow them to increase their artificially-low interest rates, but we all know that many great jobs have been lost over the past decade.

Where have all the good jobs gone? Many have been lost to productivity. Google is a very important company in our economy and its stock has a major impact on our markets. While it has twice the market value of the former giant, General Electric, it has only 57,000 employees versus the 330,000 at GE. With 4,000 employees, Netflix has superseded Blockbuster, which had 60,000 employees at one point. Amazon is a global powerhouse but has only 270,000 employees, which is about half that of the retailer Kroger. It’s awesome if you work for one of these companies. But real economic growth requires jobs growth, and better yet, the growth of good jobs! While technology improves our lives in many ways, it eliminates jobs and creates deflation.

This market has done well over the past few years for all of us, but almost entirely on the back of PE expansion – which is only great while it lasts. It can work the other way, too, if investors lose confidence or find an alternative to equities and subsequently drive stock prices down. For real stock market progress to take hold, our economy needs to create traction leading to higher sales. This will then increase profits and fuel the growth of more good jobs.

Robert J. Katch is the founder of Manchester Financial, an Investment Counsel/Wealth Management firm located in Westlake Village. For more information call 800-492-1107.

This material is provided for general and educational purposes only, and is not legal, tax or investment advice. For each strategy or option mentioned, there are detailed tax rules that must be followed.

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Cyber Security: Become a Smarter User of Your Smart Phone

by Laura Navarro

We could all be more vigilant and cyber-aware these days. Many of us have been the victim of hacking, malware, or identity theft.  And if it hasn’t happened to us, we certainly know someone who’s had it happen to them.  Here are a few suggestions to become smarter when using your smart phone.

Protect your mobile account with a pin number.  Not only should you utilize a password to open the phone itself, but you should also set a pin with your wireless provider.  This serves to protect your account and identity whenever you contact them for assistance or customer service.

Be proactive if your phone is lost or stolen.  If you misplace your phone, immediately search for its location using another device – such as a tablet or computer.  Android users can access their “Device Manager” through Google.  Simply sign into your Google account and select “My Account.”  Click on the “Find My Phone” tab and follow the prompts to either locate the phone or, if it’s stolen, lock it and wipe it clean.  iPhone users can log into their account using their Apple ID and utilize the same functions.

Update the operating system on a regular basis.  Check for updates at least weekly and be sure to upgrade your phone’s operating system as suggested. Hackers and viruses find their way into a phone much more easily when not regularly updated.

Back up your phone on iCloud.  If your phone needs to be “reset” or wiped clean due to loss or theft, all of the information on that phone will be lost.  However, regularly backing up your phone will save all of your photos, apps, and music and you’ll be able to easily reinstall them on a new device.

Install antivirus apps.  If you use an Android phone, antivirus apps are a must.  Gadget Guardian (powered by Lookout) is one suggestion.  However, there are many others that also do a good job.

Download apps only from official sites. Google Play is the official site for Android users and either iTunes or the App Store for Apple users. Downloading from other sites will subject you to unnecessary risk.

Avoid connecting to free Wi-Fi. It may be tempting to surf the Internet or get some work done while you’re sipping a latte at your local coffee house.  However, hackers have a field day in these environments.  If you want to use your laptop at these locations, use the “Hot Spot” feature on your phone to tether your laptop or tablet to the Internet.  Providers usually charge an extra subscription fee or data charge for this service, but it is well worth avoiding the headaches of being hacked.

Turn off blue tooth when not in use.  Hackers can use this feature to gain easier access to your phone.

Consider encrypting communications whenever possible. If you have an iPhone, you automatically have encrypted messaging whenever communicating with another iPhone user. Other options are “secret conversations” on Facebook and Whats App.  Both people need to have this app on their phone to encrypt their messages each way.

Laura Navarro, CFP® is a Senior Financial Planner with Manchester Financial, an Investment Counsel/Wealth Management firm located in Westlake Village. For more information call 800-492-1107.

This material is provided for general and educational purposes only, and is not legal, tax or investment advice. For each strategy or option mentioned, there are detailed tax rules that must be followed.





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