Case Studies

Cameron Aydlett Headshot

Loss of Spouse by Cameron Aydlett, CFP®

They are the clients you look forward to seeing. Not only are they great people, but our conversations are quite diverse and intellectually stimulating. Gretchen admitted long ago that she wasn’t as interested in the financial matters as her husband, Trent. Although well-educated herself, Gretchen enjoyed focusing on environmental issues and educating young children. Trent was a scientist who, by nature, thrived on analyzing numbers. Their differences made them a perfect match. However, Trent voiced many times his concerns for his wife if he predeceased her. He was worried that she would need somewhere to turn and to someone she trusted to help her handle her finances.

Let’s go back almost three decades to when the relationship began, which was actually before my time. Triad Financial Advisors was building momentum as a financial planning firm in Greensboro. Carter Leinster, the founder, was busy establishing connections with local businesses and enticing employers to allow her to offer “lunch and learn” sessions to its key employees. It was during one of these seminars that Trent was introduced to Carter and to TFA. The concept of analyzing his current financial situation and projecting it forward was rather appealing to him. Thus, he decided that he and Gretchen would go through the financial planning process to ensure that they were on the right track to achieve their short-term and long-term goals.

Fortunately, Gretchen and Trent made a good team. They were saving diligently and living within their means. They were right on target to achieve their objectives. After the planning process, they became investment clients. They met with advisors at TFA regularly each year to talk about what mattered in their lives – children, grandchildren, travel, projects, etc - and how we could continue to enable them to live with intention. It was clear that they trusted TFA. After all, we know much more about them than simply how much they have invested with us. Over the next several years, Trent expressed his gratitude for the relationship that had been started back in the 1980s. He felt confident that his wife would have a resource if he weren’t around for her. However, this would be well down the road. You see, Trent was in excellent health based on what you could see from the outside. He was lean, very active, and looked like the picture of health. What he didn’t share with many people was the fact that he had some heart problems that he had been dealing with for many years. This was under control, or so he thought.

Fast forward to 2015 and to the week after our meeting on Thursday afternoon. It was Wednesday, and I wasn’t expecting to run into Trent and Gretchen. I’ll never forget this day, because it was the last time I would see Trent. I remember his smile that was always warm and sincere. They were dropping off copies of their tax returns they had forgotten to bring with them the week before. We exchanged pleasantries and went on our way. Two days later, I was meeting with prospective clients who had been introduced to TFA by Gretchen. The new prospects informed me that Trent was in surgery at that very moment. I learned later that day that Trent had passed away before making it to the operating room.

Of course his family and friends were devastated. We all were. This all happened so quickly. We never imagined that we would have to put Trent’s plan into action so soon. This wasn’t supposed to happen for many more years. He was a young and vibrant husband, father and grandfather. Gretchen needed guidance through the next few days and then through the next several months. With her children by her side, she met with me and the rest of her TFA team to make a list of what needed to be done and who would be responsible for taking care of each task. We ask our clients for copies of estate documents, income tax returns and statements on investments not managed by TFA such as annuities. We do this so we know what all of the pieces are. We can do a better job for our clients when we know what is involved, where it is held and what the client’s goals are.

The family was relieved to know that we could help organize and prioritize for them. I don’t remember how many times I heard, “I’m so glad I have a team helping me. I don’t know what I’d do without you.” Even though the children don’t live close by, they stop by when they’re in town and are always appreciative of the things we do for their mom. They too see the value of having a team approach.

I take pride in helping Gretchen take control of her finances. She has grasped the ins and outs of her trust as well as her husband’s now irrevocable trust as well as her other accounts. She and I are working on consolidating her checking accounts to better track cash inflows and outflows. It’s nice to have pension incomes, but keeping track of these can be onerous. The grandchildren’s 529 plans haven’t fallen through the cracks either. Gretchen has taken an interest in how these accounts are performing, how they are invested and how much each grandchild is expected to need in the future. Gretchen once said, “Trent knew what he was doing when he decided to work with you. He knew you would take care of me.” I can only do so much. This story wouldn’t be a success without the active participation from Gretchen. She’s taking on her added role with grace and determination. At some point during every meeting, you’ll hear, “Oh good thinking! Yes, I need to take care of that.” And she does.

Not long ago, Gretchen and I, along with her Client Associate, went out to lunch to celebrate Trent’s life. It had been a little over a year since he passed away. We didn’t want this to be a sad occasion, and it wasn’t. It was a true celebration. I continue to look forward to my meetings with Gretchen and not just because she often brings in homemade cookies. I appreciate her attitude toward learning a role her husband had filled for so long. I don’t think I will ever get tired of hearing the gleeful words “oh thank you, thank you, thank you.” It makes my career more rewarding when I know I’ve made a positive impact in another person’s life.

Names have been changed for privacy purposes.

Bonnie Cienek Headshot

Tax Strategies by Bonnie Cienek, CFP®

TFA works closely with our clients and their tax advisors in determining the best strategy available to help minimize taxes, and to implement those strategies. This was the case for Trevor, age 72 and Kate, age 70, who came to us needing help with an income distribution strategy and a way to reduce their taxable income. Kate had been retired and accumulated a substantial portfolio balance in her IRA. She needed to take her Required Minimum Distribution from her IRA account by year-end. Trevor was happy to continue working and did not plan on retiring for another two years. Trevor was already taking his Required Minimum Distribution and they were both receiving social security benefits.

In preparation of Kate’s taking her distribution and in gathering information for their taxes, they noticed that the increase in taxable income would affect the amount of medical expenses and charitable gifts that could be deducted for the year on their tax return. The standard deduction was more beneficial, which eliminated some of the miscellaneous charitable deductions that Trevor and Kate wanted to take advantage of. Their main concern though was how to reduce their taxable income.

In reviewing their total income sources for the year (IRA distributions, social security benefits and Trevor’s salary,) it was noted that Kate’s RMD would increase their adjusted gross income by $20,000, also causing 85% of their social security income to be taxed. This then would increase their marginal tax rate significantly, and also increase their Medicare premiums.

In the past, Trevor would deposit his Required Minimum Distribution into their savings account, and during the year they would gift to various qualified charities from their savings.

We reviewed with Trevor and Kate that since they had enough monthly income both from Trevor’s job and their social security benefits to cover their expenses that they should direct a portion of the required IRA distributions to be paid directly to a qualified charitable institution from their IRA accounts. We explained that if you are over 70 ½ any amount (up to $100,000) can be paid directly to a qualified charitable organization from their IRA accounts and will be considered to be withdrawn tax-free and not included in their adjusted gross income, and unlike taking a charitable deduction is not subject to a percentage limitation.

By using this strategy, Trevor and Kate were able to reduce their taxable income by the amount of their charitable gifts. This approach also helped to keep less of their social security benefits taxable and their Medicare premiums from going up.

Trevor and Kate told us that neither their previous investment advisor nor their CPA had recommended this strategy to them.

Names have been changed for privacy purposes.

Aaron Parrish Headshot

Preparing for Retirement by Aaron Parrish, CFP®

Bill and Catherine Johnson live in Greensboro and were close to retirement age when they first reached out to TFA. At the time, they were working with an advisor in Virginia who provided only investment services and minimal communication throughout the year. Bill was 64 and Catherine was 61 and had recently been let go from her job. The Johnsons found themselves in a challenging position with many questions and felt as though their current advisor wasn’t the right person to find the answers.

They were ready to get serious about a plan for their retirement and needed a partner to help them get there. Their most pressing issue was to decide if they could reach their retirement goals without Catherine going back to work. We started by gathering all of their financial information to begin mapping out different scenarios in their financial plan. This process sparked a discussion and eventually a compromise that allowed Catherine to retire if Bill worked for 2 more years.

Our next step was to reallocate their investments. Over the course of their careers, the Johnsons had accumulated over $1 million dollars. Unfortunately, their portfolio consisted of mutual funds with bloated fees. By using low cost mutual funds, we were able to reduce their investment expenses by 45%. This reduced the drag on their portfolio and allowed them to “keep more money in their pocket.”

Like most retirement age investors, Bill and Catherine assumed they should take their Social Security benefit as soon as they retired. As their advisor, I worked to show them that they could greatly benefit from utilizing the spousal benefit based on Catherine’s work record and delaying Bill’s benefit until age 70. The analysis showed that over their life expectancy, this strategy could potentially increase their Social Security income by over $185k. This strategy would provide less income early in retirement but much more income later on. To alleviate their concern regarding the low-income period, I developed a plan to show how we would efficiently withdraw from their various accounts to fund their lifestyle during this period.

Throughout our early days working together, Bill and Catherine often discussed the idea of having a vacation home. With four children scattered across the country, they were open to the idea of relocating to be near them or having a second home in proximity to them. Of course, this was a dream that also brought up a lot of questions such as, “Can we afford it?” and “What will buying a second home do to our current budget?” I got to work again, running different scenarios to show them exactly how buying a vacation home would affect their other goals. We explored how it was feasible but it would require them to curb their lifestyle expenses and reduce the amount of funds available for other travel. After weighing the pros and cons, they decided that the vacation home wasn’t a priority and spending those resources in other areas would provide more value.

One of the planning scenarios that concerned the Johnsons was a potential nursing home stay. Although their assets and income sources could sustain an average stay in a nursing home, they weren’t comfortable with the amount of assets that would be depleted. To reduce this risk, we had our outside insurance expert, Tom Jordan run quotes from various insurance companies to find the most affordable policy for them. By obtaining these policies, they were able to significantly reduce their exposure to potential long term care expenses.

After their retirement concerns were addressed, our attention turned to the estate documents which hadn’t been updated in almost 10 years. We coordinated a meeting with a local estate attorney to have everything reviewed and revised. I attended the meeting with the Johnsons to help communicate their goals and provide information regarding their net worth and current beneficiary designations. Together we were able to get their estate documents updated and give Bill and Catherine true peace of mind because all of their affairs were officially in order.

When Bill retired at 67, he was surprised by a letter from Medicare explaining that due to his income, his premium would be $243.50/month instead of the usual $121.80/month premium. We helped him gather and fill out the necessary forms to inform Medicare that he retired and the premium should be based on a lower income. After appealing Medicare’s decision, we were able to secure his premium at the lower rate of $121.80.

During our first meetings with Bill and Catherine, we were able to identify their retirement goals and ultimately paint a clear picture of how they will attain them. We generated a financial plan that clearly laid out the years leading up to retirement and successfully implemented it. We also worked closely with them to give them security in knowing their estate will be handled according to their wishes. Bill and Catherine are loving retirement. They currently still live in Greensboro but are trying to decide where their retirement journey will lead them next. No matter where they end up, TFA will work to stay on top of their goals and investments so they can truly enjoy the freedom of retirement.

Names have been changed for privacy purposes.

Jennifer Windsor Headshot

Care of Aging Parents by Jennifer Windsor, CFP®

In August of 2015, I got a phone call from John. John’s mother, Sally, was 79 years old and was beginning to show signs of memory loss. John explained that Sally would sometimes forget appointments or ask questions over and over. She owned a beach condo and insisted on keeping it because she used it so often (but in reality, rarely visited the beach). She would collect mail and stash it in drawers, stack it in piles around the house and sometimes move pieces from one pile or drawer to another without ever opening the envelope. Sally had accumulated years of account statements, tax documents, uncashed checks and junk mail by the time John and his wife stepped in to help sort out the mess. John’s ultimate request to me was this: “Can I bring you what we have, and will you help us figure this out?”

When John, his mother and I met for the first time, John brought a 12-inch stack of files with him. His wife had taken the time to sort out different monthly account statements and tax statements into separate, labeled files. Some statements were only a month old while others dated back to 2007. John wasn’t sure which of these accounts might even still exist. We decided to approach each company, one at a time, to ask whether the account was still open, the shares were still held, the outstanding checks could be reissued, etc. Before we could begin, however, we discussed the importance of making sure Sally had appropriate legal documents in place. Fortunately, Sally had already executed a Durable Power of Attorney and a Healthcare Power of Attorney, naming John as her agent for both. I began forwarding copies of Sally’s Durable Power of Attorney to each of the companies in question in an effort to open the line of communication.

The next time John, Sally and I met, we called each institution, explaining with each call that Sally had not touched base in a long time and that we wanted to confirm whether the account still existed. If it did, we moved forward with other questions – what was the current balance? What assets did the account hold? Could they forward us a recent statement? We spent a couple hours moving down the list, each time having to verify Sally’s identity, confirm John’s Power of Attorney was on file and then repeat the same list of questions in order to gain as much relevant information as possible. At the end of an exhausting couple of hours, Sally and John learned that Sally had $500,000 in IRA assets, an additional $200,000 in non-qualified assets and a hefty long-term care policy that had lapsed in March. What a surprise to them both!

At this point, the real work began. John and Sally agreed that having 10 or 20 accounts in different places was unnecessarily cumbersome, so they decided to roll all the IRA assets into one IRA and all the non-qualified assets into one brokerage account – no easy task considering Sally owned several individual stocks, some inherited stocks still in her late husband’s name, and other assets inherited from a late aunt. We also discovered that the last year’s Required Minimum Distributions had never been taken from Sally’s IRAs, and Sally had never filed her 2014 tax return.

We worked together to calculate cost basis, update ownership information and liquidate some of the holdings. Over the next few months, John and I consolidated Sally’s accounts, gathered the necessary 2014 tax documentation and collaborated with a CPA to file Sally’s 2014 tax return. It didn’t take long for federal and state tax notices to begin flooding Sally’s mailbox, and I helped John understand and respond to each one. We worked with the IRS and with the Taxpayer Advocate Service to draft a letter showing reasonable cause for not filing Sally’s 2014 tax return on time. We made sure Sally received her 2015 Required Minimum Distribution and set up future distributions to happen automatically.

We revisited Sally’s legal documents and updated her living trust, naming John as Co-Trustee so that the transition of Trustee duties would be painless. We checked Sally’s Social Security record to be sure she was receiving the correct Social Security payments and had properly signed up for Medicare. We verified Sally’s pension payments and set them up on direct deposit. We even found assets with the state treasurer’s escheated property division and facilitated a claim for their return.

For months, we worked with Sally’s long-term care insurance company to reinstate her policy. A neurologist confirmed that Sally was struggling with short-term memory loss, and we submitted his statement to the long-term care insurance company for review. Eventually, the insurance company agreed to reinstate the policy – 11 months after its lapse! I made sure that John was added as a third party for any missed payment notifications in order to prevent any future lapse.

Looking back, it is still amazing to me what John, Sally and I were able to accomplish together. Sally still struggles with the here and now, and she is often convinced that she does not have any money. John frequently reminds her that she does, and that it is safe and sound with TFA.

Names have been changed for privacy purposes.