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4 important steps after cashing out: Things you need to know about Liquidity Events

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Several things may spark a personal liquidity event, or a large inflow of money, during your career. Selling a business, earning a large commission or accepting an executive buyout, are a few examples. And with that influx of cash comes many investment questions and options—particularly if your current employment is affected.

Understanding and evaluating the different personal and professional areas that may be impacted is important, as you will have many financial decisions to make once the event occurs. Career desires, market conditions, day-to-day finances and employer-provided benefits are a few of the items you will need to consider. Watch more on this topic in the below video. Also check out Part 1 of the Colorado Business Magazine video series where Marti discusses spring cleaning for your finances.

Below are the four important steps:

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1) Determine Your Next Career Step

First, determine your personal short- and long-term employment goals. Are you going to take some time off? Do you want to start a new business? Do you want to venture into an entirely new profession?  Understanding where you are now and where you want to land 12 months (or more) from now will help provide a framework for strategic planning and decisions.

2) Evaluate the Market Environment

The market has changed dramatically over the past few years, and these shifts could carry on for the foreseeable future. The current interest rate environment continues to provide challenges that didn’t exist for investors five years ago. It’s critical for you to have an understanding of current market conditions and how they will likely affect your investments.

3) Establish Your Cash Flow Plan

Now it’s time to look at your cash flow needs. Are you spending more than you’re earning? If the answer is yes, your asset allocation inside your current portfolios becomes extremely important, as there will be a need to fill the deficit without eroding your portfolio’s principal. For example, if you are making an annual salary of $100,000, one of your goals may be to replace that money with the interest earned from your portfolio as opposed to taking direct withdrawals. Advisors can provide you with recommendations and options on how to achieve these goals, while continuing to position your portfolio for your long-term needs.

4) Evaluate Your Ancillary Benefits

Health care, life insurance, savings vehicles, disability and similar benefits are often tied to employment and may end or need to transition when your current job service ends. Advisors can help you identify areas to review and provide recommendations on the best ways for you to move forward based on your strategic plan.

Liquidity events can provide you with many exciting opportunities, but they come with challenges as well. Taking the time to evaluate and plan how to proceed, both personally and professionally, is extremely important. A trusted advisor can work with you to navigate these different areas and make sure you are well positioned for the future.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Marti Brust joined UMB Private Wealth Management in 2006. As senior vice president and wealth advisor for the Colorado Investment and Wealth Management department, she works with high net worth individuals and not-for-profit organizations in the areas of investment, retirement, education and estate planning. Ms. Brust earned a Bachelor of Arts in Journalism with an emphasis in Public Relations from the University of Central Oklahoma. She has obtained the Certified Wealth Strategist designation and holds a state insurance and FINRA Series 7 and 66 licenses.

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Do you need a wealth advisor?

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Do you need a wealth advisor (also known as financial planner)? You might think that only the very wealthy need this type of expert advice. If you’re interested in investing, whether it’s for retirement, education or to leave a legacy, it is recommended that you work with a financial planning professional.

Whether it’s your first time talking to a financial planning professional or your 10th, you want to ensure your advisor is taking the time to ask the sometimes difficult questions to plan the best future for you.

Basic financial planning questions

Most customers focus on questions like:

  • Will I have enough to retire?
  • Will my children’s education be taken care of?
  • What if I get sick?

These are important topics to cover, but an in-depth financial/estate planning will include more than these basic questions.

Do I need a trust?

One question you should ask is, “Do I need a trust?” A trust is a legal agreement that allows you to transfer assets to a trustee. A trust can be used for various reasons including to:

  • manage assets
  • protect assets
  • facilitate charitable gifts
  • transfer of monetary assets or property

If the answer is yes, your advisor should assist you with making sure your assets are titled appropriately, or given the correct ownership recognition. You wouldn’t want to spend several thousand dollars for an attorney to prepare a trust document, only to find out that the assets aren’t titled appropriately. If so, the trust doesn’t get funded and your estate plan isn’t carried out to your intentions.

What about insurance?

Your advisor should also discuss the topic of insurance with you. Customers and advisors sometimes avoid this question, as it can be an uncomfortable conversation. Most insurance is used in the case of a disaster, accident, illness or death, and these are not pleasant subjects to discuss. You want an advisor who will understand the sensitivities of these topics, but will not avoid the subject. Insurance is an important part of a financial plan and it can be helpful to your family’s future.

Building relationships

You should look for an advisor who will build a relationship with you. If they work to create more than a business partnership, it’s likely there will be more open dialogue between you both. Advisors who are thorough in their work and ask the hard questions will be able to build a solid financial/estate plan for you, your family and their future generations.

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When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.

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David Brody serves as executive vice president and marketing manager, UMB Private Wealth Management. He joined UMB in 2010. Brody received a Bachelor of Arts degree from the University of Georgia. He also has various sales and management training through Cannon and the American Bankers Association.

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The Plan in Planned Giving

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Planned giving can be an important tool when planning for the future of your estate. Some may have a desire to give to non-profit organizations, including their alma mater, a medical research project or a favorite youth organization. Whatever your desire, make sure you work with an experienced financial partner that can help guide you through the process to ensure your goals can be met.

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First, what constitutes a meaningful gift?

Quite simply, any gift is a meaningful gift. Many people are under the impression that only the very wealthy can be philanthropic. However, this is not the case. Gifts of any size are greatly appreciated by non-profit organizations, especially now as economic challenges have affected many individuals’ ability to donate while the needs continue to grow.

Motivations for gifting

The reasons for gifting vary greatly depending on the individual. Compassion for those in need, an extension of a religious or spiritual commitment, desire to share good fortune with others and memorializing the lives of others are some of the most prevalent reasons for planned gifts. You should personally evaluate your motivation and goals, and keep them in mind when determining how and when you want to support a cause.

Selecting the “right” organization

There are many worthy organizations, and choosing the non-profit that best fits your giving intentions is extremely important. Once your inspiration for giving has been clearly identified, make a short-list of potential groups. Organizations should be carefully researched and vetted to ensure you are comfortable with the final decision. It’s important to learn about a specific topic or organization, so your philanthropy can be used in a meaningful way. Once one or more organizations have been selected, a financial partner can help you define your vision, determine how the gift will be distributed and then evaluate, when possible, how the gift has been used.

Gift Options

Another item to consider is the type of gift you may want to give. Many organizations have gift acceptance policies, which may exclude certain types of donations. Things like stocks, real estate, art or other items may be quite valuable, but you should have a conversation with the organization first to ensure they are able to accept these types of gifts.  

Planned giving is an extremely meaningful and personal investment. Taking the time to evaluate these types of questions can really help individuals and organizations make the most of charitable gifts.


Jan Leonard is senior vice president and managing director for charitable trusts, private foundations and fine art services. She joined UMB in 2003 and has more than 25 years of experience in the management of private and public organizations. Leonard earned a bachelor’s degree from Arkansas Tech University and a master’s degree in business administration from Ottawa University in Ottawa, Kan. She is also a graduate of the Cannon School of Foundation Management.

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Fiduciaries: what are they and why do you need them?

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One of the most important items in your estate planning process is naming the fiduciaries who will execute your wishes and manage your assets when needed. First, you may be wondering what exactly is a fiduciary. Very simply, a fiduciary is a third-party representative who is appointed to act on behalf of someone else.

Two of the most common fiduciaries in estate planning are the personal representative, the person who handles the assets that are included in someone’s last will and testament; and a trustee, someone who handles the assets that have been placed in a trust.

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So, why do you need a fiduciary and how do you choose the right one? Here are some things to keep in mind.

  • Carefully select a fiduciary that you trust to execute your plans.

    Handling an estate may seem like a simple process that anyone can easily manage. However, don’t underestimate both the amount of work and the expertise needed to carry out required duties.

    First, there are a variety of laws that must be navigated, including complicated probate laws. Additionally, accounting for estates and trusts can be extremely technical and require excellent record keeping and tracking. Your fiduciaries must be able to show through proper accounting that they have handled and managed the estate and its assets in an accurate, fair and unbiased manner. If you pick someone who is lacking in knowledge or organizational skills they are at risk for liability and personal fines.

    Tax planning is also a necessary expertise—it’s imperative that an estate is run in a tax-efficient manner. Fiduciaries must understand how their actions affect the estate or trust as well as the beneficiaries. This includes how assets are invested and distributed since trusts are subject to different tax rates and laws than individuals or corporations.

  • There may be disagreements.

    Secondly, you may truly believe that your family members and friends will easily work together and agree on how your assets should be handled. Unfortunately, this is rarely the case. Appointing a family member or friend frequently causes tension or distress that may not have existed before. If not handled properly, this can easily result in stress, damaged relations or, in some cases, legal action between or against your loved ones.

  • You don’t have to be wealthy to use a professional fiduciary.

    Employing a professional fiduciary is cost-effective, and something you should think about even if you do not consider yourself to be a high-net-worth individual. Your immediate reaction may be that it’s more expensive to hire a fiduciary to handle everything, rather than seeking individual counsel from different experts as needed. However, in many cases, a fiduciary’s cost will be equal to or less expensive.

At the end of the day, it’s in your best interest to carefully research your options to select the appropriate fiduciary for your own unique situation. Designating the right person to efficiently and quickly handle these details in a difficult time is truly one of the best gifts you can leave behind.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Tjaden serves as executive vice president and chief fiduciary officer. He is responsible for supervising all fiduciary activities and staff for UMB, including offices in Kansas City, St. Louis, Denver, Phoenix and Salina, as well as the Trust Company in South Dakota. Mr. Tjaden oversees Personal Trust, Custody, Foundations, Trust Legal and Business Support Services within the Private Wealth Management division. He joined UMB in 1977. Mr. Tjaden earned a bachelor’s degree in business administration and political science from Kansas State University. He also earned a Juris Doctor and a master’s in business administration from the University of Kansas. Additionally, Mr. Tjaden is a Certified Trust and Financial Advisor and a member of the Estate Planning Society, the Johnson County Bar Association and the Kansas Bar Association.

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Estate Planning: What will your legacy be?

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You don’t have to be a millionaire to set up an estate plan. Have you thought about passing down a family heirloom to one of your children? Maybe you’ve considered leaving money to a charity that benefits public arts funding. When you’ve spent your life acquiring assets and building wealth through hard work, it’s only natural to want some control over what happens to them after you’re gone. The best way do this is to have a sound estate plan.

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As you form your estate plan, keep in mind several key ideas.

  • Pick your heirs

    Whether you want to pay for your grandchildren’s college education or give a ring that’s been in your family for generations to your oldest daughter, decide who you want to provide for and how.

  • Provide direction

    If you have specific ideas about how you want your assets to be used when you’re gone, make sure that those ideas are clear in your estate plan. You may want to start a family foundation that supports children’s literacy or structure a trust that holds money you’ve left for your children until they reach a certain age. Whatever special objectives you have, clearly outline them in your estate plan to ensure they’re accomplished.

  • Protect your children

    If you have young children, it’s important to select a guardian to care for them and include this in your will. This may seem like an impossible task, but only you should decide who is best suited for the job. Be sure to talk to them about it before you put them in your will. Having a conversation with them ahead of time will prevent surprises and ensure they are up to the responsibility. Once they agree, make sure it’s documented. If you name a guardian in your will, the probate court will be more likely to honor your wishes. If you don’t list a guardian in your will, the court will select one without guidance.

  • Prevent legal hiccups

    Generally, assets owned by one person are subject to probate after they have passed. Probate is a name for the legal process conducted to determine the authenticity of a will and to distribute the assets of an estate. Probate involves legal costs and causes delays in the distribution process.

To avoid probate and minimize taxes on your assets, you can place part or all of them in a trust. One option is a “self declaration of trust,” where you are responsible for the assets while you are still alive (initial trustee) and a professional third party is responsible for distributing the assets after you are gone (successor trustee). Another option is to name the professional third-party as the trustee while you are still alive.

Many people tend to put off estate planning. But it is an important process for you to consider. It’s an opportunity to take control of future planning for yourself and your beneficiaries. It can be a difficult, but if successfully completed, this seemingly impossible task becomes an efficient and well-executed plan.

 

Content is for informational purposes only and should not be taken as legal advice.  Please consult an attorney for assistance related to estate plans and your particular situation.

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Tjaden serves as executive vice president and chief fiduciary officer. He is responsible for supervising all fiduciary activities and staff for UMB, including offices in Kansas City, St. Louis, Denver, Phoenix and Salina, as well as the Trust Company in South Dakota. Mr. Tjaden oversees Personal Trust, Custody, Foundations, Trust Legal and Business Support Services within the Private Wealth Management division. He joined UMB in 1977. Mr. Tjaden earned a bachelor’s degree in business administration and political science from Kansas State University. He also earned a Juris Doctor and a master’s in business administration from the University of Kansas. Additionally, Mr. Tjaden is a Certified Trust and Financial Advisor and a member of the Estate Planning Society, the Johnson County Bar Association and the Kansas Bar Association.

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A smooth road to retirement

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Are you ready to begin the next stage of your life? Retirement is still an option despite the current slow-growth economy. If you’re considering or approaching retirement, there are several items to keep in mind when nearing this important milestone. If you are planning to leave the working world in the next 18 to 24 months, here are a few considerations in the current economy:

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  • Understand your actual timeline.

    Your “time horizon” may be longer than you realize. Life expectancy is also a big factor. A retirement date is an initial benchmark, but you need to keep in mind that your money can still “work for you” while you are enjoying your newly discovered free time.

  • Make sure to have a cash reserve.

    You should build up a reserve large enough to carry you through six to 12 months of retirement expenses. This can provide a cushion in case of an unexpected downturn or a major unplanned expense.

As markets can vary year to year, those with more than two years until retirement can plan for either situation in the following ways:

  • Increase contributions.

    Invest extra cash. Consistent dollar-cost averaging can help reduce the worry of when and how much to invest. You may also want to direct some of those extra contributions into a cash reserve, just in case of unexpected declines.

  • Diversify, diversify, diversify.

    Don’t put all your eggs in one basket. Throughout market cycles, different classes, styles and assets with diverse market capitalizations perform differently. Actively managing your portfolio diversification can have a greater impact on performance than individual investments.

Most of all, flexibility and patience are virtues in the world of portfolio management.  Don’t fall in love with a retirement date, and don’t be frustrated with market activity. If you have questions or concerns, it may be advantageous to seek the advice of an experienced professional.

Professional advisors can offer objective, educated and customized guidance. They are also an objective and knowledgeable resource that can provide a valuable perspective. While an advisor may not be able to provide every person with the news they want to hear, a good financial advisor can help maximize and leverage the assets individuals have against their personal timelines, risk tolerance and goals.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Diederich serves as managing director of portfolio management. He is responsible for managing the portfolios of high net worth clients and select institutional relationships. He joined UMB in 2003. Mr. Diederich earned a Bachelor of Science in Finance from Missouri State University in Springfield, Mo., and a Master of Business Administration from the University of Missouri – Kansas City. He is a Certified Financial Planner®, a member of the Financial Planning Association and has more than 15 years of experience in the financial services industry.

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How to generate income during retirement

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Senior Couple WalkingWith the baby boomer generation already in or quickly approaching retirement age, it is important for current and soon-to-be retirees to determine the best approach to collecting the money from their 401(k), IRA, Roth IRA, pension plan, 403(b)  or social security.

You don’t want to spend your retirement years worrying about money. You should spend the time enjoying your family and hobbies or traveling! Planning ahead and working with a professional can help alleviate your anxiety.

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Here are some important things to remember about saving and spending during retirement:

  • Generate income using assets and investments

    Discuss with your financial planner how to generate income during retirement with the money you’ve set aside for this time in your life. Your planner can help you separate your assets into three groups: taxable, tax-favored and tax-free. If you take a blended approach to meeting your required minimum distributions, your money can last significantly longer.

  • Diversify your portfolio

    It is always recommended to have a portfolio of assorted investments. You don’t necessarily have to rely completely on safe, income-producing investments. Adjust your rate to your needs when necessary and don’t be afraid to spend capital from your retirement portfolio. Traditional IRAs, 401(k)s, 403(b)s, and self-employed plans are structured for you to withdraw from it over your lifetime. You might be nervous spending down these accounts, but a financial advisor can help you distribute these funds appropriately over the course of your retirement so that you can live comfortably.

  • Remember: taxes, timing, spending

    These three items are the most important factors to creating income during your retirement. You should understand your tax obligations because tax rates could help determine acceptable savings withdrawals.It’s also important to carefully time your retirement. The point at which you begin taking money from your retirement accounts can make a significant difference in the amount that is available several years into your retirement. Remember that some retirement funds charge a penalty if you withdraw before a certain age.Finally, it’s vital to spend wisely during this time in your life to ensure that you will have enough funds to last throughout your retirement. Do you want to splurge on a Hawaiian vacation during your retirement? If so, this is something you should plan for in advance. Talk to your advisor about any major spending you would like to do in your retirement. You might not be on a completely fixed income, but you need to be mindful of how much money you have to spend.

  • Educate

    Take the time to educate yourself before and during your retirement. Start planning early so you can enjoy this time in your life. Do your best to educate your children about saving for retirement and encourage them to start saving at an early age.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


UMB Financial Corporation (Nasdaq: UMBF) is a financial services holding company headquartered in Kansas City, Mo., offering complete banking, payment solutions, asset servicing and institutional investment management to customers. UMB operates banking and wealth management centers throughout Missouri, Illinois, Colorado, Kansas, Oklahoma, Nebraska and Arizona. It also has a loan production office in Texas. Subsidiaries of the holding company include mutual fund and alternative investment services groups, single-purpose companies that deal with brokerage services and insurance, and a registered investment advisor that manages the company's proprietary mutual funds and investment advisory accounts for institutional customers.

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Financial planning is a marathon, not a sprint

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Whether you have just started the race and you are at the beginning of your career, or you are closing in on the finish line of retirement, you should stay on track with your financial planning. Much like running a marathon is different than a sprint, planning long-term financial goals is different than simply paying your bills every month. A knowledgeable financial partner can coach you through this and make the process seem less daunting. Similar to a mile marker showing you what point you are at in a marathon, certain life events signal when and how you should financially prepare.

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  • Just starting out

    Start saving as soon as possible to set the pace for this long-distance run. Consider opening a savings account and set aside whatever you can from each paycheck. With most banks, you can set up an automatic transfer from your checking account to a savings account so you won’t even have to think about it. Also consider a retirement fund—either a 401(k) or similar employer-sponsored plan, or an Individual Retirement Account (IRA) separate from your current job.

  • Planning for a family

    Thinking about starting a family? This is an important decision and one that you must be prepared for financially. Much like training before you run a marathon, adjusting your budget and saving for having kids is important. Paying for medical bills when the baby is born or financing adoption fees is no simple task. Not to mention childcare and other expenses related to children once you have them. Bottles, diapers, clothes, toys, it all starts to add up quickly!

  • Children’s education

    If your children plan to pursue higher education after high school, you will need to save for that expense. A four-year degree is estimated to cost $442,697.85 for students enrolling in 2031 if tuition increases seven percent per year. Does that number make you nervous? Planning ahead and starting to save when your children are born will help with some of that anxiety.

  • Pre-retirement

    As you see the retirement finish line in the distance, it is important to meet with your financial partner(s) to understand when you can retire and feel comfortable with your finances at that time. Ask how your retirement fund(s) is/are performing and whether or not you need to increase/decrease your contributions. Want to spend your retirement vacationing at that lake house you have always dreamed of? It doesn’t have to be a dream if you start budgeting now.

  • Post-retirement

    Now it’s time for the post-run cool down and stretch. After you retire, it is more important than ever to monitor your finances. You aren’t contributing to a retirement fund or planning to pay for your children’s college; instead you are now working on a fixed income and have to ensure that it will last for the rest of your life.

Marathon runners train very hard for a long time to prepare for those 26.2 miles. Often they don’t do it alone and will work with a trainer who helps them through the preparation. Utilize the expertise available at your bank and start preparing for the long-term so you can reach the finish line when and how you want.

 

When you click links marked with the “‡” symbol, you will leave UMB’s website and go to websites that are not controlled by or affiliated with UMB. We have provided these links for your convenience. However, we do not endorse or guarantee any products or services you may view on other sites. Other websites may not follow the same privacy policies and security procedures that UMB does, so please review their policies and procedures carefully.


Mr. Miles serves as assistant vice president and banking center manager in Denver. He is also a member of the UMB Consumer Advocate Team. He joined UMB in October of 2007. He is currently studying Organizational Leadership at Colorado State University.

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