Where to Start when Starting out Investing

The Lessons We Need to Learn Before Investing

The investing life cycle, as I like to call it, seems to start in the same place for everyone. That is our first interaction with money and what to do with it: spend it or save it. Traditionally, when we were all young and reached some type of significant milestone, like a religious ceremony or graduation, someone gifted us money. And whatever the amount of money gifted, we always thought it was a life-altering amount, no matter how much it was! Most kids’ first thought is what to spend it on, but depending on who was there to guide us on what to actually DO with the money, most, again hopefully, were guided to save some of it. I can remember my Dad taking me to the bank for the first time with some gift money and opening what used to be called a passbook savings account where literally there was a “book” that looked like a passport, and every time money was entered into it, there was some type printing press like a machine that printed out the balance and accrued all the interest in the account and printed the results into the book. 

Now that was SAVING and YES, I just dated myself big time there. Because we all know nowadays kids are day trading crypto on their phones on the playground in elementary school, right? It seems access to investing has come leaps and bounds in the last generation, but the real question is this: at the start of your investing life cycle, what were you taught? Spend it, Save it, Day Trade with it, or Invest with it? Besides donating it those are the options. Having access in this digital age to all the tools in finance at our fingertips doesn’t actually drive smart behavior after all. This behavior has to be taught. Providing access to a broader community to easily trade any asset they want in small increments is great, but where is the advice as to what to actually invest in and in what types of accounts will you be investing from? What about compounding wealth?

The use of Trusts in Planning, Especially for those with Special Needs

Attorney working on a trust.

Let’s assume, for argument’s sake, you’ve mastered the basics. That someone told you along the way in your investing life cycle told you to have a long-term retirement savings account like a 401K, you live below your means, and you’ve accumulated some wealth, maybe even a fair bit of wealth, and are starting to think about the next generation or just your own future. It seems like this investing life cycle timeline skipped a few chapters, though. You start to build up your wealth and savings or even just come into some money via an inheritance or stock options, and boom, you leap right from building the wealth to preserving it. It seems like we went right from middle school graduation money to 401K to get a will and life insurance! Back up, there are a lot of steps in between. But, if it’s legacy and taking care of others that starts to come to mind, this is where the use of trusts could come in handy.

Let me start with the disclaimer that I’m not an attorney, and if you’re seeking expert advice on trusts and estates, then please make sure to contact an attorney who specializes in this type of work. That being said, in my travels as an investment advisor and in my personal life, I’ve had to get smart on using trusts so sharing the basics on the topic I think is incredibly important. Let’s be clear, the accounts via which we invest can get complicated, and for some reason, we seem to skip over this part. It’s like the retirement planning lobby has drilled into our heads to save but only in accounts that they offer, not in a self-directed way that focuses on very real needs in our lives that we want to save for.

First, the basics of trusts, why we even need them, and what they are. There are generally 2 types of trusts, Irrevocable Trusts and Revocable Trusts, and by their names, they imply the common-sense difference between the 2; one can be revoked or changed, and the other cannot. What that means in practicality is that if you want to make changes or need to make changes in a trust, then the revocable trust is the way to go. Any assets transferred to the trust are still yours. So, you control them. With an irrevocable trust, upon transfer of the assets to the trust, the assets have left your name, and the transaction is permanent. So why would one choose one method over another? And why use trusts in the first place?

The hope is that by using trusts for your estate planning that you can care for the ones that you love after you’re gone. For example, transferring assets to a revocable trust can be cheaper and more efficient than gifting your estate via a will and help avoid the probate process which incurs undue costs and burden to surviving family members if not planned for properly.

Irrevocable Trusts may be used by those wanting to minimize estate taxes or to protect assets from lawsuits and other creditors. Another use of irrevocable trust is to also aid in maintaining access to government benefits. This is the case for example when dealing with those with special needs.

But faith and hope aren’t plans. A plan is a plan. We do put hope and faith in experts from different fields, so why not do that with a financial expert? Some suggest that don’t want to be sold anything. The reality is most independent Registered Investment Advisors (like Gasima) are duty-bound legally and ethically to serve the best interest of the client and not sell them anything they don’t require. The truth is, most people don’t want to face the reality of their finances and make the hard choices that come with looking at their personal situation. But does it have to be looked at from a negative point of view? Why don’t people get excited about the possibilities of what a plan could do for them and what lifestyle choices it could finance? 

It’s kind of like a personal relationship. Sometimes we’re happy and in love and other times we’re angry and frustrated. The reasons are complicated, and things are not so easy to describe or accept. And much like our relationships in life, when it comes to personal finances, we sometimes love them, hate them, are indifferent to them and many times emotional about them. So why not do something about it, just like you would with any other relationship? Because essentially, that’s what we’re talking about: a relationship that needs to be managed. This just happens to be the relationship with your finances, and by the way, America; your relationship is in trouble if you don’t have a plan! 

The Vital Role of Special Needs Trusts in Supporting Disabled Loved Ones

Family with special needs considering a trust.

A strong example of an irrevocable trust and something near and dear to my heart is a Special Needs or Supplemental Needs Trust. Like my family, anyone who has a child with a disability or someone in their life who has become incapacitated knows the immense emotional and financial burden that this can place on a family. When the need is obvious, families typically apply for and receive government assistance via Social Security and Medicaid. The program for disabled people via which they receive monthly checks is called Supplemental Security Income or SSI. But to be clear, even in the most generous of state-funded programs for disabled children who have never worked before, the benefits are puny and barely enough to even put food on the table. I mean, we’re talking less than $700 a month type of checks. The unfortunate truth is you are going to need to privately finance the care of your loved one by yourself and this is where an irrevocable trust in the form of a Special Needs Trust can come in handy. 

At the end of the day, look at this as a retirement plan for the benefit of your loved one in need. And the beauty of this type of account is you can save and ask for relatives to gift to this account, all while keeping intact their government benefits. Grandparents can leave money to the trust without endangering crucial benefits for the recipient. Additionally, there are accounts called ABLE Accounts where anyone can contribute for an eligible beneficiary up to $18,000 a year without exceeding the annual gift tax exemption, or money left over from SSI disability payments can be contributed without endangering the eligibility of the benefits. And most importantly, the funds can be used almost like a 529 plan for education, whereby the beneficiaries can take distributions tax-free as long as they are used for qualified disability expenses. 

Let’s be clear about one thing: you have to act and engage the right professionals. I’ve been there. I put my son’s Special Needs Trust, ABLE accounts, and all his planning together by myself. There was no billboard or Google Ad that said, “get your special needs trust here.” And you don’t some special trust administrator to charge you more fees in order to manage your money for your special needs loved ones. There was even a case recently that came to light here in Florida where one of these “non-profits” for special needs administration allegedly took $100MM from 1000s of special needs families and subsequently declared bankruptcy without ever returning the funds to these poor families. Don’t be scammed, and there is no need to overpay. Everything can be done in a transparent, easily accessible online way. 

My point is this: YOU CAN DO THIS, and it’s actually pretty easy.  Like my recent talk on “having a plan,” you need to get a plan together and act upon it. I’d love to hear from you on how I can help since I have personal experience in this area and can’t tell you how sad it makes me when I speak to other families with special needs members that don’t know about the power of the types of trusts to ensure your loved ones’ well-being. The investing life cycle always applies and it’s no different here. 

Feel free to reach out on our website @ www.gasimaglobal.com to book an appointment to find out more. 

The information contained in this article is for educational purposes only, this is not intended as tax, legal, or financial advice. One should always consult with the tax, legal, and financial professionals of their choosing regarding their specific situation.
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