Understanding Lifestyle Creep — and How to Avoid it

As you make more money, it’s important to be mindful of lifestyle creep. But Principal Robin Aiken, CFP® also explains it’s OK to allow the occasional indulgence. Read more via Insider.

Understanding Lifestyle Creep — and How to Avoid it

As you make more money, it’s important to be mindful of lifestyle creep. But Principal Robin Aiken, CFP® also explains it’s OK to allow the occasional indulgence. Read more via Insider.

Building Your Financial Team Roster: How to Navigate the New NIL Rule by Adding the Right Advisor to Your Team

By: Joshua Vaughan, CFP®

08/06/21

A recent ruling by the U.S. Supreme Court has opened the door for amateur athletes to make money from their name, image, and likeness (NIL) for the first time. Athletes in both men’s and women’s sports have begun announcing deals in multiple arenas including creating NFT’s (non-fungible token), social media marketing, promoting local restaurant and gyms, and endorsing national brands. The financial opportunities will continue to grow as both companies and athletes navigate this new terrain. With these opportunities, however, comes a new responsibility for athletes that has not been part of the equation previously…”I can now make money, what should I do next?” The answer is to build a solid support system to help navigate your financial future. This starts with having a financial advisor as part of your team.

The burden of making big financial decisions is not something an athlete, or any person, should handle alone. A good advisor will be well-versed on most financial matters and can help the athlete navigate these tough decisions. In our opinion, the advisor should be independent—one that does not work for financial institution offering a limited menu of proprietary or brokered products and strategies—they can help the athlete find “best of breed” solutions no matter who provides them.  Additionally, we believe that the advisor should be “fee only”—that’s a legal term that essentially means that the advisor does not accept commission on the products they recommend so they are objective and do not face obvious conflicts of interest in providing their advice. These items are of pivotal importance on the front end of an athlete’s earning career as building good habits (saving, controlling spending, investing, managing risks, planning for taxes, etc.) will propel them toward a better future. The advisor should collaborate with an athlete on these items and help them create a plan in conjunction with their goals to establish a strong financial foundation.

The truth is, not every athlete will become wealthy based on the NIL ruling alone. And, unfortunately, many that do may not invest in themselves with a long-term view in mind.  Most athletes will have a second career after their athletic careers are completed. The ruling does, however, present a great opportunity to jump start an athlete’s financial future and open new network/career opportunities. Those that manage their money and opportunities wisely, will be in a better position to succeed. Having a good advisor to help along the way can make a big difference!

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $10 billion for more than 2,000 family relationships nationwide.

Disclaimer:  The content of this presentation represents the opinions of Homrich Berg regarding these educational topics and should not be interpreted as direct investment advice or marketing of HB services. Investing involves risks including loss of principal. This document does not constitute legal, tax accounting or investment advice. This discussion includes our opinions and forward-looking thoughts as of August, 2021 and is not a guarantee of future results.

Building Your Financial Team Roster: How to Navigate the New NIL Rule by Adding the Right Advisor to Your Team

By: Joshua Vaughan, CFP®

08/06/21

A recent ruling by the U.S. Supreme Court has opened the door for amateur athletes to make money from their name, image, and likeness (NIL) for the first time. Athletes in both men’s and women’s sports have begun announcing deals in multiple arenas including creating NFT’s (non-fungible token), social media marketing, promoting local restaurant and gyms, and endorsing national brands. The financial opportunities will continue to grow as both companies and athletes navigate this new terrain. With these opportunities, however, comes a new responsibility for athletes that has not been part of the equation previously…”I can now make money, what should I do next?” The answer is to build a solid support system to help navigate your financial future. This starts with having a financial advisor as part of your team.

The burden of making big financial decisions is not something an athlete, or any person, should handle alone. A good advisor will be well-versed on most financial matters and can help the athlete navigate these tough decisions. In our opinion, the advisor should be independent—one that does not work for financial institution offering a limited menu of proprietary or brokered products and strategies—they can help the athlete find “best of breed” solutions no matter who provides them.  Additionally, we believe that the advisor should be “fee only”—that’s a legal term that essentially means that the advisor does not accept commission on the products they recommend so they are objective and do not face obvious conflicts of interest in providing their advice. These items are of pivotal importance on the front end of an athlete’s earning career as building good habits (saving, controlling spending, investing, managing risks, planning for taxes, etc.) will propel them toward a better future. The advisor should collaborate with an athlete on these items and help them create a plan in conjunction with their goals to establish a strong financial foundation.

The truth is, not every athlete will become wealthy based on the NIL ruling alone. And, unfortunately, many that do may not invest in themselves with a long-term view in mind.  Most athletes will have a second career after their athletic careers are completed. The ruling does, however, present a great opportunity to jump start an athlete’s financial future and open new network/career opportunities. Those that manage their money and opportunities wisely, will be in a better position to succeed. Having a good advisor to help along the way can make a big difference!

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $10 billion for more than 2,000 family relationships nationwide.

Disclaimer:  The content of this presentation represents the opinions of Homrich Berg regarding these educational topics and should not be interpreted as direct investment advice or marketing of HB services. Investing involves risks including loss of principal. This document does not constitute legal, tax accounting or investment advice. This discussion includes our opinions and forward-looking thoughts as of August, 2021 and is not a guarantee of future results.

Cohabitating Considerations with a Significant Other

By: Kory Gildea

05/28/2021

Frequently in modern society we’re seeing couples who choose to avoid the institution of marriage while maintaining a long-term, committed relationship with their significant other. If you’re a member of this demographic, it’s important to plan accordingly, especially when living with your partner. In the eyes of the government, a long-term partner is not the same as a spouse, and as such there are a number of planning topics that require extra consideration. For those couples cohabitating with a partner, let’s review a few steps that can be taken to help get your affairs in order.

When living with someone outside of a marriage, the easiest place to start is to form a cohabitating agreement (property agreements or living together contracts may also fit your needs). This is a legal agreement formed between an unmarried couple which protects the interests and assets of each individual while in a relationship. These agreements can be as broad or refined as the couple would like.

What a cohabitating agreement does:

  • Spells out who pays which bills
  • Lists who owns which property going into the relationship and what happens to property acquired during the relationship (think large purchases, pets, etc.)
  • Identifies arrangements related to the living situation
  • Lists what happens in the event of a breakup as well as how disputes will be resolved
  • Determines custodial rights and costs when children are involved
  • Settles other matters couples would like noted when in a serious relationship

It’s important when creating a cohabitating agreement with your partner that you ensure the document will be enforceable in the event of a separation. To do so, the contract should be in writing and signed by both parties. The contract should also be reviewed by each party separately, with best practice being to review individually with a lawyer (this could also be a good time to discuss estate planning). It’s important to note that if children are involved in the relationship, the document should be in the best interest of the children. To do otherwise would increase the chances a court would intercede. Should you and your partner elect against forming a cohabitating agreement, it becomes even more important to have a continuous open dialogue on matters which impact the other person.

If it hasn’t already been a topic of discussion, it’s important to get comfortable talking to your partner about financial matters that impact one another. This doesn’t mean running every purchase by your partner, but the two of you should be on the same page as it relates to general spending habits, your respective financial goals, and how bills and expenses are to be managed. You should also discuss how accounts are to be titled. Each party should be aware of the other’s financial history, and whether a partner’s debt or bad credit could end up impacting them. Lastly, it may be beneficial to discuss tax filing strategies with your partner and a professional to minimize taxes to the best of your abilities.

Under this same umbrella are financial arrangements if you are living together. Splitting rent can typically be handled with relative ease, but things get more complicated if you or your partner intends to purchase a home, or if you’d like to purchase a home together. The main factors to consider when discussing this with your significant other is what percentage of the home each of you will own, and whether or not a person’s ownership is transferrable to someone outside the relationship. The three most common forms of ownership are:

  • Sole Ownership – One partner owns the home outright and determines what should happen to the home in the event of a breakup or death, which would be addressed in the will.
  • Joint Tenancy with Rights of Survivorship (JTWROS) –Each party owns 50% of the home and is unable to sell or leave their share in the house to anyone besides their co-signer should something happen to them.
  • Tenancy in Common – This is a less cohesive form of ownership than JTWROS. Either party may own any percentage of the home as agreed upon and may exit the agreement by selling their ownership percentage in the house. Should something happen to either party, their ownership percentage in the home will pass to their estate or as their will directs.

If, as a couple, you elect to proceed with purchasing a home together, it’s important to have a plan in place if the relationship doesn’t work out. You should also have a general idea of how furnishing costs and future house and property expenses will be split (think property agreement in this case).

How you and your partner approach your respective insurance needs is another important matter to discuss. Insurance carriers of all kinds have come a long way in their coverage of unmarried partners, and now tend to offer comparable products and services as they would to married couples. See below for how most carriers handle some common types of insurance for unmarried partners, and remember that best practice is always to consult with your local insurance agent:

  • Life Insurance – Unmarried couples can obtain life insurance on one another if each has their partner’s consent and has an insurable interest.
  • Homeowner’s Insurance – There should not be any issues acquiring joint homeowners insurance when both individuals own the home. If only one party owns the house, you should confirm whether your partner’s belongings are insured in the event that something happens to the home (i.e., a fire, flood, etc.). This may require obtaining a renter’s insurance policy.
  • Auto Insurance – Most insurance companies offer the ability to share a policy with a partner either through a domestic partner insurance policy or through practices such as adding your partner to your plan as a qualified driver. A shared policy may not be in both party’s best interest depending on each driver’s driving records, the types of cars they own, or other influencing factors.
  • Health Insurance – Many companies and health insurers now offer coverage to domestic partners of the insured. It is important to discuss with your HR representative or the insurance company directly to determine whether any additional action or documentation is needed. It should be noted, if your partner is insured through your company and you’re fired they will not be covered by COBRA as a typical spouse would.

Whether married or not, it’s always important to have the not-so-fun conversations with your significant other and plan for all situations. The difference is, when you’re not married you typically don’t have the law working in your favor. Take time to talk with your partner and financial advisor about ways in which your relationship differs from that of a married couple, and make sure you’re prepared for situations which may arise.

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $9 billion for more than 2,000 family relationships nationwide.

*Homrich Berg does not provide legal or tax advice.  Please consult your attorney or CPA for opinions on any such matters

Cohabitating Considerations with a Significant Other

By: Kory Gildea

05/28/2021

Frequently in modern society we’re seeing couples who choose to avoid the institution of marriage while maintaining a long-term, committed relationship with their significant other. If you’re a member of this demographic, it’s important to plan accordingly, especially when living with your partner. In the eyes of the government, a long-term partner is not the same as a spouse, and as such there are a number of planning topics that require extra consideration. For those couples cohabitating with a partner, let’s review a few steps that can be taken to help get your affairs in order.

When living with someone outside of a marriage, the easiest place to start is to form a cohabitating agreement (property agreements or living together contracts may also fit your needs). This is a legal agreement formed between an unmarried couple which protects the interests and assets of each individual while in a relationship. These agreements can be as broad or refined as the couple would like.

What a cohabitating agreement does:

  • Spells out who pays which bills
  • Lists who owns which property going into the relationship and what happens to property acquired during the relationship (think large purchases, pets, etc.)
  • Identifies arrangements related to the living situation
  • Lists what happens in the event of a breakup as well as how disputes will be resolved
  • Determines custodial rights and costs when children are involved
  • Settles other matters couples would like noted when in a serious relationship

It’s important when creating a cohabitating agreement with your partner that you ensure the document will be enforceable in the event of a separation. To do so, the contract should be in writing and signed by both parties. The contract should also be reviewed by each party separately, with best practice being to review individually with a lawyer (this could also be a good time to discuss estate planning). It’s important to note that if children are involved in the relationship, the document should be in the best interest of the children. To do otherwise would increase the chances a court would intercede. Should you and your partner elect against forming a cohabitating agreement, it becomes even more important to have a continuous open dialogue on matters which impact the other person.

If it hasn’t already been a topic of discussion, it’s important to get comfortable talking to your partner about financial matters that impact one another. This doesn’t mean running every purchase by your partner, but the two of you should be on the same page as it relates to general spending habits, your respective financial goals, and how bills and expenses are to be managed. You should also discuss how accounts are to be titled. Each party should be aware of the other’s financial history, and whether a partner’s debt or bad credit could end up impacting them. Lastly, it may be beneficial to discuss tax filing strategies with your partner and a professional to minimize taxes to the best of your abilities.

Under this same umbrella are financial arrangements if you are living together. Splitting rent can typically be handled with relative ease, but things get more complicated if you or your partner intends to purchase a home, or if you’d like to purchase a home together. The main factors to consider when discussing this with your significant other is what percentage of the home each of you will own, and whether or not a person’s ownership is transferrable to someone outside the relationship. The three most common forms of ownership are:

  • Sole Ownership – One partner owns the home outright and determines what should happen to the home in the event of a breakup or death, which would be addressed in the will.
  • Joint Tenancy with Rights of Survivorship (JTWROS) –Each party owns 50% of the home and is unable to sell or leave their share in the house to anyone besides their co-signer should something happen to them.
  • Tenancy in Common – This is a less cohesive form of ownership than JTWROS. Either party may own any percentage of the home as agreed upon and may exit the agreement by selling their ownership percentage in the house. Should something happen to either party, their ownership percentage in the home will pass to their estate or as their will directs.

If, as a couple, you elect to proceed with purchasing a home together, it’s important to have a plan in place if the relationship doesn’t work out. You should also have a general idea of how furnishing costs and future house and property expenses will be split (think property agreement in this case).

How you and your partner approach your respective insurance needs is another important matter to discuss. Insurance carriers of all kinds have come a long way in their coverage of unmarried partners, and now tend to offer comparable products and services as they would to married couples. See below for how most carriers handle some common types of insurance for unmarried partners, and remember that best practice is always to consult with your local insurance agent:

  • Life Insurance – Unmarried couples can obtain life insurance on one another if each has their partner’s consent and has an insurable interest.
  • Homeowner’s Insurance – There should not be any issues acquiring joint homeowners insurance when both individuals own the home. If only one party owns the house, you should confirm whether your partner’s belongings are insured in the event that something happens to the home (i.e., a fire, flood, etc.). This may require obtaining a renter’s insurance policy.
  • Auto Insurance – Most insurance companies offer the ability to share a policy with a partner either through a domestic partner insurance policy or through practices such as adding your partner to your plan as a qualified driver. A shared policy may not be in both party’s best interest depending on each driver’s driving records, the types of cars they own, or other influencing factors.
  • Health Insurance – Many companies and health insurers now offer coverage to domestic partners of the insured. It is important to discuss with your HR representative or the insurance company directly to determine whether any additional action or documentation is needed. It should be noted, if your partner is insured through your company and you’re fired they will not be covered by COBRA as a typical spouse would.

Whether married or not, it’s always important to have the not-so-fun conversations with your significant other and plan for all situations. The difference is, when you’re not married you typically don’t have the law working in your favor. Take time to talk with your partner and financial advisor about ways in which your relationship differs from that of a married couple, and make sure you’re prepared for situations which may arise.

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $9 billion for more than 2,000 family relationships nationwide.

*Homrich Berg does not provide legal or tax advice.  Please consult your attorney or CPA for opinions on any such matters

Gray Divorce and Where to Start

Gray divorce is becoming more common among older Americans. While the financial implications are a big hurdle to navigate, HB’s Tricia Mulcare explains,” The first step I always tell my clients is not financially motivated: Take a deep breath.” Read more via MarketWatch

Gray Divorce and Where to Start

Gray divorce is becoming more common among older Americans. While the financial implications are a big hurdle to navigate, HB’s Tricia Mulcare explains,” The first step I always tell my clients is not financially motivated: Take a deep breath.” Read more via MarketWatch.

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients, including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $9 billion for more than 2,000 family relationships nationwide.

Building Financial Independence in Your College-Aged Children

By: Kory Gildea

09/18/20

For many people, college is viewed as a place and time of freedom and independence. Students enter as naïve teens, and leave as adults ready to take on the real world. Students form new opinions, enhance their education, and learn what it means to handle responsibility and act for themselves. Unfortunately, one area that often gets left by the wayside during all of this growth is their personal financial development.

In these treasured college years, many of America’s youth disregard financial responsibility and instead choose the mentality that money, or the lack of it, is a problem for their future selves to deal with. However, this frame of mind only delays the struggles and errors which inevitably come as young adults begin to handle their own finances. If you’re a parent with a child who is in high school or college, now is the time when you can help teach your children how to make sound financial decisions, even if for the time being you’re providing the bulk of their financial support.

The most obvious opportunity for you to teach your children how to get their financial lives in order is to discuss the exciting topic of budgeting with them! As a recent college grad, I know all too well that tracking where you spend your money in school isn’t always a fun thing to do, especially when the weekend’s charges hit your credit card. However, budgeting doesn’t have to be some horrible task that you agonize over. Budgeting comes in many forms and you can be flexible with how you and your child approach the matter. If together you both decide you would like to track every expense, that’s great, but it may not be realistic. An alternative would be to sit down and figure out what weekly or monthly expenses look like, and work from there. This could be as simple as allotting X money for rent, Y money for food and other bills, and then any extra spent is just “social”. It’s more important to instill the habit of spending within their means, than it is to actually know where every single dollar goes. Additionally, it’s important to prevent budgeting as coming across as a punishment or a chore. This should be a tool your child can use to help guide future decision-making, not something eliciting shame.

Having your student pay his or her own bills each month is another valuable skill to develop, even if they’re not ultimately the ones providing the capital for said bills. When your children communicate with the Power Company, or landlord, or whoever else is charging money for a service, they’re learning to depend on themselves rather than on you. They also begin the act of paying bills monthly, seeing the money leave their account, and learning the consequences firsthand of what happens when they leave a window open all month in the summer heat. We are creatures of habit, and the earlier your child develops the habit of monitoring their financial responsibilities and addressing them directly, the easier their transition to full financial independence will be.

If your child manages to find themselves with a cash surplus, this is a great time to discuss putting money away in savings, or putting money aside to give to charity. Unfortunate as it may be, it is ingrained in many young people’s DNA to spend every last dollar they have, so the prospect of doing otherwise will likely be met with resistance. However, if your student can afford to do so, this is the perfect time to shift their focus from “wants” to “needs”. This is especially true after a summer job or internship where the student’s pockets might feel just a bit heavier. It’s best to start small here and habitualize the act of saving small amounts consistently, as opposed to expecting meaningful capital to be put away.

As a parent, this is also an important time to make sure your child has begun building and understanding credit. Should your child graduate college without forming any kind of credit history, or having already created a poor credit history for themselves, then it’s likely they’ll face additional, unnecessary challenges as they experience the real world for the first time. Already complicated situations like renting an apartment, or making a first car purchase, get only more difficult for a young adult when they’re weighed down by mistakes they made unknowingly early in their financial life. Use this time to make sure your child understands what credit is and how it can potentially impact them down the road. Once your child has a solid understanding, you can ease them into building their credit through various actions such as opening a checking account for them, or cosigning on a credit card with them. Upon taking these additional steps, you should once again make sure your child understands the new responsibilities bestowed upon them, and the potential impact that inappropriate financial decision-making can have.

Handling money is just like playing a sport or painting or anything else we do, it takes practice and time to acquire skill. As a parent, your children look to you for guidance, and so it’s important that you instill in them the productive habits that are required for them to make sound financial decisions. With a little help early, you can spare them much pain ahead.

Intra-Family Loans

By: Todd Hall

08/10/20

In a low-interest rate environment, loans to children or grandchildren (intra-family loans) can be an effective way of assisting family members while keeping wealth within the family. Such loans can be for many purposes, such as assisting with the purchase of a home or car, paying off higher interest debt, or starting a business. There are several uses of intra-family loans in more complex wealth transfer plans as well. A properly structured intra-family loan has many benefits, including:

  • lower interest rates for the borrower compared to commercial loans
  • greater flexibility than commercial loans (e.g. any number of years)
  • loans can be made with no credit checks or reporting if desired
  • origination and other transaction fees can be avoided

Interest Rates Used

There is a minimum interest rate that must be charged on intra-family loans in order to avoid adverse tax consequences. The rate that must be charged is called the Applicable Federal Rate (AFR) and is published monthly by the IRS. The rate is based on the term of the loan as follows:

  • Short-term — Three years or less
  • Mid-term — More than three years and up to nine years
  • Long-term — More than nine years

As of August 2020 the AFRs are: 0.17% for short term, 0.41% for mid-term, and 1.12% for long term loans. This means a parent can create a 30-year loan to a child for 1.12%, while commercially available mortgages are around 3%.

Properly Implementing Intra-Family Loans

The IRS presumes a transfer of money to a family member is a gift unless it is properly structured as a bona fide loan. Before implementing an intra-family loan, consult with qualified tax and legal advisors to confirm it is set up properly and will be honored by the IRS. Best practices include:

  • Sign a promissory note
  • Establish a fixed repayment schedule and ensure payments are made
  • Set a rate at or above the AFR in effect when the loan originates
  • Secure or collateralize the debt
  • Maintain records that reflect a true loan transaction
  • Avoid having a prearranged schedule to forgive the loan
  • Lender should report interest income, and if applicable the borrower may deduct interest payments (e.g. for a properly secured mortgage up to a loan size of $750,000)

If properly structured and maintained, intra-family loans are a technique that can have significant benefits for both the borrower and the lender.