Here’s a simple financial question: who is the beneficiary of your IRA? How about your 401(k), life insurance policy, or annuity?

You may be able to answer such a question quickly and easily. Or you may be saying, “You know … I’m not totally sure.” Whatever your answer, it is smart to periodically review your beneficiary designations.

Your choices may need to change with the times. When did you open your first IRA? When did you buy your life insurance policy? Was it back in the Eighties? Are you still living in the same home and working at the same job as you did back then? Have your priorities changed a bit – perhaps more than a bit?

While your beneficiary choices may seem obvious and rock-solid when you initially make them, time has a way of altering things. In a stretch of five or ten years, some major changes can occur in your life – and they may warrant changes in your beneficiary decisions.

In fact, you might want to review them annually. Here’s why: companies frequently change custodians when it comes to retirement plans and insurance policies. When a new custodian comes on board, a beneficiary designation can get lost in the paper shuffle. (It has happened.) If you don’t have a designated beneficiary on your 401(k), the assets may go to the “default” beneficiary when you pass away, which might throw a wrench into your estate planning.

How your choices affect your loved ones. The beneficiary of your IRA, annuity, 401(k) or life insurance policy may be your spouse, your child, maybe another loved one or maybe even an institution. Naming a beneficiary helps to keep these assets out of probate when you pass away.

Many people do not realize that beneficiary designations take priority over bequests made in a will or living trust. For example, if you long ago named a son or daughter who is now estranged from you as the beneficiary of your life insurance policy, he or she will receive the death benefit when you die, regardless of what your will states.¹

You may have even chosen the “smartest financial mind” in your family as your beneficiary, thinking that he or she has the knowledge to carry out your financial wishes in the event of your death. But what if this person passes away before you do? What if you change your mind about the way you want your assets distributed, and are unable to communicate your intentions in time? And what if he or she inherits tax problems as a result of receiving your assets? (See below.)

How your choices affect your estate. Virtually any inheritance carries a tax consequence. (Of course, through careful estate planning, you can try to defer or even eliminate that consequence.)

If you are simply naming your spouse as your beneficiary, the tax consequences are less thorny. Assets you inherit from your spouse aren’t subject to estate tax, as long as you are a U.S. citizen.² For example, a spouse can roll assets inherited from a 401(k) plan into an IRA without incurring taxes on the wealth transfer.³

When the beneficiary isn’t your spouse, things get a little more complicated … for your estate, and for your beneficiary’s estate. If you name, for example, your son or your sister as the beneficiary of your retirement plan assets, the amount of those assets will be included in the value of your taxable estate. (This might mean a higher estate tax bill for your heirs.) And the problem will persist: when your non-spouse beneficiary inherits those retirement plan assets, those assets become part of his or her taxable estate, and his or her heirs might face higher estate taxes. Your non-spouse heir might also have to take required income distributions from that retirement plan someday, and pay the required taxes on that income.⁴

At present, as a result of the Pension Protection Act, surviving spouses from same-sex couples may be allowed by employers to convert inherited retirement plan assets into inherited, traditional or Roth IRAs, avoiding taxes until those assets are withdrawn. This requires a direct transfer, not a rollover distribution.⁵

If you designate a charity or other 501(c)(3) non-profit organization as a beneficiary, the assets involved can pass to the charity without being taxed, and your estate can qualify for a charitable deduction.⁴

Are your beneficiary designations up to date? Don’t assume. Don’t guess. Make sure your assets are set to transfer to the people or institutions you prefer. Let’s check up and make sure your beneficiary choices make sense for the future. Just give me a call or send me an e-mail – I’m happy to help you.

Shannon Simon is a Representative with INVEST Financial Corporation and may be reached at 800.552.0152 or 616.949.6006.

These are the views of Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.

Citations.

¹ seattlepi.nwsource.com/lifestyle/356213_consumer25.html [4/24/08]

² smartmoney.com/taxmatters/index.cfm?Story=20020830 [9/29/00]

³ online.wsj.com/public/article/SB119948578270968559.html?mod=yahoo_free [1/5/08]

⁴ news.morningstar.com/articlenet/article.aspx?id=212411 [11/6/07]

⁵ investmentnews.com/apps/pbcs.dll/article?AID=/20080331/REG/872112904/1037 [3/31/08]

While the prospect of retirement may seem a distant dream to those individuals under the age of thirty, preparing for it, financially, should be an immediate reality.

Ideally, the sooner young adults start investing, the easier it will be for them to reach their retirement goals. In fact, there are many benefits associated with starting and maintaining a retirement plan at an early age. 1

How do I get started saving for my retirement? It is really simple and easier than you think! Make savings an expense today, that will grow with you as your income grows. Start saving now it can be as little as $50 a month or whatever amount that is within your budget. Direct this money into an account where you will not have immediate access (investment account, bank savings account, or your credit union), this will minimize the chance of using the funds for something other than retirement.

The next step would be to increase the amount you are saving as your income increases throughout your years of employment. One way of doing this would be to increase your savings by 1% annually, after a pay increase. Another way to increase your savings is when you receive a promotion, take ½ of the increase received for the promotion and direct that amount into your investment accounts. This approach will provide you with an increase in disposable income with an increase in invested monies.

One of the most notable advantages of investing young is Compounding Interest. Compounding interest means that you earn interest on the profits of your investments. The more time that interest has to accrue, the greater your chances are for more financial stability in retirement.

To further support the investing young theory is Investment Consistency. Investing on a regular basis may allow you to generate long-term gains over time. For most, simplicity equals consistency; and this constancy over time has the potential to lead to financial security.

Another benefit of having plenty of time before retirement is the ability to be diversified. Diversification is known to lower risk. If you have a portion of your money invested in stocks, some in real estate, some in businesses and some in other alternative investments, when any one of the markets corrects itself, you will be less likely to suffer an overwhelming overall loss. Of course, no strategy can eliminate the risk of loss.

In summary, the key to young adult financial planning is to follow simple and consistent investment strategies starting at a young age. Additionally, diversify and use investment vehicles that provide tax benefits, such as an IRA. These methods could help lessen taxes and reduce the risks of your investments and provide greater confidence when you are closer to retirement age.

Shannon Simon

Partner

Obtained from the INVEST Financial Corporation, Investment News You Can Use,

March 2010.

As I know many of you do in your own personal life as well as through your planning, I have always tried to give back to the community and support worthy charities and causes. From an early age, my parents impressed upon me that no matter how little we may have felt we had, someone always had less. Growing up in Flint, it was never too difficult to find that person, and my parents were the first to lend a hand or give the last five dollars they may have had to help out. Later when I was in the Marine Corps Reserves, I was very involved in Toys for Tots and was amazed at the joy a single new toy could bring to a child. It had never occurred to me until then that for some children there were no presents under the tree, without help from such organizations. This is not to say we had a lot, but I was fortunate to have parents who always made it work somehow.

I say all this because I am happy to announce a new initiative at FHF. Although we have always sponsored events, golf outings, and donated our time and money, we wanted to make a more concerted effort and see how we could make the most difference. So for 2010, I as managing partner, make the pledge that we will donate 5% of all company profits to charity this year. And to make it the most effective, we would like to concentrate those monies on a few select organizations and also volunteer personal time.

This is where you, our client, comes in. We want to hear from you and learn about organizations you sponsor and support. We would also like to invite you to volunteer with us as we work to make our community a better place and help those less fortunate than us. So in the next few weeks, if you have a charity you support and want us to consider, please email me at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or give me a call. We will consider all organizations that are federally recognized charitable organizations, and have a local presence. We will especially consider and be interested in any that have had an impact or special importance to you, our clients. I would like to choose 3 to 5 organizations to concentrate our efforts on this year. We will then post the opportunities for you to volunteer with us on our website, under community involvement. I am thinking at least one that would offer entire family volunteering opportunities would be nice. So send in your ideas, and then look for the upcoming opportunities and let’s all help our community become stronger as we move in a new decade.

Jaime Westenbarger

Managing Partner

Welcome to a new feature of our website, my Blog, a place for direct and timely communication. You can subscribe to this by clicking the button on the top right. This will feed it directly into your Outlook; alternatively, check back weekly for a new edition. In this first edition, I would like to thank our clients, introduce Forest Hills Financials, Inc. and inform you regarding our new website.

Thank you to all of our clients

First, if you are a long-time client, I would like to personally thank you for allowing us to help secure your future. Your loyalty to me and my firm means a lot and I appreciate every one of you. Secondly, I would like to thank all of our new clients and I look forward to a long lasting relationship.

Because of you, our loyal clients, this past year was fantastic. We saw gains in clients, revenue and assets. Now I could pat myself and my people on the back for this accomplishment, but it is largely because of you, our clients. You took the time to tell your friends, family and co-workers what we have done for you and they have called asking for us to do it for them. On top of that, you have stayed true to the philosophy we put in place for you and understood that as with any process, there are ups and downs. You’ve appreciated and acknowledged our hard work and determination in preserving your assets and rewarded it with your continued faith and trust. For that I would like to thank you and say I look forward to many more years assisting you with your planning.

Our Company

As many of you know, I founded Forest Hills Financial because I wanted to offer true independent advice to my clients and felt it was something that was missing in the financial services industry, where proprietary products and sales strategies are the norm. I want to educate our clients while helping them secure their future and live up to our slogan of “helping you keep what you have earned.” Please, click on the Why FHF on the website to learn more about our detailed and comprehensive process.

New Website

We have rebranded and updated our website and are excited to offer a more streamlined site that offers many tools and resources for our customers. If you would like an informational tour of our new site and how to use it, please call Laurie to schedule a time for us to go through it with you, either by phone or in our office. In addition to my weekly blog, we now have a list of all events that we are holding with our business partner, Northpointe Bank, and elsewhere in the community. Our newsletters are now available online and archived for the past 12 months under the Learning Center tab. If you have not subscribed to receive our electronic newsletter please click on the icon on the top of the page to receive your newsletter directly in your email inbox.

I am excited to announce that I will be hosting a local radio show in the near future. We intend to have podcasts available on our site and iTunes. There are exciting plans for 2010, so please stop by often to check them out.

Thank you again for allowing us the opportunity to continue to earn your business and here’s to a prosperous 2010.

Jaime Westenbarger

Managing Partner