The Right Beneficiary

Who have you chosen to inherit your assets? It may be wise to review your choices. 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. 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?

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. For example, a spouse can roll assets inherited from a 401(k) plan into an IRA without incurring taxes on the wealth transfer.

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. 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. Before the end of 2008, Congress may vote to make this option mandatory.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.

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. If you have any questions about your situation, please give me a call at 888-891-9709 or drop me an email at judy@stewart-financial.com

TD Ameritrade Update

Important Information Regarding TD AMERITRADE's Financial Strength and Stability

We recognize that the current economic environment continues to be a source of concern for you and your clients. Many of you have questions about recent events, along with concerns about ongoing market volatility and what it means for both your investments and your clients'.
If you'd like to gain a better understanding of TD AMERITRADE's financial strength and stability in light of the industry-wide issues of subprime market risk and liquidity, please read below.

Does TD AMERITRADE have liquidity issues?

TD AMERITRADE's capital structure and liquidity are strong and stable. TD AMERITRADE has no exposure to the U.S. housing market and the associated complex financial structures that are at the root of the current liquidity crisis. The collateral backing our liquidity is in cash or U.S. securities, which are available and marked-to-market daily, and not housing-related securities.
The credit and liquidity issues currently impacting other firms have not impacted our liquidity structure, which we monitor daily.

In addition TD AMERITRADE does not take proprietary risk on its balance sheet. Our clear, transparent business model and commitment to conservative fiscal management have helped us avoid the recent troubles other firms have experienced from investment risks.

Does the recent buy out of Bear Stearns by JP Morgan affect TD AMERITRADE?

It does not affect the firm financially or otherwise. Our capital structure and liquidity are strong and stable.

Does TD AMERITRADE invest in or have exposure to risks in the subprime market?

TD AMERITRADE does not own securities in the subprime and Structured Investment Vehicles (SIV) markets.

In addition, we keep our own assets separated from our clients' assets. This means your investments and those of your clients with TD AMERITRADE are not exposed to any hypothetical risks associated with our firm's investments.

Please note, however, that every investment has risk and TD AMERITRADE can't offer an opinion as to whether the investments made in self-directed accounts are exposed to additional risk as a result of the current market climate.

Are the money market funds available through TD AMERITRADE safe?
If the available cash in your TD AMERITRADE account or your clients' accounts is invested into money market funds, the money is invested in either the TD Asset Management USA funds or The Reserve funds.

Both of these investment companies have provided statements regarding their respective funds' exposure to the subprime market, SIVs and asset-backed conduits that focus on the subprime asset class.

Please see the statement from TD Asset Management USA and/or see the statement from The Reserve.

If available cash in a TD AMERITRADE account is invested in a Money Market Deposit Account (MMDA) when it isn't currently invested in securities, that money is held at TD Bank USA and is FDIC insured. In addition, please note that TD Bank USA does not invest in the subprime and SIV markets.

Before investing in any mutual fund, be sure to carefully consider the security's investment objectives, risks, charges, and expenses. For a prospectus containing this and other important information, contact the investment company or TD AMERITRADE. Please read the prospectus carefully before investing.An investment in a money market fund is not insured by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.

What protection does TD AMERITRADE provide to client accounts?
TD AMERITRADE is a member of the Securities Investor Protection Corporation. SIPC protects securities customers of its members up to $500,000 (including $100,000 for claims for cash). An explanatory brochure is available on request, or at www.sipc.org. The SIPC phone number is (202) 371-8300.

In addition, TD AMERITRADE carries "excess SIPC" insurance through London insurers. Customers are protected up to an additional $149.5 million per customer (including $900,000 in cash) up to an aggregate of $250 million.

Using Your Brain

Dispelling the Myth about Your Brain and Recall

The brain is an organ and, as such, it requires oxygen and exercise. Feed your mind, and you'll feel emotionally and physically invigorated. It's critical to focus on keeping your brain in shape.
By consistently engaging in the right activities, you can increase your memory, improve your problem-solving skills and even boost your creativity. Here are some fun ways to keep your mind active:

Grab a cue and play pool. Rack 'em up, grab a cue and contemplate on your strategy. Billiard players must focus on the immediate, blocking out distractions as they plan their next moves. Strategic planning increases mental clarity. Concentrating on the immediate helps keep your mind sharp. Additionally, this game of angles demands that players think in terms of physics, something most of us rarely do in our everyday lives.

Calm down with yoga.You might be surprised at how demanding yoga can be. Beyond the physical demands that give your entire body a workout, yoga has great calming and relaxation qualities. Yoga forces you to focus on controlling all your muscles and your breathing. Let your worries slide away and give your mind a rest from stress.

Play golf in the fresh air. Escape to the links and spend a few hours in the fresh air counting birdies, bogeys and mulligans. Golf is a social sport and a great way to network and loosen up at the same time. Golfers get mental stimulation using their decision-making skills as they plan stroke strategies. As the sport involves the control of repetitive movements, it instills mind-body discipline.

Lace up your running shoes. Lace up your jogging shoes and get moving. Even if you never plan to run a marathon, it will get both your body and mind in shape. Running will boost the levels of oxygen in your brain and flowing through your body. In turn, your body will release more endorphins, which will make you feel energized while producing a sense of pleasure and well-being.

Challenge a friend to a game.Challenge a friend to a game of chess at lunch. Invite colleagues over for an evening of cards. Besides the social aspects, such activities will keep your mind active. You'll use your memory and expand your powers of recall. You'll also test your mathematical skills and logic.

Subscribe to a daily online newsletter. Whether it's a "word of the day," "quote of the day" or "this day in history" newsletter, receiving new information each day will add data to the HD (hard drive) in your head. The mental stimulation will increase your comprehension skills.
Pick up a book.Choose from classic literature, science fiction or self-improvement books and give your brain a boost. Pick up a novel before your next business flight or vacation. On top of the cerebral benefits, the escapism that comes from reading can be refreshing. Reading helps you exercise your cognitive skills and increase your vocabulary.

Take a course.Learn something new. Sign up for a cooking class, register for karate training or enroll in a wine-tasting seminar. You'll be challenging yourself to assimilate new concepts, information and ideas, and you'll hone your retention skills through memorization.

Learn a new language.Attend classes, listen to tapes or date someone with whom you can converse in another language. Instead of watching the same TV programs you always do, take in a foreign-language movie with subtitles. Learning a new tongue keeps your brain flexible and your mind sharp, helping to reduce the slowing of the thought processes that comes with age.

Grab the controller.Believe it or not, playing certain video games really can be good for your health. The operative word here, however, is "certain": choose games that involve strategy or problem solving. Problem-solving and role-playing games will help you practice strategic planning. You'll also improve your hand-eye coordination.

Rent a classic movie.Rent Shakespearean adaptations or other language-heavy period movies and treat them as an exercise; watch them with a dictionary and thesaurus in hand and make a point of understanding all the dialogue, even if it means pausing the movie periodically. Some options include Macbeth, Othello and Hamlet.

Learn to play an instrument.Pull out your old guitar, sign up for piano lessons, or rent a trumpet or a clarinet. Trying to understand how music is made will stimulate your creativity. Reading music provides mental stimulation. Playing an instrument requires powers of recall as well as concentration to maintain tune and tempo.

Build a model.Remember how excited you were as a kid making model airplanes and ships? Re-create that by building a miniature model. Following written instructions sharpens your powers of concentration.

Do a crossword. Stick the newspaper crossword puzzle in your purse or briefcase and work on it while you're waiting for an appointment or a meeting to begin. You'll improve your cognitive skills and creative thinking, as well as your word power and vocabulary.

Engage in a debate.A lively discussion can be invigorating. As long as you avoid letting it digress into an altercation, you can have a lot of fun debating the pros and cons of an issue with a friend or colleague. You'll practice your quick-thinking skills, logic and creativity.

Use your cognitive skills, test your powers of recall, improve your memory and challenge yourself to be more creative in your thinking. You'll reap great brain-boosting benefits by keeping your mind active.