Monte Gehrtz, Financial Advisor, AdvisorNet Fargo
I’ve been a financial advisor with AdvisorNet for 12 years and enjoy it more every day. I’m from rural ND and spent 4 years in the Air Force and 10 in the Air Guard. I value relationships and core values of trust, integrity, and service. I have a Master of Business Administration from NDSU and a Master of International Business from University of Florida. I enjoy learning and am constantly advancing to be a better advisor for my clients and peers. I am involved in business ventures outside of the financial realm, which gives me real-life understanding of operating and running businesses, making relating financial decisions to business owners easier with experiences I’ve actually had, not just learned about. Helping clients reach their financial and business goals is why I work, and I love it.
How to Financially Prepare Your Children for College & Beyond
People often approach me with questions about how they can help set their children up to succeed with resources better than they had when they were teenagers. Parents, grandparents, and loved ones alike all want to see the next generation do better than they have done. There are many considerations for saving. Here are a few of the most prevalent:
Saving for a child’s education is a top priority for many parents. Higher education can be expensive, and saving early can help reduce the financial burden on your child and your family.
Unexpected expenses can arise at any time, such as medical emergencies, home repairs, or job loss. Having savings set aside can help provide a financial cushion for you and your children in case of emergencies.
As children grow, they may have various expenses, such as purchasing a car, starting a business, or buying a home. Saving for these expenses can help provide the financial resources needed to support your child’s goals and aspirations.
Saving for your child’s future can help provide financial security and stability for your family. It can help ensure that your child has the resources they need to pursue their goals and live a comfortable life.
Teaching financial responsibility:
By saving for your child’s future, you can also teach them about the importance of financial responsibility and the value of saving and investing. This can help set them up for financial success later in life.
Overall, saving for your children is important because it can help provide financial security, reduce the burden of future expenses, and teach children about the importance of financial responsibility. Now, let’s take a look at a few common questions I get asked about financial preparedness
Q&A on Financial Preparedness
Q: I have a child (or children) and am looking to save money for them to eventually be able to go to college one day. What kind of savings account would you recommend for me?
A: 529 college savings plans are a popular way for families to save money for their children’s higher education expenses. These accounts offer a number of benefits, including tax advantages and flexibility, that can make them a smart choice for many investors.
One of the biggest benefits of 529 plans is their tax advantages. Contributions to these plans are made with after-tax dollars, but the investments grow tax-free as long as the money is used for qualified higher education expenses. This can include tuition, room and board, textbooks, and other expenses related to attending college or other postsecondary educational programs.
In addition to their tax advantages, 529 plans also offer a great deal of flexibility. The account owner (usually a parent or grandparent) can make contributions at any time and in any amount, up to the lifetime contribution limit set by the state. Many plans also offer a variety of investment options, so families can choose an investment strategy that aligns with their risk tolerance and investment goals.
Finally, the 529 plan is a great way to encourage family members to save for a child’s education. Anyone can contribute to the account on behalf of the child, so grandparents, aunts, uncles, and other relatives can all help contribute to the account and benefit from its tax advantages.
Q: What if my child doesn’t go to college, or is already funded from scholarships like a GI Bill or grandparents?
A: The best option is usually to set up a UGMA (Uniform Gifts to Minors Act) account. This is a type of custodial account that is created by an adult for the benefit of a minor child. Here are some benefits of UGMA accounts:
- Tax advantages: Contributions to UGMA accounts are considered gifts to the child, and as such, may be subject to gift tax rules. However, UGMA accounts are taxed at the child’s lower tax rate, which can result in significant tax savings. Additionally, UGMA accounts may offer tax benefits if the funds are used for qualified educational expenses.
- Flexibility: UGMA accounts can hold a variety of investments, including stocks, bonds, and mutual funds, which can provide flexibility and diversification. The account can also be used for any purpose that benefits the child, such as paying for educational expenses, funding a down payment on a home, or supporting the child’s hobbies or interests.
- Control: The adult who creates the UGMA account, known as the custodian, has control over the account until the child reaches the age of majority—age 18 in ND and MN. This allows the custodian to manage the investments and make decisions about how the funds are used.
- Easy to set up: UGMA accounts are relatively easy to set up and can be opened at most financial institutions. There are typically no minimum contribution requirements, and the account can be funded with cash, securities, or other assets.
When the minor becomes an adult, they have full access and control of the account to do as best seen fit. Hopefully, they use it to start a business, to put a down payment on a house, or to reach other life milestones at a young age.
Q: I own a business, and I’m worried that if something happens to me, my child(ren) won’t know what to do with the company or its finances. How can I prepare for any worst-case scenarios and make sure my child(ren) are not overwhelmed with business-related financial issues?
A: The most important thing to do is to create a family business estate plan. A family business estate plan is a legal document or set of documents that outlines how a family business will be passed on to future generations after the death of the current owners. A well-designed estate plan provides clarity around business succession, minimizes estate taxes, and ensures that the business will continue to operate smoothly after the current owners are no longer able to manage it.
Some important considerations in a family business estate plan include:
- Identifying heirs and successors: This involves identifying who will inherit the business and in what proportion. It may also involve identifying a successor who will manage (but not own) the business after the current owners pass away.
- Tax planning: A well-designed estate plan may include various strategies to minimize estate taxes. For example, the plan may involve transferring assets to family members during the current owner’s lifetime or using trusts to hold assets.
- Business structure: The estate plan may involve evaluating the business’s legal structure (e.g. sole proprietorship, partnership, LLC, or corporation) and determining whether changes should be made to maximize tax benefits, limit liability, or facilitate succession planning.
- Management and control: The estate plan should clearly outline who will manage the business after the current owners are no longer able to do so. This may involve passing on management to a family member or identifying an external party to manage the business.
- Contingency planning: The estate plan should also include contingency plans for unexpected events such as disability, incapacitation, or death of key personnel.
Ultimately, a family business estate plan is a crucial tool for ensuring the successful transfer of the business to future generations while minimizing taxes and facilitating an orderly transition of management and control.
Final Tips for Parents & Their Children
Below are a few general financial tips for parents to pass on to their children to guide them as they transition from living at home to independent life:
Teach the importance of budgeting:
Parents can teach their kids how to budget by giving them an allowance and helping them allocate that money toward different categories, such as saving, spending, and giving
Encourage saving for big goals:
Set specific savings goals, such as saving for a car or a down payment on a home. Parents can help their kids set goals and create a plan to save for them, like setting up automatic savings deposits.
Advise avoiding debt:
Avoid debt whenever possible. Parents can teach their kids to save for purchases instead of using credit cards or loans, and to avoid taking on debt unless it is absolutely necessary
Emphasize the value of hard work:
Parents can encourage their kids to take on chores and other tasks to earn money, and also to save a portion of their earnings.
Model good financial behavior:
Modeling good financial behavior for your children is important in setting them up for success. Parents can set a good example by being responsible with their own money, sticking to a budget, and prioritizing savings.
By teaching kids these and other principles of good money management, parents can help them develop healthy financial habits that will serve them well throughout their lives.
I believe the most important thing is to make a plan and stick to it. Monthly contributions are the safest way to help ensure a proper funding method for college savings. Passing on a family business takes time and thought to ensure all kids are included and the business carries on as desired. Professionals such as Financial Advisors, CPAs, and Estate Attorneys are worth relying on—that is what we are here for.
Monte Gehrtz is a Financial Advisor offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker/dealer and Registered Investment Adviser. Cetera is under separate ownership from any other named entity.
808 3RD AVE S STE 205, FARGO, ND 58103.
Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer’s official statement and should be read carefully before investing.
Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investing in any state’s 529 Plan. A diversified portfolio does not assure a profit or protect against loss in a declining market. For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
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