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Women and Wealth: Creating a Strategy That Works for You

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1 Women and Wealth: Creating a Strategy That Works for You
General Financial Strategies for Women Good [morning/afternoon/evening]. Thank you for coming. Some of you know me—and I’ve had the pleasure of being your Financial Advisor for a number of years. But for those of you who don’t, let me introduce myself. I’m [Name] with the [Name of team], and I’ve been in the financial services industry for XX years, XX of them with Merrill Lynch. [Feel free to add as much about yourself and your team as you wish.] Most investors today realize the importance of adhering to core concepts when it comes to pursuing their financial goals. This [morning/afternoon/evening] we’re going to talk about some of the wealth management concerns and challenges facing women today, and some of the ways Merrill Lynch can help you incorporate fundamental concepts into your investment strategy that can lay the foundation for helping you pursue your financial goals, no matter what your life situation is. As a Merrill Lynch Financial Advisor, I can work with your own personal tax and legal advisors to help you address any of your wealth management needs. Presented by: Natalie Lariccia and Katie Solvesky

2 Women control substantial wealth
Some economic factors about women: Women comprise 43% of top wealth holders1 Women account for 37% of North American high-net-worth segment (more than $1 million in investable assets)2 Here are a few interesting facts concerning women as related to the economy: More women control more wealth in the U.S. than ever before; 43% of those in the wealthiest tier of the country are women. Women account for 37% of the North American high-net-worth segment (defined as those having investable assets of $1 million or more). 1 Lisa Belkin, “The Power of the Purse,” The New York Times, August 2009. 2 World Wealth Report 2011, Merrill Lynch Global Wealth Management and Capgemini, 2

3 Women comprise almost half the work force
Some statistics about women in the workplace: Women comprise 46.7% of the total U.S. labor force1 They account for 51.5% of persons employed in management/professional positions2 More than 8 million U.S. businesses are majority women-owned, with an economic impact of $3 trillion annually, translating into more than 23 million jobs3 Women receive more bachelor and advanced college degrees than men4 22% of married women earn more than their husbands5 Women today are earning more and are in higher career positions than in any previous generation. As such, they have more money than they have ever had before. Let’s take a look at a few statistics concerning women in the workplace: Women comprise almost 46.7% of the total U.S. labor force They account for 51.5% of persons employed in management, professional and related occupations categories More than 8 million U.S. businesses are majority owned by women. Women-owned firms have an economic impact of $3 trillion annually, which translates into the creation and/or maintenance of more than 23 million jobs―or 16% or all U.S. jobs. Women receive more bachelor and advanced college degrees than men 22% of women who are married earn more money than their husbands 1 Women’s Employment During the Recovery, U.S. Department of Labor, 2011, 2 Bureau of Labor Statistics, “Employed persons by detailed occupation, sex, race, and Hispanic or Latino ethnicity,” 2010. 3 The Economic Impact of Women-Owned Businesses in the United States, Center for Women’s Business Research, 2009. 4 U.S. Census Bureau, Current Population Survey, 2010 Annual Social and Economic Supplement, April 2011. Pew Research Center analysis of 1970 Decennial Census and 2007 American Community Survey. 3

4 Women influence most household financial decisions
Women are actively involved in household finances: 95% of women are financial decision makers and 84% of married women are either solely or jointly responsible for household financial decisions1 Investment attitudes and behavior in a shared decision-making household tend to resemble those of a female decision maker2 Women more readily recognize their Advisors’ worth and reward them with loyalty3 It’s undeniable that women influence the majority of household decisions: 95% of U.S. women are involved in household financial decisions The investment attitudes and behavior in a household that shares decision-making responsibilities tend to reflect those of a female decision maker Women are more apt to recognize the value of their Advisors and reward them with loyalty 1 Prudential Research Study, “Financial Experience & Behaviors Among Women, 2010–2011. 2 MSAO Strategic Insights and Intelligence team analysis of Spectrem Group’s 2008 Millionaire Investor survey data, August 25, 2008. 3 MSAO Strategic Insights and Intelligence team analysis of Spectrem Group’s 2011 UHNW Investor and 2011 Millionaire Investor survey data, February 8, 2012.

5 Life Expectancy in Years1
Unique challenges Women face unique challenges that can impact their ability to realize longer-term goals: Increased life expectancy/greater retirement needs1 Longer exposure to inflation/increased health care costs Long-term impact of time spent out of work force2 Earning 81.2% as much as men as a full-time worker3 80.5 75.5 Women Men Despite numerous advances, women continue to face unique challenges that can impact their ability to realize longer-term goals and can put them at a greater level of financial risk than men. For example, women can expect to live longer—80.5 years versus years for men. With an increased life expectancy comes more years spent in retirement, which creates greater retirement needs and increased health care costs. Also with a longer life expectancy comes greater exposure to the effects of inflation not only on everyday income but on long-term savings goals. Because more women are caregivers than men, they lose more wages due to leaving the work force early because of their caregiving responsibilities. Thus, women generally save less and contribute less to company-sponsored retirement plans. In addition, women earn 81.2% as much as men during their working years. And generally, they have a more conservative approach to investing. Life Expectancy in Years1 1 U.S. Census Bureau, Life Expectancy by Sex, Age, and Race: 2008 (most recent statistics). 2 The MetLife Study of Caregiving Costs to Working Caregivers: Double Jeopardy for Baby Boomers Caring for Their Parents, 2011. 3 Bureau of Labor Statistics, Current Population Survey, “Median weekly earnings of full-time wage and salary workers by detailed occupation and sex, 2010,” April 2011. 5

6 A necessary planning factor
Inflation A necessary planning factor $.31 $.49 $.04 $.57 19601 2010 $2.73 $3.67 $.44 $1.37 20502 $7.33 $9.85 $1.18 $3.68 There are a number of reasons why it’s important to start saving for retirement now, while you are young. One of the most important is inflation. Inflation simply means that the cost of living goes up over time. Inflation reduces your purchasing power, so your retirement saving strategy should be designed to help your money grow in order to keep up with the future cost of living. Let’s consider the cost of a gallon of milk, a dozen eggs, a gallon of gas and postage stamp. Each of these items has risen dramatically over time due to inflation and other market pressures. 1 2 Assumed 2.5% Inflation Rate from 2010 through 2050 6

7 Chief financial concerns
The top financial priorities identified by women are:1 Funding retirement Financial situation of children or grandchildren Health, spouse’s health and becoming a burden to family Adequate help to meet financial goals The top financial priorities identified by women are: Funding retirement The financial situation of their children or grandchildren Their health, their spouse’s health and worry about becoming a burden to their family Adequate assistance to help meet their financial goals Let’s take a look at some of these concerns and a few ideas that might help you better face your financial future. 1 Wealthy Women Investors, Spectrem Group, 2011. 7

8 Develop a Budget and Stick to It
Budgeting Develop a Budget and Stick to It Create a budget to help plan for the long term Become more aware of day-to-day cash flow and expenses Pay down debt, especially high-interest debt Consider health care and insurance options Set up an emergency fund You budget to gain control of your financial life and give yourself financial security. By looking closely at your expenses, you have the opportunity to make adjustments to your spending so that you can contribute more to savings. Become more aware of day-to-day cash flow and expenses Pay down debt, especially high-interest debt Consider health care and insurance options Set up an emergency fund High Interest Debt can be crippling Paying the minimum balance on a $1,000 balance credit card with an 18% APR will take 153 months to pay off and you would have paid $1, in interest! Hypothetical example for illustrative purposes only. Assumed minimum payment is calculated by using 2.5% of the balance

9 Budgeting Buy or Rent? Renting Buying Pros Cons
Flexibility (can relocate easily) Can invest money elsewhere (stock market) No upkeep fees (drippy faucets, broken dishwashers, etc.) No Equity Annual rent increase could outpace inflation Buying Tax-break: deduct mortgage interest and property taxes Potential tax-free capital gain Emotional satisfaction Property tax and upkeep Mortgage costs Less flexibility should you want to move; in very bad housing markets, you could lose principal

10 Budgeting Financing a Home Fixed Rate Mortgage
Adjustable Rate Mortgage Government Guaranteed Loans The interest rate of this loan is locked in at origination and remains the same throughout the term of the loan These loans have an interest rate that is tied to an index, changing with prevailing market rates The FHA loan is a fixed rate mortgage that is designed especially for the first time home buyer of moderate or low income. A VA loan, is designed for men and women with a history of active military service or he/she is the surviving spouse of an active service member. Government Guaranteed Mortgage Loans The FHA loan is a fixed rate mortgage that is designed especially for the first time home buyer of moderate or low income. Guaranteed by the Federal Housing Administration, these loans can be easier to qualify for than a traditional FRM and allow a smaller down payment than most other home loans, generally about 3 percent. Interest rates are usually lower than standard fixed rate loans, and programs are available for the purchase of single family homes or multi family homes, as long as they are to be owner occupied. VA loans are another government guaranteed mortgage. To be eligible for a VA loan, one must have a history of active military service or be the surviving spouse of an active service member. Often, a veteran can obtain a VA loan with little or no down payment, but must demonstrate the ability to make monthly payments. The USDA Rural Development Guaranteed Housing Loan is another government guaranteed home loan option. This type of home mortgage loan is provided to low and moderate income individuals who are purchasing a home in an area designated as a Rural Development eligible area. No down payment or mortgage insurance is required with this loan program, and qualification can be much easier than your average home loan, allowing consumers with less than perfect credit to obtain financing for home purchases. Option ARMs Also referred to as flexible payment ARMs, Option adjustable rate loans have an interest rate that adjusts every month with no adjustment caps. These loans allow borrowers to make very low mortgage payments initially, but these monthly payments will rise over time, often quite steeply. Balloon Mortgages Balloon mortgages are structured with a payment schedule similar to that of a thirty year fixed rate loan, although the term of the balloon loan is shorter, most often spanning five to seven years. At the end of the loan term, the outstanding balance must be paid in one lump sum, either out of pocket or by refinancing the home. Interest Only Mortgages Interest only mortgages are loans that allow the borrower to pay only the interest on the loan for a predetermined period of time. The principle of the loan is not paid down during this period at all, leaving the homeowner a lower monthly payment to meet over the short term. However, once this initial interest only period expires the payments increase to include repayment of the principle and are steeper than a standard loan, as the principle must be paid over a shorter time period. The longer the interest only period, the higher the payments will rise after its expiration. Biweekly Mortgages Biweekly mortgages are loans in which the borrower makes payments every two weeks instead of the typical monthly payment arrangement. The result of this practice is a slightly shorter repayment term. Paying biweekly results in 26 payments a year, which is equivalent to thirteen monthly payments, rather than the twelve payments made with a standard monthly mortgage payment. Bimonthly Mortgages Bimonthly mortgage plans do not require any extra payments, but save slightly on interest by advancing the payment by half the month. On average, these types of arrangements only shorten the loan term by approximately one month on a thirty year mortgage. While each option may prove itself best for a segment of loan seeking consumers, none will be a perfect fit for everyone. Depending upon personal finances, the length of time one intends to reside in the home to be purchased, and many other factors, the perfect home loan option will vary widely from one consumer to another.

11 Investing

12 Taking control Investors can take greater control of their financial situation. Learn about investing Identify your financial goals Financial security of children/grandchildren Care of aging parents Your own long-term care Work with a Financial Advisor Monitor your portfolio Don’t procrastinate Your life is probably hectic. And juggling a variety of personal and professional obligations most likely leaves little time for the additional responsibility of overseeing your investment needs. But taking greater control can be essential to your long-term financial security. When it comes to investing, there are some things you can do to help ensure that your investment management needs are met: Learn about investing. You don’t need to be an expert, but you do need to be comfortable. Identify your financial goals. Do you want to prepare for the financial security of your children or grandchildren? Are you responsible for the care of aging parents? Do you need to take steps toward your own long-term care? Take the time to look at your life and determine your expectations, your wants and your needs for the future. Work with a Financial Advisor. At Merrill Lynch, we are committed to understanding your specific needs so we can help you develop a strategy that fits your goals, risk tolerance, investing style and time frame. As I’ve mentioned previously, monitor your portfolio. As your needs and market conditions change, you may have to make changes to keep your portfolio aligned with your overall goals. Don’t procrastinate. Get involved now and take control of your financial future.

13 A strategy defined by your goals
Your overall investment strategy depends on: Your goals, timetable and tolerance for risk A balance of stocks, bonds and cash Monitoring and rebalancing your portfolio ? STOCKS BONDS CASH Your investment strategy should be defined by your goals. And at various stages of your life, you will probably have multiple goals that need to be addressed. I can help you make investment choices depending on your answers to questions such as: What are your goals? Are you looking to buy a home or additional property? Do you have another type of major purchase in mind, such as a vacation home, a boat or collectibles? Are you planning for your child’s college education? Is your retirement planning adequate? What is your timetable for your investment goals? Are you buying property within the next five years? Do you have less than 10 years before your child starts college? What about retirement—do you see yourself retiring in 10, 20 or 30 years? Concerning investment, what is your tolerance for risk? Once you answer these questions, you and I can work together to determine the balance of stocks, bonds and cash you are most comfortable with and that can help you pursue your investment goals. If your goals, timetable and risk tolerance change, we can revise your investment strategy and rebalance your portfolio as needed. Let’s take a look at how we can start.

14 Determining an appropriate asset allocation
Merrill Lynch Asset Allocation Models Moderately Conservative Moderately Aggressive Conservative Moderate Aggressive 60% 35% 5% 70% 25% 5% 80% 15% 5% 20% 55% 25% 40% 50% 10% Your goals, timetable and tolerance for investment risk will help determine your asset allocation. Here are some hypothetical asset allocations by investor profile—Conservative, Moderately Conservative, Moderate, Moderately Aggressive and Aggressive. Keep in mind that these are for illustrative purposes only and are not specific recommendations. On the far left is an example of a conservative investor’s asset allocation that is mostly weighted in bonds, with less than half split between cash and stocks. By contrast, on the far right, the aggressive investor’s asset allocation shows a high concentration of stocks with very little weight given to bonds and even less to cash. Remember, there is no “typical” investment strategy. Each individual’s goals and preferences are different. I can help you select an asset mix that is appropriate for your situation. Let’s look more closely at investing within each asset class. Stocks Bonds Cash Source: Bank of America Merrill Lynch Research Investment Committee (RIC) Report, January Models are for illustrative purposes only. Merrill Lynch has changed the allocations for each model in the past and may change the allocations in the future, depending upon research and investment strategy recommendations.

15 Education Planning

16 How the average family pays for college
Average percentage of total cost of attendance paid for each source: Released in 2012, Sallie Mae's "How America Pays for College 2012" study conducted by Ipsos Public Affairs confirmed that students deeply value higher education, with 90 percent agreeing that college is an investment in the future. The study also finds American families are making the investment in higher education the smart way—by pursuing grants and scholarships more frequently than borrowing. Based on a nationally representative survey of college-going students and parents of undergraduates, the study found that: 81 percent of families reported completing the FAFSA application. 28 percent of families relied on parent income and savings to fund college expenses. 29 percent of students borrowed federal loans. Source: Ipsos Public Affairs/Sallie Mae’s How America Pays for College 2012 study

17 Consider tax-efficient college planning options
Understand your education funding options Tax-advantaged college planning options Section 529 college savings plans Coverdell Education Savings Accounts Uniform Gift/Transfer to Minors Act (UGMA/UTMA) custodial accounts Now let’s talk about tax-advantaged education savings options. The three options we’ll discuss today are Section 529 college savings plans, Coverdell Education Savings Accounts (ESAs) and UGMA/UTMA custodial accounts. While each of these accounts offers certain tax advantages, there are significant differences. Depending on your situation, you may want to create a strategy that combines these vehicles. For example, a Coverdell ESA and a Section 529 plan can work together to help fund private high school and college expenses. Let’s take a look at how each of these tax-advantaged plans works. Please remember there's always the potential of losing money when you invest in securities. Before you invest in a Section 529 plan, request the plan’s official statement from your Merrill Lynch Financial Advisor and read it carefully. The official statement contains more complete information, including investment objectives, charges, expenses and risks of investing in the plan, which you should carefully consider before investing. You should also consider whether your home state or your designated beneficiary’s home state offers any state tax or other benefits that are available only for investments in such state’s 529 plan. Section 529 plans are not guaranteed by any state or federal agency.

18 Retirement

19 Ratio of Workers to Beneficiaries
Not-so-good News: Social Security Is Threatened by an Aging Population Ratio of Workers to Beneficiaries 2010 2025 1950 As we mentioned earlier, the country’s Baby Boomers are retiring in record numbers. As the population ages, the number of people receiving benefits from Social Security versus the number who are paying into the system has changed dramatically over the years: * In 1950, there were more than 16 individuals paying into the Social Security system for each individual receiving benefits. * In 2010, there were only 3.3 workers for each person receiving benefits. * With both the aging population and slowing birth rates, that ratio is projected to worsen to 2.3 workers for every beneficiary by 2025. Changes to Social Security are being debated, but I think we can all agree that we cannot rely on government benefits the way our parents’ generation did. 16.5 to 1 3.3 to 1 2.3 to 1 "The 2009 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds," May 12, 2009. 19

20 Not Your Parent’s Retirement Plan
Number of Defined Benefit Plans Number of Defined Contribution Plans Private Pension Plans, Participation, and Assets: Update (Data from tabulations of the U.S. Department of Labor's Form 5500)

21 There Is Hope “The Rule of 72”
"Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it." - Attributed to Albert Einstein The “Rule of 72” is a simple way to determine how long an investment could take to double, given a fixed annual rate of interest. You divide 72 by the annual rate of return, to get an estimate of how many years it could take for the initial investment to double. Example $100 invested at 10% would take approximately 7.2 years to turn into $200. Hypothetical example for illustrative purposes only. Results are not meant to represent the past or future performance of any specific investment vehicle. Actual rates of return cannot be predicted and will fluctuate. Your results may be more or less.

22 Start Saving As Soon As You Can
The sooner you start, the more money you could potentially have in retirement $739,567 Albert Einstein is often credited with saying that the power of compounding is the 8th wonder of the world. Even if Einstein did not say this, I am certain he would agree that compounding possesses significant power. This slide shows the hypothetical pre-tax growth of a series of annual $5,000 contributions to an IRA. Over the course of 35 years, these contributions can grow to nearly three quarters of a million dollars (again assuming no taxes and a 7% annual return over 35 years). That $5000 annual contribution may sound like a big number, but it amounts to less than $100 per week. What small change could you make in your spending in order to direct that weekly $100 to your IRA? Think of it as paying yourself first. $5,000 At Retirement (35 Years later) This hypothetical illustration assumes an annual $5000 IRA contribution made at the beginning of each year for 35 years, a 7% annual rate of return, and no taxes on any earnings within the IRA. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost.

23 Even one year can potentially make a difference in your nest egg
Save for Retirement Every Year Even one year can potentially make a difference in your nest egg The sooner you start contributing to an IRA, the better. Take a look at this hypothetical example. It shows the pre-tax difference in account values for 70 year-old investors, comparing those who began their savings plan just one year apart. The 25 year-old earns $112,000 more than someone who starts saving at age 26. Even those who don’t start an IRA until their 40s can benefit from that single year’s jump-start. The 45 year-old earns $29,000 more than the 46 year-old by the time he or she reaches age 70. For those who think it’s too late to start an IRA, these numbers are a useful reminder that today is the first day of the rest of your life. This hypothetical illustration assumes annual $5000 IRA contribution made at the beginning of each year and beginning one year apart for various ages, a 7% annual rate of return, and no taxes on any earnings within the IRA until the age of 71. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. 23

24 Meet Your Company Match In 401(k) Plans
Many companies offer to match a percentage of employees’ 401(k) contributions Investors should consider contributing at least as much as the company is willing to match Don’t leave “free money” on the table by failing to contribute to your company’s 401(k) Although the company pension plan is a distant memory for many investors, the defined contribution or 401(k) plan offers some opportunities that are worth taking advantage of. Many companies offer employees a match on a certain percentage of their contributions. It may make good financial sense to contribute up to the match limit in order to earn what is in essence an instant return. Those who do not meet their company’s match in the 401(k) plan are leaving money on the table. The average person born in the latter years of the baby boom held 11 jobs from age 18 to age 441 ¹ September 2010 24

25 Reasons to Invest Early Impacts on Your Paycheck
A pre-tax contribution to your retirement account reduces your take home pay less than the amount of your contribution. Example Mary is 35 and her annual salary is $50,000. She wants to contribute 5% of her salary to her 401(k) to take advantage of her company’s matching contributions and retire in 30 years. Results Mary’s monthly take-home pay would be reduced by: $156     Her annual income tax bill would decrease by: $625     With an employer match, at age 65 her account would grow to: $395,291 This hypothetical illustration assumes a 5% contribution rate at the beginning of each year, a 6% annual rate of return, and a 25% federal tax bracket (state and local taxes are not included). It also assumes a company match of 100% for every dollar contributed up to 5% of eligible compensation. Hypothetical results are for illustrative purposes only and are not meant to represent the past or future performance of any specific investment vehicle. Investment return and principal value will fluctuate and when redeemed the investments may be worth more or less than their original cost. Taxes are due upon withdrawal. If you take a withdrawal prior to age 59½, you may also be subject to a 10% additional federal tax.

26 Risk in retirement Types of risk to consider:
Market and sequence of returns Inflation Longevity/life expectancy Health care Asset allocation As you assess your own retirement needs, you should also consider your tolerance for risk. Whether you’re planning for the short term, the long term or for future generations, remember that investing for retirement often requires a different tolerance for risk than investing during retirement. What type of risks am I talking about? Let’s take a look: Market. There are market fluctuations with the potential for lower returns as you save for retirement. But poor returns during the beginning of retirement can impair your portfolio’s ability to generate income over the long term. Inflation. The cost of living may rise faster than the value of your investments. Longevity. With today’s medical advances, there is the possibility that you may outlive your assets. Health care. There may be an unanticipated deterioration in your health situation or an unexpected rise in health care expenses. Asset allocation. Is your portfolio appropriately diversified for your anticipated retirement needs? It’s important to consider these risks as you develop a retirement planning strategy. 26

27 Framework for building a retirement strategy
Different portfolios are designed to address separate needs: A short-term portfolio is designed to supplement ongoing retirement income sources An intermediate-term portfolio is designed to generate returns over a longer period of time, helping you keep pace with inflation and making it less likely you will outlive assets A long-term portfolio is designed to fund wealth structuring goals You can create a framework for building a retirement strategy by determining your needs for the short, intermediate and long term using portfolios that have separate objectives. For example: A short-term portfolio can be constructed using high-quality, fixed-income assets designed to generate regular cash flows. Annuities that provide a guaranteed income stream might be appropriate for such a portfolio. As the short-term portfolio is consumed to pay for expenses, assets can be transferred from an intermediate-term portfolio. The longer time horizon for an intermediate-term portfolio allows for diversification across most major asset classes, including equities as well as fixed income, increasing the potential for growth and protection from inflation. Over time, this portfolio can be used to replenish assets in the short-term portfolio. This allows for consumption flexibility so that long-term assets won’t have to be sold to fund short-term consumption needs during periods when asset prices are down. A long-term portfolio can be used for wealth structuring, such as funding bequests or transfers of wealth to beneficiaries. Such a framework provides a transparent and efficient process that defines each need as a separate portfolio objective. 27

28 Managing your retirement assets
Remember to: Review your portfolio annually or as needed Consider whether rebalancing your portfolio is necessary Continue to monitor your portfolio By creating a framework such as the one we’ve discussed here, you can develop a strategy that considers your retirement needs as they relate to your individual circumstances. Remember that it’s important to: Review your portfolio annually or as needed to determine whether your risk tolerance, situation, income needs, cash flow requirements or goals have changed. Consider whether it’s necessary to rebalance your portfolio so it aligns and stays consistent with your retirement goals. Monitor your portfolio on a regular basis to ensure that you are on track for meeting your long-term retirement objectives. As a Merrill Lynch Financial Advisor, I can help you build a framework and consider solutions for a retirement planning strategy that is appropriate for your goals. 28

29 Estate planning strategies

30 Getting in the know Don’t rely on others to handle the details.
Review and understand your estate plan Ask your own personal legal advisor about asset titling and beneficiary designations Find out: Are you a personal representative (executor) and/or a trustee? Are you familiar with your parents’ estate plan? Another concern you may have is ensuring that your estate passes according to your wishes. If not now, at some point in your future you most likely will have sole responsibility for financial decisions concerning your estate, or will have to deal with the consequences of inadequate preparation. Get in the know, and don’t rely on other family members to handle the details. It’s important to be familiar with any provisions you may have already made: Make sure to review and understand your estate plan. Ask your own personal legal advisor about details such as asset titling and beneficiary designations. Find out about the things you may not be sure of. For example, are you already designated as a personal representative (executor) and/or a trustee? Are you familiar with your parents’ estate plan? If something were to happen to you tomorrow, what would you want to occur regarding your estate? If you don’t already have one, the best time to put a plan in place is now. 30

31 Reasons to have an estate plan
Your entire estate is taxable. IRA and 401(k) assets Life insurance proceeds Real property, bank accounts Your beneficiaries need liquidity to pay: Estate tax Administrative expenses Outstanding debt There are two things to remember about estate planning. First, everything you have any ownership interest in is considered taxable. Without appropriate estate planning (with a team that includes your Merrill Lynch Financial Advisor and your own personal legal and tax advisors), your estate tax liability may not be well managed. Second, estate planning helps ensure that your beneficiaries have sufficient liquidity to pay your obligations. For example: Federal estate tax is due in cash nine months after your death. There will be estate administrative expenses to pay, and if you have any outstanding debt, it will need to be satisfied before your beneficiaries can receive their inheritance. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors. 31

32 Distributing your assets per your wishes
Will Living Trust Provides for the distribution of assets after your death Applies to assets owned in your name not otherwise the subject of beneficiary designations Does not address lifetime planning, e.g., incapacity Is subject to probate proceedings Requires court-appointed personal representative Provides benefits while you are still alive, including during incapacitation, and after death Allows limited probate proceedings for pour-over will Applies to all assets titled in the name of the trust Addresses lifetime management of assets Requires grantor-appointed trustee A will allows you to provide for the distribution of your assets following your death. A living trust provides benefits while you are still alive and after your death. Either may be suitable for your circumstances. Let’s take a look at some of the aspects of both. A will applies to one person—it is not written jointly. A will does not make provisions for any issues while you are alive, such as incapacity. It is also subject to probate proceedings, a court-supervised process that identifies and gathers your assets. A personal representative needs to attend probate court on behalf of your will. A revocable living trust allows you to transfer your property to the trust during your lifetime and offers benefits while you are still alive. It can also contain post-death provisions, serving, in effect, as a will substitute. A revocable trust is also considered more effective regarding management of your assets in the event of your incapacitation. A domestic partner, for example, can be named as the successor trustee to assume responsibility upon your incapacitation and/or death. A pour-over will accompanies a revocable living trust. It deals with forgotten assets not titled to your trust during your lifetime and sends them into your trust. (Note: Some states are more effective than others concerning living trusts versus wills; therefore, it’s important to fully understand your state laws.) Both wills and living trusts are revocable by testator at any time prior to death except during periods of incapacity. Your own personal legal advisor can help you determine which would be more appropriate for your situation.

33 Be prepared for your discussion
Before meeting with your own personal legal advisor: Prepare a family tree Make a list of everything you own Think about whom you want to designate as beneficiaries, personal representative and /or trustee of your plan Consider what you want to leave to whom and in what form Indicate which charitable organizations you wish to support Taking the time to think about your estate plan now can help ensure that your wishes are met for the future. Here are some things you can do before meeting with your own personal legal advisor: Prepare a family tree. Make a list of everything you own. Think about your family and the individuals you would like to designate as beneficiaries of your estate. Also determine whom you would choose as personal representative and/or trustee of your estate plan. Consider what exactly you would like to leave to whom, and in what form you would like beneficiaries to receive those assets. Indicate which charitable organizations that support causes you believe in—such as the arts, educational institutions, social causes, etc.—you wish to support. As a Merrill Lynch Financial Advisor, I can work closely with you and your own personal legal and tax advisors to help you determine a strategy suitable for your situation. 33

34 Putting it all together

35 Best Practices to Help You Plan for your Future
Save Every Year Start Saving As Soon As You Can Pay Down Debt Meet Your Company’s 401(k) Match Monitor and Adjust Your Portfolio Create A Budget 35

36 What about your life? Consider this:
Are you living for today, maintaining a long-term horizon, or both? Is your financial strategy a balance between lifetime financial needs and the legacy you would like to leave? Are you familiar with your investment portfolio? Do you feel you have the right mix of stocks, bonds and cash to help meet your investment needs? Have you determined your tolerance—both financial and emotional—for investment risk? Have you worked to develop strategies to help meet your philanthropic goals? Do you have a will and/or trusts? If so, are they current? We’ve looked at a few of the economic and workplace advances women have made, and at some of the unique challenges women today face. But what about your life? Maybe it’s time to seriously consider these questions: Are you living for today, maintaining a long-term investment horizon, or both? Is your financial strategy a balance between lifetime financial needs and the legacy you would like to leave your beneficiaries? Are you familiar with your investment portfolio; for example, are you aware of its mix of stocks, bonds and cash, and are you confident that mix can help you meet your investment needs? Have you determined your financial and emotional tolerance for investment risk? Have you worked to develop investment strategies to help meet your philanthropic goals and objectives? Do you have a will and/or trusts? If so, are they current? 36

37 Are Not Bank Guaranteed
The information in this presentation is intended to be a general introduction of Merrill Lynch’s approach to wealth management. It is not intended to be either a specific offer by any Merrill Lynch entity to sell or provide, or a specific invitation to apply for, any particular product or service. Merrill Lynch offers a broad range of brokerage, investment advisory (including financial planning) and other services. There are important differences between brokerage and investment advisory services, including the type of advice and assistance provided, the fees charged, and the rights and obligations of the parties. It is important to understand the differences, particularly when determining which service or services to select. Any information presented about tax considerations affecting client financial transactions or arrangements is not intended as tax advice and should not be relied upon for the purpose of avoiding any tax penalties. Neither Merrill Lynch nor its Financial Advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors. Asset allocation, diversification and rebalancing do not assure a profit or protect against a loss in declining markets. Investments in foreign securities involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets. Merrill Lynch Wealth Management makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S) and other subsidiaries of Bank of America Corporation. Banking products are provided by Bank of America, N.A., and affiliated banks, members Federal Deposit Insurance Corporation (FDIC) and wholly owned subsidiaries of Bank of America Corporation. Investment products: MLPF&S is a registered broker-dealer, member Securities Investor Protection Corporation (SIPC) and a wholly owned subsidiary of Bank of America Corporation. Are Not FDIC Insured Are Not Bank Guaranteed May Lose Value


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