Real Estate

For most investors, real estate represents the largest part of their net worth; over two-thirds of all American families own a home. If you are an estate planning specialist, you will likely have clients that are interested in investing in real estate. Real estate investment trusts (REITs) are companies that own and operate income-generating real estate. There are also a number of mutual funds that invest solely in REITs. The four most common types of equity REITs are office buildings, residential (apartments), regional malls and shopping centers. You can learn more about all of these topics in estate planning courses.

Investing in a House

There are two key points to keep in mind as an estate planning specialist when analyzing the benefits of home owner-ship. First, national price appreciation of residential real estate has historically been modest. Over past 30 years (ending 12/31/2007), house prices increased 6.0% annually vs. 4.1% for inflation, according to Freddie Mac. Factoring in the declines in 2008, 2009 and 2010, residential real estate annualized return figures drop by at least one full percentage point. Second, home ownership is expensive. It is comparable to owning a mutual fund or variable annuity that charges 3% annually (homeowner’s insurance, property taxes, and maintenance costs) and also has a back-end sales charge of 6-7% (the real estate selling commission plus closing costs). Annual expenses are higher than 3% if improvements or monthly mortgage costs are included. This type of investment clearly needs a lot of research, which you can learn how to do via estate planning courses.

Bank Loan Funds

A relatively new category, bank loan funds allow the interest-rate sensitive investor to receive a high level of current income with low volatility. Also referred to as “prime rate” funds, the portfolios are comprised of bank loans. In this case, the bank lends money to borrowers who frequently have less than stellar credit profiles. The proceeds are often used for leveraged buyouts. The bank then packages these loans and sells them to institutional investors and mutual funds.

There are two major selling points to prime rate, or bank loan, funds. First, yield can be quite appealing, even compared to intermediate- or long-term bonds. Second, the yields are adjusted quarterly. These adjustable-rate funds come close to eliminating interest-rate risk. Keep in mind that when interest rates fall, so do the yields on these securities.

The three negatives to bank loan funds are: (1) losses are possible, (2) limited liquidity, and (3) high fees. Over the past decade, prime-rate funds have only had one negative year. Some bank loan funds borrow money so that they can leverage their holdings.

Enhanced Appreciation Notes

Enhanced appreciation notes (EANs) are designed to provide some or all of the stock market’s upside potential, while partially or fully insulating the investor from downside risk (note: some of these securities have no downside protection). EANs are usually linked to major indexes and provide an enhanced participation on the upside—up to a limit, or cap (note: index returns for EANs never include dividends). For example, an EAN may be structured so that the investor gets 1.25% to 3% for every 1% increase in the index. If the ratio is 1.25-to-1 and the index went up 10% (excluding any dividend) during the life of the EAN, the investor would receive a total return of 12.5%.

Issuers usually cap the upside potential of EANs. As an example, if the participation rate is 200% or 300% on the upside, the cap for the year may be 13-20%. Some EANs provide a level of downside protection, described as a percentage of the investor’s principal. For example, the first 10-20% of the loss may be fully absorbed by the issuer; the investor would then incur any loss in excess of this figure. This means that the investor has no chance of loss provided the index never exceeds the level of downside protection provided by the issuer.

Typically, the barrier is set at 70-75% of the initial level (the value of the index when the investor buys the EAN). If the covered loss is ever breached (20% or 25% in this example), the investor would have full downside exposure past the point of protection.

Conclusion

In summary, there are many options to consider when helping your clients pick a good investment. Whether you are an estate planning specialist or a financial advisor, you must make sure you are educated about whichever products you decide to offer to your client. Estate planning courses are just one way to learn the information you will need to know.

Cory Bowman is Director of Ops at the Institute of Business Finance. IBF has helped thousands of members of the financial services industry attain designations. For more information about IBF, estate planning courses, or training to be an estate planning specialist, visit http://www.icfs.com

Each year a whole new cohort of students and their families have to decide what health care program to enroll in. There are on-going changes taking place in terms of what is available to students, so look around. And remember, as with many decisions in life, the best option for you depends on your situation and needs.

Some new developments, however, appear to be beneficial for students. This year, young people up to the age of 26 can remain on their family’s health plan. This is possible even if it is an employer sponsored health plan, although there may be slight variations in terms of when it is possible for a student to enroll. Some employers require students and young adults to wait until 2011. However, it is interesting to see this provision being offered to benefit young people.

Another approach to health insurance specifically for students is to enroll in the university sponsored health plan. Before you do this, consider the restrictions that are to be expected with this type of plan. These are to do with what health care providers will be covered. You may find that you are restricted to on-campus health care. While it may be affordable, it may not cover your needs.

There are also student health plans available that are not affiliated with a particular college or university. These tend to be more flexible but may also be more expensive than the school sponsored plans. Both the individual and school sponsored approaches to health insurance are likely to undergo further changes due to the reforms taking place in health care at present. Stay abreast of developments.

If you have a pre-existing condition, you need to proceed carefully when opting for a health plan. Individual heath insurance coverage appears to offer the most options, but it is possible to be declined due to a pre-existing condition, though this changes in 2014. Find out what protocol the health insurer uses to define a pre-existing condition and how this is likely to impact you. There is no use signing up to a health plan if a potentially expensive pre-existing condition will not be covered. Not all health insurers take this stand, so check it out thoroughly.

If you find you are locked out due to a pre-existing condition, the majority of states offer high-risk pools or Medicaid, either of which you may qualify for. It is important to check if these are available to you.

There is a lot to consider and this is an extra burden for you at a time when there are a lot of decisions to be made. Although staying on your parents’ health plan seems to be a good option, it could end up being a costly decision for your parents if it is work related and the employer contributes little for your insurance. For this reason, it is important to go over the options with family before you commit yourself to a particular health plan. You want the best you can get at an affordable rate, so look carefully.

Dan Wright enjoys writing tips to help people obtain inexpensive health insurance. He maintains a website where he blogs about ways to save on individual health insurance quotes and other types of health insurance plans.

College students have to deal with a very large number of new responsibilities all at once: living on their own for the first time, maintaining a heavy workload of coursework, and managing their finances.

Most college students rush out and complete student credit card applications as a way of gaining access to a reserve of credit for use in emergency situations – or as a backup to their regular source of income.

While student cards can be a great way to start building a credit history for later in life, there are a number of drawbacks to getting college students hooked on credit card use at such a young age.

If you are on the lookout for student credit card applications, here are 5 insights to consider:

1. College students traditionally acquire huge debt problems:

The major news media has featured a number of recent stories showcasing the growing problem of college and university student credit card debt. Many students today are graduating with not only a hundred thousand dollars or more in student loan debt, but they often are saddled with tens of thousands in high-interest credit card debt, as well. This is no way to start out life as an adult.

2. Student credit is a good idea when used in moderation:

On the other hand, having a credit card while in college can be a good idea in the sense that it can help the student build up a credit history. Having a credit score will be useful down the road as the student graduates and decides to buy a car or a home one day.

3. A student should make a few small charges each month and then pay off the balance:

In order to start building up a solid credit history, a college student should make a few small charges for regular expenses like gas and groceries – but then should pay off the balance in full each month.

4. Parents should take an active role in educating their college students about how to use credit appropriately:

College students are usually pretty smart folks, or they wouldn’t be heading off to college in the first place. Still, when it comes to money management, parents of students should really take an active role in educating their kids about how to use credit appropriately. This can include helping the student find the best-possible rate on a new credit card, as well as coaching them on how to use the car and to keep the balance at a reasonable level.

5. Parents who fund their kids’ educations should consider giving them prepaid debit cards instead:

In addition to the new credit card, parents who fully or partially fund their kids’ living expenses while in college should consider supplying their kids with prepaid debit cards. Each of these cards carries the symbol of one of the major credit card issuing institutions like Visa, MasterCard, American Express or Discover – so they can be used anywhere a credit card is used.

But, because prepaid debit cards require no application process or credit check to acquire, parents can buy them on behalf of their kids and then monitor their use. Unlike with actual credit cards, by using prepaid debit cards the college student can never overspend.

Leverage these 5 insights to help educate your college-age child about responsible money management.

Find prepaid debit cards to help the student in your life manage their personal finances at: Prepaid Gift Card Warehouse.