Active vs. Passive Portfolio Management – and the Winner is … ?

Whether active management of a portfolio can actually produce better investment results than a passive portfolio has been a long-standing argument in the investment community. And, given the recent history of market volatility, this conversation has moved even more to the forefront.

What is Active? What is Passive?

An actively managed portfolio uses the skill of a single manager or team of managers who employ technical analysis, fundamental research and personal judgment to determine which investments (we’ll use stocks as our example throughout this article) to buy and hold or to sell within a portfolio. The manager(s) typically operates within a specific discipline (large cap growth, small cap value, international, etc.).

Those who subscribe to the active approach to money management do not buy into the efficiency of markets. They believe there’s enough inefficiency and imperfect information to make it possible to profit by identifying mispriced (either too high or too low) securities and taking action (buy and hold or sell).

On the other hand, subscribers to the passive approach (also be described as “indexing”) believe that markets are efficient and that all information that is available on a specific stock is known and built into the price of the security. These folks believe that in the long run, parking money in an index, such as the S&P 500, will yield better investment results than actively trading and picking specific stocks within the index will yield.

The argument for passive investing becomes even more compelling when you consider how the management fees and trading costs inherent in the actively managed portfolio can drag performance down.

Of course, it’s also possible to be an active trader of passive investments, such as exchange-traded funds (ETFs). These have become wildly popular with good reason: EFTs are low cost, liquid and are easily traded like a stock. An ETF can be tied to one asset, such as gold, or to a group of assets, such as dividend-paying stocks.

What’s sometimes missing from the passive vs. active conversation, though, is the notion that, according to the widely accepted 1991 study by Brinson, Singer and Beebower, asset allocation of a portfolio accounts for 91% of the long-term performance of a portfolio, and market timing and stock selection are considered to have far less impact.

Even if you choose the passive route, it’s unwise to think you can put all your eggs in one basket (or, in our case, in one index) and think you’re assured long-term success.

In other words, diversification – choosing the right mix of asset classes – is a far more powerful influencer of investment returns than is hiring money managers, using indices or employing a combination of both. This holds true whether you’re talking about large, medium or small companies, domestic or international, developed or emerging markets, traditional asset classes or alternatives – just to name a few.

Of course, with so many investment products and solutions available, even self-proclaimed passive investors need professional advice to get it right.

So…… Passive the winner or is Active the winner? In our opinion, a combination of both approaches is the best strategy. Making tactical changes between asset classes as economic conditions change and markets adjust can help to achieve the proper asset allocation to maximize risk-adjusted returns.

Also, don’t forget that the “right” portfolio or asset mix doesn’t come in one size fits all. Rather, “right” is whatever is ideal for you at this moment – which means you’ll need to revisit your portfolio or asset mix whenever your life circumstances change.


If your life circumstances have changed, take the next step and revisit your portfolio.

We’d be happy to talk with you about your unique situation and goals, as well as what might be a more ideal asset allocation for you at this point in time.

You can schedule a complimentary discussion by calling 443-692-8833 or send an email with your availability to

Also: If you’ve not yet downloaded our valuable new planning resource, Six Estate Planning Mistakes High-Net-Worth Families Make and How to Avoid Them, simply click here to learn more and to access your copy.


Stock (and bond) market volatility has been up quite a bit recently. Why is it happening and what does it mean to me and my family’s financial well-being? The price of oil is down along with the value of the Russian Ruble – is this good or bad for my portfolio? Credit spreads have widened (and narrowed again recently) – am I in the high yield market and if so, what should I do? Yes, all these questions (and many more) are important to consider when determining investment strategy, but understanding these very important concepts below will help you to get the results you want and need from your portfolio.

It can be tempting to try and anticipate the ups and downs of the market. It seems that the media spends much of their time discussing what market experts, economists, and traders are predicting for the next day, week or month. Some of this information can be valuable if you are a TRADER – trying to anticipate these short term changes and make money by trading on these estimates. By contrast, most of us are INVESTORS. We are in the stock market to beat inflation and earn a reasonable return. Your advisor should help you to determine what return you should have as a goal, based on your needs and time horizon. The longer the horizon, the less your portfolio feels the impact of volatility. If you need your funds to buy a house in six months, then it will really only be luck if your portfolio is up when you need the funds. And investing should have nothing to do with luck.

Studies show, and results mostly bear this out – over 90% of your portfolio return is based on what asset allocation you and your advisor choose, based on your time horizon, and what your risk tolerance is. An advisor can recommend a higher risk portfolio, but if you cannot be comfortable with market swings, you are most likely to sell some (or all) of your portfolio at the exact wrong time. Many investors trying to time the market actually get out of the market AFTER it has suffered most of the downdraft. Even if you do get out at the right time, you then must choose when to get back in to the market. So, you need to make TWO correct decisions regarding market timing, to be a successful investor.

This is not to say we are advocating a “buy and hold” strategy. Effective asset allocation typically involves adjusting your portfolio regularly, based on market volatility. As one portion of your portfolio increases in value, and another portion decreases, proper asset allocation (based on your objectives and risk tolerance) would dictate selling some of what is up and buying some of what is down. By rebalancing back to your indicated asset allocation, you are systematically buying low and selling high. Your advisor may also make some recommendations regarding tactical changes to your portfolio, based on economic and market forecasts. These changes, though, should not be so significant that they result in making big bets to achieve higher returns, or compromise the appropriate asset allocation for your objectives.

Is Forming a Private Family Foundation Right for You?

Financial Advisors Fully Focused on YouAt some point in the family lifecycle of wealth, the question invariably arises as to whether or not it makes sense to stop writing checks as individual family members or branches, and to form a Private Family Foundation in order to take a more formal approach to family philanthropy.

Here are a few considerations and alternative solutions:

The statistics on philanthropic giving in the United States are encouraging. According to the National Philanthropic Trust, while corporate giving remained stagnant in 2013, individual giving in the same year rose 4.4% since 2011, and amounted to over $335 billion, and 95% of high net worth households give to charity.

Charitable gifting strategies, such as Charitable Gift Annuities and Charitable Remainder and Lead Trusts, to name a few, are becoming more familiar to many high net worth families, so it stands to reason that the question of the Private Family Foundation is being raised more often.

Benefits of Forming a Family Foundation

A Family Foundation can be a great resource in teaching younger generations about the importance of giving back.

Even more compelling is crafting a family philanthropic mission statement that defines the types, locations and areas of focus that the family wants to support. This could include addressing issues that affect children, families, homelessness, domestic abuse and more.

Having a Private Family Foundation gives you time to decide where and when to make the investments that are appealing to the family, while gaining an income tax deduction in the year money is contributed to the foundation. Plus, it creates a family legacy.

A Private Family Foundation can be an effective estate-planning tool as well.

Assets placed inside the foundation are removed from the estate of the donor. However, they also become unavailable to heirs.

To remedy this situation, the family can take the next step and form a Legacy Trust as a potentially low-cost method of keeping the heirs whole while still gaining the estate tax benefit (more on this in a future article!).

Family members can also receive salaries for serving on the board of directors of the foundation.

Drawbacks of Forming a Family Foundation

So what’s not to like?

And why is it that, according to IRS statistics, there were only 115,000 Private Family Foundations in the United States as of 2008?

The primary answer is that establishing and running a Family Foundation can be expensive and time-consuming.

The Private Family Foundation is typically established as its own 501©3 entity with an independent EIN, which means there are legal and accounting costs. Starting a Private Family Foundation with anything less than $2-3 million is usually cost prohibitive.

Also, there are regulations that must be met, so record keeping is imperative. As an example, Private Family Foundations are required to donate 5% of their assets annually to qualifying organizations or face a punitive excise tax.

Self-dealing prohibitions place constraints on how gifts can be distributed. An affiliated member of the Foundation cannot use the funds from the Foundation to satisfy a multi-year commitment made by the individual.

Gifts made to a Private Family Foundation do not receive the same tax deduction as gifts made directly by an individual to a public charity. As a general rule, an individual donor can deduct up to 50% of their AGI (adjusted gross income) through charitable cash contributions, while a gift to a Private Family Foundation is limited to 30% of AGI.

Also, while gifts of appreciated property (we will limit this discussion to publicly traded stocks for simplicity) are deducted at fair market value when gifted to a public charity, cost basis is used as the deduction amount when the gift is to a Private Family Foundation, which usually results in a lower deduction.

Philanthropically driven individuals and families that like the control and legacy-building that a Private Family Foundation provides, but not the cost and administration, do have other options.

For example, donor advised funds have become popular in recent years to satisfy this demand. The main drawback to this solution is that gifts must typically be made in cash, as these funds generally do not accept appreciated assets. Do not confuse this with an Exchange Fund, which is specifically designed to accept concentrated stock positions, but which has nothing to do with philanthropy.

There are also a myriad of planned giving strategies, such as CRATs, CRUTs, Charitable Gift Annuities and CLT’s.

We hope we’ve helped you determine if a Private Family Foundation is the right choice for your family, as well as given you a few ideas of possible paths and their pros and cons.

If you’re philanthropically inclined and would like to take the next step by developing a strategic giving plan that aligns with your family legacy goals, give us a call at 443-692-8833 or email us at

We would enjoy the opportunity to discuss your unique situation and, if you want to move forward, help you select and set up the solution that’s the best fit for you.

6 Critical Considerations for End-of-Year Financial Planning

Senior couple meeting with agentThe holiday season is almost upon us and, for many, this means time spent with family and friends reflecting on the blessings in life and on those we hold dear.

Of course, it’s also time to get ready for the coming year – and that includes conducting a year-end financial checkup.

This is especially important for making sure your financial plan is on track toward your goals, as well as for ensuring your financially related actions are a reflection of your values.

Here are 6 critical considerations to support you as you wrap up 2014 and prepare for a financially healthy new year:

#1: Maximize Your Retirement Plan Contributions

The 401K contribution limit for 2014 is $17,500 with a $5,500 catch-up provision if you are age 50 or older. Keep in mind that these are IRS limits and your plan may have different limits, so make sure to consult your plan administrator.

If you’re a business owner, you may be able to put even more retirement money aside if you have the right plan. SEP plans, for example, have a maximum contribution limit of $52,000 or 25% of your compensation. There’s still time to establish a SEP plan prior to year-end if this task got away from you this year.

#2: Give Generously, but Wisely

The holiday season often makes us feel more charitably inclined and giving money to charity can provide a dollar-for-dollar reduction to your taxable income, depending on the type of charity and subject to certain income limitations.

With the strong performance of the stock market over the past few years (recent weeks aside!), you may have appreciated stock that you or your advisor would like to sell, but the taxable gains are holding you back. In this case, it might be wise to gift that stock to charity. Because of the tax advantage, you can give the full amount of the value of the stock, rather than selling the stock, paying the tax and then giving the amount left over after taxes to the charity. Most charities accept stock donations, which they then can sell with no tax consequence.

There are many other creative ways to satisfy your charitable inclinations – so feel free to contact us to discuss your options.

#3: Take Full Advantage of the Annual Gift Tax Exclusion for 2014

Each taxpayer is allowed to gift $14,000 to any individual in 2014 without having to pay gift tax. For a married couple, the combined maximum gift is $28,000. This is an excellent wealth transfer strategy, effectively reducing the net worth of the giver with potentially no tax consequences to themselves or the recipient.

#4: Education has No Limit

If you’re paying education expenses on behalf of someone else, that amount is outside of the annual exclusion amount. There is no limit on what you can pay for someone else’s education, as long as the payment goes directly to the educational institution. Check with your tax advisor to make sure you understand the tax impact of any gifts you make.

#5: Beware of the Mutual Fund Tax Trap as Year-End Approaches

Most mutual funds pay out the majority of their distributions as early as November. These are taxable unless owned in a qualified retirement account. The distributions are generally divided equally among all shareholders as of a certain date, and do not take into consideration how long each investor has owned the fund.

This means that buying a mutual fund close to year-end could put you into the unfortunate situation of having to pay tax on a year’s worth of gains on a fund you only owned for a few days.

#6: Match Capital Gains with Losses

Because the stock market has been primarily on the rise for the past several years, you may not have a lot of capital losses to capture. However, check to see if you have loss carryforwards from prior years that could be used to offset the taxes from gains this year. You can offset up to $3,000 in ordinary income with loss carryforwards. But if you do have gains, you could get an even larger offset.

We hope you find these 6 considerations valuable during your year-end financial check up. As always, if you need our support in maximizing your opportunities, feel free to contact us anytime. We’d be happy to take a look at your unique situation to help you make the smartest decisions possible.

This article is not intended to be tax advice. Please consult with your tax advisor for specific guidance for your situation.

How to put cash on the sideline to good use

You’ve no doubt heard that there is a lot of “cash on the sidelines,” both corporate and personal, as people wait for the most opportune time to leap into this highly volatile stock market.

My firm belief is that the time to invest is when you have the money and the time to sell is when you need the money. However, if you are one of those hoarding cash and are not comfortable investing in traditional assets, you may be wondering if there are alternatives to parking in a money market earning next to nothing. There are.

First, remember that good financial planning prescribes that you keep four to six months of living expenses easily accessible in a liquid bank account should the need arise. This is especially important now, when many folks are concerned about job security. If you have that need taken care of, and you still have some idle cash, consider the following.

Are you maxing out your 401K and IRA contributions? While these contributions would be considered market investments, they have the added potential benefit of a current year tax deduction, and earnings in these investments accumulate tax deferred. With the ongoing problems with Social Security, taking responsibility for your own retirement has never been more critical.

Consult with your tax advisor and 401k or 403B administrator on the maximum contribution you can make and when those contributions need to be made.

Another critical reason to max out your 401(K) or 403(B) contribution is that many employers offer some type of matching contribution. Whatever the match amount, this is “free” money to you that you can rely upon to increase your retirement savings.

Pay off high interest credit card debt. Carrying credit card debt is, in most cases, a bad idea. If you have balances and idle cash, this is a “no-brainer.” The interest rates are likely high, 20 percent or higher in some cases, and are generally not deductible, so there is no economic advantage to carrying a balance on these cards.

Should you pay down or pay off your mortgage? The answer to this is not as clear.

The interest on mortgage loans up to $1.1 million are generally deductible (check with your tax advisor), so if you pay taxes at a 30% federal marginal tax rate, and you have a mortgage at 5% interest, your after tax interest rate is actually 3.5%.

In this scenario, if you believe you can earn more than 3.5% in other investments (like the stock market), then paying off the mortgage may not be the best use of these funds. Consult your advisor to determine if this strategy makes sense for you.

Finally, if you have idle cash, then you may want to consider sharing your blessings with others. Many of our neighbors are in desperate need of food, shelter, and access to health care. It may be that investing in your community is the best use of your idle cash.

Charitable contributions may be tax deductible (consult your tax advisor for rules and limitations), and the feeling of helping out a neighbor in need is priceless. There are many local resources to help you decide which charitable organizations might be a good fit for you.

Please contact us if you would like to discuss any of these topics further.

Study all of your options for long-term care

A friend of mine moved his elderly mother into an assisted living facility last week. It was a difficult decision for the family to make, but a necessary one given the human and financial resources required for her to continue to live on her own.

This scenario is played out daily in families all across the country – and a reminder that while medical advances have prolonged life expectancy, there is no guaranty that the quality of life will be ideal. While the decision to transfer an aging loved one to an assisted living facility is difficult, the nursing home decision can be even harder.

It is estimated that approximately 70% of people over age 65 will require some type of long term care (LTC). And while we typically associate the need for LTC with the elderly, injury and disease can trigger a need at any age. Christopher Reeve, who became a paraplegic at age 42 as a result of a riding accident, is one of the most glaring examples.

While we are accustomed as a society to insuring our homes, our automobiles, our lives and, increasingly, our pets, the need to insure the cost of long term care is not so clear. As a result, families are absorbing these significant costs of care.

According to an AARP study, in 2009, about 42.1 million family caregivers in the United States provided care to an adult with limitations in daily activities. The estimated economic value of their unpaid contributions was approximately $450 billion in 2009, up from an estimated $375 billion in 2007.

There are basically four ways to pay for LTC: Medicare, Medicaid, self-insure, or LTC insurance.

Medicare is a federal program that has fairly stringent requirements and little flexibility in the type of care provided. Medicaid is designed for low income individuals. For those with options, these alternatives may not be the most advantageous.

The decision to self-insure, purchase long term care insurance, or a combination of the two, requires planning, and a good working knowledge of the costs of various types of care (institutional, assisted living, home health care), local costs, and your particular preferences.

There are many different LTC insurance products on the market today. Many are traditional- the owner of the policy pays for the coverage annually. If LTC benefits are needed, a claim is made against the policy. If no benefits are needed, the policy expires unused, much like auto insurance.

There is another product available, which is a life insurance policy, where portions of the death benefit can be used for LTC needs. So – if there is a LTC need, the funds are available. If there is NOT a LTC need, then the life insurance policy pays a death benefit to your beneficiaries. In effect, you are repositioning a portion of your investment portfolio to protect the rest of your portfolio.

We can help you sort out the options and determine the best solution for you and your family.

Diversification is more important than style

A long-standing argument in the investment community has been whether active management of a portfolio can actually produce better investment results than a passive portfolio. And with the volatility of the markets in recent history, this conversation seems to have moved to the forefront.

An actively managed portfolio uses the skill of a single, or team of managers that use technical analysis, research and their personal judgment to determine which investments (we’ll use stocks for this example) to buy and hold, or sell within a portfolio. The manager(s) typically operate within a specific discipline, i.e. large cap growth, small cap value, international, etc. Those who subscribe to this method of money management do not buy into the efficiency of markets. They believe there is enough inefficiency and imperfect information that it is possible to profit from identifying mispriced (either too high or too low) securities.

Passive investing can also be described as “indexing”. Subscribers to this approach of investing believe that markets are efficient and that all information that is available on a specific stock is known and built into the price of the security. These folks believe that in the long run, parking money in an index, such as the S&P 500, would yield better investment results than actively trading and picking specific stocks within the index. The argument becomes more compelling when you consider management fees and trading costs in the actively managed portfolio that can drag down performance.

And of course, it is also possible to be an active trader of passive investments, such as exchange traded funds, or ETF’s, which have become wildly popular with good reason. This investment is low cost, liquid, and is easily traded like a stock. An ETF can be tied to one asset, i.e. gold, or a group of assets, like dividend paying stocks.

What is sometimes missing in this conversation is the notion that according to the widely accepted 1986 study by Brinson, Singer,and Beebower, asset allocation of a portfolio accounts for 91% of the long term performance of a portfolio. Market timing and stock selection are considered to have far less impact. So even if you choose the passive route, it is unwise to think you can put all your eggs in one basket, or one index, like the S&P 500 and think you will have long term success.

Diversification, which is choosing the right mix of asset classes, whether it be large companies, medium companies, or small, domestic or international, developed or emerging markets, traditional asset classes or alternatives, just to name a few – is a far more important decision than whether to hire money managers, use indices, or a combination of both. And with all the available investment products and solutions, even self-proclaimed passive investors need professional advice to get it right. And don’t forget that the “right” portfolio, or asset mix, is never “one size fits all”. It is what is right for you at this moment- and can change as your life circumstances change.

With advisors, do put all your eggs in one basket

I was struck recently by a radio ad for an insurance company where the narrator described a situation where a patient went to two different doctors and received two medications. When the patient went to the pharmacist to have the prescriptions filled, he was informed that the combination of drugs could be detrimental to his health.

Unfortunately, far too many people have a similar approach to investing. They hire multiple advisors so as not to keep “all their eggs in one basket”, yet the potentially conflicting recommendations that could be harmful to their financial health go undetected because there is no financial pharmacist to alert the investor to the danger.

This is not to say that diversification is not important – it is critical. The asset allocation of a portfolio determines more than 90% of the returns. Stock selection, market timing and other factors account for the rest in very small proportions. So what’s the problem with having multiple advisors?

First, by employing multiple advisors, an investor loses an economic advantage of having all of their investments combined for fee purposes. Advisors need to get paid for the service they provide which typically is in the form of an advisory fee. The fee is typically a percentage of the portfolio being managed, and often is reduced based on the size of the portfolio. If you have multiple advisors, you are likely paying more in fees, which will drag down the overall return.

Second, think about why you hire an advisor. To get the best return possible? How would you know if you were? Smart investors hire an investment advisor to manage risk. This means having an advisor that can build a customized portfolio that reflects the risk you are willing to take, while achieving long term returns commensurate with an appropriate benchmark. If you have multiple advisors, there is a good possibility that they are not working together. The portfolio construction could be overlapping or conflicting. So who is really managing the risk in your portfolio? You are – and paying handsomely for the privilege.

In years past, when investment advisors were more specialized and technology and investment products were more limited, having multiple advisors made some sense. Today, it is possible to achieve broad diversification using multiple money managers and strategies through a single advisor. The advantage is that you have one person overseeing the entire process, keeping the risk, and the fees, in check.

Often I hear that people hire multiple managers to keep their advisors “honest”. Trust is a key component to any advisory relationship and you should feel confident that your advisor takes the time to know you, understands your needs, and has your best interest at heart. If you don’t feel that way, regardless of the great performance you think you’re getting, it’s time for a new advisor. I also hear that pieces of a portfolio are being managed by friends or family as a favor. I am not against having friends or family as advisors – who better to trust? But if you are not willing to put all your money with them, then it’s better to put nothing. Find another way to find favor.

You and your employer are parting ways- what to do with your 401K?

People are often confused about what to do with their 401K assets when they separate from their employer. Should they keep their assets in the plan, transfer to their new employer’s plan, or roll the funds into a self-directed IRA? The answer depends on the needs of the individual and the limitations of the plans, but here are some things to consider.

Keeping the assets in the former employer’s plan could be advisable if there are outstanding loans. Many plans allow the former employee to continue making loan payments if the assets are left in the plan. This would be advisable if there were not sufficient assets outside the plan to pay off the debt.

If the 401k assets are transferred to another plan, it is common practice for the employer to pay off any loans by liquidating 401K assets and transferring the net balance. The problem with this is that funds used to pay off the loan become fully and immediately taxable at ordinary income tax rates, and could also be subject to a 10% penalty if the owner is under age 59 ½.
Another reason to keep 401K assets in a former employer’s plan is if you are age 55 or over and need to start taking income from the plan. Some plans allow for the avoidance of the 10% penalty (which would normally apply to anyone under 59 ½) if the funds are systematically withdrawn over a finite period of time.

Transferring 401K assets to the new employer’s plan might make sense if the new plan allows for loans and you want to keep that option open with a larger available asset pool from which to borrow- not recommended except in extreme emergencies or hardship. Remember, these assets are designed to generate income in retirement and leveraging them could compromise your future cash flow.

The new employer must agree to accept assets from a prior employer’s plan, so this is not always an option.

For many people, rolling 401K assets into a self-directed IRA is a good idea. All 401K plans have administrative expenses, which are typically passed through to the employee. By rolling into a self-directed IRA, you can avoid plan fees and potentially enhance your return.

In a self-directed IRA, you have more control over your investment choices, whether you manage the funds yourself or work with an advisor. Many 401K plans have limited mutual fund investment options, which may be sufficient for your needs, but it’s nice to have access to other, potentially lower cost investments as well.

If you have a large amount of appreciated company stock in your 401K, you need to consider net unrealized appreciation (NUA) and the special tax treatment from which you can potentially benefit. Consult your advisors if this situation applies-it is an extremely important, and often overlooked consideration.

It may be tempting to take a distribution of cash from your company 401K after separation, but BEWARE. This can be a costly mistake, resulting in taxes, penalties, and risk to your retirement cash flow. With the future of Social Security benefits uncertain, it is wise to use your retirement assets for their intended purpose- retirement.

Umbrella Insurance, Is It Right for You?

The turbulence of the financial markets and state of the economy in recent years have caused smart investors to become more focused on transparency in their investment selections, on understanding the risk in their portfolios, and on ensuring that their asset allocation matches up with their long-term objectives for their wealth.

All too few however are introduced to a simple, relatively inexpensive strategy for insuring their assets and future income — umbrella insurance.

In an increasingly litigious society, far too many people with significant assets roll the dice when it comes to protecting their assets, and their lifestyle, from frivolous lawsuits.

Imagine a friend, neighbor or total stranger getting injured on your property (do you own a swimming pool?) and suing you for damages. Or having your teenager involved in a car accident with someone who sues you for damages that exceed the coverages on your auto insurance policy. It can happen — and all too often does.

The typical auto insurance policy offers liability limits of $100,000 per person and $300,000 per accident. What if the injured party decides to sue for damages, injuries, time away from work, and the total damage award is $400,000? And what if you have to pay legal fees? Your insurance would cover the first $100,000, and you would have to pay the rest out of pocket.

And in the worst case scenario in which you don’t have the cash, a liquidation of your assets, including your home, may be required, as well as garnishment of your future wages. Why subject yourself to these risks when affordable protection is accessible to all?

So what exactly is umbrella insurance coverage? As the name implies, it is coverage that sits over your automobile and homeowner’s coverage.

Umbrella insurance kicks in when auto and homeowner’s policy limits are reached. For example, a $1 million umbrella insurance policy would provide $1 million over and above the limits of the auto and homeowner’s policy. And the cost? A $1 million umbrella policy can cost as little as $200, or less in some cases, and can be purchased through your automobile or homeowner’s insurance agent.
And if you don’t have those coverages combined, there is potential additional cost savings in doing so. The low cost of umbrella insurance reflects the fact that this coverage is for catastrophic situations, which also causes many to believe “it can never happen to me,” and forego the coverage. A potentially big — and costly — mistake.

How much coverage do you need? This question is best answered with the help of your financial advisor, but a good rule of thumb is that it should cover your net worth, or a good portion thereof, depending on how much liquidity you have and how much you are willing to put at risk.

No financial strategy is appropriate for everyone.  Feel free to contact us to discuss your particular situation.