Southern Trust FinancialPlanningMarc WolffPresident - Investments1943 Morrill St.Suite 1Sarasota, FL 34236941-308-0041mwolff@southerntrustfinancial.comwww.Southerntrustfinancial.com

September 2013Famous People Who Failed to Properly Plan

It's Time to Review Your Life InsuranceNeeds

Is College Debt the Next Bubble?

What rate of return should I expect fromstocks?

September, 2013

Famous People Who Failed to Properly Plan

See disclaimer on final page

It's almost impossible tooverstate the importance ofestate planning, regardless ofthe size of your estate or thestage of life you're in. A closesecond to the need to planyour estate is getting it donecorrectly, based on your

individual circumstances.

You might think that those who are rich andfamous would be way ahead of the curve whenit comes to planning their estates properly,considering the resources and lawyerspresumably available to them. Yet, there areplenty of celebrities and people of note whodied with inadequate (or nonexistent) estateplans.

No estate planIt's hard to imagine why some famous peopleleft this world with no estate plan. A case inpoint involves formerentertainer-turned-congressman SalvatorePhillip "Sonny" Bono. He died in a skiingaccident in 1998, leaving no will or estate planof any kind. His surviving wife had to petitionthe probate court to be appointed her deceasedhusband's administrator, seek court permissionto continue various business ventures in whichSonny was involved, and settle multiple claimsagainst the estate (including one from Sonny'smore famous prior spouse, Cher). To makematters worse, a claim against the estate wasbrought by a purported extramarital child, whichnecessitated a DNA test from Sonny's body todetermine whether he'd fathered the claimant(he did not).

Do-it-yourself disasterWe've all seen the ads for do-your-own legaldocuments, including wills and trusts. And thelaw does not require that you hire an attorney toprepare your will. But even the highest rankingjurist of his time should have relied on estateplanning experts to prepare his estate plan.Instead, U.S. Supreme Court Chief JusticeWarren E. Burger, who died in 1995, apparentlytyped his own will (consisting of only 176words), which contained several typographicalerrors. More importantly, he neglected to

address several issues that a well-drafted willwould typically include. His family paid over$450,000 in taxes and had to seek the probatecourt's permission to complete administrativetasks like selling real estate.

The importance of updating your estateplanSure, formulating and executing an estate planis important, but it shouldn't be an "out-of-sight,out-of-mind" endeavor. It's equally important toperiodically review your documents to be surethey're up-to-date. The problems that can ariseby failing to review and update your estate planare evidenced by the estate of actor HeathLedger. Although Ledger had prepared a willyears before his death, there were severalchanges in his life that transpired after the willhad been written, not the least of which was hisrelationship with actress Michelle Williams andthe birth of their daughter, Matilda Rose. Hiswill left everything to his parents and sister, andfailed to provide for his "significant other" andtheir daughter. Apparently his family eventuallyagreed to provide for Matilda Rose, but notwithout some family disharmony.

Let someone know where thedocuments are keptAn updated estate plan only works if the peopleresponsible for carrying out your wishes knowwhere to find these important documents.Olympic medalist Florence Griffith Joyner diedat the young age of 38, but her husbandclaimed he couldn't locate her will, leading to adispute between Mr. Joyner and Flo Jo'smother, who claimed the right to live in theJoyner house for the rest of her life.

The will of baseball star Ted Williams instructedhis executor to cremate his body and sprinklethe ashes at sea. However, one of William'sdaughters produced a note, allegedly signed byTed and two of his children, agreeing that theirbodies would be cryogenically stored. Beforethe will could be filed with the probate court, thebody was taken to a cryogenic company, whereits head was severed and placed in a container.

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It's Time to Review Your Life Insurance NeedsYour life insurance needs may change withoutyou even realizing it. You may have purchasedlife insurance years ago, and never gave it asecond thought. Or, you may not have lifeinsurance at all--and now you need it. Whenyour life circumstances change, you have afresh opportunity to make sure the people youlove are protected.

You're tying the knotWhen you were single, you may not havethought much about life insurance. But now thatyou're getting married, someone else may bedepending on your income. If one of you shoulddie, the other spouse may need to rely on lifeinsurance benefits to meet expenses and payoff debts.

The amount of life insurance coverage youneed depends on your income, your debts andassets, your financial goals, and other personalfactors. Even if you have some low-cost lifeinsurance through work, this may not beenough. To be adequately protected, you mayeach need to buy life insurance policies from aprivate insurer. The cost of an individual policywill be based on your age and health, theamount of coverage you buy, the type of policy(e.g., cash value or term insurance), and othervariables.

You've become a parentWhen you become a parent, it's time to takeanother look at your life insurance needsbecause your family's financial security is atstake. Married, single, and stay-at-homeparents all need life insurance. Life insuranceproceeds can help your family meet both theircurrent expenses (such as a mortgage, childcare, or car payments) and future expenses(such as a child's college education). Even ifyou already have life insurance, it's time toreview your policy limits and beneficiarydesignations.

You're contemplating divorceDuring a divorce, you'll have a number ofpressing financial issues to address. Make surethat one of these is life insurance. You'll want tothink about what protection you need, and whatprotection your children (if any) will need in thefuture. For example, if you'll be paying orreceiving child support, you may want to uselife insurance to ensure continuation of thosepayments. During a divorce, you may also needto negotiate ownership of life insurancepolicies. Life insurance ownership andobligations may be addressed in your divorcesettlement, and state laws vary, so ask yourattorney for advice and information. Finally,you'll want to evaluate your own life insurance

needs to make sure your family is protected inthe event of your death.

Your children have left the nestIf having children was the reason you originallypurchased life insurance, you may feel that youno longer need coverage once your childrenare living on their own. But this isn't necessarilythe case. Before making any decision, take alook at the types and amounts of life insuranceyou have to make sure your spouse isprotected (if you're married). And keep in mindthat life insurance can still be an important toolto help you transfer wealth to the nextgeneration--your children and any futuregrandchildren.

You're ready to retireAs you prepare to leave the workforce, youshould revisit your need for life insurance. Youmay find that you can do without life insurancenow if you've paid off all of your debts andachieved financial security.

But if you're like some retirees, your financialpicture may not be so rosy. You may still besaddled with mortgage payments, tuition bills,and other obligations. You may also needprotection if you haven't accumulated sufficientassets to provide for your family. Or maybeyou're looking for a way to pay your estate taxbill or leave something to your family membersor to charity. You may need to keep some ofyour life insurance in force or even buy adifferent type of coverage.

Your health has changedIf your health declines, how will it affect your lifeinsurance? A common worry is that if yourhealth changes, your life insurance coveragewill end if your insurer finds out. But if you'vebeen paying your premiums, changes to yourhealth will not matter. In fact, you should take acloser look at your life insurance policy to findout if it offers any accelerated (living) benefitsthat you can access in the event of a serious orlong-term illness.

It's also possible that you'll be able to buyadditional life insurance if you need it,especially if you purchase group insurancethrough your employer during an openenrollment period. Purchasing an individualpolicy may be possible, but more difficult andmore expensive.

Of course, it's also possible that your health haschanged for the better. For example, perhapsyou've stopped smoking or lost a significantamount of weight. If so, you may want torequest a reevaluation of your life insurancepremium--ask your insurer for more information.

Regularly reviewing your lifeinsurance can help it keeppace with your changingneeds, and your financialand family obligations.

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Is College Debt the Next Bubble?What might a 23-year-old recent collegegraduate, a 45-year-old entrepreneur, and a60-year-old pre-retiree have in commonfinancially? They may all be hobbled by studentloan debt. According to financial aid expertMark Kantrowitz, the student loan "debt clock"reached the $1 trillion milestone last year.1 Andeven as Americans have reduced their creditcard debt over the past few years, student loandebt has continued to climb--both for studentsand for parents borrowing on their behalf.

A perfect stormThe last few years have stirred up the perfectstorm for student loan debt: soaring collegecosts, stagnating incomes, declining homevalues, rising unemployment (particularly foryoung adults), and increasing exhortationsabout the importance of a college degree--all ofwhich have led to an increase in borrowing topay for college. According to the FederalReserve Bank of New York, as of 2011, therewere approximately 37 million student loanborrowers with outstanding loans.2 And from2004 through 2012, the number of student loanborrowers increased by 70%.3

With total costs at four-year private collegespushing $250,000, the maximum borrowinglimit for dependent undergraduate students of$31,000 for federal Stafford Loans (the mostpopular type of federal student loan) hardlymakes a dent, leading many families to turn toadditional borrowing, most commonly: (1)private student loans, which parents typicallymust cosign, leaving them on the hook later iftheir child can't repay; and/or (2) federal PLUSLoans, where parents with good credit historiescan generally borrow the full remaining cost oftheir child's undergraduate education fromUncle Sam.

The ripple effectThe implications of student loan debt areominous--both for students and the economy asa whole. Students who borrow too much areoften forced to delay life events that traditionallyhave marked the transition into adulthood, suchas living on their own, getting married, andhaving children. According to the U.S. CensusBureau, there has been a marked increase inthe number of young adults between the agesof 25 and 34 living at home with theirparents--19% of men and 10% of women in2011 (up from 14% and 8%, respectively, in2005).4 This demographic group often findsthemselves trapped: with a greater percentageof their salary going to student loan payments,many young adults are unable to amass adown payment for a home or even qualify for amortgage.

And it's not just young people who are havingproblems managing their student loan debt.Borrowers who extended their student loanpayments beyond the traditional 10-yearrepayment period, postponed their loansthrough repeated deferments, or took out moreloans to attend graduate school may discoverthat their student loans are now competing withthe need to save for their own children's collegeeducation. And parents who cosigned privatestudent loans and/or took out federal PLUSLoans to help pay for their children's educationmay find themselves saddled with educationdebt just as they reach their retirement years.

There's evidence that major cracks are startingto appear. According to the Federal ReserveBank of New York, as of 2012, 17% of the 37million student loan borrowers with outstandingbalances had loans at least 90 days pastdue--the official definition of "delinquent."5

Unfortunately, student loan debt is the only typeof consumer debt that generally can't bedischarged in bankruptcy, and in a classiccatch-22, defaulting on a student loan can ruina borrower's credit--and chances of landing ajob.

Tools to helpThe federal government has made a big pushin recent years to help families research collegecosts and borrowers repay student loans. Forexample, net price calculators, which givestudents an estimate of how much grant aidthey'll likely be eligible for based on theirindividual financial and academic profiles, arenow required on all college websites. Thegovernment also expanded its income-basedrepayment (IBR) program last year for federalstudent loans (called Pay As YouEarn)--monthly payments are now limited to10% of a borrower's discretionary income, andall debt is generally forgiven after 20 years ofon-time payments. (Private student loans don'thave an equivalent repayment option.)

Families are taking a much more active role,too. Increasingly, they are researching majors,job prospects, and salary ranges, as well ascomparing out-of-pocket costs and jobplacement results at different schools todetermine a college's return on investment(ROI). For example, parents might find that,with similar majors and job placement successbut widely disparate costs, State U has a betterROI than Private U. At the end of the day, it'sup to parents to make sure that theirchildren--and they--don't borrow too much forcollege. Otherwise, they may find themselvesliving under a big, black cloud.

Growing debt

The average amount of studentloan debt for the Class of 2011was $26,600, a 5% increasefrom 2010 (source: Project onStudent Debt, Student Debtand the Class of 2011, October2012). But some students--andtheir parents--borrow much,much more.

Sources1 Mark Kantrowitz, StudentLoan Debt Clock Reaches $1Trillion, May 8, 20122 Federal Reserve Bank ofNew York, Grading StudentLoans, March 5, 20123 Federal Reserve Bank ofNew York, Q4 2012 QuarterlyReport on Household Debt andCredit, February 28, 20134 U.S. Census Bureau,America's Families and LivingArrangements: 20115 Federal Reserve Bank ofNew York, Q4 2012 QuarterlyReport on Household Debt andCredit, February 28, 2013

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Southern Trust FinancialPlanningMarc WolffPresident - Investments1943 Morrill St.Suite 1Sarasota, FL 34236941-308-0041mwolff@southerntrustfinancial.comwww.Southerntrustfinancial.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2013

Securities offered throughSecurities America, Inc. MemberFINRA/SIPC. Marc Wolff,Registered Representative. Advisorservices offered through SouthernTrust Financial Planning. MarcWolff, Financial Planner. SouthernTrust Financial Planning, Forefield,and the Securities Americacompanies are not affiliated.

Representatives of SecuritiesAmerica do not provide tax or legaladvice. Please consult theappropriate professional regardingyour situation.

What return are you really earning on your money?If you're like most people, youprobably want to know whatreturn you might expect beforeyou invest. But to translate agiven rate of return into actual

income or growth potential, you'll need tounderstand the difference between nominalreturn and real return, and how that differencecan affect your ability to achieve financial goals.

Let's say you have a certificate of deposit (CD)that's about to expire. The yield on the newfive-year CD you're considering is 1.5%. It's notgreat, you think, but it's better than the 0.85%offered by a five-year Treasury note.*

But that 1.5% is the CD's nominal rate of return;it doesn't account for inflation or taxes. If you'retaxed at the 28% federal income tax rate,roughly 0.42% of that 1.5% will be gobbled upby federal taxes on the interest. Okay, you say,that still leaves an interest rate of 1.08%; atleast you're earning something.

However, you've also got to consider thepurchasing power of the interest that the CDpays. Even though inflation is relatively lowtoday, it can still affect your purchasing power,especially over time. Consumer prices havegone up by roughly 1% over the past year.**

Adjust your 1.08% after-tax return for inflation,and suddenly you're barely breaking even onyour investment.

What's left after the impact of inflation andtaxes is called your real return, because that'swhat you're really earning in actual purchasingpower. If the nominal return on an investment islow enough, the real return can actually benegative, depending on your tax bracket andthe inflation rate over time. Though thishypothetical example doesn't represent theperformance of any actual investment, itillustrates the importance of understandingwhat you're really earning.

In some cases, the security an investmentoffers may be important enough that you'reessentially willing to pay someone to keep yourmoney safe. For example, Treasury yields havesometimes been negative when people worriedmore about protecting their principal than abouttheir real return. However, you shouldunderstand the cost of such a decision.

*Source: Department of the Treasury ResourceCenter (www.treasury.gov) as of April 2013.

**Source: Bureau of Labor Statistics, ConsumerPrice Index as of April 2013.

What rate of return should I expect from stocks?That depends on manyfactors, including your timeframe and the types of stocksinvolved. Many retirementplanning calculators project a

portfolio's future value based on historicalreturns. However, past performance is noguarantee of future results, and you should takeany such assumptions with a grain of salt.

You may have heard that stocks havehistorically averaged a 10% return. However,be careful about relying too much on thatnumber. First, the figure on which thatstatement is based--9.8%--reflects thecompounded annual total return of the S&P 500between 1926 and 2012. Is your time framelikely to be that long? Second, equities'performance in recent years hasn't been asrobust. The last time the S&P's compoundedannual 10-year total return was 9.8% or morewas 2004; from 1999 to 2008 it was negativefor the first time in decades, and from 2003 to2012, it was 7.1%.*

Third, that 7.1% was the index's nominal return;it doesn't take into account inflation or taxes. Asof April, the annual inflation rate was a littleover 1%, according to the Bureau of Labor

Statistics. That would cut that 7.1% to just over6%. And a 1% inflation rate is very low; over thelast 20 years, it has averaged roughly 2.4% ayear, which would mean an inflation-adjustedreturn under 5%. That's less than half theoften-quoted 10% average, not including anytaxes owed.

What would that mean to a hypothetical$100,000 portfolio? Even if you managed toachieve a 9.8% nominal return compoundedannually for 10 years, adjusting it for 2.4%inflation would mean a projected balance ofalmost $255,000 would actually be worthroughly $200,000 before taxes. That's a prettysubstantial gap.

Returns for stocks other than the large caps ofthe S&P 500 can be different. Still, whenplanning for income or long-term goals,focusing on real returns could help keep yourexpectations realistic.

*Calculations based on total returnscompounded annually through December 2012on the S&P 500 Index, which is an unmanagedmarket-cap weighted index composed of thecommon stocks of 500 leading companies inleading U.S. industries. It is not available fordirect investment.

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