Case Study 3

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Case Study 3

May 17, 2016 | ASSET MANAGEMENT

The purpose of financial planning is to attain financial security, which everyone defines differently.  In the ideal situation, we start early, establish goals, develop a plan, and consider as many contingencies as possible.  A financial advisor can assist in many ways.

For example, car accident victims, or any other type of personal injury claim, are usually compensated in one of two ways. Most of the time, they get a check and are sent on their way.  That money is usually gone in a couple of years, if not sooner.  Sometimes these settlements are structured, meaning you get a specified sum for a certain period of time.  This limits your options and is generally not a good deal for the recipient.  About ten years ago, a lawyer contacted me with something different in mind.  He had a young client whom he had convinced to do more than just “get a check”.  She did take a part of the money to pay some bills.  We took the rest of the money and invested it in a moderate risk/reward profile.  She has taken large sums of money out of the account almost every year, but she still has the total settlement amount in the account. In addition to investment advice, an advisor can help provide discipline or accountability to the client. That way, discussions arise over the long term plan and the current needs or wants. As a result, I have time to plan for the eventuality and can raise cash at opportune moments. We discuss the need and amount to be taken, resulting in a well-reasoned, disciplined approach using the funds. In many cases, a disability arises from the accident, or other personal injury. In this case, access to principle can be particularly important, although income remains the primary goal. An actively managed account, as described above, would work well in such a case. Depending on the severity of the injury, a special needs trust may be the best way to go, especially if public benefits are being received or sought.

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