Five Behavioral Finance Resolutions for a Better Financial Year

Category: Format

Posted on

At a Glance

  • The greatest investment risk for affluent investors is often behavioral, not financial — emotional reactions, overconfidence, and narrative-driven decisions can quietly erode long-term outcomes.

  • Improving decision quality matters more as wealth grows — avoiding large, irreversible mistakes is far more impactful than trying to optimize short-term returns.

  • Disciplined frameworks and outside perspective help protect long-term plans — especially during periods of volatility, transition, or heightened uncertainty.

As the old year draws to a close and a new one begins, millions of Americans will once again make New Year’s resolutions. For many, these resolutions focus on health or wealth, and when it comes to financial resolutions, the usual suspects tend to surface: spend less, save more, and pay down debt.

For affluent investors and families, however, financial outcomes are rarely limited by access to capital. Instead, the greatest risk often comes from behavioral missteps made during periods of uncertainty, transition, or emotional intensity—when the consequences of a single decision can compound over years or even decades.

These traditional resolutions are, of course, worthwhile. But this year, consider adding another set of commitments that go beyond budgeting and focus on the behavioral tendencies that shape—and sometimes sabotage—financial decision‑making. The following behavioral finance resolutions are designed to help you make sound, deliberate financial choices in the year ahead.

Dial Down Your Emotions

Emotions often move faster than logic. They can override rational thinking and push investors toward decisions that may feel reassuring in the moment but undermine long‑term financial health. This year, resolve to take emotion out of investing as much as possible.

In our work with high‑net‑worth families, we most often see emotional decision‑making surface during market drawdowns, liquidity events, or periods of concentrated exposure—when the dollar impact of reacting impulsively can be material.

Separating feelings from financial choices can help sidestep several potentially damaging behavioral biases, including loss aversion. Loss aversion is the tendency to fear losses more than we value gains. It can lead to panic selling during volatile markets, locking in losses, and missing subsequent recoveries. Conversely, it may cause investors to hold onto losing positions far too long, unwilling to realize losses even when doing so would be financially prudent.

At higher levels of wealth, these decisions are rarely about timing the market perfectly. They are about avoiding large, irreversible allocation errors at precisely the wrong moment.

Emotional investing can also fuel home bias—the instinct to stick with what feels familiar. This might mean favoring a particular company, industry, or even domestic markets at the expense of broader diversification. Instead, it helps to view investments not as reflections of personal preference or identity, but simply as tools designed to support long‑term objectives.

Get a Second Opinion

From time to time, even disciplined investors may feel tempted to alter a long‑term financial plan. Before acting, it often pays to seek a second opinion. Thoughtful counsel can help rein in two common behavioral biases: overconfidence and confirmation bias.

This tendency is especially common among successful professionals and business owners who are accustomed to making confident decisions in their operating lives and may unintentionally carry that same decisiveness into complex investment choices.

Overconfidence bias reflects the belief that one can predict outcomes with greater accuracy than is realistically possible. Left unchecked, it may lead to behaviors such as market timing or taking oversized positions in perceived “can’t‑miss” opportunities.

Confirmation bias, meanwhile, is the tendency to seek out information that supports existing beliefs while discounting evidence to the contrary. This can create an echo chamber, making it difficult to objectively assess whether an investment decision is truly sound.

A thoughtful second opinion is less about outsourcing judgment and more about improving decision quality by introducing disciplined friction before capital is reallocated. Seeking outside perspective helps pressure‑test ideas, surface overlooked assumptions, and move forward with greater clarity.

Keep an Open Mind

Financial markets evolve constantly. Rigid thinking increases the risk of missing emerging opportunities or holding onto investments that no longer serve a portfolio’s goals.

We often encounter this dynamic after long periods of market leadership by a particular asset class, strategy, or geography—when familiarity begins to masquerade as prudence.

Maintaining an open mind allows investors to reevaluate long‑held assumptions and adapt as new information emerges. This helps counter status quo bias, the impulse to stick with the current situation simply because it is familiar. It also mitigates anchoring—the tendency to rely too heavily on the first piece of information encountered. For example, investors may anchor to the original purchase price of a stock and use it as a reference point for future decisions, rather than focusing on more relevant fundamentals.

As portfolios grow more complex, flexibility becomes an asset in its own right.

Look at Things From Different Angles

How information is presented can dramatically influence how it is interpreted. The same facts may feel very different depending on framing, a reality well understood by marketers, pundits, and headline writers seeking attention.

Before accepting any narrative as true—particularly in finance—it is worth examining the issue from multiple angles. Seeking out contrarian viewpoints, reframing the story, and asking what the opposite case might look like can all be valuable exercises.

This approach helps guard against framing bias, where decisions are influenced more by presentation than by substance. For instance, a fund described as having a “5% chance of loss” may feel riskier than one described as having a “95% chance of success,” even though both statements convey the same probability.

For investors managing significant wealth, reframing decisions in probabilistic terms rather than narrative ones can materially reduce emotional influence and support greater long‑term consistency.

Stepping back, asking questions, and challenging initial interpretations often leads to more balanced and resilient decision‑making.

Start a Media Diet

Today’s information ecosystem is noisy, fragmented, and optimized to capture attention. Headlines are designed to provoke emotion, while social media algorithms tend to amplify the most sensational viewpoints.

For affluent investors, persistent exposure to market narratives can encourage unnecessary portfolio activity—even when a well‑constructed long‑term plan is already in place.

A deliberate media diet can help restore balance. This does not require complete disengagement, but it may involve limiting exposure to unvetted commentary and prioritizing sources with strong editorial standards. A healthy media diet also means resisting the urge to check markets constantly; long‑term strategies do not require play‑by‑play updates.

A more intentional media environment helps curb availability bias, where highly publicized events distort perceptions of risk. It also mitigates recency bias, which leads investors to overweight recent market movements. By reducing exposure to trending narratives, it further limits the pull of herding—the impulse to follow the crowd.

Reducing noise is not about disengaging from markets; it is about preserving decision‑making bandwidth for moments that truly matter.

Why Behavioral Discipline Matters More as Wealth Grows

As wealth increases, financial complexity tends to rise alongside it. Additional assets, entities, and stakeholders introduce more variables—and more emotionally charged decisions. In this environment, behavioral discipline becomes increasingly central to long‑term success. The cost of small mistakes grows, while the marginal benefit of impulsive action declines.

Many of the most impactful financial decisions are not urgent, but they are consequential. Having a clear framework—and a thoughtful sounding board—can help ensure those decisions are made deliberately rather than reactively.

If you ever have questions or would like to talk through how these principles apply to your own situation, we would be happy to have a conversation.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

Posted on

The final weeks of the year tend to blur together in a whirlwind of pie orders, last-minute shopping, school concerts and cross-country flights. But amid the bustle, it’s worth pausing for some 2025 year-end financial planning. A few thoughtful steps now can help you optimize your tax situation, strengthen your savings, and position yourself for a confident start to 2026. Whether you’re a successful individual, business owner, or managing a complex financial life, the right moves in December can make the new year feel more organized and less stressful.

Mind the Evergreens

Balsam and holly aren’t the only evergreens worth considering as December rolls around. Some financial tasks never go out of season, including maximizing retirement contributions, making charitable gifts and managing capital gains and losses.

    • Retirement Accounts: December 31 is the final day to make 2025 contributions to your employer-sponsored retirement plan. This year, you can contribute up to $23,500 to a 401(k), plus an additional $7,500 catch-up contribution if you’re 50 or older. There’s a big change here for 2025: a higher catch-up limit of $11,250 for individuals ages 60 through 63. In 2026, the annual contribution limit rises to $24,500 and catch-up contributions increase to $8,000. The higher catch-up contribution for those 60 to 63 remains the same.

      IRAs and HSAs offer slightly more breathing room—their 2025 contribution deadline isn’t until April 15, 2026. But the earlier you contribute, the longer your investments can benefit from compounding.

      While you’re reviewing retirement accounts, consider increasing your contribution rate for next year or enabling automatic annual increases if you haven’t already. Small boosts add up meaningfully over time.

    • Capital Gains and Losses: If you’ve sold investments at a gain this year, you may be able to reduce your tax bill by realizing losses elsewhere in your portfolio. Through tax-loss harvesting, losses can offset gains, and if your realized losses exceed your gains, you can deduct up to $3,000 against ordinary income. Losses must be realized by year-end.
    • Charitable Contributions: If you plan to deduct charitable contributions for the 2025 tax year, gifts must be made by Dec. 31. (More on charitable strategy below.)

Give Thoughtfully (and Tax Efficiently)

The charitable giving landscape is set to shift in coming years. The recently enacted One Big Beautiful Bill (OBBB) permanently extends the higher standard deduction with further increases in coming years. Rules will change for itemizers as well. In 2026, if you itemize, you will only be able to itemize charitable deductions on contribution amounts that exceed 0.5% of your adjusted gross income. Finally, top earners will see the deduction value of gifting capped at 35% instead of the full marginal rate of 37% in 2026.

Together, these changes mean a more complex charitable giving environment. In some cases, smaller donations may not offer the same tax impact next year as they have in previous years—including this one. It may make sense to increase your giving this year to take advantage of the current rules, perhaps consolidating several years’ worth of giving into a single large gift.

A donor-advised fund (DAF) can be a strategic way to do this. By contributing to a DAF before Dec. 31, you receive an immediate tax deduction while preserving flexibility to recommend grants to charities over time.

Lock in Home Efficiency Tax Credits—While You Still Can

Thinking about upgrading insulation or installing solar panels? Two valuable credits are set to expire at the end of the year: the Energy Efficient Home Improvement Credit and the Residential Clean Energy Credit.

To qualify, improvements must be placed in service—fully installed and ready for use—by Dec. 31, 2025. The purchase date doesn’t matter, but the installation date does. If energy-efficiency upgrades are on your list, don’t wait to try and line up an installer who has the capacity to complete the work before year-end.

Enjoy Some Breathing Room

Beyond its effects on charitable giving, the OBBB also includes broader tax implications worth noting.

The bill preserves the income tax rates and brackets established in 2017 by the Tax Cuts and Jobs Act. Had those expired, the brackets would have reverted to the higher pre-2018 rates. What does this reprieve mean in practice? You may not need to rush to realize income—such as a year-end bonus—before Dec. 31 to avoid being taxed at a higher rate. The extra time could provide more runway for strategic planning.

Allow Yourself to Do Nothing

Year-end planning isn’t only about getting things done. It’s also about protecting your time, energy and emotional bandwidth. Between office gatherings, family obligations, travel and shopping, these weeks can feel overfull. And while holiday obligations can be fun, they can also be draining.

Be honest about what you can take on. Practicing saying “no” when you’re stretched thin is an act of self-care. Doing so often allows you to say “yes” to the experiences that actually bring you joy, like finding time to exercise, curl up with a good book or watch a cheesy Hallmark movie.

If You Want a Clear Year‑End Strategy, We Can Help

If you’re unsure which steps make the most sense for your situation—or want help coordinating taxes, savings, and charitable planning—we’re here to support you. A short conversation can help you make confident decisions before December 31.

If you'd like to review your 2025 year‑end plan, feel free to reach out.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

Posted on

Educating the Next Generation About Family Wealth

Over the next few decades, an enormous amount of wealth is expected to pass from older to younger generations. This has been dubbed the “Great Wealth Transfer,” and one estimate suggests that $124 trillion will change hands by 2048. It’s an eye-popping figure, to be sure, but it also highlights the reality that many families are, or soon will be, navigating how to pass on their wealth. A top-of-mind question: Is the next generation ready to take on the responsibility?

Wealth is not just cash in the bank; it can include investments, real estate, businesses and more that require stewardship and foresight. Successful management means preserving and growing assets and using them wisely. Striking the right balance here is key: For the next generation to succeed, it takes intentional preparation and education.

Plant the Seeds of Financial Literacy Early

Where to begin? In an ideal world, financial education starts in early childhood and is treated as an open and ongoing conversation as kids age. The goal is to build financial literacy gradually, so wealth management feels natural rather than overwhelming.

When kids are young, this might mean introducing simple topics like the difference between saving and spending. Managing an allowance can help put those ideas into practice. As kids get older you can begin introducing more complex topics, such as investing, compound interest, debt and taxes.

It’s equally important to engage adult children, many of whom may have received no other formal financial education. While 29 states now have K–12 financial education requirements in public schools, this focus has largely come to the forefront only in the last few years. If your kids are adults now, they may have missed out. So it’s worth finding out what they know, what they don’t know and what they’d like to know more about.

Putting Structure Around Family Wealth Education

In addition to ongoing conversations about money, your family might benefit from more intentional ways of building financial literacy. Some families hold regular financial meetings where they share goals, key issues and address questions or concerns. Others put together more formal workshops with wealth advisors or other experts.

There also is a wealth of credible educational content online that is built to both educate and engage audiences around financial literacy topics.

Turning Wealth Conversations into Real-World Experience

Eventually, theory should give way to practice. As younger family members learn the basics, you might consider providing a "practice portfolio," giving them the chance to make investment decisions with small amounts of money and learn from their successes and mistakes.

When family members have honed their knowledge, consider assigning them real responsibilities that match their skills and interest. This might mean relatively simple tasks like helping guide gifts made through a donor-advised fund. Or these responsibilities could be more involved, such as taking a role in the family business or helping to make investment decisions with the family’s wealth. With your guidance and oversight, these experiences can help develop confidence and capability.

Grounding Family Wealth in Purpose and Values

One of the most important things that helps guide families on how to grow and spend wealth is imparting a strong value system. Values can help you frame wealth as a tool rather than a goal.

Your values will be unique to you, but some worth considering may be:

  • Stewardship: Recognizing the responsibility that comes with wealth. Stewardship encourages careful management and intentional choices so resources can benefit both current and future generations.
  • Giving back: Using wealth to help create positive change in your community and the greater world.
  • Self-worth beyond wealth: Remembering that wealth is a tool to achieve goals—whether gaining an education, pursuing passion or giving back, for instance—not a measure of personal value.

 

By grounding financial decisions in values, families can help prevent counterproductive or reckless financial decisions, foster responsibility and ensure wealth is not seen as something to be simply consumed.

Keeping Family Wealth Conversations Going Across Generations

Discussing money isn’t always easy, and for many families, it’s downright taboo. While 66% of Americans say conversations about wealth are important, 62% say they never have them.

But getting over this hurdle is incredibly valuable. The most successful families treat wealth education not as a one-time event, but as an ongoing process that evolves as your family grows and your financial picture changes. We can work with you to create an environment where family members can openly discuss the unique challenges and opportunities that come with wealth.

If you’re thinking about how to prepare the next generation for responsibility—not just inheritance—we’re happy to help.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

Posted on

Why Business Exit Planning Matters

If you’re a business owner, business exit planning eventually becomes essential. Whether you sell to an outside buyer, family, or employees, the question is whether you can exit on your own terms. The reality is that most business owners don’t have a clear, documented exit plan. And if you find yourself among them, you could find it leaves you in a tight spot when it’s time for you to step down.

Delaying planning your exit risks settling for a below-market sale price, losing control of choosing your successor or rushing into choices that don’t reflect your vision. Delays also leave you with little time to take steps to boost the business’s valuation and ensure business continuity. A clear exit plan helps maximize options and value. If you haven’t mapped out yours yet, there’s no time like the present. Consider these steps:

Put a Price on Your Business

Proper valuation of your business is the first step in exit planning. Some back-of-the-envelope math can provide a decent starting point. But to really understand what your business is worth, meet with a valuation expert. Besides a healthy dose of objectivity, these professionals bring market expertise and a knowledge of valuation standards. They can identify intangible sources of value you may have overlooked and help ensure your valuation passes muster with potential buyers and the IRS.

There are three main approaches to determining value:

  • The asset approach adds up the value of your company’s tangible and intangible assets, then subtracts liabilities.
  • The income approach calculates value according to your business’s expected future cash flows.
  • The market approach compares your business to recent sales of similar companies.

 

You may find one approach is more apt than another for the type of business you own, but a comprehensive valuation is likely to incorporate all three in one way or another. Bear in mind that valuation isn’t a one-time event. As your business grows and market conditions change, you’ll likely want to update your valuation.

Clarify Your Vision

Before you can build an effective exit plan, it’s necessary to clarify your goals. Be as specific as possible as you define what a successful transition looks like to you.

Some questions to keep in mind: Do you want to maximize the sale price, selling at the highest price possible? Do you intend to keep the business within your family or pass it to a handpicked successor? What are your obligations to employees? Is it important that your business maintains a consistent set of values when you’re gone? What timeline makes sense for you? How involved—if at all—do you want to be with the business after you exit?

The answers to these questions will guide the decisions that follow. They can be deeply personal, and we’re here to be a resource as you consider what’s truly important to you.

Shape Your Exit

With valuation and goals in hand, there are a range of steps you can take to support your transition. What you do will depend largely on the type of exit you’re planning. For some owners, you might make strategic adjustments to boost the value of your business, such as reducing unnecessary expenses or diversifying revenue streams to make your company more attractive to buyers.

If your plan involves transferring the business to a family member or a long-time employee, the sooner you identify them, the better. That way you’ll have plenty of lead time to train them in the leadership skills necessary to provide a smooth handoff.

Seeking an external buyer? Preparation is equally as important. In addition to boosting your valuation, you’ll need to organize your financial records, legal documents, contracts, employee agreements and operational procedures. One thing to consider is the type of deal structure that works best for you: Would you like to be paid over time or in one lump sum? And would you like to exit the company immediately or would you be open to staying on in an advisory capacity to help the new owner learn the ropes?

Begin the process of finding and vetting buyers early. These could be industry competitors, investment groups or individual entrepreneurs who may be a good fit. A business broker can help you identify potential buyers and spread the word through their network.

Plan Your Exit with Tax Strategy in Mind

Taxes play a major role in what you ultimately keep from a sale, so it’s important to understand your options early.

Your exit is also a key moment for gift and estate planning. Be aware that gifts to family members above the lifetime gift and estate tax exemption ($15 million for individuals in 2026) might trigger gift taxes. With enough lead time—ideally a few years before a sale—you may be able to transfer interests to family members or trusts, use your lifetime gift and estate tax exemption more strategically or coordinate charitable strategies in a way that reduces future estate or capital gains taxes while aligning with your legacy goals.

Meanwhile, sales to employees could trigger capital gains taxes. If your business is structured as an S corp or C corp, you might consider an employee stock ownership plan (ESOP), which could defer or even eliminate capital gain taxes if structured properly.

If you are considering an external buyer and your business is structured as a C corp or S corp, you and the buyer will also need to decide whether the transaction should be a stock sale or an asset sale. A stock sale often benefits sellers because more of the gain is taxed at long-term capital gains rates and may avoid a second layer of tax inside a corporation. Buyers often prefer an asset sale because they can step up the basis of the assets they acquire and may avoid certain liabilities.

In an asset sale, the company sells individual assets—such as equipment, inventory, customer relationships and goodwill—and portions of the gain may be taxed at higher ordinary income rates (for example, depreciation recapture). How the purchase price is allocated across these asset categories can significantly affect after-tax results for both sides.

Because these decisions can be complex and difficult to change once a letter of intent is signed, involving an advisor, CPA, and attorney early can help ensure the deal structure supports your long-term financial plan and minimizes taxes.

Charting the future

For many business owners, exit planning rarely tops the to-do list. After all, there are plenty of day-to-day demands competing for attention, let alone the fact that it can be difficult for owners to think about the day they’ll no longer lead the company they built. Yet the most successful exits are those planned in advance, allowing owners to optimize value, identify an ideal buyer or successor, and prepare their employees for a smooth transition—and structure the sale in a way that makes sense after taxes.

If you’re starting to think about an exit—whether you’re ten years out or already in early conversations with a buyer—you don’t have to navigate these decisions alone. At TAGStone Capital, we help business owners pull all the pieces together: clarifying goals, coordinating with valuation experts, CPAs and attorneys, and designing a plan for turning a one-time liquidity event into durable, tax-efficient cash flow for the next phase of life.

If you’d like help with business exit planning, TAGStone Capital can help you design a tax-efficient strategy that meets your financial goals and protects your legacy.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.

Posted on

At a Glance

Protecting your assets while you are alive involves planning for periods when you may be unavailable or incapacitated. Key tools include a financial power of attorney, trusted contact persons on financial accounts, and a healthcare advance directive to ensure your wishes are followed.

Protecting What’s Yours (While You’re Alive)

Whether due to disability, dementia, or simply enjoying an exotic vacation, there are many ways you can end up unavailable to make critical financial or health care choices for yourself or your loved ones. If you’ve not documented your desires in advance, it can add extra stress for everyone, plus the outcomes may not be what anyone had in mind!

One source of confusion over when and how to protect your assets is understanding which legal logistics apply during your lifetime, and which don’t come into play until after you pass.

If you’re interested in how estate planning shifts once you’re gone, we cover that separately in Protecting What’s Yours (After You Pass) — including both why it matters and how it works step by step.

Today, we’ll cover a trio of tools for protecting your interests while you are alive:

  1. A financial power of attorney
  2. Trusted contact person(s)
  3. A healthcare advance directive

I. A Financial Power of Attorney

The Basics. A financial power of attorney (POA) is a legal document authorizing someone (your “agent”) to make financial decisions on your behalf. No matter how much authority you grant an agent, they still owe you a fiduciary level of care, which means any decisions they make for you must be based on what they believe to be in your best financial interests.

When It Applies. A POA applies while you are alive, but unavailable to act for yourself. You can structure it to:

  • Begin immediately or upon a triggering event (such as a debilitating accident or illness)
  • Remain in force during a finite time period or be ongoing
  • Apply to all your financial matters, or only to specific transactions

 

Common Scenarios. A financial POA can be helpful to address:

  • Capacity: If you become incapacitated due to illness, injury or dementia.
  • Availability: If you’re unable to be present for a financial transaction, such as if you’re traveling abroad or you’re otherwise preoccupied.
  • Convenience: If you’d simply like to make it convenient for someone else to be able to make financial decisions for you – such as your spouse or a trusted sibling (in general), your parents (if you’re heading off to college), or your adult children (if you’re aging).

 

Additional Tips.

  • Again, anyone to whom you grant a POA is only your legal agent while you are alive; their authority ends the moment you pass away. Your estate’s trustees should take it from there, as we discuss in Protecting What’s Yours (After You Pass).
  • Your agent(s) should have access to the documents that describe the POA you’ve granted them. If they can’t prove what their role is, they may not be able to act on it when needed.
  • Some banks and account custodians have their own POA forms they would prefer you use; also, they may be wary of POA paperwork that is several years old. Check with the financial institutions you frequent about their policies, and consider annually reestablishing any durable POAs, to ensure they remain relevant.
  • You cannot grant a POA if you are deemed to be of unsound mind. This makes sense, since you may inadvertently name a “bad” player … or others may be able to contest the POA you’ve established. Don’t wait until it’s too late.

II. Trusted Contact Person(s)

The Basics. In 2017, the SEC approved the role of trusted contact person as part of a FINRA Rule 4512 amendment. The amendment requires your account custodians (brokers) to encourage you to name a trusted contact as an extra line of defense for your investment accounts. If the custodian feels you are being financially exploited, they then have a back-up person they can talk to about some of their concerns. The additional input may enable them to delay disbursing funds from your account “where there is a reasonable belief of financial exploitation.” [Source]

When It Applies. While the primary aim of the FINRA amendment is to prevent financial elder abuse, there are at least two scenarios when a trusted contact can be useful:

  • If you are unavailable, and the custodian believes your account may have been compromised
  • If you are cognitively impaired

 

Common Scenarios. Imagine you’re on a mid-Atlantic cruise, and your broker receives a suspicious trade order from “you.” They try, but cannot reach you to verify it’s really you. If there is no trusted contact to reach out to, they may have little choice but to execute the trade and disburse the funds as ordered. If a trusted contact can instead provide evidence that the order is likely fraudulent, your broker may be able to place a temporary hold before disbursing the funds.

Similarly, if a loved one is exhibiting signs of dementia, a trusted contact can help prevent them from falling prey to financial exploitation. What if your aging parent tries to empty out their own bank account to help a “friend” in need? If your parents have named you as a trusted contact, an account custodian who suspects foul play can reach out to you, explain the circumstances, and receive your “second opinion.”

Additional Tips. If you’ve named someone as a trusted contact, your broker or account custodian can discuss some of your relevant circumstances with them, and gather pertinent information from them. But a trusted contact cannot make any financial decisions on your behalf, nor can they view your account. Unless you grant it to them separately, a trusted contact does not have a financial power of attorney, as described in Section I.

III. A Healthcare Advance Directive

The Basics. Your healthcare advance directive can offer two types of protection:

  • Your living will provides your life-sustaining and end-of-life medical care instructions, and related healthcare preferences, in case a time comes when you cannot state them for yourself.
  • Your healthcare directive can also name healthcare representative(s), or agent(s) and grant them healthcare power of attorney. If you cannot make your own healthcare decisions, your agent can decide on your behalf, guided by your living will. Medical professionals can also more freely discuss your condition with your agent, without violating HIPAA privacy rules.

 

When It Applies. Your healthcare advance directive only comes into play if you are alive, but unable to direct your own medical care.

Common Scenarios. Accidents and illnesses can rob you of your mental capacity – temporarily or permanently. If you do not have an advance directive in place, healthcare professionals and/or key family members may have to make medical decisions for you, without knowing what you would have preferred. Also, the individual(s) you would most want to have making decisions on your behalf may not be able to do so if you haven’t named them as your representative(s) in your advance directive. This can be stressful if not heartbreaking for everyone involved.

Additional Tips.

  • Not only should almost everyone have an advance directive, it should be easy to get ahold of it when needed. Distribute copies to your primary physician and any of your other healthcare providers to keep on file. Give it to key family members. At TAGStone Capital, we also maintain a portal for storing clients’ essential paperwork – including advance directives.
  • IMPORTANT: Do you have children who recently turned 18? As soon as your child is an adult, healthcare providers may not be able to even discuss your child’s case with you unless you have a healthcare power of attorney. Also, as described in this Wall Street Journal piece, if your child is attending school in another state, it’s worth establishing a healthcare power of attorney in their state and yours.

How Can TAGStone Capital Help?

We hope our summary has helped clarify the role these protections play in safeguarding what’s yours during your lifetime. In practice, incapacity planning is only one part of a broader continuum that extends into estate administration after death. For families who want to understand how these responsibilities transition to trustees, executors, and heirs, we explore those considerations in our companion series, Protecting What’s Yours (After You Pass).

Professional legal counsel is often warranted as you work through these decisions. If helpful, we can coordinate with your existing advisors or introduce you to experienced professionals, and we can assist in organizing and maintaining these documents as part of a broader planning framework.

Need help coordinating these documents with your financial plan?
Schedule a complimentary 15-minute conversation to discuss how these protections fit into your broader wealth strategy.

Past performance does not guarantee future results. All investments include risk and have the potential for loss as well as gain.

Data sources for returns and standard statistical data are provided by the sources referenced and are based on data obtained from recognized statistical services or other sources we believe to be reliable. However, some or all information has not been verified prior to the analysis, and we do not make any representations as to its accuracy or completeness. Any analysis nonfactual in nature constitutes only current opinions, which are subject to change. Benchmarks or indices are included for information purposes  only  to  reflect  the  current  market  environment;  no  index  is  a directly  tradable investment.  There  may  be  instances  when  consultant  opinions  regarding any fundamental or quantitative analysis do not agree.

The  commentary  contained  herein  has  been  compiled  by  W.  Reid Culp,  III  from  sources  provided  by  TAGStone  Capital,  as well  as  commentary  provided  by  Mr.  Culp,  personally,  and  information independently  obtained  by  Mr.  Culp.  The  pronoun  “we,”  as  used  herein,  references collectively the sources noted above.

TAGStone Capital, Inc. provides this update to convey general information about market conditions and not for the purpose of providing investment advice. Investment in any of the companies or sectors mentioned herein may not be appropriate for you. You should consult your advisor from TAGStone or others for investment advice regarding your own situation.