It’s easy to put off doing many of these things. But get them done, and your heirs will be thankful you did.
3 min
No one likes to think about their own demise, but planning can make life after your death significantly easier for heirs.
Here are five ways to help heirs avoid extra time, money, stress and acrimony after you pass:
Having a will or living trust is essential—but it isn’t enough. The proper documents need to be updated periodically, especially as life circumstances change.
Amber Hughes , a lawyer in the Phoenix office of law firm Dickinson Wright, offers the example of a mother who belatedly drafted new estate-planning documents but died before signing them. The old will had named as heirs stepchildren she hadn’t spoken to in 20 years, and her sons are spending tens of thousands of dollars to have the unsigned will enforced by a judge.
Many people also fail to update beneficiaries for life insurance, retirement accounts and bank or investment accounts. These assets pass according to the beneficiary designation, if there is one, regardless of what the will or living trust says, says Laura Zwicker , chair of the private client services group at law firm Greenberg Glusker Fields Claman & Machtinger in Los Angeles.
A client’s brother had an IRA valued at several million dollars. When he died, the IRA funds went to a woman he hadn’t dated for at least 10 years instead of to his brother’s daughters, even though they were named as beneficiaries in his trust. The heir indicated on the IRA was the former girlfriend, and that was the one that counted. “Imagine their surprise, but there’s nothing we can do about it,” Zwicker says.
Many people have digital assets, including email and online photos, that could be lost to heirs if proper provisions aren’t put in place. For instance, a writer who stores plays or novels on a Google drive, but doesn’t set up a Google inactive-account profile, may make it harder or impossible for heirs to gain access to these works. Terms might differ, so having appropriate documentation on file with each provider is important.
Cryptocurrency and non fungible tokens can also easily be lost if their owners don’t provide heirs a way to access these assets. So people should make sure beneficiaries know how to access an account’s private keys—the secret numbers used to access cryptocurrency—as well as the kind of wallet and crypto type. One caveat: Those private keys and other sensitive information shouldn’t be included in a will because it becomes public through the probate process and that puts the assets at risk.
Many people assume that heirs will figure out on their own how to divide personal property, but that can lead to fights.
Hughes offers the example of three sisters who fought over their mother’s collection of hundreds of porcelain dolls. They had to hire a professional mediator to draw straws until all of the dolls were distributed. Had the mother made a personal-property list before she died, significant aggravation and hostility might have been avoided. The list can be handwritten and up-to-date, and should be kept with estate-plan documents. The document should also include where items can be found.
Estate-planning experts advise that people set aside a folder with important information for the heirs, such as names, numbers and locations of accounts, as well as names and contact information for attorneys, accountants and financial advisers. This is especially important since bills are often paid online, eliminating once-helpful paper statements. Also let heirs know where to find your estate-planning documents. “If you can’t find the will and you don’t know who the trust and estate attorney is, that’s a horrible situation,” says Seth Slotkin at law firm Akin Gump Strauss Hauer & Feld in New York.
One word of caution: Try not to leave unnecessary documents for your heirs, because it’s overwhelming, Slotkin says. How long to keep certain documents depends on their nature, but generally speaking, purging unnecessary documents will save your heirs time and money, he says.
Parents sometimes create conflict by choosing one child over another to serve as executor, trustee or both, says Neil Solarz , shareholder at Weinstock Manion in Los Angeles.
Sometimes it may be appropriate. But in most instances, Solarz recommends naming a relative or friend to avoid potential sibling-rivalry issues. If there’s no one else available, people might consider hiring a trust company or a private professional fiduciary—vetted and licensed individuals who are licensed to act as trustees or executors.
People who have specific reasons for dividing assets or roles unevenly should prepare a letter that explains their thought process, which can help mitigate the potential for future conflicts, Slotkin says. For example, clarify that you named your daughter as executor because she lives locally, but that you want all of your children to work together to settle the estate, he says. Or, if you are leaving the younger of three children $100,000 more than the others, explain why. This extra step can mean the difference between harmony and acrimony among your heirs, he says.
“The thing that’s most likely to cause the estate process to dissolve into something horrible is acrimony among the children,” Slotkin says. “If you want to make things easy for your kids, if there’s anything that could be misinterpreted, explain it to them so they’re not fighting about it.”
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Wall Street’s hottest momentum trade has reversed sharply, as former winners tumble and heavily shorted stocks surge.
3 min
Wall Street’s hottest trade has gone ice cold.
For years, it paid off to buy stocks that were rising in price—and bet against struggling shares. The momentum trade was especially profitable this year, as investors piled into hot stocks including Micron Technology, Nvidia, Advanced Micro Devices and other artificial-intelligence darlings while wagering against those likely to be hurt by the embrace of AI.
The S&P 500 Momentum Index soared 44% in the second quarter, its best quarterly performance on record, and it surged 133% over the past five years, nearly double the broad market’s performance.
Mega funds and rookie investors alike piled into the trade, some using leverage and options contracts in an effort to amplify their returns, propelling the underlying shares higher.
“It is a self-fulfilling prophecy,” said Matthew Tym, managing director at Cantor Fitzgerald, of the trade.
Suddenly, the trade is a loser. The momentum index has tumbled more than 9% since July 1, lagging behind the S&P 500’s 2.8% gain. The index—which tracks stocks in the S&P 500 based on a “momentum score”—is on track for the biggest quarterly underperformance in 25 years. July was the second-worst month for the momentum trade in around 40 years, according to Bank of America estimates; the only month worse was April 2009, in the teeth of the global financial crisis.
Hedge funds that bought momentum shares while shorting low-momentum stocks suffered even more. At the same time, a basket of the most popular stocks held by hedge funds tracked by Goldman Sachs recorded its biggest one-month underperformance in July relative to the S&P 500 in more than 20 years, according to the bank’s analysts.
Momentum trading is based on a rather simple observation: Investments that go up tend to keep outperforming; those that underperform often remain laggards. This kind of trading might seem too simple a stock-picking strategy to work. Yet it often has.
“For decades, it didn’t take a lot of sophistication to run a momentum strategy and make a decent living at it,” says Agustin Lebron, senior researcher at EquiLibre, a trading firm.
Part of the reason: It takes a while for corporate and other information to spread to various investors, so they slowly build positions, producing buying momentum.
“A huge pension fund can’t flip around its positions in a day,” says Lebron. “Behavioral biases also account for some of the effect, as well—people tend to sell their winners too early and hold losers too long.”
Fans of the strategy point to the human tendency to extrapolate from past results—and chase investment returns—noting that momentum patterns have been evident in markets for decades, even centuries. They also say that some of the worst months for momentum strategies are during longer periods of outperformance.
Some have been doing the trade by buying the strongest investments in a sector while shorting the weakest; others lean in to rising markets or asset classes. Still others use a quantitative approach or turn to banks or others who sell ways to make distinct wagers on momentum as a “tradable factor” or a “thematic basket.”
The fans remain believers. “Any strategy has disappointing periods,” says Antti Ilmanen, global co-head of the portfolio solutions group at AQR Capital Management.
The surge in Moderna and other biotech stocks helped crush the momentum trade. These shares were among the most heavily shorted in recent years, but positive news on a cancer vaccine from Moderna and Merck sent those stocks flying, crushing some quant and other hedge funds. Moderna is up around 150% so far this month.
These traders had an especially rough day on Aug. 19, which Goldman Sachs told its clients was the worst day for “systematic long-short managers” in more than two years. About half of the losses were because of momentum trades, the bank said.
Some traders have begun to short, or bet against, the very stocks that propelled the momentum trade earlier this year. Net short positions in futures tied to the Nasdaq-100 index among speculators recently climbed to some of the highest levels of the past two decades, according to data from the Commodity Futures Trading Commission.
The about-face is a sign of how markets have become more treacherous for investors, even as indexes keep climbing. Part of the issue: the recent meltdown of Situational Awareness, a hedge fund that had piled into some of the most popular momentum shares, including chip stocks. After a period of market tumult, Nvidia shares rocketed almost 9% after its earnings, showing how quickly sentiment can shift.
Some investors say the run-up in share prices driving tech stocks higher reminds them at times of the dot-com frenzy decades ago.
Mike Ogborne, the founder of San Francisco-based Ogborne Capital Management, said he has grown more cautious on technology stocks and is keeping more of his portfolio in cash than he typically does.
And he is nervous about the surge in spending by technology giants and quarterly capital expenditures that keep rising.
“It is a little bit like Cinderella and the clock striking midnight. You don’t know when midnight is going to come around,” Ogborne said. “They don’t send a memo around telling you when the capex cycle is over.”
