I’m really inspired by the former President’s sentiments of patriotism and leadership.  I’ll share it here in it’s entirety and ask you to consider the same.

Reprinted from NewsMax…

For one who was born and grew up in the small towns of the Midwest, there is a special kind of nostalgia about the Fourth of July.

I remember it as a day almost as long-anticipated as Christmas. This was helped along by the appearance in store windows of all kinds of fireworks and colorful posters advertising them with vivid pictures.

No later than the third of July – sometimes earlier – Dad would bring home what he felt he could afford to see go up in smoke and flame. We’d count and recount the number of firecrackers, display pieces and other things and go to bed determined to be up with the sun so as to offer the first, thunderous notice of the Fourth of July.

I’m afraid we didn’t give too much thought to the meaning of the day. And, yes, there were tragic accidents to mar it, resulting from careless handling of the fireworks. I’m sure we’re better off today with fireworks largely handled by professionals. Yet there was a thrill never to be forgotten in seeing a tin can blown 30 feet in the air by a giant “cracker” – giant meaning it was about 4 inches long. But enough of nostalgia.

Somewhere in our growing up we began to be aware of the meaning of days and with that awareness came the birth of patriotism. July Fourth is the birthday of our nation. I believed as a boy, and believe even more today, that it is the birthday of the greatest nation on earth.

There is a legend about the day of our nation’s birth in the little hall in Philadelphia, a day on which debate had raged for hours. The men gathered there were honorable men hard-pressed by a king who had flouted the very laws they were willing to obey. Even so, to sign the Declaration of Independence was such an irretrievable act that the walls resounded with the words “treason, the gallows, the headsman’s axe,” and the issue remained in doubt.

The legend says that at that point a man rose and spoke. He is described as not a young man, but one who had to summon all his energy for an impassioned plea. He cited the grievances that had brought them to this moment and finally, his voice falling, he said, “They may turn every tree into a gallows, every hole into a grave, and yet the words of that parchment can never die. To the mechanic in the workshop, they will speak hope; to the slave in the mines, freedom. Sign that parchment. Sign if the next moment the noose is around your neck, for that parchment will be the textbook of freedom, the Bible of the rights of man forever.”

He fell back exhausted. The 56 delegates, swept up by his eloquence, rushed forward and signed that document destined to be as immortal as a work of man can be. When they turned to thank him for his timely oratory, he was not to be found, nor could any be found who knew who he was or how he had come in or gone out through the locked and guarded doors.

Well, that is the legend. But we do know for certain that 56 men, a little band so unique we have never seen their like since, had pledged their lives, their fortunes and their sacred honor. Some gave their lives in the war that followed, most gave their fortunes, and all preserved their sacred honor.

What manner of men were they? Twenty-four were lawyers and jurists, 11 were merchants and tradesmen, and nine were farmers. They were soft-spoken men of means and education; they were not an unwashed rabble. They had achieved security but valued freedom more. Their stories have not been told nearly enough.

John Hart was driven from the side of his desperately ill wife. For more than a year he lived in the forest and in caves before he returned to find his wife dead, his children vanished, his property destroyed. He died of exhaustion and a broken heart.

Carter Braxton of Virginia lost all his ships, sold his home to pay his debts, and died in rags. And so it was with Ellery, Clymer, Hall, Walton, Gwinnett, Rutledge, Morris, Livingston and Middleton. Nelson personally urged Washington to fire on his home and destroy it when it became the headquarters for General Cornwallis. Nelson died bankrupt.

But they sired a nation that grew from sea to shining sea. Five million farms, quiet villages, cities that never sleep, 3 million square miles of forest, field, mountain and desert, 227 million people with a pedigree that includes the bloodlines of all the world. In recent years, however, I’ve come to think of that day as more than just the birthday of a nation.

It also commemorates the only true philosophical revolution in all history.

Oh, there have been revolutions before and since ours. But those revolutions simply exchanged one set of rules for another. Ours was a revolution that changed the very concept of government.

Let the Fourth of July always be a reminder that here in this land, for the first time, it was decided that man is born with certain God-given rights; that government is only a convenience created and managed by the people, with no powers of its own except those voluntarily granted to it by the people.

We sometimes forget that great truth, and we never should.

Happy Fourth of July.  Ronald Reagan President of the United States

May God Bless America!

Read More: NewsMax.com

The Original Post Is Located Here: What July Fourth Means To Me by Ronald Reagan

In a landmark decision, the U.S. Supreme Court upheld Obamacare, including the individual mandate, in a 5-4 decision. This means more Americans will have health insurance in future years.

It also means that taxes will go up for many.

In particular, for those earning over $200,000 ($250,000 for joint-filers) there will be a new 3.8% surtax on investment income and a 0.9% surtax on Medicare taxes.

What about those that don’t earn over $200,000? Unfortunately, you don’t escape.

There’s a host of potential areas of higher taxation for you also. Most notably for older taxpayers, less of your medical expenses will now be eligible for tax deductions.

Check out this video from Yahoo Finance that gives a clear summation of the key points of interest.

Here are some of the new taxes you’re going to have to pay for Obamacare:

• A 3.8% surtax on “investment income” when your adjusted gross income is more than $200,000 ($250,000 for joint-filers). What is “investment income?” Dividends, interest, rent, capital gains, annuities, house sales, partnerships, etc. Taxes on dividends will rise from 15% to 18.8%–if Congress extends the Bush tax cuts. If Congress does not extend the Bush tax cuts, taxes on dividends will rise from 15% to a shocking 43.8%. (WSJ)
• A 0.9% surtax on Medicare taxes for those making $200,000 or more ($250,000 joint). You already pay Medicare tax of 1.45%, and your employer pays another 1.45% for you (unless you’re self-employed, in which case you pay the whole 2.9% yourself). Next year, your Medicare bill will be 2.35%. (WSJ)
• Flexible Spending Account contributions will be capped at $2,500. Currently, there is no tax-related limit on how much you can set aside pre-tax to pay for medical expenses. Next year, there will be. If you have been socking away, say, $10,000 in your FSA to pay medical bills, you’ll have to cut that to $2,500. (ATR.org)
• The itemized-deduction hurdle for medical expenses is going up to $10,000. Right now, any medical expenses over $7,500 per year are deductible. Next year, that hurdle will be $10,000. (ATR.org)
• The penalty on non-medical withdrawals from Healthcare Savings Accounts is now 20% instead of 10%. That’s twice the penalty that applies to annuities, IRAs, and other tax-free vehicles. (ATR.org)
• A tax of 10% on indoor tanning services. This has been in place for two years, since the summer of 2010. (ATR.org)
• A 40% tax on “Cadillac Health Care Plans” starting in 2018.Those whose employers pay for all or most of comprehensive healthcare plans (costing $10,200 for an individual or $27,500 for families) will have to pay a 40% tax on the amount their employer pays. The 2018 start date is said to have been a gift to unions, which often have comprehensive plans. (ATR.org)
• A”Medicine Cabinet Tax” that eliminates the ability to pay for over-the-counter medicines from a pre-tax Flexible Spending Account. This started in January 2011. (ATR.org)
• A “penalty” tax for those who don’t buy health insurance. This will phase in from 2014-2016. It will range from $695 per person to about $4,700 per person, depending on your income. (More details here.)
• A tax on medical devices costing more than $100. Starting in 2013, medical device manufacturers will have to pay a 2.3% excise tax on medical equipment. This is expected to raise the cost of medical procedures. (Breitbart.com)

As you can see, these taxes are both “progressive” (aimed at rich people) and “regressive” (aimed at the middle class and poor people).

The big ones–the 3.8% investment income hike and the Medicare tax increase–only hit you if you’re making more than $200,000 a year. The rest hit you no matter how much you’re making.

Here’s How Much The Obamacare Penalty Tax Will Cost You

As with everything tax-related, there’s no simple answer to “How much is the Obamacare tax penalty?” But here are some key points, from FactCheck.org:

• The penalty/tax will be phased in from 2014 to 2016.
• The minimum penalty/tax in 2016 will be $695 per person and up to 3-times that per family. After 2016, these amounts will increase at the rate of inflation.
• The minimum penalty/tax per person will start at $95 in 2014 (and then increase through 2016)
• No family will ever pay more than 3X the per-person penalty, regardless of how many people are in the family.
• The $695 per-person penalty is only for those who make between $9,500 and ~$37,000 per year. If you make less than ~$9.500, you’re exempt. If you make more than ~$37,000, your penalty is calculated by the following formula…
• The penalty is 2.5% of any household income above the level at which you are required to file a tax return. That level is currently $9,500 per person and $19,000 per couple. The penalty on any income above that is 2.5%. So the penalty can get expensive quickly if you make a lot of money.
• However, the penalty can never be more than the cost of a “Bronze” heath insurance plan purchased through one of the state “exchanges” that will be created as part of Obamacare. The CBO estimates that these policies will cost $4,500-$5,000 per person and $12,000-$12,500 per family in 2016, with the costs rising thereafter.

You should note that, for most people, the “penalty tax” for those who choose not to buy health insurance will cost a lot less than the health insurance itself.

So, basically, you’re looking at penalties of approximately the following at the following income levels:

• Less than $9,500 income = $0
• $9,500 – $37,000 income = $695
• $50,000 income = $1,000
• $75,000 income = $1,600
• $100,000 income = $2,250
• $125,000 income = $2,900
• $150,000 income = $3,500
• $175,000 income = $4,100
• $200,000 income = $4,700
• Over $200,000 = The cost of a “bronze” health-insurance plan

The IRS will be in charge of collecting the penalty-tax.

Those who don’t pay will NOT be charged criminally.  The IRS will NOT have the power to seize your assets, but can sue you.

The most the IRS can collect from you if it wins the suit is 2X the amount you owe.

The list of folks exempt from the penalty-tax is as follows:

• Those who make less than $9,500
• Employees whose employers only offer plans that cost more than 8% of the employee’s income
• Those with “hardships”
• Members of Indian tribes
• Members of certain religions that don’t pay Social Security tax, such as Amish, Hutterites or Mennonites

There’s no doubt that this is a decision that will be debated in public circles for some time to come.

More from The Daily Ticker

The Original Post Is Located Here: Obamacare Creates a Slew of New Taxes That May Affect You Negatively

I thought it was funny at the time and I’ve referenced that statement many times since.

The single biggest concern investors face when considering retirement planning is the goal to have enough money to support you for as long as you live.

The obvious question is… “How long are you gonna live?”

If we only knew, it would make so many of the tough financial decisions older Americans face easier.

Obviously, none of us has a crystal ball, but an increasing number of sophisticated online Life Expectancy Calculators are helping folks to better quantify their probabilities of living to a certain number of years in retirement.

This from a recent article on Kiplinger’s…

Life-span predictions may sound like the stuff of tarot cards and palm readers. But an increasingly sophisticated set of online tools promise to help individuals gain a sense of how long they might live — and retirees, health care providers and financial planners are paying attention.

The tools are gaining popularity as older adults face a host of difficult questions that revolve around life expectancy: Should you start taking Social Security at age 62 or wait and collect a bigger check at 70? Do the longer-term benefits of various types of cancer screening outweigh the immediate risks of these procedures? Given your current rate of portfolio withdrawals, do you risk outliving your nest egg?

The more complex versions ask dozens of questions about your eating habits, how you handle stress, and even how many friends you’ve made in the past year. Some will spit out an exact life-span estimate and offer suggestions on ways to extend it, while others will show a range of probable life spans or the risk that you’ll die within, say, five years.

A List of Online Life Expectancy Calculators

1.  LivingTo100.com = created and maintained by Dr. Thomas Perls, associate professor of medicine at Boston University School of Medicine.  Aimed at individuals and asks dozens of questions about everything from your family’s longevity to your consumption of red meat. The calculator’s goal, Perls says, “is to be an educational tool and to teach people that their day-to-day health-related behaviors can have a dramatic impact not just on how long they live but how well they live.”

2.  ePrognosis.org = a site that helps health care providers get a better handle on those risk-benefit tradeoffs. The site offers 16 different calculators that estimate mortality risk over specific time periods for various groups of older adults, including those who are hospitalized, in nursing homes or living at home. Although the tools are intended for health care providers, you can use them by clicking a button stating that you’re a health care professional.

3. gosset.wharton.upenn.edu/~foster/mortality = Rather than focusing on a single number, some tools offer users probabilities that they will reach a range of ages. This calculator tells a healthy 65-year-old woman that she is expected to live to 88 years old and has a 50% chance of dying between 81 and 95.5 years old. A longer calculator available at the same site shows users how many years they might add to life expectancy by changing their behavior.

4. www.lifespancalc.com = Financial-services companies offering annuities, long-term-care insurance and other products are spotting opportunity in the calculators. Northwestern Mutual’s calculator found here is more educational than selling anything.

Using these tools in your own privacy can help you get a better handle on the potential time horizon you should be considering when making financial decisions.

Focusing on this longer time horizon is critical to help you weather the short term emotional swings in any investment game plan.

As always, if you need investment help or have important financial questions, please feel free to let us know and we’ll be happy to answer your question.

Read more: http://www.kiplinger.com/features/archives/krr-your-life-span-ask-the-calculator.html#ixzz1zZXv1Fbm

The Original Post Is Located Here: How Long Will You Live? Ask A Life Expectancy Calculator

With current estimates showing that two-thirds of those aged 65 and over will need long-term care in their lifetimes, there is a good chance that you may need assistance in the future, but the challenge lies in estimating the future cost of home health care, assisted living facilities and nursing homes. Bottom line, it won’t be cheap.

According to the 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, the average annual cost for a private room at a nursing home in 2011 was $87,235.

The national average for a semi-private room was $78,110. And the national average for an individual living in an assisted living community was $41,724.

In most cases, long-term care health insurance coverage provides benefits for nursing homes, assisted living facilities, and home care. If you can afford the premiums, you may want to consider purchasing long-term care insurance.

There are a dizzying array of options and features that you need to be aware of, but starting with a few key questions to keep in mind.

1. How Likely Are You to Need It?

This depends on your general health, family history, and expected longevity. For example, if your family has a history of serious medical conditions, dementia, or Alzheimer’s disease, you may have a stronger reason to consider this type of insurance.

2. What’s Your Asset Level?

Those who come into retirement with less than $250,000 in assets will probably have better uses for their money than paying premiums for long-term care insurance; they may also be eligible for Medicaid if they should need long-term care. Those with more than $2 million in assets may be able to pay for this type of care out of pocket. If your portfolio falls in the middle of this range, however, you may be a good candidate for this type of coverage.

3. What Kind of Coverage Do You Need/Want?

The key differentiator in the pricing of long-term care insurance policies is the amount of daily benefit you’re buying; you’ll obviously pay more for a policy that pays $150 of your long-term care costs per day versus one that pays just $100. You’ll also be able to specify whether you’d like your daily benefit to step up with inflation; even though such a feature will cost you, it’s highly advisable given that health-care inflation rates have been far outstripping inflation as a whole during the past few decades.

Another factor to evaluate is the total lifetime benefit. For example, a policy may cover $250,000 in lifetime long-term care benefits, or the lifetime benefit may be unlimited. Some policies are comprehensive, meaning the patient can obtain care in a variety of settings, from a traditional nursing home to care at home. Cheaper policies, however, will only pay for care in a traditional setting, usually a nursing home. Policy costs can also vary based on the length of your elimination period, which is similar in concept to an insurance deductible. If your policy has an elimination period of 30 days, for example, that means you’ll have to pay for any long-term care costs you incur in the first 30 days of your illness; after that period has elapsed, your insurer will pick up all or part of the tab, up to your daily benefit amount.

4. How Would You Like to Pay for That?

Under a traditional long-term care policy, you make regular payments during the life of that policy. But you can also customize your payment program, paying for your policy in a single payment, over 10 or 20 years, or until you hit age 65. Such payment options allow you to front-load your payments and reduce your fixed costs in retirement.

5. How Likely Is the Company to Pay?

It probably is a good idea to check up on the insurer’s financial strength. Also ask your agent about the insurer’s history of raising client long-term care premiums. Although such maneuvers can improve a firm’s financial health, they can also present a financial hardship to the insured, a lesson many long-term care policyholders learned the hard way during the past few years.

We offer an array of Long Term Care Health Insurance programs.  Send us a message and we’ll be happy to help answer your questions.

The Original Post Is Located Here: Five Key Questions About Long Term Care Health Insurance

You’ve probably seen the e-mail in your inbox sent on behalf of the Nigerian Banker who simply needs you to forward $500 before he can release a substantial windfall in your name.

Or the friend who is traveling abroad and has lost their wallet and desperately needs you to send them $2000 via Western Union.

We often think of these scams as “small scale” and that only “gullible” people can be taken advantage of with these tactics.

The harsh reality is that all humans are comprised of the same base emotions of Fear and Greed.  As such, we can all at times be susceptible to the lure of con-men.

That’s why we always counsel investment management clients and potential clients that the # 1 way to avoid a financial scam is to never allow your financial manager to take CUSTODY over your investment assets.

This means you should never write a check earmarked for insurance or investment purposes made out in the name of your advisor.

Just as important, you should always ensure that your investments are “housed” at a Bank, Brokerage or Trust company that is completely separate and “arms-length” from your financial manager.

Take the case of Bernie Madoff.  Remember him?

It just so happens that his own company, Bernard L. Madoff Securities Inc., held custody over all his clients assets.  This allowed him to create fictitious statements.  Show fictitious trades. Report fictitious returns.

And ultimately manipulate the largest financial scam ever carried out in history.

Thousands of individual investors, pension funds, corporations and universities lost big in Bernie Madoff’s $50 billion Ponzi scheme.

Here’s a celebrity client list, some of whom are now facing significant financial challenges as a result of Madoff’s fraud. While not all amounts have been disclosed, here are 10 of the biggest celebrities that were hit.

1. Steven Speilberg-  the director’s Wunderkinder Foundation lost an undisclosed amount, although in 2006 about 70% of the interest and dividend income came from the Madoff firm.

2.  Kevin Bacon and Kira Sedgwick–the stars of “Footloose” and “The Closer”  lost an undisclosed amount. Sedgwick said at the time that while they weren’t destroyed, they did lose hard earned money that they thought was in a safe place.

3. Elie Wiesel Foundation for Humanity lost $15.2 million.

4. Sandy Koufax

5. Eric Roth- the screenwriter of “Forrest Gump” said, “The tragedy is the people who lost their life savings and their dreams.”

6. Larry King reportedly lost more than $1 million.

7. Zsa Zsa Gabor personally lost $10 million

8. Jeffery Katzenberg- the head of DreamWorks Animation and producer of films like “Shrek” lost an estimated $20 million.

9. John Malkovich said he was “ruined” financially by the scam.

10. Eliot Spitzer

This was a terrible tragedy that continues to play out for thousands of investors across the globe. And if anything positive can come from this, it’s the lesson that….

This entire scam could have been avoided if investors simply had not allowed Madoff’s personal Investment Management Firm to hold custody over their hard-earned investment assets.

Read more: 10 Celebrities Scammed By Madoff | Bankrate.com

The Original Post Is Located Here: 10 Celebrities Scammed By Madoff- They Broke The #1 Investment Management Rule

But like the old saying goes, “all good things must come to an end.”

The IRS will only allow you to defer taxes in your IRA for only so long. When you reach that magical age of 70 1/2 you are now forced to begin taking minimum required distributions every year going forward.

These distributions are taxed as ordinary income and must be distributed each year by December 31st. You better make sure that you’re taking the withdrawal properly because the penalty for not doing so is 50% of the amount you should have taken. Ouch!

Here’s some tips for making smart decisions when it comes to taking the Required Minimum Distribution from your IRA each year.

Avoid two distributions in the same year. Retirees who delay their first retirement account withdrawal until April 1 will need to take two distributions in the same year because the second distribution will be due December 31. Withdrawals from 401(k)s and IRAs are taxed as income, and two withdrawals in the same year could significantly increase your income tax bill. Take a look at what your taxable income is going to be and determine whether or not two distributions are going to kick you into a higher tax bracket.

Delay 401(k) withdrawals if you are still working. People who are still working after age 70½ can delay distributions from their current 401(k), but not IRA, until April 1 of the year after they retire. If you are an employee, then you can continue to leave that money in the plan.  However, employees who own 5 percent or more of the company sponsoring the plan must start 401(k) distributions after age 70½, even if they are still working.

Withdraw the correct amount. The distribution amount is generally calculated by dividing your account balance by an IRS estimate of your life expectancy. However, if you have a spouse who is more than 10 years younger than you and is the sole beneficiary of your IRA, your spouse’s age must also be factored into the calculation. Retirees over age 59½ can withdraw more than the required minimum amount each year, but excess withdrawals will not count toward required distributions in future years. Retirees can take any number of withdrawals they choose throughout the year, as long as the minimum is met by December 31 (or April 1 if it is your first required distribution).

Take distributions from the worst-performing account. If you have several IRAs, you must calculate the required minimum distribution for each account, but you don’t have to take a separate withdrawal from every IRA you own. You can add up your IRA distributions and take it all out of one IRA or a combination of any IRAs you choose. If you have three IRA accounts and they are paying you 1 percent, 3 percent, and 5 percent, my suggestion, in most cases, would be to take it all from the one that is paying you the least.

Those with a 401(k) or most other types of workplace retirement accounts must take a withdrawal from each account. However, if you have multiple 403(b) tax-sheltered annuity accounts, you can total the required minimum distributions and take them from any account or combination of accounts.

Convert to a Roth. There are no minimum distribution requirements for Roth IRAs. Workers already paid income taxes on Roth IRA contributions, and the money can be withdrawn as you need it or can be passed on to heirs. Once you have a Roth, then you don’t have to worry about distributions.  Having both Roth and traditional retirement accounts can add tax diversification and flexibility to your retirement draw-down strategy.

If you’re looking for strategic ways to enhance the IRA withdrawals you’re forced to take, we’d be happy to discuss your options further.  Just call us or leave a comment below.

More at Smart Strategies for Taking Required Minimum Distributions

The Original Post Is Located Here: Smart IRA Tips For Taking Your Required Minimum Distributions

The IRS gives you 60 days to rollover funds from a traditional IRA or a similar qualified
 account to another traditional IRA or qualified account. If you haven’t completed the 
rollover within this 60-day window, your IRA rollover essentially becomes a taxable IRA 
withdrawal. That means the entire amount of the rollover will be subject to taxes at your 
current ordinary income tax rate. Plus, if you haven’t reached age 59½, you’ll also face a
 10% penalty on the withdrawal.

Ouch!

Another rule states that a rollover can only consist of the same property. You cannot take 
the lump-sum distribution from your IRA, purchase other assets with the cash, then roll
 those assets over into a new IRA. This violates the same property rule. The IRS would 
consider the cash distribution from your IRA as income, subject to taxes at your current
 ordinary income rate plus any applicable penalties.

Here’s an example of how an investor could run afoul of this rule:

A just-retired executive, age 58, has decided to rollover his 401(k) account from his 
former employer into an IRA. He wants to purchase some shares of the company’s stock 
with his rollover assets. So, he takes a portion of the funds he has received from his
 401(k) account to buy the shares, and places the remainder of the qualified money in a 
new IRA. Then, he deposits the shares of stock he purchased into the same IRA, in order 
to maintain the tax-deferred treatment of these assets.

The IRS would view the portion of the 401(k) rollover used to purchase the stock as 
taxable income, and the investor would owe taxes at his current ordinary income tax rate
 on this amount. Plus, the IRS would also assess a 10% penalty on this taxable amount 
because he is younger than 59½.

There’s a relatively easy way to avoid these income taxes and penalties – do a direct 
trustee-to-trustee transfer.

This will let the IRA and retirement plan custodians do all the
work of moving your assets. You don’t have to worry about receiving a lump-sum
 distribution check and making sure you deposit the funds in a new IRA within the 60-day 
window. The trustees can also ensure that your assets are transferred in a time efficient 
manner.

Please keep in mind the services provided by a Trustee may involve costs which
 can reduce the overall return on your investment.

If you have multiple IRA’s or other qualified retirement accounts and would like to
 consolidate these assets into one account, we can help you manage the process and make
 sure it is done as efficiently as possible. Please call our office at 800-960-3499 or send us a message with your questions.

The Original Post Is Located Here: IRA Rollover- Don’t Make This Mistake

At the end of 2010, Congress handed wealthy taxpayers an unprecedented estate tax planning gift.  This opportunity gives them the ability to shift a large chunk of assets out of their estate tax-free during their lifetimes.  The problem is that the window is short and scheduled to expire at the end of 2012.  Without further acts by Congress, this remarkable opportunity could be gone forever.¹

Two important things happened at the end of 2010:

• Congress reunified the estate tax, gift tax and generation-skipping tax (GST), giving each top rates of 35% with $5 million lifetime individual exemptions. (In 2012, these exemptions are actually set at $5.12 million, as they are indexed for inflation.)
• In addition, the estate and gift tax exemptions became portable between married couples. So currently, an executor of an estate can elect to transfer any unused portion of a deceased spouse’s $5 million individual exemption to a surviving spouse.²

With these changes, a whole new horizon emerged in terms of estate tax planning – one that may sunset in 2013.

The big news: the $5 million lifetime gift tax exemption. For married couples, the lifetime gift tax exemption is actually $10.24 million at the moment thanks to the portability factor. Back in 2010, the lifetime gift tax exemption was at $1 million and it wasn’t portable.³

If you used up the prior $1 million lifetime gift tax exemption before 2011, you now have the opportunity to gift up to $4.12 million more before 2013 given the new $5.12 million limit.^2,7

So considering all this, the big question is: should you gift as much as you can to your children before 2013 with the intent of reducing inheritance taxes down the road?

After all, lifetime gifts reduce your taxable estate. Additionally, if you give your children appreciated securities, the long-term capital gains of those securities will be taxed at their capital gains rates rather than yours. If your children’s income puts them in the 10% or 15% tax bracket, their capital gains tax rate is 0% through 2012.⁴,⁵

Portability means great flexibility – provided you play by the rules. Let’s illustrate how this works. Dad doesn’t gift up to $5.12 million during his lifetime – he only ends up gifting $3 million. Well, Mom can subsequently gift up to $7.24 million after he passes thanks to the portability rules, as there would still be $7.24 million to go toward the present $10.24 million lifetime gift tax exemption for a married couple.

There is an important rule you must follow to realize this portability: when the first spouse passes away, the executor of his or her estate must file an estate tax return even if no estate tax is owed. That estate tax return formally notifies the IRS that you are transferring the unused or partially used gift tax exemption.^4,6

Incidentally, this estate tax return is due nine months after the death of said spouse, with a six-month extension permissible.⁶

Is there still a need for bypass trusts? We can’t say goodbye to them, because 15 states still levy their own estate taxes with exemptions commonly at $1 million or under. Moreover, what if portable exemptions aren’t retained in the future?⁶

The potential for savings could be great. When you look at this remarkably generous lifetime gift tax exemption allowance in light of certain estate tax planning techniques that might leverage it – such as the grantor-retained annuity trust and the family limited partnership – the potential is intriguing. Parents can potentially forgive millions of dollars of low-interest, intra-family loans and possibly arbitrage state tax rates if their children live in different states.

The problem: we don’t yet know what 2013 will bring. Congress could elect to retain the increased lifetime individual exemption (and portability) for 2013 and beyond, but the massive federal deficit would seem to render this a longshot.

If Congress lets the 2010 law governing gift and estate taxes sunset, it will be 2001 all over again – the individual lifetime gift tax exemption will reset from $5.12 million to $1 million (with no portability) and estate taxes will top out at 55% instead of 35%.⁷

Once more, estate and tax planning professionals must weigh the degrees of opportunity and ambiguity presented by our shifting estate tax laws.

If you have questions pertaining to your specific situation, please let us know and we’ll be happy to assist.Citations:

1. online.wsj.com/article/SB10001424052748703675904576063903166546250.html [1/8/11]
2. blogs.forbes.com/hanisarji/2010/12/29/gift-tax-under-the-2010-tax-relief-act-p-l-111-312 [12/29/10]
3. blogs.forbes.com/hanisarji/2011/01/02/new-year-different-rules-2011-estate-tax-gift-tax-gst-tax-rules/ [1/2/11]
4. www.fa-mag.com/online-extras/6827-new-estate-tax-law-poses-dilemma-for-the-rich.html [2/14/10]
5. hrblock.com/taxes/tax_tips/deductions_credits/gifts.html#3 [2/18/11]
6. www.forbes.com/2010/12/23/married-couples-guide-new-estate-tax-personal-finance-deborah-jacobs.html [12/23/10]
7. www.businessweek.com/articles/2012-03-19/family-businesses-should-plan-now-for-rising-gift-tax [3/19/12]

The Original Post Is Located Here: The Big Estate Tax Planning Dilemma of 2012

How could your assessor be wrong? It might depend on when you property was last appraised.

Although assessments must typically be established each year, some assessors might not perform an annual appraisal of every property they assess. Instead, individual valuations are sometimes made when there is a municipal-wide reassessment, and then carried forward until another municipal-wide reassessment is performed. In some cases, many years can pass between reassessments.

So, if your property value has fallen, you could be paying more than you should.

Moreover, when assessments are conducted, errors can sometimes be made. Some of these errors may include the size of your home or the number of bedrooms and bathrooms. Sometimes unfinished basements are listed as finished in the assessor’s report; sometimes garages that don’t exist are factored into the property value.

You can obtain a property valuation report from your local assessor’s office upon request.

Study it for these possible errors. And, compare your home’s value to others in the neighborhood; it should be in line. Obtain proof of any errors, and then visit the assessor’s office to ask how you can dispute the report.

We always advise people to consult with their own qualified legal, tax, and financial advisor prior to making any financial decisions.

If your property value is assessed correctly, there might be other tax breaks available, depending on where you live. Although retirement property taxes are typically imposed by cities, townships, counties and school districts, some states specify a maximum tax rate as the standard for local assessors to follow.

In closing, you should also know that property tax protests must be made in a timely manner, and there are strict deadlines that must be met for making a timely protest. For information regarding these deadlines, you should contact the assessor’s office in your local community.

The Original Post Is Located Here: Can You Lower Your Retirement Property Taxes?

As you might know, Morningstar rates mutual fund investments based on performance over the last three, five and ten years on a scale ranging from one-star (lowest) to five-star (highest). Morningstar ratings are assigned on a curve, with 10% of funds receiving five stars, 22.5% receiving four stars, 35% receiving three stars, 22.5% receiving two stars and 10% receiving one star.

This information can be an important part of the fund analysis process. However, some investors may want to use the number of stars a fund receives as the sole criteria for gauging a fund’s performance. And that approach might not be prudent for a number of reasons.

First, not every fund has an equal chance of receiving the highest rating. Risk-adjusted returns (RAR) — on which Morningstar bases its ratings — are calculated over one of four broad categories. These include domestic equity funds, international equity funds, taxable bond funds and municipal bond funds. But in each RAR category, there are different asset classes, such as small-cap funds and large-cap funds, and at any given time
one of those asset classes may be performing better than the others. As a result, funds in asset classes that are performing well at a given point in time may receive a higher rating than others.

Second, ratings tend to favor newer funds in some cases. When Morningstar calculates overall ratings, ten-year statistics account for 50% of the overall score, five-year statistics account for 30%, and three-year statistics account for 20%. But if only five years of data is available, the five-year period is weighted 60% and the three-year period 40%. And if only three years of data is available, the three-year statistics alone are used in the overall rating. As a result, older funds that did not perform well in their early years but perform well now could receive fewer stars than their current performance justifies.

Finally, it may go without saying, but past performance does not guarantee future success. This years winner could be next year’s loser — and vice versa.

The moral of the story: although Morningstar ratings can be a very helpful tool for evaluating a mutual fund investment’s performance, no third-party system should take the place of the work that you and your financial advisor do to analyze your specific investment objectives. We always advise people to consult with their own qualified legal, tax, and financial advisor prior to making any financial decisions.

If you’re concerned about the performance of a mutual fund in your portfolio, please call our office at 800-960-3499 or email us at info@sustainwealth.com for more information. We’d be glad to send you an article on how (and how not) to use Morningstar ratings.

The Original Post Is Located Here: Are Morningstar Ratings Important For Your Mutual Fund Investments?