Personal Finance – Page 2 – Safe Retirement Income

July 26, 2018 by Tim Barton Leave a Comment

Avoid Probate Strategies

Probate = the Latin word for proving, which means that the estate probate process is the process by which your will is brought before a court to determine that it is a valid will. The courts charged with this responsibility are generally known as probate courts, which may supervise the administration or settlement of your estate.

Supervision of the estate settlement process by the probate court can result in additional expense, unwanted publicity and delays of a year or more before heirs receive their inheritance. The public hearings, delays, and cost of probate motivate many people to explore ways in which to avoid or minimize the impact of probating a will, including:

State Statute

Many states have made provision for certain estates to be administered without the supervision of the probate court, resulting in less cost and a speedier distribution to heirs. Assuming they meet the specific legal requirements.

A form of Property Ownership

The joint tenancy form of holding title to property allows ownership to pass automatically to the surviving joint tenant, who is usually the surviving spouse.

Transfer on Death

Many states have enacted Transfer on Death statutes that allow a person to name a successor owner at death on the property title certificate for certain types of property, including real estate, savings accounts, and securities.

Life Insurance

Unless payable to the estate, life insurance proceeds are rarely subject to the probate process.

Lifetime Giving

Gifts are given during life avoid the probate process, even if made shortly before death.

Trusts

A “Totten” trust, which is a bank savings account held in trust for a named individual, can be used to pass estate assets at death outside of the probate process.
A revocable living trust, created during the estate owner’s lifetime, can be an effective way to avoid the expense and delay of probate while retaining the estate owner’s control of his or her assets before death.

Proper planning may serve to minimize the impact of the probate process on your estate and heirs.

Any potential method of avoiding probate, however, should be evaluated regarding its income and tax consequences, as well as its potential impact on the estate owner’s overall estate planning goals and objectives.

June 27, 2016 by Tim Barton Leave a Comment

Considerations for a Reverse Mortgage

A reverse mortgage is a loan against the value of your home that does not have to be paid back for as long as you live in the home. Simply put, a reverse mortgage converts some of the equity in your home into income.

In Evaluating a Reverse Mortgage, Consider…

Typically, a reverse mortgage must be a “first” mortgage, meaning that if you still owe money on your home, you must pay off the existing mortgage before you can get a reverse mortgage (note: an initial lump sum payment from a reverse mortgage can be used to pay off an existing mortgage).
Keep in mind that, while you don’t have to repay a reverse mortgage for as long as you live in the house, the amount that ultimately has to be repaid does grow over time.
While the amount of debt grows over time, the reverse mortgage repayment cannot exceed the value of your home at the time it is ultimately sold.
If you take out a reverse mortgage, you continue to own your home. This means that you continue to be responsible for expenses such as property taxes, hazard insurance and home maintenance and repair.
Reverse mortgage proceeds may affect eligibility for assistance under state and federal programs.
The upfront costs associated with a reverse mortgage, such as an origination fee, closing costs and mortgage insurance premium, can be significant. This means that a reverse mortgage may be expensive if the loan is repaid within a few years of closing. As a result, if you anticipate moving within a few years, you should explore another alternative, such as a home equity loan.
Repayment of a reverse mortgage when your home is sold will mean less equity left to pass to your heirs.

May 25, 2016 by Tim Barton Leave a Comment

2016 Gross Income Adjustments

What Adjustments to 2016 Gross Income Are Available?

Once total or gross income from all sources has been determined, certain adjustments to income are available. These adjustments amount to a reduction in gross income and generally are granted to achieve tax fairness or in recognition of a desirable social objective. Adjustments to income are available regardless of whether a taxpayer itemizes deductions or takes the standard deduction.

The available adjustments to income include:

IRA Contributions	Eligible individuals can contribute and deduct up to $5,500 to an IRA; $11,000 for an eligible married couple, even if one spouse has no earned income. For workers age 50 and older, the IRA contribution limit is $6,500 for 2016.
Education Savings Account Contributions	Subject to income limitations, up to $2,000 per beneficiary (generally a child under age 18) per year may be contributed to an Education Savings Account and deducted; subject to income limitations.
Student Loan Interest Deduction	Up to $2,500 of the interest paid in 2016 on a loan for qualified higher education expenses may be deducted, subject to income limitations.
Health Savings Account Deduction	Contributions to a Health Savings Account, up to specified maximums, may be deducted.
One-Half of Self-Employment Tax	Self-employed taxpayers generally deduct one-half of their self-employment tax, as determined on Schedule SE.
Self-Employed Health Insurance Deduction	Self-employed taxpayers can deduct 100 percent of the health insurance premiums (including long-term care insurance premiums) they pay for themselves, their spouses and dependents.

May 17, 2016 by Tim Barton Leave a Comment

Another Role for Life Insurance…

The Wealth Replacement Trust

The Problem:

There can be significant tax advantages in giving appreciated assets to a charity. Examples include real estate and securities. If you were to sell an appreciated asset, the gain would be subject to capital gains tax. By donating the appreciated asset to a charity, however, you can receive an income tax deduction equal to the fair market value of the asset and pay no capital gains tax on the increased value.

For example, Donor A purchased $25,000 of publicly-traded stock several years ago. That stock is now worth $100,000. If she sells the stock, Donor A must pay capital gains tax on the $75,000 gain. Alternatively, Donor A can donate the stock to a qualified charity and, in turn, receive a $100,000 charitable income tax deduction. When the charity then sells the stock, no capital gains tax is due on the appreciation.

When a donor makes substantial gifts to charity, however, the donor’s family is deprived of those assets that they might otherwise have received.

A Potential Life Insurance Solution:

In order to replace the value of the assets transferred to a charity, the donor establishes a second trust – an irrevocable life insurance trust – and the trustee acquires life insurance on the donor’s life in an amount equal to the value of the charitable gift. Using the charitable deduction income tax savings and any annual cash flow from a charitable trust or charitable gift annuity, the donor makes gifts to the irrevocable life insurance trust that are then used to pay the life insurance policy premiums. At the donor’s death, the life insurance proceeds generally pass to the donor’s heirs free of income tax and estate tax, replacing the value of the assets that were given to the charity.

May 4, 2016 by Tim Barton Leave a Comment

About Advanced Directives

Advance Directives are a way to “have your say” about the type of care you receive (or don’t receive) in the event you suffer a catastrophic medical event, such as a stroke or an accident, that leaves you unable to communicate your wishes. Every adult should plan ahead by completing an Advance Directive that specifies his or her personal preferences in regard to acceptable and unacceptable medical treatments. There are two types of Advance Directives:

Living Will

A Living Will states your preferences regarding the type of medical care you want to receive (or don’t want to receive) if you are incapacitated and cannot communicate. You specify the treatment you want to receive or not receive in different scenarios.

Medical Power of Attorney

Also known as a durable power of attorney for health care or a health care proxy, a Medical Power of Attorney names another person, such as your spouse, daughter or son, to make medical decisions for you if you are no longer able to make medical decisions for yourself, or you are unable to communicate your preferences.

Note that a Medical Power of Attorney is not the same as a Power of Attorney, which gives another person the authority to act on your behalf on matters you specify, such as handling your financial affairs.

Important Points to Remember

Each state regulates Advance Directives differently. As a result, you may wish to involve an attorney in the preparation of your Advance Directive
You can modify, update or cancel an Advance Directive at any time, in accordance with state law.
If you spend a good deal of time in several states, you may want to have an Advance Directive for each state.
Make sure that the person you name to act for you – your health care proxy – has current copies of your Advance Directive.
Give a copy of your Advance Directive to your physician and, if appropriate, your long-term care facility.

April 30, 2016 by Tim Barton Leave a Comment

Estate Planning Quiz

figuring an answer

	True	False
1. The unlimited marital deduction postpones the payment of federal estate taxes.	[__]	[__]
2. A married couple can give any individual up to $28,000 in gifts tax-free in 2016.	[__]	[__]
3. Federal estate taxes must be paid in cash, generally within nine months of death.	[__]	[__]
4. Federal estate tax rates are progressive, meaning that they increase with the size of the estate.	[__]	[__]
5. Your estate may have to pay state inheritance taxes.	[__]	[__]
6. If you die without a will, state intestacy laws will determine who inherits your property.	[__]	[__]
7. The federal estate tax is payable only if your taxable estate exceeds the unified credit equivalent, which is $5,450,000 in 2016.	[__]	[__]
8. The marital deduction does not apply to property you bequest to someone other than your spouse.	[__]	[__]
9. An estate can be taxed at a rate as high as 40%.	[__]	[__]
10. Various estate planning techniques and tools can be used to reduce estate taxes.	[__]	[__]

All of these statements are true.

If you answered seven or more correctly, you have a good foundation of knowledge upon which to build your estate plan. Regardless of how many you answered correctly, the time to begin planning your estate is today, before it is too late to make important decisions about the accumulation, preservation and distribution of your assets.

April 28, 2016 by Tim Barton Leave a Comment

Gifts of Life Insurance

Regardless of your reasons for giving, a gift of life insurance can represent a substantial future gift to a favorite charity at relatively little cost to you. You can:

Make a Charity the Beneficiary of an Existing Policy: If you have a life insurance policy you no longer need, you can name the charity as the beneficiary of the policy, meaning that the charity will receive the policy’s death benefit after you die. While there are no current tax benefits to this approach, the value of the policy will be removed from your estate for federal estate tax purposes.

Make a Charity the Owner and Beneficiary of an Existing Policy: Instead of simply naming the charity as beneficiary of an existing life insurance policy, you transfer full ownership of the policy to the charity. The charity will then receive the policy’s death benefit after you die. In addition to removing the value of the policy from your estate for federal estate tax purposes, this approach also provides you with current federal income tax deductions.

Help a Charity Purchase a New Insurance Policy on Your Life: If you wish to make a substantial future gift to a charity at a relatively low cost to you, another alternative is to consider purchasing a new life insurance policy and name the charity as the policy owner and beneficiary. You then arrange to pay the premiums through gifts to the charity. This approach provides federal income tax deductions and the policy proceeds are not included in your estate for federal estate tax purposes.

Important Note: Most states through their “insurable interest” laws allow a charity to be the owner and/or beneficiary of an insurance policy on a donor’s life. Since state laws do vary, however, it is important to consult with a professional advisor before making a gift of life insurance to a charity. Please contact my office if we can be of assistance.

April 27, 2016 by Tim Barton Leave a Comment

Long Term Care…Did you know?

3d man reading a book

Did You Know…

At least 70% of people over 65 will need long term care services and supports at some point in their lives.
(Source: 2016 Medicare & You, Centers for Medicare & Medicaid Services)
About 68% of nursing home residents and 72% of assisted living residents are women.
(Source: Long-Term care Services in the United States: 2013 Overview, National Center for Health Statistics)
The national median daily rate in 2015 for a private room in a nursing home was $250, an increase of 4.17% from 2014.
(Source: Genworth 2015 Cost of Care Survey, March 2015)
The average length of a nursing home stay is 835 days.
(Source: CDC Vital and Health Statistics, Series 13, No. 167, June 2009)
At a median daily rate of $250, an average nursing home stay of 835 days currently costs over $208,000, making it virtually unaffordable for many Americans.
Medicare does not pay for long-term care services, as explained by the Social Security Administration:

“About Social Security and Medicare… Social Security pays retirement, disability, family and survivors benefits. Medicare, a separate program run by the Centers for Medicare & Medicaid Services, helps pay for inpatient hospital care, nursing care, doctors’ fees, drugs, and other medical services and supplies to people age 65 and older, as well as to people who have been receiving Social Security disability benefits for two years or more. Medicare does not pay for long-term care, so you may want to consider options for private insurance (emphasis added).”

April 3, 2016 by Tim Barton Leave a Comment

4 Points to Financial Literacy

Four key things to learn and know on your way to financial literacy.

The difference between saving and investing: Some people think these are one and the same, but they’re not. The focus in saving is on preserving money that you accumulate over time. Money that is saved is typically “stored” in low-risk vehicles, such as fixed annuities, bank savings accounts, CDs and money market accounts, which guarantee the principal and interest. A savings approach is appropriate for shorter-term needs that generally require a higher degree of liquidity, but is generally not the best approach for accomplishing your longer-term financial objectives. Investing, on the other hand, emphasizes accumulation through growth. Investment vehicles, such as stocks, bonds and mutual funds, involve a greater risk to principal than do savings vehicles, but also offer a higher return potential and may better guard against inflation. Most financial plans reflect a combination of savings and investments.
Risk and reward: First off, let’s understand that there is risk in saving and investing…it can’t be avoided. You could keep your savings in a mattress and the mattress could catch on fire! The key is to understand the different types of risk and the relationship of risk and reward. For example, savings vehicles typically have no risk of loss of principal (market risk) or lack of a ready market when you need the money (liquidity risk). Without these risks, however, they produce a relatively low return, which means that they may not grow at a rate to keep pace with inflation (purchasing power risk). Investment vehicles, however, do come with both market risk and liquidity risk, including the risk of losing your principal investment. With these risks, however, investment vehicles offer the potential to produce a higher return and greater accumulation over time. The objective is not to eliminate risk. Rather, the objective is to balance risk and return in a way that is consistent with your temperament and financial goals.
Understand saving and investment vehicles: Take the time to understand what you’re saving and investing in…the potential risks and rewards, the fees and expenses, the advantages and disadvantages.
Investment resources: Know where you can turn for advice. Decide whether you want to actively manage your investment portfolio or whether you’d prefer to pay an advisor to recommend specific investments, as well as make market timing and asset reallocation decisions.

January 10, 2016 by Tim Barton 2 Comments

Tips to Win the $1.3 BILLION Powerball Lotto?

A lot of people including those who never play a lottery are asking for tips to win the $1,300,000,000 lottery. So why are people who have been firm members of the Never Buy a Lottery Ticket Club asking? Because a BILLION DOLLARS is a lot of head turning money no matter the astronomical odds of actually winning…leaving the Never Buy a Lottery Ticket Club with the fastest declining club membership in the world.

Playing a game this large gives every one an equal chance to win. No matter how many tickets one purchases the odds of winning stay the same for everyone of them. A lottery this big becomes a nationwide social event complete with all buzz and camaraderie. It’s human nature to want to be part of a historic event this large. Even all the losers will have stories to tell about the time…

Much like when a big weather event strikes, people talk about their involvement or closeness to it for years to come.

Is there any way I can increase my odds of picking jackpot winning numbers?

Sorry, there is no way to do that.
The odds of winning the jackpot are 1 in 292,201,338.00.
The odds of getting struck by lightning are about 1 in 280,000 roughly 10 times better than winning $1.3 billion Powerball lottery.
Go ahead and get out all your lucky charms or “feelings.” They might make you feel good and at the very least give you a conversation starter.

Buying more tickets increases my odds, right?

This strategy is statistically insignificant.
Many people believe their chance of winning is substantially increased by purchasing more than one ticket.
A good example is the coin flip. The chance of winning each flip is 50-50. Every time the coin is flipped the chance of winning remains 50-50 no matter how many times it’s flipped. At the start of each flip it’s 50-50. Same with each lotto ticket sold, each ticket has exactly the same odds 1 in 292,201,338.
Another example is the chance of being struck my lightning which is about 1 in 280,000. No one thinks the chance of being struck increases with the number of times they walk out the door.

If my coworkers decide to pool money to buy a ticket should I participate?

Even though this does not increase your chance of winning you’d be foolish not too. Imagine the feeling of watching all your coworkers celebrating their winning of millions that you were only $2 away from participating in. Besides with the lottery this big it’s transformed into a country wide social event and the price for being a part of it is $2.
Also consider it’ll be awfully lonely when all your coworkers retire you are the only coming to work each day.
If you are the kill joy who constantly advises against the lottery as an utter waste of time and money. Human nature being what is… In the very unlikely event a winning ticket is acquired by your coworkers, they are very unlikely to share with you.

Only buy one ticket

Most of the 18,315,365 winners of Powerball lottery have been single ticket purchasers sometimes first time purchasers. As discussed previously buying multiple tickets does not increase the chance of winning.

Whoa! Wait a minute there have been over 18 MILLION winning tickets!?

Yes, 18,315,365 people have won millions of Powerball dollars since the beginning. So in spite of the steep odds against winning, someone or several people will eventually get a winning ticket.
Remember none of this increases anyone’s odds of winning the current lottery or any future lottery.

The only tip: Have fun. Buy a ticket and enjoy talking about all the what ifs. I’ve been doing retirement and financial planning for almost 40 years. I thought about pointing out if the average lottery player purchasing one ticket per week over 40 years saved that money with interest, they’d have more money in the end. Does anyone really want to hear that now?

Instead read $100 Million Lottery Winner – Now How To Get Your Money this was my first post on AreaVoices regarding winning a lottery. Have to admit it is the most read. Thanks to this record Powerball an update is coming soon.