Beneficiary Designations and Estate Planning in Nevada

There are some assets that require individuals to specify a beneficiary. These include life insurance policies, IRAs, and retirement plans. When you die, these assets are designed to be paid directly to the individuals you have named as beneficiary. Sounds simple, right? But as this article from estateplanning.com explains: naming beneficiaries may be simple, but not always effective.

Beneficiary designations can be quite useful, but they need to be considered as part of your overall estate plan. Naming a trust as beneficiary will often prevent the problems described in the article, and by bringing all of your assets together under one plan, you can be sure that each beneficiary will receive the amount you want them to have. An experienced estate planning attorney will be able to provide valuable guidance and make sure your plan will work the way you want.

13 Ways to Save More Money in 2013

Looking for a few good ways to make 2013 the year you take control of debt and get that savings account fattened up? Here’s a great article from our friends at Quicken Loans that shows you how save on cable, caffeine, dry cleaning and more.

Read more: http://www.quickenloans.com/blog/13-ways-save-2013-infographic#ixzz2KpDqy7eo

Did you see it?

Our very own Greg Crawford was featured this week in the Northern Nevada Business Weekly discussing estate planning and proper portfolio design. The paper dedicated 6 pages to exploring the various aspects of wealth management. Greg touches on common mistakes in retirement accounts and goes over the The American Taxpayer Relief Act of 2012. Check it out.

A Thanksgiving Poem

As I head out of the office tomorrow to go visit my Mother In Law for Thanksgiving, I wanted to take a moment and share my favorite holiday poem written by my friend Dave Mulligan. I often recite this right at the Thanksgiving dinner table, and most people find it to be very entertaining.

Enjoy your holiday!

Black November
by Dave Mulligan

When I was a young turkey, new to the coop,
My big brother Mike took me out to the stoop,

Then he sat me down, and he spoke real slow,
And he told me there was something I had to know;

His look and his tone I will always remember,
When he told me of the horrors of Black November!

“Come about August, now listen to me,
Each day you’ll get six meals instead of just three,

And soon you’ll be thick, where you once were thin,
And you’ll grow a big rubber thing under your chin;

And then one morning, when you’re warm in your bed,
In’ll burst the farmer’s wife and hack off your head;

Then she’ll pluck out all your feathers, so you’re bald and pink,
And scoop out your guts and leave ya layin’ in the sink;

And then comes the worse part,” he said not bluffing,
“She’ll spread your cheeks and pack your ass with stuffing.”

Well, the rest of his words we’re to grim to repeat,
I sat on the stoop like a winged piece of meat,

And decided on the spot that to avoid being cooked,
I’d have to lay low and remain overlooked.

I stared a new diet of nuts and granola,
High-roughage salads, juice and diet cola;

And as they ate pastries and chocolates and crepes,
I stayed in my room doing Jane Fonda tapes.

I maintained my weight of two pounds and a half,
And tried not to notice when the bigger birds laughed.

But ‘twas I who was laughing, under my breath,
As they chomped and they chewed ever closer to death;

And, sure enough, when Black November rolled around,
I was the last turkey left in the entire compound.

So now I’m a pet in the farmer’s wife’s lap;
I haven’t a worry, I eat and I nap.

She held me today, while sewing and humming,
And smiled at me and said: “Christmas is coming.”

Tick Tock

If you click onto the front page of our website you’ll see the countdown clock for when the current exemptions for estate taxes expire at the end of the year. Right now, and only until December 31st these are current estate tax exemptions: Individuals have a $5,120,000 lifetime gift exemption. A married couple has a $10,240,000 exemption. The estate tax rate is currently 35%. If the politicians in Washington don’t address the expiring tax laws, then the limit goes back to $1,000,000 for an individual, $2,000,000 for a couple, and a estate tax rate of 55%.

Let’s do some math to demonstrate why planning this year is more important than ever.

You have a married couple who have a net worth of $15,000,000. They set up their trust and gift their full exemption amount to the trust: $10,240,000.
They have $4,760,000 that would taxable at 35% this year if they passed away, that’s $1,666,000 in estate taxes.

Now let’s say they wait and everything reverts back to the 1 million exemption and the 55% estate tax. Now they have a $13,000,000 estate and at death the estate tax could be 55% or $7,150,000.

By acting by the end of this year, these folks could potentially save over FIVE MILLION DOLLARS in taxes.

Call us now so we can help you save your heirs millions of dollars in taxes.

Trustee Selection and Taxes – Situs Matters

Situs is an often overlooked factor in trustee selection
By Denis Damiens, CFP®

Advisors are often consulted by clients when the selection of a trust company or bank trust  department is considered, because it is often the advisor who prompted the client to undertake the estate planning which created the trust.

When selecting a trustee, people often consider potential trustees’ experience with investments, taxes and legal matters, judgment, track record and fees. However, have you considered the impact that situs, or the state in which the trust is domiciled, has on overall trust expenses? It is vital.  

A popular trust management strategy involves the retention of income and gains in the trust. This strategy has the beneficiaries spend down the assets which remain in the estate, not in the trust, and are subject to estate taxes, thus reducing the taxable estate at death. The income and gains retained in the trust are subjected to federal and, in many cases, state taxes, depending on the situs of the trust.

Consider the following trust situation when choosing between two trust companies:

  1. Trust assets consist of one million dollars of securities and cash available for investment.
  2. The trust assets will be managed by an outside advisor, and the trustee will serve as a “directed trustee”.
  3. All aspects of the trustee relationship appear equal.
  4. Alliance Trust Company is located in Nevada, a state that does not have an income tax on trust assets.
  5. Trust Company “ST” (state taxes) is located in a state which has a state income tax of 9% on trust income.
  6. The trust income is retained by the trust in order to grow trust assets.

Comparison of Alliance Trust Company in Nevada & Trust Company “ST”
                                        Alliance                 ST         

Trust Assets              1,000,000          1,000,000
Trustee fee (.5%)             5,000                5,000
Taxable income (5%)     50,000               50,000
State income tax                    0                 4,500
Net Trustee cost                 5,000                     9,500 

The selection of Alliance Trust Company as a trustee saves $4,500 per year, each year. Nearly the cost of the trustee fee.

Clearly, state income taxes dramatically impact trust expenses. It is in the best interest of the beneficiaries and advisors to minimize expenses of trust assets in order to maximize growth of those assets. Taxation and the state of domicile of the trust should be a major consideration in the selection of a trustee.

For more information about using Alliance Trust Company as a trustee, please contact Denis Damiens at (775) 297-4000 extension 2.

Retirees Face Estimated $240,000 in Medical Costs

Retirement health-care costs are enough to cause a severe anxiety attack.

A 65-year-old couple retiring in 2012 is estimated to need $240,000 to cover medical expenses throughout retirement, according to the latest retiree health care costs estimate calculated by Fidelity Investments. That doesn’t include long-term-care costs, over-the-counter medications and most dental costs. This is a 4% increase from last year, when the estimate was $230,000.

Plus, that $240,000 estimate is based on average life expectancy for a 65-year-old—the husband living until age 82 and the wife until 85—but “average” means half of people live longer than that.

In other words, that 65-year-old couple may well need much more than $240,000.

When Should You Start Taking Social Security?

If you’re approaching retirement and are eligible for social security, you have three broad options for drawing your benefits: start early, wait until your “full” retirement age, or hold out a few years longer to qualify for the monthly maximum.

Early withdrawals

Starting your withdrawals at the earliest allowable date (age 62) may be a good idea if you (a) plan to stop working or cut back to part-time status, and (b) really need the income. Your health is also a consideration, since an early start will maximize your lifetime benefits if your life expectancy is much below eighty.

Selecting early retirement will permanently reduce the amount you receive each month. In addition, until you reach full retirement age, your benefits will be cut by one dollar for every two dollars over $14,640 that you earn (as of 2012). Consequently, if you’re in good health, don’t need the extra income, and/or plan to keep on working, you’re generally better off postponing your benefits until full retirement age or beyond.

Full retirement age

Full retirement age is 66 for workers born between January 1, 1943, and December 31, 1954. For those born later, the age limit gradually increases to 67.

Once you’ve reached full retirement age, your social security benefits are no longer reduced by any amount of earned income. If you’ve waited to start your benefits, your monthly income will be greater than under early retirement, although less than you’d get by waiting until age seventy.

Maximum retirement age

If you wait until age 70 to begin drawing social security, your monthly benefits will be maximized for the rest of your life. This option is generally the best choice for people who are in good health and who can afford to wait. The disadvantage is that political factors might cause changes to the program in the interim.

 Other Factors

Although the above three ages are the major milestones, the years between are also important, since each year you wait will increase your monthly benefit. If you’re now working for a relatively high income, your overall benefits will increase even more because they’re recomputed annually based on your highest earning years.

Other considerations include your marital status, the relative ages and earnings of each spouse, and expected survivor benefits. The potential variables are too complex to address here, but if you’re interested in planning for your own retirement, just call our office to schedule an appointment.

 

Fiduci-What?

Alliance Trust Company acts as a fiduciary for all of our clients.

So what does it mean to act as a fiduciary?

In simple terms, it means that your customers’ interests come first. The client and advice to the client are at the center of a fiduciary relationship. More specifically, an adviser, financial planner or broker who claims to act as a fiduciary is held to standards outlined in the 1940 Investment Advisors Act. Besides acting in your best interest they must:

  • Owe you undivided loyalty and act in good faith
  • Avoid engaging in activity that’s a conflict of interest, and, at the very least, disclose any potential conflict
  • Provide a full disclosure of any advice they offer

We encourage every investor to ask the question of their advisors: Are you a fiduciary? If they cannot say “yes”, then it is almost a certainty that you are being sold and recommended investments that are less than stellar.