Think Before You Take That First Step!

I recently received the following question from an attorney and wanted to share it with you because it could help you as you work with and support your clients and friends who have the same situation. “‘My father asked me, ‘Now that I have turned 65, I plan to draw on your mother’s Social Security benefit and continue working. How do I go about doing this?’ My parents are both 65, are highly compensated ($300,000 plus), and plan to continue working into the foreseeable future. Is this a good idea?”

After I fell out of my chair, I asked the attorney where his father got this idea. He said an insurance agent trying to sell him Medicare Advantage suggested this as being a good strategy. Good is a very subjective word. Also, not knowing all of the facts and circumstances is problematic. However, more likely than not, this is not a good idea. Claiming a Social Security retirement benefit sooner than it is needed can be a costly mistake. The mistakes in this scenario are found by looking at the Social Security rules, the income tax rules; as well as, general principles for retirement planning. [Read more…]

Home for the Holidays

The holidays provide a time to reconnect with family members. So this is an appropriate time to discuss the family of financial planners. For decades, this financial planning family, as covered by the financial press, has included Chartered Financial Consultants® and CERTIFIED FINANCIAL PLANNERSTM. One family member absent from the published festivities has returned—the CPA Personal Financial Specialist (CPA/PFS).

In this season I am reminded of the critical role of CPAs in the financial planning process because of another cyclical event: the recruiting of CPAs by financial services firms. About every ten years financial services firms go on a binge to recruit CPAs to both refer business (and share in compensation) or to recruit the CPA into Financial Planning, asset management and product sales. The economy has recovered and the season as begun anew. Some recent headlines that have come across my desk are: “10-Step Plan to Meet More CPAs” and “What CPAs Want.” The articles opine that financial services firms through “strategic arrangements” with CPAs hope to provide financial services and products to the CPA’s clients. [Read more…]

The Gift That Keeps on Giving

Without fail, every December for the past 27 years, I have received requests at the last minute for a tax deduction to help offset income for the current year.  I follow up the request with two questions: how much would you like to contribute and to what would you like to make the contribution?  My questions are usually followed by a deafening silence and a true deer in the headlight look.

Charitable gifts are best not rushed, and I encourage clients to direct their charitable giving to causes in which they understand and have an interest.  Last minute charitable gifts and tax deductions often conflict with deliberate and purposeful giving.  Is there a solution?  Indeed there is a solution; the answer is a Donor-Advised Fund. [Read more…]

Tis the Season . . .

December 31, 2013 is fast approaching and the deadline for making charitable gifts and receiving an income tax deduction is fast upon us. I often wonder who is giving and how much is being given. One source for such statistics is the National Philanthropic Trust.

Some of the numbers are encouraging, especially in light of the Recession of 2007 – 2009. The percentage of U.S. households which give to charity is 88%.  Charitable giving is up 3.9% which exceeds the consumer price index. Of total giving, the largest source is from individuals (73%), followed by foundations (14%), bequests (8%), and corporations (5%) [Yes, there are rounding errors—not my issue]. [Read more…]

It’s Almost “That” Time!

Well, it’s that time of year, and everyone is preparing their list of tax deductions in hopes that the jolly Internal Revenue Service will provide them with tax breaks. Between now and year-end I will be addressing year-end tax planning, and hopefully, filling everyone’s stockings with deductions.

A perennial question is the deductibility of legal fees. I have received a request from an attorney, whose primary practice is the sale of businesses.  He wrote:

“We have a client who has asked whether our legal expenses for Trust and Estate planning could be run through his company (he is the sole owner). I am curious as to the accounting basis for doing this deduction. I will obviously have the client double check any course of action with his CPA, but I’m curious as to your thoughts on this matter. Any help or advice you can offer would be very much appreciated.” [Read more…]

Quack, Quack! Discernment Needed!

I am a fan of humor, which is off-kilter, offbeat and unconventional. One of my favorite authors of this genre is Douglas Adams. In his book Dirk Gently’s Holistic Detective Agency, he provides the following reinterpretation of a familiar phrase: “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands.”

In a previous posting I made mention of how critical it is for consumers to understand how financial planners are compensated. I stated that for the majority of the financial services industry “compensation falls into two broad categories: products and services provided and employment relationship. Both of these categories can have an impact on recommendations provided by the financial planner.”

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Essential Health Benefits: Pablum for the Masses

I am having entirely too much fun with the Affordable Care Act. The next item I would like to review is the list of Essential Health Benefits. I have entitled the posting “Pablum for the Masses.”

Pablum is an entendre on several levels: it means bland or insipid, which this Act most certainly is. It is a bland soft cereal for infants, and our government is certainly treating its citizens as infants by the passage of the act. Finally, it may mean simplistic writing, speech, or conceptualization, and the act is simplistic to the point of absurdity. [Read more…]

Major Tom to Ground Control!

“Once again, please check to make sure your seat belt is securely fastened, your seat back and tray table are in the full upright and locked position, and all carry-on luggage is placed completely underneath the seat in front of you.” At some point, everyone who travels by air has heard this familiar refrain. There’s even a feeling of comfort in this familiar routine of flight. But what if the next time the Emergency Briefing Public Announcement said, “Once we reach our cruising altitude we will engage the auto pilot and return to the cabin and begin our cabin service.”

I’m fairly certain fear would break into our “comfort bubble.” Feelings of unbelief and incredulity probably would surface and maybe even some anger. We might think, I’m paying for a service: air transportation. For this service I expect flight attendants in the cabin to provide safety and a snack. I also expect the flight crew to pilot the aircraft! These feelings and responses are entirely appropriate and natural, and yet . . . .

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Don’t Let the Bogeyman Get You!

An adviser forwarded the following email string along to me—you can’t make this stuff up!  Only in America. . . .

The adviser’s clients had landscaping work accomplished at their home. After the work was completed a final bill was sent by the landscaping firm.  At the bottom of the invoice was the following handwritten note:

“P.S.  I know I quoted you $635.00 for the project. However, being a business owner I don’t mind asking if you can pay in cash, or write a check out to me in my name. If you do so, I will reduce the price for my services to $600.00.  My taxes are horrible.  If you don’t want to, I will not be upset at all and will understand 100%.  Please let me know.  I can stop by and pick up the check at your convenience.”

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Should You Retitle Your Cemetery Plots?

For today’s posting I thought I would pursue a holiday theme. All Hallows’ Eve is just around the corner. It is the night which precedes All Saints Day. All Saints Day is a Christian holiday in which Christian Saints, martyrs and departed family and friends are remembered. Also, to reinforce the interactive nature of the blog postings I thought I would include an adviser’s question. Here is what came across my desk on Monday:

Tom,
Ok, I had to ask you this because I thought it might be a question you have never considered before.  I have a client who has pre-paid cemetery plots, and she wonders if they should be retitled into the name of the RLT. Is that possible and have you ever heard of such a thing? Thanks for thinking this over.

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