Trusts

Trusts are vehicles that can help shelter your assets from taxation and manage the property that you leave to your heirs. Simply put, you transfer property in the name of a trustee who manages it for the benefit of a third party, the beneficiary. One of the great advantages of trusts in their flexibility. They can be adapted to fit a wide variety of situations. In fact, as our attorneys at Wealth Enhancement Group say, “Trust is not the key word. Trust doesn’t tell you that much.”

What precedes the word trust tells you everything. The most important aspect of trusts is that they allow property to be managed according to the donor’s specific wishes, far into the future. Living trusts allow you to control trust assets; irrevocable trusts take away control but offer many attractive estate tax implications and more. Your advisers can help you determine which type of trust best suits your situation.

Vacation Properties and Income – Part 2

Another way for retirees to generate income from a vacation home is to sell it. By using the federal capital gains exclusion in conjunction with the sale of your primary residence, you can potentially realize tax-free income. Here’s how it works. The basic capital gains exclusion rules state that you must have owned and used the home as your primary residence for at least two years out of the five-year period ending on the date of the sale. If you are married, the full $500,000 exclusion ($250,000 for single homeowners) is available as long as one or both of you satisfies the ownership test (two years) and you both satisfy the use test (primary residence).

Vacation Properties and Income – Part 1

If you have a vacation home, you’re already aware of the enjoyment it provides and the benefits it can offer at tax time. But you may not be aware of how vacation property can be used to generate income in retirement or how it can play into an estate plan. In fact, vacation properties offer retirees a number of different options in managing their finances and estate.
Vacation property may be used to generate income in several different ways. The first, and most obvious, is renting it. The IRS allows you to deduct mortgage interest on your primary residence and one additional property up to a limit of $1 million in combined mortgage debt for mortgages taken out after 1987. Current tax rules also allow you to rent out a second home for up to 14 days per year without having to report the rent as income. If you rent for more than 14 days, the home is considered investment property, and rent must be reported as income. Converting the property to an investment property, however, allows you to deduct rental expenses, such as insurance and utilities, if you have a net profit on the property (deductions are limited if you report a loss). You can still use an income-producing property for personal use while maintaining your tax advantages — but only for the greater of 14 days or 10 percent of the total days it is rented. Maintenance days do not count as personal-use days, but use by in-laws or other part-owners does, even if rent is charged.

Simple Truths

As a financial advising firm, one of the simple truths we have learned is that relationships are the single greatest influence on how people use their money and plan for the future. When people talk about their hopes and dreams, they talk about the people they love. Their future, the life they wish to live, is always full of the people most important to them. They don’t talk first about dollars and cents, Dow averages, or bond yields. They talk about a spouse, a parent, a child. When imagining their financial futures, even those without family often focus on others, such as employees, friends, faith communities, and charities.

Keeping Your Emotions in Check…

In times like these, with the economy in a tailspin, and the stock market in the tank, investing requires an extra dose of patience, perseverance and perspective.
It takes patience to ride out the bear market, perseverance to continue to invest even through a difficult economy, and perspective to see the long-term picture and realize that recessions and bear markets are just part of the natural economic cycle. Slumping economies and bear markets of the past have always turned around — and there is no reason to believe that this time will be any different.

Saving for College

Saving for College
Another school year is around the corner and your children or grandchildren are that much closer to college. If you haven’t already started to save for their college costs, this may be a good time to talk to your adviser about setting up a tax-sheltered college savings plan.
By planning ahead, you can use a 529 college savings plan to give your children a head start on their college costs. There are two types of 529 plans: college savings plans and prepaid tuition plans.
College savings plans are state sponsored investment accounts that allow participants to contribute regularly. A 529 plan account grows tax-deferred and withdrawals from the plan for qualified educational expenses are exempt from federal income tax. There are no income limits.

Trusts and How They Can Work For You

Trusts and You

Trusts are vehicles that can help shelter your assets from taxation and manage the property that you leave to your heirs. Simply put, you transfer property in the name of a trustee who manages it for the benefit of a third party, the beneficiary. One of the great advantages of trusts in their flexibility. They can be adapted to fit a wide variety of situations. In fact, as our attorneys at Wealth Enhancement Group say, “Trust is not the key word. Trust doesn’t tell you that much.”

What precedes the word trust tells you everything. The most important aspect of trusts is that they allow property to be managed according to the donor’s specific wishes, far into the future. Living trusts allow you to control trust assets; irrevocable trusts take away control but offer many attractive estate tax implications and more. Your advisers can help you determine which type of trust best suits your situation

5 Financial Things You Don’t Want To Do – 5 part series

# 2 Having no clue about how much to save

According to 2007 Retirement Confidence Survey from the Employee Benefits Research Institute, only 43% of workers have actually calculated how much they’ll need to retire on. We’ve always said you can’t hit the bull’s-eye if you don’t know what the bull’s-eye is – you need a plan and a goal. The goal is not a number, but rather the lifestyle you desire. Part of my job is to assess a client’s needs to attain that goal.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Incentive Trusts — Keeping a Steady Hand on the Tiller Part 2

How far can you go in using your estate to provide rewards for appropriate actions by your heirs? You’ll probably find yourself limited more by your imagination and ability to foresee circumstances than by legal constraints. Some common themes contained in incentive trusts involve education, moral and family values, business and vocational choices, charitable giving, and religious participation.

Business and vocational choices: Entrepreneurs can use trusts to provide incentives to those heirs who commit to helping carry on a family business. Trusts can be designed to encourage or discourage career choices specified by the trust creator. Trusts can also be used to offer focused financial support to those beneficiaries who opt to follow paths that are personally and socially rewarding yet generally less lucrative.

Charitable and religious opportunities: Some trusts are designed to encourage religious behavior by requiring specific observances. Some trusts provide funds for dues or other costs associated with religious participation. Some subsidize those heirs who choose missionary work or other religious vocations. Some provide matching funds for heirs’ contributions to favored organizations.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.

Incentive Trusts — Keeping a Steady Hand on the Tiller Part 1

A good legacy may work wonders for those left behind, but you may also believe that your heirs need more than mere financial benefit from your estate. To provide direction and help ensure that important life goals remain foremost in their heirs’ lives, many people are including incentive trusts in their estate plans.
Where You Can Focus Your Legacy
Education: Incentive trusts have been used to provide extra support to those heirs who pursue advanced degrees, focus on designated fields of study, or attend specified institutions. Some trusts are designed to reward instances of outstanding scholarship and academic achievement. Some permit withholding support from those who fail to meet minimum levels of accomplishment.
Moral and family values: Some trusts are intended to promote family life by providing income support payments to heirs who choose to stay at home with children. Some trusts offer beneficiaries bonuses for childbearing, foster care, or adoption. Some withhold benefits from those heirs who might be convicted of a crime or fail a prescribed drug or alcohol screening test.

Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.