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Still Time to Make 2018 Better

There are a few months left in the year, giving you time to consider some of these ideas for improving your tax and financial picture:

  • Make contributions to qualified retirement plans.  You can put up to $5,500 in an IRA or $18,500 in a 401(k) for 2018.  If you’re age 50 or older, you can make additional catch-up contributions of $1,000 or $6,000 respectively.

  • Consider gifts to family members.  You can make tax-free gifts of up to $15,000 per person ($30,000 for married couples).  Family members in lower tax brackets might save on capital gains tax if you transfer shares of stock that have gone up in value.

  • Review your will or living trust to determine if any changes are necessary, especially in light of the new tax law that took effect this year.  You may also want your attorney to review the documents to see if changes are required.  When making changes to your estate plans, consider various options for including a gift to charity.

  • Ask your insurance agent to review existing policies – life, homeowners, auto.  You may want to add coverage for long-term care, disability or an umbrella policy.

  • Check beneficiary designations on life insurance policies and retirement accounts.  These generally pass outside your will or living trust, so the beneficiary designations should be coordinated with the rest of your plans.  You can name charity the beneficiary of retirement accounts and avoid the income tax that would be owed if the funds were left to family members.

  • Meet with your investment advisor to review your portfolio.  Are your investments still the right mix for your age, income and risk tolerance?  Consider transferring some appreciated assets to charity before year’s end to secure an income tax deduction if you itemize.

  • If you’re age 70½ or older, make sure you’ve taken all your required minimum distributions from retirement accounts, to avoid a 50% tax.  A better idea might be to have some of the distribution sent directly to charity.  Although there is no charitable deduction available, you’ll save taxes anyway by avoiding the income tax that would normally be owed.

Six Reasons to Have a Will

A will is one of the most important documents you will ever sign.  Think about the things a will enables you to do:

  • A will lets you direct precisely who will receive all the property you have accumulated over your lifetime.  Without a will, the state in which you live could decide who receives what – all according to inflexible rules.

  • Your will can contain a trust that provides financial security and money management for family members who need special assistance.

  • Your will permits you to nominate the person who will handle your estate or serve as guardian of minor children.

  • Your will enables you to assist friends and charities that the law omits.

  • A skillfully drafted will can allow your family to minimize taxes and other costs that may sap your estate of vital assets.

  • Your will can be an expression of your personal values, by remembering a special person in your life, distributing cherished heirlooms or providing for the charities that were important to you.

Buy? Sell? Ask Questions First

Stock prices have generally been up over the past few years, prompting many investors to reexamine their holdings.  It may be time to sell (to take advantage of gains in certain companies) or to buy (if share prices seem poised to increase).  Consider these factors:

Have I picked stocks wisely?
Look at a company’s position in its field and consider long-term potential.

What have market changes done to my overall investment mix?
Is it time to reevaluate how much you have invested in stocks?  What are your current investment goals?  Retired investors might consider bonds, CDs, Treasuries and other investments less affected by Wall Street’s swings.

What is the “cost” of selling or buying?
Taxes are an important consideration in selling shares.  If you sell at a gain, you’ll share some of your good fortune with the IRS.  Losses, on the other hand, are deductible only to the extent of capital gains plus $3,000 of other income.  You can carry over any excess, but it may take years to deduct a large loss.  Consider broker’s fees in your decision, too.

Am I able to weather the storms of a fluctuating market?
Determine the level of risk with which you’re comfortable.  Then review your exposure to see if you can safely ride out market upheavals.

Should I consider gifts of securities to charity?
You can avoid capital gains entirely if you give securities that have gone up in value to charity.  Plus, if you itemize, you’ll be entitled to deduct the full fair market value of the securities if you have held the shares more than one year.  You can make the most of stock losses by selling the shares and contributing the proceeds to charity.  That will give you two deductions – one for the capital loss and another for the gift.

Financial Communication Also Important in a Marriage

Anniversaries are a time to celebrate and reflect, but they’re also a good time to share information.  Consider Stanley and Ruth, who have been married for 42 years.  Every year just before their wedding anniversary, they get out the photo album and spend an evening strolling down memory lane.  They also get out their “financial album” and spend time reacquainting themselves with where they stand financially.

During most of the year, Stanley is responsible for making investment decisions, making sure life insurance is adequate and having repairs done on the house.  Ruth pays all the bills and balances the checkbook each month and prepares the income tax returns.  Although each consults the other, both have come to depend on the other to handle their particular “chores."

But Stanley and Ruth both know that some day, one of them will be left alone to handle all the financial jobs.  To make sure that Ruth knows how they stand financially, where their money is invested and how much life insurance will be available, Stanley reviews these matters during their “financial anniversary celebrations.”  Ruth, in turn, shows Stanley the budget and goes over the past year’s tax return with him.  They also get out the copies of their wills to see if any changes are needed.  Every two or three years, the couple meets with their attorney to see if tax or state law changes affect their estate plans in any way.

Both Stanley and Ruth realize that being the surviving spouse will not be easy, and there will be numerous lifestyle adjustments to be made.  But they can take action now to prepare themselves for the future.  By reviewing the family finances together each year, the transition from a husband or wife to a widower or widow should be a little easier when the time comes.


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