With current estimates showing that two-thirds of those aged 65 and over will need long-term care in their lifetimes, there is a good chance that you may need assistance in the future, but the challenge lies in estimating the future cost of home health care, assisted living facilities and nursing homes. Bottom line, it won’t be cheap.

According to the 2011 MetLife Market Survey of Nursing Home, Assisted Living, Adult Day Services, and Home Care Costs, the average annual cost for a private room at a nursing home in 2011 was $87,235.

The national average for a semi-private room was $78,110. And the national average for an individual living in an assisted living community was $41,724.

In most cases, long-term care health insurance coverage provides benefits for nursing homes, assisted living facilities, and home care. If you can afford the premiums, you may want to consider purchasing long-term care insurance.

There are a dizzying array of options and features that you need to be aware of, but starting with a few key questions to keep in mind.

1. How Likely Are You to Need It?

This depends on your general health, family history, and expected longevity. For example, if your family has a history of serious medical conditions, dementia, or Alzheimer’s disease, you may have a stronger reason to consider this type of insurance.

2. What’s Your Asset Level?

Those who come into retirement with less than $250,000 in assets will probably have better uses for their money than paying premiums for long-term care insurance; they may also be eligible for Medicaid if they should need long-term care. Those with more than $2 million in assets may be able to pay for this type of care out of pocket. If your portfolio falls in the middle of this range, however, you may be a good candidate for this type of coverage.

3. What Kind of Coverage Do You Need/Want?

The key differentiator in the pricing of long-term care insurance policies is the amount of daily benefit you’re buying; you’ll obviously pay more for a policy that pays $150 of your long-term care costs per day versus one that pays just $100. You’ll also be able to specify whether you’d like your daily benefit to step up with inflation; even though such a feature will cost you, it’s highly advisable given that health-care inflation rates have been far outstripping inflation as a whole during the past few decades.

Another factor to evaluate is the total lifetime benefit. For example, a policy may cover $250,000 in lifetime long-term care benefits, or the lifetime benefit may be unlimited. Some policies are comprehensive, meaning the patient can obtain care in a variety of settings, from a traditional nursing home to care at home. Cheaper policies, however, will only pay for care in a traditional setting, usually a nursing home. Policy costs can also vary based on the length of your elimination period, which is similar in concept to an insurance deductible. If your policy has an elimination period of 30 days, for example, that means you’ll have to pay for any long-term care costs you incur in the first 30 days of your illness; after that period has elapsed, your insurer will pick up all or part of the tab, up to your daily benefit amount.

4. How Would You Like to Pay for That?

Under a traditional long-term care policy, you make regular payments during the life of that policy. But you can also customize your payment program, paying for your policy in a single payment, over 10 or 20 years, or until you hit age 65. Such payment options allow you to front-load your payments and reduce your fixed costs in retirement.

5. How Likely Is the Company to Pay?

It probably is a good idea to check up on the insurer’s financial strength. Also ask your agent about the insurer’s history of raising client long-term care premiums. Although such maneuvers can improve a firm’s financial health, they can also present a financial hardship to the insured, a lesson many long-term care policyholders learned the hard way during the past few years.

We offer an array of Long Term Care Health Insurance programs.  Send us a message and we’ll be happy to help answer your questions.

The Original Post Is Located Here: Five Key Questions About Long Term Care Health Insurance

You’ve probably seen the e-mail in your inbox sent on behalf of the Nigerian Banker who simply needs you to forward $500 before he can release a substantial windfall in your name.

Or the friend who is traveling abroad and has lost their wallet and desperately needs you to send them $2000 via Western Union.

We often think of these scams as “small scale” and that only “gullible” people can be taken advantage of with these tactics.

The harsh reality is that all humans are comprised of the same base emotions of Fear and Greed.  As such, we can all at times be susceptible to the lure of con-men.

That’s why we always counsel investment management clients and potential clients that the # 1 way to avoid a financial scam is to never allow your financial manager to take CUSTODY over your investment assets.

This means you should never write a check earmarked for insurance or investment purposes made out in the name of your advisor.

Just as important, you should always ensure that your investments are “housed” at a Bank, Brokerage or Trust company that is completely separate and “arms-length” from your financial manager.

Take the case of Bernie Madoff.  Remember him?

It just so happens that his own company, Bernard L. Madoff Securities Inc., held custody over all his clients assets.  This allowed him to create fictitious statements.  Show fictitious trades. Report fictitious returns.

And ultimately manipulate the largest financial scam ever carried out in history.

Thousands of individual investors, pension funds, corporations and universities lost big in Bernie Madoff’s $50 billion Ponzi scheme.

Here’s a celebrity client list, some of whom are now facing significant financial challenges as a result of Madoff’s fraud. While not all amounts have been disclosed, here are 10 of the biggest celebrities that were hit.

1. Steven Speilberg-  the director’s Wunderkinder Foundation lost an undisclosed amount, although in 2006 about 70% of the interest and dividend income came from the Madoff firm.

2.  Kevin Bacon and Kira Sedgwick–the stars of “Footloose” and “The Closer”  lost an undisclosed amount. Sedgwick said at the time that while they weren’t destroyed, they did lose hard earned money that they thought was in a safe place.

3. Elie Wiesel Foundation for Humanity lost $15.2 million.

4. Sandy Koufax

5. Eric Roth- the screenwriter of “Forrest Gump” said, “The tragedy is the people who lost their life savings and their dreams.”

6. Larry King reportedly lost more than $1 million.

7. Zsa Zsa Gabor personally lost $10 million

8. Jeffery Katzenberg- the head of DreamWorks Animation and producer of films like “Shrek” lost an estimated $20 million.

9. John Malkovich said he was “ruined” financially by the scam.

10. Eliot Spitzer

This was a terrible tragedy that continues to play out for thousands of investors across the globe. And if anything positive can come from this, it’s the lesson that….

This entire scam could have been avoided if investors simply had not allowed Madoff’s personal Investment Management Firm to hold custody over their hard-earned investment assets.

Read more: 10 Celebrities Scammed By Madoff | Bankrate.com

The Original Post Is Located Here: 10 Celebrities Scammed By Madoff- They Broke The #1 Investment Management Rule

But like the old saying goes, “all good things must come to an end.”

The IRS will only allow you to defer taxes in your IRA for only so long. When you reach that magical age of 70 1/2 you are now forced to begin taking minimum required distributions every year going forward.

These distributions are taxed as ordinary income and must be distributed each year by December 31st. You better make sure that you’re taking the withdrawal properly because the penalty for not doing so is 50% of the amount you should have taken. Ouch!

Here’s some tips for making smart decisions when it comes to taking the Required Minimum Distribution from your IRA each year.

Avoid two distributions in the same year. Retirees who delay their first retirement account withdrawal until April 1 will need to take two distributions in the same year because the second distribution will be due December 31. Withdrawals from 401(k)s and IRAs are taxed as income, and two withdrawals in the same year could significantly increase your income tax bill. Take a look at what your taxable income is going to be and determine whether or not two distributions are going to kick you into a higher tax bracket.

Delay 401(k) withdrawals if you are still working. People who are still working after age 70½ can delay distributions from their current 401(k), but not IRA, until April 1 of the year after they retire. If you are an employee, then you can continue to leave that money in the plan.  However, employees who own 5 percent or more of the company sponsoring the plan must start 401(k) distributions after age 70½, even if they are still working.

Withdraw the correct amount. The distribution amount is generally calculated by dividing your account balance by an IRS estimate of your life expectancy. However, if you have a spouse who is more than 10 years younger than you and is the sole beneficiary of your IRA, your spouse’s age must also be factored into the calculation. Retirees over age 59½ can withdraw more than the required minimum amount each year, but excess withdrawals will not count toward required distributions in future years. Retirees can take any number of withdrawals they choose throughout the year, as long as the minimum is met by December 31 (or April 1 if it is your first required distribution).

Take distributions from the worst-performing account. If you have several IRAs, you must calculate the required minimum distribution for each account, but you don’t have to take a separate withdrawal from every IRA you own. You can add up your IRA distributions and take it all out of one IRA or a combination of any IRAs you choose. If you have three IRA accounts and they are paying you 1 percent, 3 percent, and 5 percent, my suggestion, in most cases, would be to take it all from the one that is paying you the least.

Those with a 401(k) or most other types of workplace retirement accounts must take a withdrawal from each account. However, if you have multiple 403(b) tax-sheltered annuity accounts, you can total the required minimum distributions and take them from any account or combination of accounts.

Convert to a Roth. There are no minimum distribution requirements for Roth IRAs. Workers already paid income taxes on Roth IRA contributions, and the money can be withdrawn as you need it or can be passed on to heirs. Once you have a Roth, then you don’t have to worry about distributions.  Having both Roth and traditional retirement accounts can add tax diversification and flexibility to your retirement draw-down strategy.

If you’re looking for strategic ways to enhance the IRA withdrawals you’re forced to take, we’d be happy to discuss your options further.  Just call us or leave a comment below.

More at Smart Strategies for Taking Required Minimum Distributions

The Original Post Is Located Here: Smart IRA Tips For Taking Your Required Minimum Distributions

The IRS gives you 60 days to rollover funds from a traditional IRA or a similar qualified
 account to another traditional IRA or qualified account. If you haven’t completed the 
rollover within this 60-day window, your IRA rollover essentially becomes a taxable IRA 
withdrawal. That means the entire amount of the rollover will be subject to taxes at your 
current ordinary income tax rate. Plus, if you haven’t reached age 59½, you’ll also face a
 10% penalty on the withdrawal.

Ouch!

Another rule states that a rollover can only consist of the same property. You cannot take 
the lump-sum distribution from your IRA, purchase other assets with the cash, then roll
 those assets over into a new IRA. This violates the same property rule. The IRS would 
consider the cash distribution from your IRA as income, subject to taxes at your current
 ordinary income rate plus any applicable penalties.

Here’s an example of how an investor could run afoul of this rule:

A just-retired executive, age 58, has decided to rollover his 401(k) account from his 
former employer into an IRA. He wants to purchase some shares of the company’s stock 
with his rollover assets. So, he takes a portion of the funds he has received from his
 401(k) account to buy the shares, and places the remainder of the qualified money in a 
new IRA. Then, he deposits the shares of stock he purchased into the same IRA, in order 
to maintain the tax-deferred treatment of these assets.

The IRS would view the portion of the 401(k) rollover used to purchase the stock as 
taxable income, and the investor would owe taxes at his current ordinary income tax rate
 on this amount. Plus, the IRS would also assess a 10% penalty on this taxable amount 
because he is younger than 59½.

There’s a relatively easy way to avoid these income taxes and penalties – do a direct 
trustee-to-trustee transfer.

This will let the IRA and retirement plan custodians do all the
work of moving your assets. You don’t have to worry about receiving a lump-sum
 distribution check and making sure you deposit the funds in a new IRA within the 60-day 
window. The trustees can also ensure that your assets are transferred in a time efficient 
manner.

Please keep in mind the services provided by a Trustee may involve costs which
 can reduce the overall return on your investment.

If you have multiple IRA’s or other qualified retirement accounts and would like to
 consolidate these assets into one account, we can help you manage the process and make
 sure it is done as efficiently as possible. Please call our office at 800-960-3499 or send us a message with your questions.

The Original Post Is Located Here: IRA Rollover- Don’t Make This Mistake

At the end of 2010, Congress handed wealthy taxpayers an unprecedented estate tax planning gift.  This opportunity gives them the ability to shift a large chunk of assets out of their estate tax-free during their lifetimes.  The problem is that the window is short and scheduled to expire at the end of 2012.  Without further acts by Congress, this remarkable opportunity could be gone forever.¹

Two important things happened at the end of 2010:

• Congress reunified the estate tax, gift tax and generation-skipping tax (GST), giving each top rates of 35% with $5 million lifetime individual exemptions. (In 2012, these exemptions are actually set at $5.12 million, as they are indexed for inflation.)
• In addition, the estate and gift tax exemptions became portable between married couples. So currently, an executor of an estate can elect to transfer any unused portion of a deceased spouse’s $5 million individual exemption to a surviving spouse.²

With these changes, a whole new horizon emerged in terms of estate tax planning – one that may sunset in 2013.

The big news: the $5 million lifetime gift tax exemption. For married couples, the lifetime gift tax exemption is actually $10.24 million at the moment thanks to the portability factor. Back in 2010, the lifetime gift tax exemption was at $1 million and it wasn’t portable.³

If you used up the prior $1 million lifetime gift tax exemption before 2011, you now have the opportunity to gift up to $4.12 million more before 2013 given the new $5.12 million limit.^2,7

So considering all this, the big question is: should you gift as much as you can to your children before 2013 with the intent of reducing inheritance taxes down the road?

After all, lifetime gifts reduce your taxable estate. Additionally, if you give your children appreciated securities, the long-term capital gains of those securities will be taxed at their capital gains rates rather than yours. If your children’s income puts them in the 10% or 15% tax bracket, their capital gains tax rate is 0% through 2012.⁴,⁵

Portability means great flexibility – provided you play by the rules. Let’s illustrate how this works. Dad doesn’t gift up to $5.12 million during his lifetime – he only ends up gifting $3 million. Well, Mom can subsequently gift up to $7.24 million after he passes thanks to the portability rules, as there would still be $7.24 million to go toward the present $10.24 million lifetime gift tax exemption for a married couple.

There is an important rule you must follow to realize this portability: when the first spouse passes away, the executor of his or her estate must file an estate tax return even if no estate tax is owed. That estate tax return formally notifies the IRS that you are transferring the unused or partially used gift tax exemption.^4,6

Incidentally, this estate tax return is due nine months after the death of said spouse, with a six-month extension permissible.⁶

Is there still a need for bypass trusts? We can’t say goodbye to them, because 15 states still levy their own estate taxes with exemptions commonly at $1 million or under. Moreover, what if portable exemptions aren’t retained in the future?⁶

The potential for savings could be great. When you look at this remarkably generous lifetime gift tax exemption allowance in light of certain estate tax planning techniques that might leverage it – such as the grantor-retained annuity trust and the family limited partnership – the potential is intriguing. Parents can potentially forgive millions of dollars of low-interest, intra-family loans and possibly arbitrage state tax rates if their children live in different states.

The problem: we don’t yet know what 2013 will bring. Congress could elect to retain the increased lifetime individual exemption (and portability) for 2013 and beyond, but the massive federal deficit would seem to render this a longshot.

If Congress lets the 2010 law governing gift and estate taxes sunset, it will be 2001 all over again – the individual lifetime gift tax exemption will reset from $5.12 million to $1 million (with no portability) and estate taxes will top out at 55% instead of 35%.⁷

Once more, estate and tax planning professionals must weigh the degrees of opportunity and ambiguity presented by our shifting estate tax laws.

If you have questions pertaining to your specific situation, please let us know and we’ll be happy to assist.Citations:

1. online.wsj.com/article/SB10001424052748703675904576063903166546250.html [1/8/11]
2. blogs.forbes.com/hanisarji/2010/12/29/gift-tax-under-the-2010-tax-relief-act-p-l-111-312 [12/29/10]
3. blogs.forbes.com/hanisarji/2011/01/02/new-year-different-rules-2011-estate-tax-gift-tax-gst-tax-rules/ [1/2/11]
4. www.fa-mag.com/online-extras/6827-new-estate-tax-law-poses-dilemma-for-the-rich.html [2/14/10]
5. hrblock.com/taxes/tax_tips/deductions_credits/gifts.html#3 [2/18/11]
6. www.forbes.com/2010/12/23/married-couples-guide-new-estate-tax-personal-finance-deborah-jacobs.html [12/23/10]
7. www.businessweek.com/articles/2012-03-19/family-businesses-should-plan-now-for-rising-gift-tax [3/19/12]

The Original Post Is Located Here: The Big Estate Tax Planning Dilemma of 2012

How could your assessor be wrong? It might depend on when you property was last appraised.

Although assessments must typically be established each year, some assessors might not perform an annual appraisal of every property they assess. Instead, individual valuations are sometimes made when there is a municipal-wide reassessment, and then carried forward until another municipal-wide reassessment is performed. In some cases, many years can pass between reassessments.

So, if your property value has fallen, you could be paying more than you should.

Moreover, when assessments are conducted, errors can sometimes be made. Some of these errors may include the size of your home or the number of bedrooms and bathrooms. Sometimes unfinished basements are listed as finished in the assessor’s report; sometimes garages that don’t exist are factored into the property value.

You can obtain a property valuation report from your local assessor’s office upon request.

Study it for these possible errors. And, compare your home’s value to others in the neighborhood; it should be in line. Obtain proof of any errors, and then visit the assessor’s office to ask how you can dispute the report.

We always advise people to consult with their own qualified legal, tax, and financial advisor prior to making any financial decisions.

If your property value is assessed correctly, there might be other tax breaks available, depending on where you live. Although retirement property taxes are typically imposed by cities, townships, counties and school districts, some states specify a maximum tax rate as the standard for local assessors to follow.

In closing, you should also know that property tax protests must be made in a timely manner, and there are strict deadlines that must be met for making a timely protest. For information regarding these deadlines, you should contact the assessor’s office in your local community.

The Original Post Is Located Here: Can You Lower Your Retirement Property Taxes?

As you might know, Morningstar rates mutual fund investments based on performance over the last three, five and ten years on a scale ranging from one-star (lowest) to five-star (highest). Morningstar ratings are assigned on a curve, with 10% of funds receiving five stars, 22.5% receiving four stars, 35% receiving three stars, 22.5% receiving two stars and 10% receiving one star.

This information can be an important part of the fund analysis process. However, some investors may want to use the number of stars a fund receives as the sole criteria for gauging a fund’s performance. And that approach might not be prudent for a number of reasons.

First, not every fund has an equal chance of receiving the highest rating. Risk-adjusted returns (RAR) — on which Morningstar bases its ratings — are calculated over one of four broad categories. These include domestic equity funds, international equity funds, taxable bond funds and municipal bond funds. But in each RAR category, there are different asset classes, such as small-cap funds and large-cap funds, and at any given time
one of those asset classes may be performing better than the others. As a result, funds in asset classes that are performing well at a given point in time may receive a higher rating than others.

Second, ratings tend to favor newer funds in some cases. When Morningstar calculates overall ratings, ten-year statistics account for 50% of the overall score, five-year statistics account for 30%, and three-year statistics account for 20%. But if only five years of data is available, the five-year period is weighted 60% and the three-year period 40%. And if only three years of data is available, the three-year statistics alone are used in the overall rating. As a result, older funds that did not perform well in their early years but perform well now could receive fewer stars than their current performance justifies.

Finally, it may go without saying, but past performance does not guarantee future success. This years winner could be next year’s loser — and vice versa.

The moral of the story: although Morningstar ratings can be a very helpful tool for evaluating a mutual fund investment’s performance, no third-party system should take the place of the work that you and your financial advisor do to analyze your specific investment objectives. We always advise people to consult with their own qualified legal, tax, and financial advisor prior to making any financial decisions.

If you’re concerned about the performance of a mutual fund in your portfolio, please call our office at 800-960-3499 or email us at info@sustainwealth.com for more information. We’d be glad to send you an article on how (and how not) to use Morningstar ratings.

The Original Post Is Located Here: Are Morningstar Ratings Important For Your Mutual Fund Investments?

The potential problem lies in the fact that these current limits are set to expire in January 2013.  Without further Congressional intervention, the estate tax limits will reduce to $1 million for a single individual and $ 2 million for a couple at that time.

It is likely that Congress will prevent the limits reducing to these lower levels, but with a projected $1.5 trillion federal budget deficit expected in 2011 and the national debt growing, it is debatable whether the estate tax will remain at the current high levels.

Regardless of the debate about future estate tax limits, you can’t dispute the fact that long term healthcare costs are rising.

As you age, your chance of requiring long term healthcare goes up significantly.  So, why not consider a “dual purpose” strategy that can provide additional tax free income if you need special care and also moves funds out of your taxable estate (just in case you have an estate tas problem in the future)?

You can gift $13,000 ($26,000 for a married couple) every year to as many people as you want with no gift tax.  As an example, you could make that gift to your daughter who would then purchase a long term healthcare insurance policy with a “return of premium at death” option on you.

The gifts would continue, and she would pay the annual premiums each year. When you die, your daughter will receive the premiums paid minus any benefits you may have used. And since you are not the policy owner, the death benefit will not be included in your taxable estate.

Suppose you want the same type of protection for your middle-aged child?

Long term healthcare insurance premiums paid directly to an insurance company for a policy owned by a third party are treated as health insurance premiums. And health insurance premiums paid for a third party are considered a tax-free transfer.

Therefore they are not regarded as a gift, they do not count towards the $13,000 annual gift exclusion, and the policy owners do not have to treat the premiums paid as income. And if you include the return of premium at death rider, the money could eventually pass to your child’s heirs.

We can show you how a long term healthcare insurance plan can potentially provide for your needs, ensure sufficient income for your spouse, and preserve assets for your beneficiaries.

Please feel free to contact our office for more information and a complimentary quote.

The Original Post Is Located Here: Can Long Term Healthcare Insurance Help Your Estate Tax Planning?

In light of these changes, you may want to reevaluate which of your investments should be inside your IRA and which ones should be held in taxable accounts.

IRA tax rules consider all distributions from your IRA as ordinary income and therefore taxed as high as 35%. On the other hand, withdrawals from a taxable account might be treated at the more favorable 15% rate if they are qualifying dividends or long-term capital gains.

Based on these IRA tax rules, you could conclude that you would be better off putting bond funds in your IRA and stock funds into a taxable account. But the answer may not always be that simple.

Suppose that you own a stock fund in a taxable account, and the manager trades frequently and creates short-term gains? The gains will be passed on to you and taxed at the ordinary income rate.

Therefore, in this case, a stock fund held in a taxable account, was not tax efficient.

Would you be better off holding it in an IRA?

It’s possible; especially when you consider that the tax deferral within an IRA can enhance the compounding of the earnings. But there is another point to consider.

If the fund is held in a taxable account it will receive the step-up in basis when you die. This will eliminate any capital gains tax that your heirs would pay on your investment’s accumulated profit.

In addition, you can deduct losses within a taxable account yet cannot for an IRA.

Saving money on taxes is certainly important, but you need to take your full financial picture into consideration before making any decisions.

If you are not sure whether your investments are making the best of the current tax laws, feel free to contact us to schedule a complimentary telephone review of your current tax situation.

The Original Post Is Located Here: IRA Tax Rules- Which Investments Are Best For Your IRA?

In a number of states, nursing home and assisting living facilities are supported by state Medicaid payments, which are funded by transfers from the federal government.

However, proposed changes in government funding procedures may mean that some states will receive less money from the federal level to pay for necessary Medicaid services. The end result could be that many states will cut back on the level of health care services they provide. Or, states may ask more patients to reach deeper into their own pockets to pay for a greater share of their health care expenses.

The unpredictability of government-sponsored benefits, and the likelihood that more of your personal health care expenses will be paid for from your own resources, provide another reason to consider long term care insurance for your future financial well-being.

Long-term care insurance can cover nursing home expenses, assisted living expenses, and in-home health care costs that government benefits may not cover. Moreover, long-term care insurance can help you preserve your wealth, by providing additional funds needed to pay for an extended stay in a nursing home or long-term health care assistance.

If you’ve not considered long term care insurance for your overall financial security, now may be a good time to do so. There’s a number of different long-term care insurance options available for your consideration.  And new advances in the industry have created products that may eliminate expensive annual premiums.

Call us at 800-960-3499 to request a no-obligation proposal.

The Original Post Is Located Here: Another Reason to Consider Long Term Care Insurance – The Unpredictability of Government Benefits