Keeping More of Your Keep!

I hope that everyone had a fantastic long weekend over the Labor Day holiday.  This year, fast food employees participated in a strike in order to call attention to the fact that, at their low wages, it is difficult, if not impossible, to make ends meet on a fast food job.  Indeed, McDonald’s was recently criticized for what it thought was a realistic budget showing that a minimum wage employee must work over 70 hours per week in order to scrape by.  However, individuals across the spectrum of income levels must be vigilant in order to save for their various goals, including college education, home ownership, and retirement.  Coordinating the efforts of your financial advisor, tax advisor, and estate planning attorney can help you achieve your long-term financial goals.

In the last few years, the estate tax has ceased to be an issue for the vast majority of individuals with respect to actually paying it.  However, managing your investments now can help ensure that you have sufficient assets for your own goals, while taking advantage of positive estate tax rules for your heirs.  For example, certain tax-deferred plans, such as retirement accounts, work well for forcing savings and promoting growth, because of tax-free growth within the account.  However, strict rules regarding distribution after death may leave your heirs with a large income tax bill.  Conversely, a brokerage account requires you to pay income tax on earnings as they are received, but all the shares held within the account receive a “step up” in basis to date of death value.

By evaluating the different types of accounts, and their benefits, you can determine how much of your funds ought to be contributed to each type of account.

By evaluating market conditions, your earning potential, and the likelihood that you will outlive your savings, you may find that certain types of savings are better than others.  Your financial advisor can help you fund the appropriate accounts and keep you on track.  Additionally, if you save a significant amount in tax-deferred retirement accounts, it may be beneficial to purchase life insurance that will cover the income taxes your heirs pay when they inherit the remaining amount.

In case you outlive most of your savings, it is likely to be beneficial to plan for Medi-Cal eligibility or VA Aid & Attendance non service connected disability eligibility through the use of specialized trusts, like the QMap Trust or QVap Trust.  Particularly in cases where your home is your primary asset, these specialized trusts will allow greater flexibility to deal with your real estate during your life and after your death, while maintaining eligibility for government benefits.  Furthermore, a properly drafted estate plan can eliminate the need for probate, contribute to your overall tax planning, and save money for your estate.  Through consultation with all of your advisors, you can set yourself to keep more of the rewards your labor earns you throughout your life!

Estate Planning: The Price of Organization, Rewards, Gifts, and Wondrous Tax Things… FREE REPORT: This complimentary report, focused on Estate Planning, is comprised of many of Mr. Miller’s articles from his long running column for the largest regional newspaper in San Diego County. This report will guide you through the questions surrounding getting your estate planning in order.

9/3/2013