New Tax Law Passes

2011 Tax Summary

The House and Senate have voted, and President Obama has signed the new Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (Tax Relief Act of 2010). The new law includes a number of tax breaks for many taxpayers. Here are some highlights that a client may wish to discuss with their tax professional or attorney:

Current tax rates and certain tax breaks extended for two years

• The Tax Relief Act extends the tax rates of 10%, 15%, 25%, 28%, 33%, and 35% for another two years.
• The new law extends for two years the repeal of the phaseout of personal exemption for certain high-income taxpayers.
• The new law also extends for two years the repeal of the limitation on itemized deductions for certain high-income taxpayers.

Capital gains and dividends

• The Tax Relief Act sets capital gains and qualified dividends tax rates at 0% and 15% for another two years.

AMT patch

• The new law increases the AMT exemption amounts for two years.

Estate tax

• The Tax Relief Act sets the estate tax exemption at $5 million per person and $10 million per couple for estates of decedents dying in 2011 and 2012.
• The new law reunifies gift and estate taxes. The gift tax exemption increases to $5 million per person for gifts made in 2011 and 2012.
• The new law also caps the tax rate at 35% for estates, gifts, and generation-skipping transfers.
• The new law provides a choice for estates of decedents who died in 2010 to use the new estate tax exemptions/rates with a stepped-up basis rule, OR to use the existing 2010 law with no federal estate tax but a limit in the amount of basis step-up that is allowed.
• The new law allows for "portability" of the estate tax exemption, meaning that any unused estate tax exemption of a deceased spouse can be carried over and utilized by the other spouse who dies second.

Other points of interest:

• The employee withholding portion of the Social Security payroll tax will be reduced by 2.0% for 2011 (e.g., 6.2% withholding is reduced to 4.2%).
• Extends for 2010 and 2011 the ability of taxpayers age 70½ or older to exclude from gross income up to $100,000 of qualified charitable distributions.
• Extension of unemployment insurance benefits for 13 months.

The points outlined here are just highlights of the new laws if you would like to learn more detail please consult with your tax advisor. If you are in search of a trustworthy and effective tax advisor please call me at 610-695-8748 or email me at roy@yourwealthadvocate.com

If you have other questions about retirement planning or personal investment coaching you can get more information at yourwealthadvocate.com.

End of Year Financial Checklist

With 2011 right around the corner now is a great time to get your finances in order.

There is still time to save some money this year and get yourself into good habits for next year and beyond. All of the items mentioned below can be daunting however a good financial advisor can help you with most of them. If you have annual reviews some of these should have already come up and dealt with.

Looking back at your finances in the past year help you see where you need to make necessary improvements to your financial future. You should access your debts as well as your investments and your life, health and homeowners insurance policies.

Insurance Policies

Take a look at your insurance policies and make sure your beneficiaries are correct and decide whether you have enough coverage for the current debt and life circumstance you are experiencing. For example; did you add new children or dependents that you need or account for in your estate planning or in the event of a tragic event.

With health insurance take a look at your deductibles if you have one maybe you can schedule that physical or get those new glasses before the end of the year to bring you over the top. This also is a reason to check on your flexible spending accounts.

Retirement Accounts

Have you reached your limit for contributions for your IRA and or 401K/403B plans? Investigate whether or not you should make those contributions and maximize them. If you inherited an IRA make sure that you have taken your minimum distribution for the year. If you miss this one you get dinged by uncle same 50 percent of the distribution amount.

Investments

This has been a pretty good year for most of us but maybe you should look over your investments for losses you may be able to harvest for tax loss. Also make sure that your investments are suitable for you based on your time horizon and risk tolerance.

Charitable Contributions

See how much you have donated to your favorite tax deductible charity and make those contributions before the end of the year.

Debt

List all of your outstanding debt obligations and decide how much of that you want to pay off in the coming year. You may want to consolidate your credit card debt to lower interest rates or maybe pay off some smaller high interest balances.

I hope the list above will inspire many of you to take some action in improving your financial life. If you need help with a strategy or changes in any of the above I am glad to help. You may be able to find more helpful information at my website, http://www.yourwealthadvocate.com

Can Using An Advisor Really Improve the Bottom Line? - Financial Planning

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Five ways new estate tax deal affects you Robert Powell's Your Portfolio - MarketWatch

Five ways new estate tax deal affects you Robert Powell's Your Portfolio - MarketWatch

Do we assume too much risk?

Assume or Transfer

The media and the financial industry have indoctrinated us to assume the amount of risk that we should take in order to achieve an expected return. Most brokers will ask you your risk tolerance and then devise a plan with products that make you assume the risk that you can stand and hope for an expected return.

The principles of prosperity says the opposite. In order to be prosperous think risk transfer not risk assumption. You say how do I do that? For many a simple whole life insurance policy is moving the risk to the insurance company. The insurance company guarantees the cash value of the policy and while we are contributing our premiums to it the company is usually paying on average a 5 to 7 percent return.

Where, in todays market can you get a consistent, guaranteed return of 5 to 7 percent? I will take those odds all day long, especially after seeing what the market has done in the last 10 years.

If you want to find out more about how to transfer your risks and create a life of prosperity instead of living a life of scarcity give me a call at 610-695-8748 to discuss the possibilities. You can also visit my website at to get more details.

Build Your Crash Proof Nest Egg

It is a fact that today unfortunately less than 25% of companies large and small offer defined benefit plans for their employees as a regular benefit. For those unfamiliar with the term defined benefit you can boil that down to a pension plan. So how do you plan your retirement when you have to rely on your own resources to provide for your non-working years.

The first step in the development of a non-destructible retirement plan is to have some funds with which to work. Primarily these funds come from savings and investments that hopefully you have acquired over your working years. The second step is to develop a relationship with trusted advisor who can coach you through the process of a plan for prosperity for the rest of your life.

Once you have all of the above factors in place you can develop an investment philosophy with your coach. An investment philosophy is based on your beliefs about the market, your risk tolerance and your time horizon. Your investment philosophy is the basis for the mindset you have in the decision making when you chose your investments. Some questions you might ask yourself when pondering an investment philosophy are what is your true purpose for money and how will you use it to fulfill your life dreams. Do you need to provide for loved ones or are they OK? Are there additional resources that will come in once you are gone for your spouse and your heirs? You definitely have to do some soul searching, but a good investor coach will help you with that.

The next item on the agenda should be how you are going to implement this plan. Will it be from your current investments or do they need to be changed? Your coach will help you with these decisions as well, he/she should ask the right questions so that with his/her knowledge suggest the correct plan of action to use.

Once your plan for prosperity is in place you should be able to relax and not worry about market conditions or fluctuation. A properly put together plan should transfer risk for a solid return not assume risk for a potentially better return. Do't be fooled by advisors who try to "sell" you products that he/she thinks are best for you, it has to feel right in order for it to work for you.


If you have any questions or want to investigate your Investment Philosophy you can visit my website at yourwealthadvocate.com or call me to set up an interview at 610-695-8748

Roy Innella Investor Coach