Roths: Not just for young investors

A recent Wall Street Journal article caught our attention because it turns some conventional investment wisdom on its head. The article, “Roth IRA and 401(K) Accounts Can Hold Advantages For Older Investors,” suggests that those investors who expect their marginal tax rates to remain the same in retirement may benefit from Roth investments as much as younger investors do.

According to the article, more specifically, older investors may benefit from the tax-free withdrawals they can take from these accounts when distributions from a regular 401(k) or IRA would push them into a higher tax bracket.

“Moreover, workers in their 40s, 50s and early 60s who want to contribute the maximum to a tax-advantaged retirement savings account can accrue more wealth with a Roth than with a traditional 401(k), even if their marginal tax rates actually decline by as many as 10 percentage points in retirement,” said Stuart Ritter, a senior financial planner at T. Rowe Price.

If you’re uncertain whether you might benefit from this unconventional investment strategy, contact your attorney or financial advisor to discuss its potential benefits for your portfolio. 

Protecting your investments from lawsuits

Among the list of wealthy investors’ top worries are a repeat of the financial fallout that happened in 2008. Yet regardless of whether the economy is doing well or suffering through another setback, wealthy investors should also be concerned about being sued.

While there’s little you can do to prevent another meltdown of the market, there are a range of things you can do to protect your assets from liability. Chief among these is owning an umbrella liability insurance policy, which you can frequently purchase from the same company you own your car or home insurance through.

These policies can help insulate your assets from a suit stemming from an auto accident, but be sure to review the policy’s limitations with your attorney to ensure you know what it does and does not include.

Other tools you may find helpful in protecting your assets are ensuring you have diversified your investments. Many state laws protect funds held up in retirement accounts and real estate holdings, for example. In addition, you may consider establishing a trust to house your investments.

Contact your attorney today to discuss these and other options for protecting your wealth. And read more on the subject in this recent Wall Street Journal article. 

5 Investments You Don't Know You Have

While many people count investments as those things they can buy and sell on the market, the Wall Street Journal recently had a great article on some unexpected things most people have that should be counted alongside their stocks and bonds. Chief among the list are your benefits including your health and life insurance and any retirement savings you may have. 

Also included on the list are your body, your marriage and your community. To see how these qualify as investment items, check out the article.

Investing: Buy or Sell in May? And Then What?

Some Wall Street experts have an adage that goes "Sell in May and then go away," in order to avoid what can be the topsy-turvy market days in the summer. However, a recent Forbes article points out that this year the better thing to do is to buy in May then be prepared to hold out for the long haul. 

The article points out that according to the research of Yale Hirsh, the founder of the Stock Trader's Almanac, the Dow Jones Industrial Average over 50 years of monthly returns "has experienced an average return of 0.3% during the  'more volatile' May-October time period while experiencing an average return of 7.5% during the November-April time period."

Yet the author, Kevin Mahn, think this year is different, and this article gives his compelling reasons why. 

How to Think about Investment Opportunities

One of the more useful investing blogs out there is ValueWalk, which had a useful video posted recently about what to consider when it comes to investment opportunities. Take a look at this video and send any of your questions to Tony.

http://youtu.be/iunrqKV6OBY 

Best Finance, Market Blogs

If you're like most people, you only have a few minutes of free time a day, so catching up on the latest news and market updates isn't likely to happen in a leisurely setting. In fact, you may be lucky if you get more than just a few minutes to catch the top headlines. Any in depth reading you may have a chance to do will only come early in the morning or late in the evening, neither of which is an ideal time to do a deep dive into market analysis. 

One of the most useful ways to stay on top of the latest trends without eating up huge chunks of time is to periodically read investment and financial blogs. Depending on whether you're interested in tips and tricks for investing, analysis of the latest stocks or insights into mastering your personal finance, there are likely more than one resource for you. 

Here's a link to a helpful list of the 100 most popular financial blogs out there. Pick and choose your favorite and check in with them when you've got time. 

A will or a trust — which is right for you?

Without a doubt the most commonly known estate planning tool is a will. Most people know what a will does and why they should have one, but are they right for everyone or is another estate planning tool a better for you?

Simply put, a trust is a legal relationship that is formed so one person or entity can hold property for the benefit of someone else. Trusts can be a much better tool for your estate planning needs for a variety of reasons. It might be wise to establish a trust, instead of using a will, if you'd like to avoid probate and are looking for privacy regarding your estate. 

Any estate that goes through probate becomes part of the public record. It can also be a time consuming and emotionally draining time for your survivors. Trusts can help your survivors avoid that process and receive the help faster. 

For additional reasons that trusts can be a useful tool, read this article. 

Setting Up A Trust? Think Location

If you're thinking about establishing a trust to save on taxes or to pass money on to the next generation, where you create the trust can be as an important as how you create the trust. Because state laws govern trusts, location plays a pivotal role in the process. Here's a helpful article on selecting the ideal location. If you have questions about how Colorado's trust laws may affect your plans, contact Tony today.

How To Invest Like A Billionaire

Most billionaires aren't billionaires because of their investments. Many, if not all, of those who are listed on the Forbes richest individuals started on that list because they created and sold something that the world needed. Many of those individuals made money and then went to the stock market. In this insightful interview, Wall Street Journal columnist Mark Hulbert has some interesting insights on how billionaires ended up that way and what you can expect from your investments. 

Click on the link to view Hulberts interview. 

Unified Tax Credit And Portability

I frequently get calls from clients or financial advisors asking me to share updates on the newest estate tax law issues. This year, those conversations revolve around actions taken by the IRS last year, in adopting regulations regarding portability. 

In the years prior to the adoption of the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010, spouses could leave one another as much as they wished without 
triggering an estate tax at the first spouse’s death because the Marital Deduction postponed the imposition of any estate taxes until the death of the surviving spouse. The 2010 Act became permanent law through the American Tax Relief Act of 2012, which was adopted January 2, 2013. Under the 2010 and 2012 Acts, the Marital Deduction was retained, but new provisions gave spouses the ability to transfer any unused estate tax credit from the first deceased spouse’s estate to the estate of the surviving spouse. The right to transfer the unused credit is 
called “portability.”

 
Read the full article about portability and its rules here. 

Meaningful Giving Can Lead To A Meaningful Legacy

With so many nonprofit, not-for-profit and philanthropic organizations asking for money, it can be difficult to decide which to donate to and how much to give. Providing a group of smaller nonprofits with gifts can be an effective way to address multiple interests, but if you're interested in leaving a legacy, it may help to articulate your long-term goals before you give to any organization. Here's a helpful article on the topic from The Denver Post. 

On Teaching Children About Wealth

The Wall Street Journal recently featured a great article in its Weekend Investor Section. "How To Be Rich," which ran on Jan. 11, provided practical advise for families who are working to teach children about what it means to be wealthy. Gone are the days where parents only needed to focus on teaching children a good work ethic; wealthy families must now also ensure they teach their children about protecting themselves online. In order to ensure your family is prepared to handle the challenges, consider talking about the responsibilities of wealth on social media early and often. You can also download a useful list of reference points here. 

How To Deal With Inheritance

Receiving an inheritance can be fraught with more than a handful of pitfalls. In the midst of dealing with the grief of losing a loved one, dealing with an inheritance can be an unnecessary stress. This helpful article by Deborah Nason has a some useful tips on creating a timeline to deal with a windfall inheritance. She urges that the best thing you may do when you inherit in the beginning is nothing. Nason and the subjects of her interview suggest entering a "decision-free zone" for a period of months so that you don't make a rash decisions. 

Social Media Holds Hidden Dangers

The Wall Street Journal recently included an article regarding the hidden dangers that the Internet can hold for families, particularly for wealthy families who may mistakenly put information on the Internet that results in con artists and burglars (and even kidnappers) taking advantage of them. Following are some tips on how to ensure you don't put your family at risk by using social media.

1. Avoid posting personal information: 

2. Minimize exposure by avoiding detail

3. Only share information you'd share with the press: If you wouldn't want a story or information that you are posting to be headline news, it's better to share privately than to do it virally. 

Uniform Gifts to Minors

Setting up and making gifts to a 2503(c) Trust (“the Trust”) is an ideal way to make end-of-year gifts to children or grandchildren. Parents and grandparents making end-of-year gifts of cash frequently set up joint accounts with the donee (sometimes referred to herein as “beneficiary”), or establish a custodial account, which in Colorado, is governed by the Colorado Uniform Transfers to Minors Act (UTMA).

There are other ways to make such a gift which results in both estate tax advantages and extended fiduciary control over how the funds are distributed. One of those is the 2503(c) Trust which is the subject of this newsletter.

Under current Federal Gift Tax law, a donor (settlor) can give $13,000 or $26,000 per couple, to each donee to whom the donor wishes to make a gift, without incurring a gift tax. Assuming the donor wishes to have some say over how the funds are used, the gift can be made to a UTMA custodial account or to a Trust. 

Estate Planning with Resident Aliens

The United States is home to a diverse population that includes many individuals who are not U.S. citizens.Thus, it is not unexpected that an estate planner (planner) may be asked to prepare an estate plan for a married couple, one of whom is U.S. citizen (USC) and the other a resident alien (RA).

When faced with such a request, the planner’s first inquiry should focus on the circumstances under which the RA became a resident of the United States. Without integrating family history, citizenship,residence,and domicile information into the tax-sensitive provisions of the plan, the plan may have significant adverse tax consequences at the death of the USC spouse.The planner also must have a thorough understanding of Colorado law regarding residency and domicile, as well as federal transfer tax rules applicable to an RA.1