Amy & Dan Smith's Planning for Life: Caregiver Connections

Whether in-person or online, connections fostered among caregivers provide long-range benefits.

As the populations for our country ages, the face of caregiving is changing along with it.  Today, 80 percent of those providing long-term care in the United States are not healthcare professionals-instead they are family members and even friends.  There are 40.4 million unpaid caregivers of adults ages 65 and older in the United States.  Most help one aging loved one, but 22 percent help two, and an impressive, but likely overwhelmed, 7 percent help three or more.*

With this shift from the clinical to the familial comes another change. A majority of those same individuals do not self-identify as “caregivers,” despite providing assistance to loved ones on a regular basis.  This may not seem like a problem, until you consider that caregivers who don’t truly understand their role are less likely to connect with those around them, for support and encouragement.

A Caring Community

Fostering connections with those who understand what you’re going through can make the road you’re traveling easier to navigate. By standing together, caregivers create a community through shared experiences that’s widespread and accessible anywhere, both in their local area and through online platforms.

Many caregivers enjoy participating in community events, attending support groups or gathering over brimming cups of coffee.  Group text messages are easy to create and maintain, and provide a safe space to exchange well wishes, best practices, uplifting messages and more. Scheduling regular get-togethers with nearby caregivers is another way to connect, providing an outlet as well as a wealth of resources.

Tap Into Your Virtual Network

An internet connection can also play an important role in your caregiving experience, cluing you into new advances in medicine and technology. Not only that, but a majority of caregivers who have accessed online information say that it has helped them cope with stress.

When venturing into online spaces, search out message boards with discussions that reflect your own experiences, pencil in video chat dates with faraway friends, and read up on all the internet has to offer-from in-depth research to lighthearted blog posts.  There’s no limit to what you can find.

Connect and Reflect

As a caregiver, you’re a part of a community of empowered individuals who give themselves to better the lives of those they love.  And since we’re on the topic of connections, it’s important not to forget the greatest connection that can be strengthened during your time as a caregiver; the one you share and are fostering each day with your loved one.

Next Steps

Connect with someone who can relate to your caregiving experience.

Explore a message board for added caregiving insight.

Have a conversation with your advisor about the financial implications of caregiving.

Sources: bls.gov,pewinternet.org; *Pew Research Center

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

 

Amy & Dan Smith's Planning for Life: Insurance—What’s the Use of It?

It’s like putting money down a black hole – Until You Need It! It is the major, unplanned-for loss that permanently wrecks financial well-being. Consider the following:

Major illness: Paying the premiums and then the deductible is annoying. However, failure to cover the possibility of a long-term illness can devastate savings and, even, lead to bankruptcy.

Fire: The loss of a residence seems remote to most folks. However, it happens. If there is inadequate coverage, comparable replacement may not be possible. At the same time the mortgage must be paid.

Liability: Harm to an individual – eg., an invited guest or a random victim in a car accident – can be emotionally gut-wrenching. One can be charged with liability for his/her actions which arguably caused injury to a friend or family member as well, of course, to a stranger. Having ample liability coverage – and, I would suggest, an umbrella policy – does give some peace of mind even though it may not remove the personal pain. Also, not having to pay lawyers to defend you (they are paid by your insurance company) can help relieve much stress.

Disability: The inability to function in the workplace due to disease or accident can put an abrupt end to the income stream which is supporting the family in whole or in part. Income replacement policies are expensive and are often not part of the employment package provided by employers. Furthermore, there are vast differences among policies — e.g., the definition of “disability,” waiting period before coverage begins, length of time the benefit is paid, etc. High quality policies are more expensive. Honestly, this is a difficult area of risk management, and hopefully it will not be needed. For the major bread-earner, however, it is an essential element for financial well-being of the family.

Long term care: Medicare does not provide long term care. The need for in-home care or residential assisted living must be self-insured. Having a policy can mean the difference between staying at home or having to going into residential living. It also gives peace of mind to parents who are not wanting to deplete the children’s inheritance. The cost of the long-term care policy depends on the “bells and whistles” one contracts for – eg, waiting period, length of time the benefit will pay, the amount of the benefit, and whether there is an inflation adjustment to the benefit. It is not too early for folks in their late 40’s to begin to look at these policies. The earlier coverage begins, the lower the premium.

Life: This is certainly an area where you hope the insurance company wins the bet; that is, that you live a long life! The type of policy one obtains—permanent vs term — depends on the risk that the loss of the insured poses. The major bread-earner with young children certainly needs to cover potential child care and education costs. Even the non-income producing spouse should have some coverage. Typically, cost of term insurance for parents with young children is inexpensive; however, it is the time of life when insurance is most needed.

Your author does not sell insurance. However, he has personally experienced the loss of his residence by fire, the long-term illness and death of a loved one, and a disability. The value of appropriate insurance at the right time cannot be overstated.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: New Reports Highlight Continuing Challenges for Social Security and Medicare

Most Americans will receive Social Security and Medicare benefits at some point during their lives. For this reason, workers and retirees are concerned about potential program shortfalls that could affect future benefits.  Each year, the trustees of the Social Security and Medicare trust Funds release lengthy annual reports to Congress that assess the health of these important programs.  The newest reports, released on June 5, 2018, discuss the current financial condition and ongoing financial challenges that both programs face, and project a Social Security cost-of-living adjustment (COLA) for 2019.

What are the Social Security and Medicare Trust Funds?

Social Security: The Social Security program consists of two parts. Retired workers, their families, and survivors of workers receive monthly benefits under the Old Age and Survivors Insurance (OASI) program; disabled workers and their families receive monthly benefits under the Disability Insurance (DI) program. The combined programs are referred to as OASDI. Each program has a financial account (a trust fund) that holds the Social Security payroll taxes that are collected to pay Social Security benefits.  Other income (reimbursements from the General Fund of the U.S. Treasury and income tax revenue from benefit taxation) is also deposited in these accounts.  Money that is not needed in the current year to pay benefits and administrative costs is invested (by law) in special Treasury bonds that are guaranteed by the U.S. government and earn interest.  As a result, the Social Security Trust Funds have built up reserves that can be used to cover benefit obligations if payroll tax income is insufficient to pay full benefits.
 
Note that the trustees provide certain projections based on the combined OASI and DI(OASDI) trust funds.  However, these projections are theoretical, because the trusts are separate, and generally one program’s taxes and reserves cannot be used to fund the other program.

Medicare:  There are two Medicare trust funds.  The Hospital Insurance (HI) Trust Fund helps pay for hospital care (Medicare Part A costs). The Supplementary Medical Insurance (SMI) trust Fund comprises two separate accounts, one covering Medicare Part B (which helps pay for physician and outpatient costs) and one covering Medicare Part D (which helps cover the prescription drug benefit).

Highlights of Social Security Trustees Report 

This year, for the first time since 1982, Social Security’s total cost is projected to exceed its total income (including interest) and remain higher for the next 75 years. Consequently, the U.S. treasury will start withdrawing from trust fund reserves to help pay benefits in 2018.  The trustees project that the combined trust fund reserves (OASDI) will be depleted in 2034, the same year projected in last year’s report, unless Congress acts.

Once the combined trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 79 percent of scheduled benefits for 2034, with the percentage falling gradually to 74 percent by 2092.
Based on the intermediate assumptions in this year’s report, the Social Security Administration is projecting that the cost-of-living adjustments (COLA) announced in the fall of 2018, will be 2.4 percent. The COLA would apply to benefits starting in January 2018.

Highlights of Medicare Trustees Report

Annual costs for the Medicare program exceeded tax income each year from 2008 to 2015. Although last year’s report projected surpluses in 2016 through 2022, this year’s report projects that costs will exceed income (excluding interest income) in 2018.

The HI trust fund is projected to be depleted in 2026, three years earlier than projected last year. Once the HI trust fund is depleted, tax and premium income would still cover 91 percent of estimated program costs, declining to 78 percent by 2042 and then gradually increasing to 85 percent by 2092. The Trustees note that long-range projection of Medicare costs are highly uncertain.

Why are Social Security and Medicare facing financial challenges?

Social security and Medicare are funded primarily through the collection of payroll taxes. Because of demographic and economic factors including higher retirement rates and lower birth rates, there will be fewer workers per beneficiary over the long term, worsening the strain on trust funds.

What is being done to address these challenges?

Both reports urge Congress to address the financial challenges facing these programs soon, so that solutions will be less drastic and may be implemented gradually, lessening the impact on the public.

You can view a combined summary of the 2018 Social Security and Medicare Trustees Reports and a full copy of the Social Security report at ssa.gov. You can find the full Medicare report at cms.gov.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Get Financially Fit

Eight moves to whip your tax strategy into shape

Tax season isn’t the only time you should be mindful of your taxes. Challenge yourself to tone up your tax strategy and help you keep your taxes in top form year-round. Of course, also be sure to consult your tax professional and financial advisor.

1. FIND A TRAINER
You’ll want a heavyweight tax professional in your corner. Don’t have one? Ask your financial advisor, other professionals, friends and family for a recommendation and get interviewing. You’ll need a tax trainer to keep you focused.

2. TAX IT TO THE MAX
Push your retirement contribution to the limit. For 2018, you can add $18,500 to your employer-sponsored plan and/or $5,500 to an IRA, with additional $6,000/$1,000 catch-up contributions if you’re over 50. Ask your advisors for details. Bulking up your tax-advantaged savings trims your taxable income, too.

3. DIG DEEP
Look long and hard how your life has changed since the last tax season. Did you get married, have a baby, or send a son or daughter to college? Make sure you understand how life changes can impact your tax bill.

4. CRUNCH YOUR NUMBERS
Your employer withholds a certain amount of pay for taxes based on your W-4, which outlines the exemptions you want to claim. Withhold too much and you’re giving the IRS an interest-free loan; too little and you’ll owe. Find the number that’s just right by using the withholding calculator on the IRS website (irs.gov/Individuals/IRS-Withholding-Calculator) or discussing your W-4 with your tax pro.

5. GET DISCIPLINED
Getting your taxes in shape takes dedication and commitment. Diligently track and review your deductible expenses, donations and mortgage interest, as well as any credits you’re eligible for. Don’t forget relevant documentation.

6. NO GAINS, NO PAIN
If you sell an appreciated asset, you’ll need to pay resulting capital gains taxes. You can use the proceeds or pump up savings. While you’re at it, check out any capital losses you may have on the books, too.

7. LOSE THE WEIGHT
Cut loose any investments that are weighing down your portfolio to offset gains from the winners. This strategy is called tax-loss harvesting.

8. SET A GOAL
Flex the power of your generosity by focusing your giving strategy on a specific location or single cause. A more organized and tax-efficient approach, perhaps through a donor-advised fund or other dedicated vehicle, could help you help others more effectively.

Discuss these steps and others with your professional tax advisor; your financial advisor can help coordinate the conversation. Then you can relax, knowing you’re in great shape for the next tax season.

NEXT STEPS
• Familiarize yourself with tax-saving strategies
• Make a commitment to be mindful of taxes year-round
• Consult your tax professional and financial advisor

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Closing a Retirement Income Gap

When you determine how much income you’ll need in retirement, you may base your projection on the type of lifestyle you plan to have and when you want to retire. However, as you grow closer to retirement, you may discover that your income won’t be enough to meet your needs.  If you find yourself in this situation, you’ll need to adopt a plan to bridge this projected income gap.

Delay retirement: 65 is just a number

One way of dealing with a projected income shortfall is to stay in the workforce longer than you had planned.  This will allow you to continue supporting yourself with a salary rather than dipping into your retirement savings.  Depending on your income, this could also increase your Social Security retirement benefit. You’ll also be able to delay taking your Social Security benefit or distributions from retirement accounts.

At normal retirement age (which varies, depending on the year you were born), you will receive your full Social Security retirement benefit. You can elect to receive your Social Security retirement benefit as early as age 62, but if you begin receiving your benefit before your normal retirement age, your benefit will be reduced.  Conversely, if you delay retirement, you can increase your Social Security benefit.

Remember, too, that income from a job may affect the amount of Social Security Retirement benefit you receive, if you are under normal retirement age.  Your benefit will be reduced by $1 for every $2 you earn over a certain earnings limit ($16,920 in 2017, up from $15,720 2016.) But once you reach normal retirement age, you can earn as much as you want without affecting your Social Security retirement benefit.

Another advantage of delaying retirement is that you can continue to build tax-deferred (or in the case of Roth accounts, tax-free) funds in your IRA or employer-sponsored retirement plan. Keep in mind, though, that you may be required to start taking minimum distributions from your qualified plan retirement or traditional IRA once you reach 70-1/2, if you want to avoid harsh penalties.
And if you’re covered by a pension plan at work, you could also consider retiring and then seeking employment elsewhere.  This way you can receive a salary and your pension benefit at the same time.  Some employers, to avoid losing talented employees this way, are beginning to offer “phased retirement” programs that allow you to receive all or part of your pension benefit while you’re still working. Make sure you understand your pension plan options.

Spend less, save more

You may be able to deal with an income shortfall by adjusting your spending habits.  If you’re still years away from retirement, you may be able to get by with a few minor changes.  However, if retirement is just around the corner, you may need to drastically change your spending and savings habits.  Saving even a little money can really add up if you do it consistently and earn a reasonable rate of return.  Make permanent changes to your spending habits and you’ll find that your savings will last even longer.  Start by preparing a budget to see where your money is going.  Here are some suggested ways to stretch your retirement dollars:

 

  • Refinance your home mortgage if interest rates have dropped since you took the loan.
  • Reduce your housing expenses by moving to a less expensive home or apartment.
  • Sell one of your cars if you have two.  When your remaining car needs to be replaced, consider buying a used one.
  • Access the equity in your home.  Use the proceeds from a second mortgage or home equity line of credit to pay off higher-interest-rate debts.
  • Transfer credit card balances from higher-interest-rate card to a low-or no-interest card, and then cancel the old accounts.
  • Ask about insurance discounts and review your insurance needs (e.g., your need for life insurance may have lessened).
  • Reduce discretionary expenses such as lunches and dinners out.

Accept reality: lower your standard of living

Once you are within a few years of retirement, you can prepare a realistic budget that will help you manage your money in retirement.  Think long term. Retirees frequently get into budget troubles in the early years of retirement, when they are adjusting to their new lifestyles. Remember that when you are retired, every day is Saturday, so it’s easy to start overspending.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Trusts for Children

Most parents are aware of the need to appoint a guardian for their children in case of their deaths before the child reaches 18. This is accomplished in a properly executed will. A guardian is responsible for the person of the child: what he/she eats and wears; where the child lives and goes to school. Thought needs to be given to the estate of the child; that is, the inheritance that the child will be receiving. Guardianship does not automatically include control of the child’s financial assets.

Many alternatives exist for the handling of a child’s finances. The simplest method is to appoint a custodian to control the funds under the Uniform Transfer to Minors Act (“UTMA”). Under the provisions of this law, the custodian is authorized to invest the funds and to spend them for the support and education of the child. It is important to know that the child can demand that the account be turned over to him at age 18 unless (21) is added to the title. For example, a clause in the will could read “a one-half share to my son Frankie to be held by John Smith as custodian under the Uniform Transfer to Minors Act (21).”

To retain control of a child’s share beyond the age of 21, a parent must establish a trust for the child. This trust can be set up to take effect at the death of the parents if the child is then under a certain age. A trustee would be appointed in the document (a will or living trust) to control the funds until the child reached the age where the parents thought he/she would be sufficiently responsible to take ownership of the account. Thus, the provision could state that, when the parents are deceased, the inheritance for a child under the age of, say, 30 would be held until the child reaches 30. Until then the trustee may distribute such amounts of income and principal as may be necessary from time to time for the health, education, support and maintenance of the child. The trust may also allow distributions of principal at certain ages such as ½ and 25 and the balance at 30, or a certain sum upon graduation from college.

Increasingly we are seeing another use of trusts for children. Parents, concerned that the inheritance they give to their children may be lost to a creditor of the child or through a bad marriage, are establishing trusts that will last the lifetimes of their children. Parents will set up separate trusts to take effect at the death of the second of them to die for each of their children, no matter what the age of the child. These trusts typically require that all the income generated by the funds (dividends and interest) be paid out automatically to the beneficiary and give the trustee broad discretion to distribute principal as needed for the beneficiary or his/her children. Whatever balance is left at the death of the child can be directed to be distributed to his/her children, and often the child will be given the right to appoint the balance then remaining among his/her children as seems appropriate. This allows the child to place assets where most needed among the children.

The benefit of a lifetime trust for the child is that it keeps the inheritance segregated from marital assets and, thus, free of the claims of creditors and a divorcing spouse. Too, if the trust is properly drafted, the child can be the trustee for his/her own trust and therefore retain control over the funds.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Tax Act Implications for Education Savings

In late December, 2017, the President signed new federal tax legislation that will change how 529 accounts can be used. Individual states may have variations. One of the most impactful changes is that tuition for primary and secondary education is now a qualified expense. Other changes include higher gifting limits and tax-free rollovers from 529 accounts to ABLE accounts.

Primary and Secondary School Expenses

As part of the act, the IRS code was amended to reflect that “qualified higher education expenses” will now include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private or religious school. The changes made in the new tax program take effect after December 31, 2017 and there is no sun setting provision for this change.

The new legislation stipulates that the amount of cash distributions from all qualified tuition programs for a single beneficiary during any taxable year shall not exceed $10,000 for these expenses, incurred during that year. It merits noting that the rules for tax-free withdrawals for post-secondary education remain unlimited up to the amount of post-secondary qualified expenses incurred for the beneficiary.

At this time, individual states and program managers are in the process of reviewing the recent federal tax law changes and determining how best to incorporate them into their programs. Please consult with your tax advisor to best determine how each state may be treating the expenses associated with K-12 education.

Gifting Limits

In any given year, an individual can gift up to the annual gift tax exclusion amount to anyone without incurring gift tax consequences. Effective January 1, 2018, the exclusion amount increased to $15,000 from $14,000. And uniquely to 529 plans, an individual can accelerate the gifting by five years, thereby making an immediate contribution of $75,000. A married couple filing jointly can now make a split gift in the amount of $150,000 per beneficiary in 2018.

If a person makes the five- year election, the gift is ratably divided over five years; should the contributor dies, a prorated part of the gift is moved back into their estate. The five-year and/or split gift election is made on IRS form 709. Although a larger gift can be made, the amount exceeding the five-year election amount would reduce your Unified Lifetime Gift Tax Exemption. Contributions to a 529 plan account are considered completed gifts to the named beneficiary, but from a legal standpoint the owner always controls the account.

Rollover Provisions

The new legislation also allows for a tax-free rollover of a 529 account to an Achieving a Better Life Experience(ABLE) account. The rollover would need to take place prior to January 1, 2026, as this provision expires. ABLE accounts were created in 2014 to give individuals with disabilities and their families the opportunity to save for the future without limiting access to critical income, healthcare, food or housing assistance programs. Rollovers from 529 plans are still subject to annual contribution limits of $15,000 in 2018.

Certain conditions may apply. Earnings in 529 plans are not subject to federal tax, and in most cases, state tax, so long as you use withdrawals for eligible education expenses, such as tuition and room and board. However, if you withdraw money form a 529 plan and do not use it on an eligible education expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. Rules and laws governing 529 plans are varied and subject to change. As with other investments there are generally less fees and expenses associated with participation in a 529 plan. There si also risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider before investing, whether the investor’s or the desired beneficiary’s home state offers state tax or other benefits only available for investments in such state’s 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. 529 plans outside their resident state may not provide the same tax benefits as those offered within their state. Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. While familiar with the tax provisions of the issues presented herein, Raymond James Financial Advisors are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matter with the appropriate professional.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Tax Cuts and Jobs Act

The Tax Cuts and Job Act legislation was signed into law on December 22, 2017. The Act makes extensive changes that affect both individuals and businesses. Some key provisions of the Act are discussed below. Most provisions are effective for 2018. Many individual tax provisions sunset and revert to pre-existing law after 2025. The corporate tax rates provision is made permanent.

Individual income tax rates

Pre-existing law: There were seven regular tax brackets: 10, 15, 25, 28, 33, 35, and 39.6 percent.

New law: There are seven tax brackets: 10, 12, 22, 24, 32, 35, and 37 percent. These provisions sunset and revert to pre-existing law after 2025.

Standard deduction, itemized deductions, and personal exemptions
Pre-existing law: In general, personal (and dependency) exemptions were available for you, your spouse, and your dependents. Personal exemptions were phased out for those with higher adjusted gross incomes.

You could generally choose to take the standard deduction or to itemize deductions. Additional standard deduction amounts were available if you were blind or age 65 and older.

Itemized deductions included deductions for medical expenses, state and local taxes, home mortgage interest, investment interest, charitable gifts, casualty and theft losses, job expenses and certain miscellaneous deductions, and other miscellaneous deductions. There was an overall limitation on itemized deductions based on the amount of your adjusted gross income.

New law: The standard deduction is significantly increased, and the additional standard deduction amounts for those over age 65 or blind are still available. The personal and dependency exemptions are no longer available.

Many itemized deductions are eliminated or restricted. The overall limitation on itemized deductions based on the amount of your adjusted gross income is eliminated.

The 10 percent of AGI floor for the deduction of medical expenses is reduced to 7.5 percent in 2017 and 2018 (for regular tax and alternative minimum tax.)

The deduction for state and local taxes is limited to $10,000. An individual cannot prepay 2018 income taxes in 2017 in order to avoid the dollar limitations in 2018.

The deduction for mortgage interest is still available, but the benefit is reduced for some individuals, and interest on home equity loans is no longer deductible.

The charitable deduction is still available but modified.

Child tax credit

Pre-existing law: The maximum child tax credit was $1,000. The child tax credit was phased out if rackets. child tax credit was refundable up to 15 percent of the amount of earned income in excess of $3,000 (the earned income threshold).

New law: The maximum child tax credit is increased to $2,000. A nonrefundable credit of $500 is available for qualifying dependents other than qualifying children. The maximum refundable amount of the credit is $1,400, indexed for inflation. The amount at which the credit begins to phase out is increased, and the earned income threshold is lowered to $2,500. The changes to the credit sunset and revert to pre-existing law after 2025.

Kiddie tax

Instead of taxing most unearned income of children at their parents’ tax rates (as under per-existing law), the Act taxes children’s unearned income using the trust and estate income tax brackets. This provision sunsets and reverts to pre-existing law after 2025.

Corporate tax rates

Under the Act, corporate income is taxed at a 21 percent rate. The corporate alternative minimum tax is repealed.
Special provisions for business income of individuals

Under the Act, an individual taxpayer can deduct 20 percent of domestic qualified business income (excludes compensation) from a partnership, S corporation, or sole proprietorship. The benefit of the deduction is phased out for specified service businesses with taxable income exceeding $157,500 ($315,000 for married filing jointly). The deduction is limited to the greater of (1) 50 percent of the W-2 wages of the taxpayer or (2) the sum of (a) 25 percent of the W-2 wages of the taxpayer, plus (b) 2.5 percent of the unadjusted basis immediately after acquisition of all qualified property (certain depreciable property). This limit does not apply if taxable income does not exceed $157,500 for married filing jointly. ($315,000 for married filing jointly), and the limit is phased in for taxable income above those thresholds. This provision sunsets and reverts to pre-existing law after 2025.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Amy & Dan Smith's Planning for Life: Executor, Administrator, Trustee: What's The Difference?

The Executor is the person appointed in a will to administer the estate of the decedent. Typically, after the death of the testator the Executor makes an appointment with the Probate Division of the Circuit Court and, after producing the original of the will and the death certificate, is sworn to uphold his/her responsibilities to administer the estate properly and honestly. This is called “qualification,” and the Executor is given a certificate which evidences his/her office. The Executor’s duties are explained by the Clerk of Court.

An Administrator is the title given to a person appointed to administer an estate where there is no will (an “intestate estate”). He/she has the same duties as the Executor except that the beneficiaries of such an estate are set forth by statute since there is no will.

Over recent years the term Personal Representative (or “PR”) has come into use as a generic term which applies to either the Executor or the Administrator. For convenience this article will use the term PR hereafter to apply to both positions.

The qualification of the PR is recorded in the permanent records of the Probate Division which are open to the public. Over recent years this has led to a practice among real estate agents to review the records regularly and to contact the named persons to solicit listings for real estate which may be in the estate. One such person told your writer recently that he makes around 60 calls per week just from the Fairfax County records alone.

Virginia has a system for overseeing the actions of the PR through the Commissioner of Accounts who is appointed by the Circuit Court. After an initial meeting with the Clerk of the Probate Division, the PR will be dealing with the Commissioner. The inventory and accounting will be filed in the Commissioner’s office.

The office of the Commissioner of Accounts is usually very helpful to the lay person who is encountering responsibilities as PR. Regular “how to” seminars are provided free of charge, and staff is usually good about answering questions. Sometimes, however, it is wise to consult with an attorney as, for example, when creditors of the estate are involved or there are conflicts among beneficiaries. If the estate is insolvent (ie, more debt than assets), the PR should consult with counsel because paying one creditor ahead of others may constitute a “preference” for which the PR could be personally liable.

The PR must be careful to keep insurance coverage over the assets in the estate to prevent loss during administration. This can be problematic where there is unoccupied residential real estate.

A Trustee is the person(s) appointed to administer a trust. A trust may be established in a will (a “testamentary trust”), in which case it comes into existence at the death of the testator, or during lifetime (a “living trust” or an “inter vivos trust”). If the trust is established in a will, the nominated trustee must be qualified by the Probate Division of the Circuit Court just as a PR. The Trustee and the PR can be the same person(s). Depending on the terms of the will, the Trustee may or may not be required to file an inventory and accountings with the Commissioner as required of the PR.

Paradoxically, the Settlor(s) and the Trustee(s) of a living trust are usually the same people, so the parties are agreeing with themselves. The Trustee of a living trust does not need to qualify. Unlike a will it is not required to be recorded, so it provides a measure of privacy. The living trust is a time-tested, effective estate planning device.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.

Tackle Year-End Deadlines and Look Ahead to 2018

With happy holidays come distracting deadlines. Our gift to you: wrapping them up in this year-end guide. Now’s the time to talk to your advisor about taking advantage of tax-deferred growth opportunities, tax-advantaged investments and charitable-giving opportunities, among other strategies. And before the ball drops in Times Square, set your financial goals for 2018.

Fall 2017 Market Closures
Thursday, November 23: Thanksgiving Day
Monday, December 25: Christmas Day

Planning To-Do’s

Discuss year-end planning: Ask your advisor to coordinate with your tax advisor and attorney to address year-end financial and tax planning.

Adjust your coverage: Prepare your documents for Medicare open enrollment, if eligible.

Check cost of living: The Social Security Administration typically announces next year’s cost-of-living adjustment in October. Keep an eye out for this important information.

Consider retirement: New retirement plan contribution limits come from the IRS. Plan to adjust contributions appropriately.

Review your portfolio: Many mutual funds make taxable distributions toward the end of the year. You may want to consider balancing your realized capital gains with losses where appropriate. If invested in mutual funds, don’t forget about important capital gains distributions dates that typically fall in mid-December.

Heed donation deadlines: Remember year-end gift and charitable contributions deadlines. Be sure to allow enough time to complete donations, and keep tax limitations in mind if you plan to give tax-exempt gifts to relatives or friends this year.

Plan to harvest tax losses: Review and implement year-end tax planning decisions for the upcoming tax season. Consider rebalancing at the same time for tax efficiency.

Keep calm and consult on: You’re likely to pick up investment tips around the holiday party punchbowl. No matter the source, take the cautious path: Consult your advisor before acting.

Set financial goals for 2018: Reassess retirement savings and work with your advisor to make adjustments, if needed.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com).

Amy V. Smith Wealth Management, LLC is an independent firm.  Amy V. Smith, CFP, CIMA offers securities through Raymond James Financial Services, Inc., member FINRA/SIPC.  Her office is located at 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176.  (Tel: 703-669-5022, www.amysmithwealthmanagement.com). Any opinions are those of Amy and Dan Smith and not necessarily those of Raymond James.  Raymond James does not guarantee that the foregoing material is accurate or complete and does not provide legal advice.  Dan Smith is not affiliated with Raymond James.