Mt. Pleasant (989) 772-1209 | Midland (989) 631-9500
RFM Financial Solutions, LLC

Archive for July, 2011

Terrific video from Morningstar regarding the current bond trends.

How can stocks be approaching an all-time high if the economy is suffering from high unemployment and sagging home prices?  Watch this great video from MoneyWatch for an explaination.

Many parents, especially the older ones, assume it is wise to add a child’s name to their house deed in case something should happen to them. On the contrary, it is probably the worst thing that can be done. By doing so, the parent creates a host of problems.

  • Gift Tax Issue – For gift tax purposes, adding a child to the title constitutes a taxable gift of the ownership interest in the home to the child. If the value of that gift exceeds the annual gift tax exemption ($13,000 for 2011), then a gift tax return must be filed. No gift tax will probably be due if the total of the current and all former gifts is less than $1,000,000, since that is the current lifetime gift exemption for an individual. (The limit increases to $5,000,000 for 2011 and 2012.) However, the law requires that the return be filed so that the IRS can track all of the gifts in excess of the annual exemption that an individual makes during his or her lifetime.
  • Home Sale Gain Exclusion – Current tax law allows homeowners who meet certain ownership and occupancy requirements to exclude from taxable income up to $250,000 ($500,000 for most married couples) of home sale gain. Thus, if a home deeded to a child is subsequently sold, the home gain exclusion will not apply to the child’s portion unless the child lived in the home for two of the prior five years. This can result in a substantial tax liability, depending upon the value of the home and the child’s ownership portion. Should the parent place the entire property in the child’s name, then generally none of the gain would be excludable and even worse, the parent is at the mercy of the child should the child decide to sell the home. There is no guarantee that the child will continue to care for the parent.
  • Debt Liability – Since property is subject to the debts of its owners, and if a child is a part owner, a debtor might file a lien on the property for the child’s debts.
  • Medicaid – Gifting the home to a child could, under certain circumstances, be considered a gift for Medicaid qualification purposes, making the parent ineligible for Medicaid benefits in the event of a long-term health crisis.

There are additional issues to consider as well, including the tax ramification to the child based upon the home being a gift or ultimately inherited. Please call us at (989) 772-1209 or email us to discuss these issues in detail before placing your home in any of your children’s names.

Starting next year, you’ll no longer be able to buy paper savings bonds at banks and other financial institutions.

Paper savings bonds, which have been around since 1935, will be replaced by electronic bonds come January 1, the Treasury Department’s Bureau of Public Debt said Wednesday.

Treasury said the move will save taxpayers $70 million over the first five years.

“Savings bonds are very much a part of this country’s history and culture, and will remain a part of America’s future — but in electronic form,” Public Debt Commissioner Van Zeck said in a statement. “It’s time for us to take a 1935 model and make it a 21st century investment tool.”

What’s your savings bond worth?

In 2012, you will only be able to buy electronic savings bonds in Series EE and I through TreasuryDirect, a free online bond-buying portal that has been available since 2002.

There will be one exception, however: You’ll still be able to use your tax refund to buy Series I paper savings bonds.

The Treasury announced its “all-electronic initiative” last year, and has already ended the sale of paper bonds through traditional payroll plans. The department estimated that the all-electronic initiative, which eliminates costs associated with printing, mailing, storage, and fees paid to financial institutions for processing savings bond applications, could result in a total savings of $120 million over the next five years.

For those who hold paper savings bonds, don’t put them in the shredder. The bonds can still be redeemed at financial institutions. Paper bonds that have yet to reach their maturity date and have been lost, stolen or destroyed, may also be converted to electronic form.

New from Schwab Mobile—the app for Android™ and the ability to deposit checks anywhere, anytime. Anyone who is currently using the Schwab iPhone® app already has the advantage of moving money and accessing accounts effortlessly via their smartphones. Now those with Android devices can have the same access.

If you are enrolled in, or have a Schwab retail brokerage account, they can use Schwab Mobile via Android or iPhone to:

  • Deposit checks by simply taking a picture with an Android or iPhone, and transfer money between accounts with ease
  • Manage funds by viewing balances for brokerage, Schwab Bank, and 401(k) accounts
  • Keep an eye on the market with real-time quotes, charts, watch lists, news, and more

Keeping You Connected to Your Money
We’re always working on technology that brings you greater flexibility and efficiency when it comes to staying on track with your financial goals. Next up, a new app for iPad.

Help Getting Started with Schwab Mobile Deposit™
After you download the latest Android and iPhone apps, all you need to do is follow these simple steps to apply:

  1. Update their smartphone with our latest app and log in.
  2. Tap on “Deposit Check.”
  3. Follow the prompts on the screen to apply.

Just take a picture of the front and back of a check and tap a few screens. You can  be assured that, once the images are submitted, you will get immediate confirmation on your mobile device that the deposit is being processed. Deposits made before 4 p.m. will be processed the same business day.

1. Anyone can call themselves a planner.

To avoid amateurs, hire a planner who’s earned special credentials (such as a Certified Financial Planner or Personal Financial Specialist designation) by meeting training standards or having a certain level of experience.

2. Planning is more than investing.

Not all planners offer comprehensive services. Some just give investment advice or focus on one aspect of planning, such as insurance or taxes.

3. Expand your choices.

When hiring a planner, interview at least three pros to find the one who can deliver the services you need and who’s compatible with your style.

4. Personal references are a good place to start – but not the last stop.

A reference from a friend or family member is a great way to search for a financial planner. But make sure you’ve got similar needs as the person who’s giving the referral. Go to groups like the Certified Financial Planner Board of Standards and the Financial Planning Association for additional references.

5. Understand how your planner is getting paid.

The three most common set-ups are: Fee-only, fee-based, and commission-based. Fee-only planners don’t get commissions for the products they sell – fees are for the advice they give. Fee-based planners may receive commission on some products they sell, but most of their money comes from a fee you pay them. Commission-based planners are paid by the companies whose products they sell.

6. Check credentials.

Check to see if a planner’s record is tarnished by disciplinary problems or complaints. Groups that award credentials or state agencies keep tabs on planners and can provide help.

7. Get references.

Ask a planner for two or more of his clients – then follow up and call to find out how a planner performs in specific circumstances, such as during a financial crisis.

8. Express yourself.

The quality of a planner’s advice is correlated to how well he or she knows you. Make sure a planner asks questions about your finances, goals, risk tolerance and philosophy. If they don’t ask, they probably aren’t paying adequate attention.

9. Know what they’re selling.

Find out what financial products a planner sells and how much he or his firm earns for making a sale. Be wary of planners who push one product – say, one family of mutual funds or one kind of insurance – as they may not give you the unbiased or comprehensive advice you need.

10. Know yourself.

The best planner will take his cues from you. Before you hire someone, identify the financial goals you want to meet, your assets and liabilities, your risk tolerance, and investment style. Are you self-directed or do you want specialized help?