As it stands now, when 2013 gets here, taxes are most likely going up. The tax cuts signed in 2001 and 2003 by President George W. Bush expire this year and brackets return to the previous rates of up to 39.6 percent in 2013 from 35 percent now. In addition, the child tax credit expires and capital gains rates go back to 20 percent from zero to 15 percent this year.

The only thing that could stop these changes is Congress. Being an election year, taxes are a hot topic. But it’s also a topic that may not see much action in an election year. A possible gridlock and unknown outcome make it important to get help now with tax planning to head off the potential hike.

Here are some possible areas to plan for:

• Convert traditional IRAs to Roth IRAs. While this decision is based on each individual’s situation, those that are considering converting may want to pull the trigger this year. Conversions are considered ordinary income so will be taxed at the individuals’ current tax rate. For the wealthy, it would be better to be taxed at 35 percent instead of 39.6 percent.
• Take income earlier. If you are able to control when income is received, taking it in 2012 could result in it being taxed at a lower rate. This includes exercising options.
• Sell profitable investments. If the capital gains tax is headed to 20 percent in 2013, some individuals may want to consider cashing in gains at 15 percent this year; this includes gains on selling a business.
• Reduce dividends. If dividends become taxed at the taxpayer’s tax rate in 2013 instead of up to 15 percent now, some individuals may want to rebalance their portfolio to put investments that pay no or lower dividends in their taxable accounts and higher dividend investments in tax-deferred accounts such as 401ks and IRAs. On top of this, in 2013 investment income would be taxed an additional 3.8 percent for those with incomes over $200,000 single or $250,000 for married filing jointly. This includes interest, dividends, capital gains and rental income. The tax is part of the health care reform plan.

Tax planning in a time where the future is unknown is difficult, but knowing what could change can help anyone prepare now to make changes to their finances if needed.

• Save for their own retirement instead of having a pension to rely on
• Pay more for their own health care as companies pick up less of the insurance premium and out-of-pocket expenses
• Manage their own retirement plan through a 401k instead of relying on a defined benefit plan (pension)
• Pay for more of their medical costs in retirement as companies pay fewer retiree health benefits

American Airlines recently became the latest company to cut worker benefits. It has told employees that it wants to do away with its pension plan and only offer employees a 401k.

• For those employees who are in the 401k now and will lose their job, there is a silver lining — they no longer have to participate in the American 401k plan. Any employee leaving a company that has a 401k can roll it over into an Individual Retirement Account (IRA). The benefits being:
• Lower investment fees — 401ks can be one of the most expensive retirement plans available. The balances can be invested in lower cost investment choices and not be subject to administrative fees.
• More investment choices — Having an IRA opens a world of possibilities in where to invest money for retirement. The 401k typically has limited choices.
• Allow a Roth Conversion — Rolling a 401k into an IRA allows for balances to be converted into a Roth IRA. This would allow future growth and retirement withdrawals to be tax free in return for paying the income tax now on the current balance, which should mean a total lower tax than in retirement. And now there is no longer an income limit to be eligible to convert.
• More flexibility in beneficiaries — An IRA allows more options for who the money will be passed on to at death and opportunities to delay income taxes to the beneficiary.

Contact a CFP for help with IRA rollovers, the rules and managing retirement plans.

 
Here are some “New Year, New Life” tips:

 
1. Move your needs to the front burner. Especially if you have children, you may have spent years pushing your needs and dreams to the back burner. Now it’s time to take some time for yourself. This doesn’t mean becoming completely selfish, or shutting yourself away from others, but it does mean taking the time to rediscover and follow your bliss. Do at least one thing that matters to you every day.

 
2. Let go of the past. It’s time to start the next chapter of your life — and to do that, you need to shut the page on the last one.

 
3. Gifts from the heart, not from the mall. You may think you really want that new 50-inch flat screen TV, but the joy of having that will wear off in short order. The most wonderful gifts are totally free: spending time with friends and family, and enjoying your favorite hobby/sport/leisure activity. Give the gift of quality time with you to your children, family, and friends. Give them your full attention, and don’t forget to tell them how blessed you feel to have them in your life.

 
4. Search for happiness within. If you’re still waiting for others to make you happy, you need to cut that out right now! It only works for a very short time, and then you’re left more miserable when it stops working (and it always does). If you’re not happy with who you are on the inside — and if you’re not comfortable spending time in your own company — you won’t be happy in a long-term relationship with anyone else either. Create happiness and stability in your own life before looking to share your life with someone else.

 
5. Take a tip from the kids. Dr. Wayne Dyer is the author of No More Holiday Blues: Uplifting Advice for Recapturing the True Spirit of Christmas, Hanukkah, and the New Year, an inspirational little book that offers positive suggestions in a quick-read format. Dr. Dyer says that, as adults, “we’ve come to believe that the holiday season is really only for children … thus only children can enjoy the holidays; adults must suffer through them.” He contrasts child-like attitudes (“I can’t believe it’s over already, it seems like it just started”) to negative adult attitudes (“Thank God it’s over. If it lasted one more day I’d have a nervous breakdown”). Ring any bells? This year, try to recapture some of the joy you experienced as a child during the holidays.

 
6. Forgiveness will set you free. You need to find a way to forgive your ex — and then forgive yourself — for what went wrong in your marriage. That doesn’t mean forgetting the lessons you learned, but it does mean letting go of the bitterness that’s poisoning your life. Remember: hatred binds us as mercilessly to its object as does love. So forgive, and free yourself.

Strategic Financial Planning is ready to navigate your life plan that not only creates peace of mind for a long-lasting relationship but can also help ease or head-off any difficult periods in your relationship. We are experienced and formally educated in financial planning for domestic and unmarried partners. SFP planner Dan Serra is among the first advisors nationwide to become an Accredited Domestic Partnership Advisor℠ designee, the only professional designation geared toward financial planning for domestic relationships read more …

Why plan now?

For opposite-sex unmarried couples, cohabitation creates a unity full of important financial decisions that need to take place together to maintain the unity. Not having a plan can leave one partner unprotected financially if something happens to the other partner. Clear documented plans can prevent financial disputes and provide protection to each partner that is not available through the laws that benefit legally married couples. And more importantly, a plan can bring even more harmony to a relationship. The number of court battles between former partners has increased in the past five years as living together grows. Even though unmarried, cohabitating couples can find themselves with the same issues as a married couple if a separation occurs. In fact, 1 in 4 partners living together experience a breakup, according to university researchers who studied cohabitation. And of those, many found “larger declines in life satisfaction” after a breakup.

For gay and lesbian couples, the laws create roadblocks that legally married couples don’t have to leap over or that provide a disadvantage in financial planning. Gays and lesbians unaware of the financial rules, or the lack of rules, can find themselves facing penalties or in dire straits when one partner falls on hard times, becomes ill, dies or a separation occurs. SFP is trained in these rules and strategies for helping to manage a financially successful relationship and provide each partner security throughout life.

Issues to address for all unmarried and domestic partners include:

• Wealth Transfer to ensure each partner is provided for in life and at partner’s death in a tax-efficient manner
• Estate Planning to protect and pass on assets to a partner and give legal authorities to each partner
• Property Ownership techniques to manage property efficiently
• Income Tax Planning to make tax-efficient decisions and reduce taxes when possible
• Partner Agreements to spell out promises to each other and how to handle financial decisions
• Insurance Planning to help partners manage risks, liabilities and meet income needs
• Retirement Planning to create a plan for building and maintaining wealth throughout retirement
• Investment Planning to develop a diversified portfolio according to the goals of each partner

Contact SFP today to discuss your situation and how we can help navigate a life together.

ACCREDITED DOMESTIC PARTNERSHIP ADVISOR ℠ and ADPA ℠ are service markets of the College for Financial Planning®.

One of the biggest twists is more couples are waiting to get married and instead just choosing to live together. U.S. Census reports say as many as 1 in 5 households are led by a couple who are not legally married. And in Canada, the government said last month it will no longer track marriage and divorce statistics because more people that are living together unmarried may skew the statistics.

But by staying single, yet in a long-term relationship, running a household’s finances is more challenging. Couples often have to manage separate bank accounts. Joining accounts can get messy if the relationship ends. It is important for all single couples to have a clear written plan on how household finances are managed and what assets are kept separate. Just because a couple live together, the finances shouldn’t.

In fact, one reason some couples choose not to marry is because one of them has financial difficulties or is not financially secure. Once the couple marries, those problems can be both their problems. Therefore, it often makes sense to stay unmarried until everyone is financially prepared to begin a legal relationship.

Before moving in together, each couple should do an inventory of their finances, such as what they own and what they owe, and share it with each other. There’s no easier way to stop a relationship in its tracks than to discover a partner has a big problem that needs professional help to fix.

It may even be wise for each partner to sit down with a financial planner who specializes in working with unmarried couples to go through the details and explain concerns and how to overcome obstacles, both potential legal issues and emotional issues. Look for financial planners who hold a new designation called Accredited Domestic Partnership Advisor, which has trained them in helping unmarried partners.

SFP is prepared to help you create a strategy to play your cards. We work with couples, individuals and attorneys in analyzing the financial complexities to create an outcome that each spouse feels is fair. Most financial advisors, accountants and attorneys excel in their field but have little or no training specifically related to the financial issues of divorce. As a CDFA™ (Certified Divorce Financial Analyst™), SFP’s Dan Serra has gone through an intensive training program to become skilled at analyzing and providing expertise on the financial issues of divorce. This allows SFP to serve in a role of making sure you and your attorney fully understand how the financial decisions made today can impact your future – and analyze a settlement proposal before signing an agreement.

Some common mistakes are:

• Negotiating to keep a home when one may not afford it
• Not understanding tax consequences of investment and property sales; retirement accounts; and spousal support
• Not looking at a long-term impact of a settlement
• Not understanding how to divide debt

Hiring a CDFA™ can help you understand:

• The difference between personal and marital property
• How property is valued and divided
• Rules for dividing retirement and pension benefits
• Tax problems and solutions
• Whether to keep a house or sell it
• Impacts of various settlement proposals

To start creating your peace of mind today, contact us or call Dan at 972-403-1234

Serving: Dallas, Plano, Frisco, McKinney, Allen, Richardson, Carrollton, Lewisville, Flower Mound, The Colony, Prosper, Highland Village, Coppell, Grapevine, Southlake, Colleyville, Irving and Highland Park.

Follow @divorceplanner on Twitter for divorce tips, news and issues

A: Because you don’t want to gamble with your financial future. Finding the right professional for your situation is key; you need an attorney to provide legal advice, but you also need a CDFA™ to provide financial advice. A CDFA™ becomes part of your “divorce team” to provide support for your attorney. A CDFA™ provides the data that shows the financial effect of a settlement and, if needed, can appear as an expert witness in court. Once you reach a settlement, it can’t be changed. Therefore, spending time evaluating your financial future is perhaps the most important step in a divorce.

Q: What is the process for working with SFP?

A: First, key data are gathered, such as income and expenses for husband and wife, followed by assets and liabilities. You will be provided a checklist of documents. If you meet with SFP before an attorney, you can often save time and money by making sure the financial information is complete – which allows the attorney to focus on the legal aspects of the case. A divorce financial planner is viewed as the financial expert and can come aboard at any stage of the divorce process.

Q: What does it cost?

A: A CDFA™ charges hourly or by retainer fee much like attorneys. At SFP, the hourly fee is $150 with a minimum of $1,000 (6.5 hours). The average divorce analysis takes 10 hours. Clients with more complicated situations may want to go on retainer where the hourly fee is as low as $87.50 an hour when an analysis may take more than 15 hours.

Q: What cities do you serve?

A: We are able to help nationwide but because of our location and the benefit of meeting in person, we are convenient to the cities of Dallas, Plano, Frisco, McKinney, Allen, Richardson, Carrollton, Lewisville, Flower Mound, The Colony, Prosper, Highland Village, Coppell, Grapevine, Southlake, Colleyville, Irving and Highland Park.

Q: Do you help women only?

A: No. SFP is an advocate for both men and women. We can even work with a couple to create a fair and equitable financial settlement ready to present to an attorney to finalize the divorce.

Q: Are you sensitive to my personal beliefs?

A: We understand traditions and religions influence how divorce is handled. We are able to work with you on following moral and ethical guidelines of your personal beliefs and address any barriers that may pose a conflict.

Q: How do I know I would benefit from hiring SFP?

A: Clients that receive the most benefit come from a marriage where their joint income is $250,000 or greater and/or total assets exceed $500,000. The couple is also willing to collaborate in a non-confrontational manner in order to work together toward an agreement. The family dynamics vary, and can include a stay-at-home mom, a retired couple, or a business owner. See what our clients have in common.

Use our Contact Page to send us your question.

Couples who once played well together are faced with a monumental task when they discover the relationship has been dealt a bad hand. The financial impact can be devastating and life becomes a house of cards. Spouses must carefully plan how the relationship ends in order to protect their financial future because in divorce, there are no “do-overs.”

SFP is prepared to help you create a strategy to play your cards. We work with couples, individuals and attorneys in analyzing the financial complexities to create an outcome that each spouse feels is fair. Most financial advisors, accountants and attorneys excel in their field but have little or no training specifically related to the financial issues of divorce. As a CDFA™ (Certified Divorce Financial Analyst™), SFP’s Dan Serra has gone through an intensive training program to become skilled at analyzing and providing expertise on the financial issues of divorce. This allows SFP to serve in a role of making sure you and your attorney fully understand how the financial decisions made today can impact your future – and analyze a settlement proposal before signing an agreement.

Some common mistakes are:

• Negotiating to keep a home when one may not afford it
• Not understanding tax consequences of investment and property sales; retirement accounts; and spousal support
• Not looking at a long-term impact of a settlement
• Not understanding how to divide debt

Hiring a CDFA™ can help you understand:

• The difference between personal and marital property
• How property is valued and divided
• Rules for dividing retirement and pension benefits
• Tax problems and solutions
• Whether to keep a house or sell it
• Impacts of various settlement proposals

To start creating your peace of mind today, contact us or call Dan at 972-403-1234

Serving: Dallas, Plano, Frisco, McKinney, Allen, Richardson, Carrollton, Lewisville, Flower Mound, The Colony, Prosper, Highland Village, Coppell, Grapevine, Southlake, Colleyville, Irving and Highland Park.

Follow @divorceplanner on Twitter for divorce tips, news and issues

Read Frequently Asked Questions (FAQs) about working with a divorce planner

The first step in creating a care plan is to divide the tasks among family members. Each child should be given an assignment, such as:

—Interview nursing home staff for details on cost and services;

—Work with a financial planner to create a strategy for managing expenses and assets;

—Meet with an attorney to structure legal documents.

When shopping for nursing homes, each one should be carefully evaluated on costs and services. Each home has its own pricing plan and what is included, or not included, in that price. All nursing homes are not a “one price for all” service. Each home should provide pricing and services in writing. In addition, obtain a copy of the contract and have an elder law attorney review it first. Never sign a blank contract.

A financial planner can help a family anticipate financial needs and resources. Unfortunately, no one knows the number of years a parent will live, which makes planning difficult. But once the nursing home is chosen and the doctor has estimated medical or drug needs, the planner can use these costs to be more precise.

The planner should create an annual budget for the parent and detail how assets would be most efficiently withdrawn to meet expenses. A net worth statement should list any annuities, pensions, trusts or benefits the parent is entitled to receive. The planner should also be knowledgeable of Social Security benefits and Medicaid planning in case the parent runs out of money. A fee-only planner is a good choice to receive unbiased advice and avoid potential solicitation of product sales. All the children should attend the plan meeting so that all agree on the strategy.

The attorney has an important role in making sure legal documents give a child or children authority to act on the parent’s behalf. This is important to make medical decisions and prove to the bank or investment company that the child can make transactions for the parent, usually by power of attorney. If the parent is wealthy, the attorney could also offer strategies for avoiding estate taxes now and in the future.

Putting a parent in a home is not an overnight event. Getting organized — and getting all the siblings on the same page first —eases the process and prevents disputes.

-Dan Serra, CFP, MS. Plano, Texas

The decline is attributed to Medicare changes under recent health care reform. The change reduced expenses for prescription drugs.

“While the savings generated through the health care reform laws is a welcome relief to many seniors, it should be considered a one-time adjustment, at least for the time being,” Brad Kimler, executive vice president of Fidelity’s Benefits Consulting business, said in a news release. “Today’s workers still face the prospect of significant medical expenses in retirement and must begin to include those costs in their retirement plan strategies.”

Kimler added that we should expect health care expenses to continue to rise as medical services continue to see price increases.

In the meantime, seniors now can enjoy those drug savings. Beginning this year, the law offers a 50 percent discount on brand name drugs that fall into the “donut hole” — the gap in Medicare between $2,840 and $4,550. This gap will further be reduced until eliminated in 2020.

The concept of the government helping to reduce medical costs isn’t extending to nursing-home expenses, however. This is a big misconception among Americans, who often mix long-term care with medical care. They are not the same. Still, 45 percent of those between 40 and 64 expect the government to pay their long-term care costs, according to a recent Thrivent Financial survey of 2,000 adult Americans (including 745 pre-retirees).

“Many who expect that government will foot the bill for their future long-term care may be unpleasantly surprised,” Mona Diebold, manager of long-term care solutions at Thrivent Financial for Lutherans, said in a news release. “While federal and state governments share responsibility for running Medicaid and Medicare programs that may pay for long-term care, restrictions limit who may qualify and when. Often, for example, individuals with personal financial resources first must substantially ‘spend down’ those resources before government programs will aid them.”

An estimated 70 percent of individuals over age 65 will require long-term care services at some point in their lives, according to the National Clearinghouse for Long-Term Care Information.

-Dan Serra, CFP, MS

Part of the planning may be a pre-marital contract. This makes sense not only to show who owns what, but can protect either spouse’s business from being caught in a divorce. It also helps each other avoid assuming debts of the other. Overall, the pre-marital contract can prevent a bad divorce experience.

In most states, what an individual brings into the marriage can remain his or her separate property, as long as it is not mixed with shared property, such as a joint checking or investment account. Also, property inherited or gifted during a marriage to one spouse may remain that spouse’s separate property.

While property owned at the time of marriage can be kept separate, property obtained or earned during a marriage may not be separate. For example, if the husband buys a car in his name, legally it is likely half the wife’s. The debt can be half the wife’s too. That’s because it is seen as being purchased with income earned during a marriage. This can even be the case for growth of separate property. If the wife has an IRA at the time of marriage and it grows by $50,000, then $25,000 of the growth can be the husband’s because it was earned while married.

If both spouses agree to separate property, it is important to speak to an attorney about a written agreement and proof that the property is separate. If a marriage ends in divorce, the court is going to want proof it is separate property.

In some states like Texas, marriage is not the only act that can create joint property. Just being in a relationship where two individuals are holding themselves out as husband and wife and are living together may trigger a ruling of joint property by a court for property obtained during this relationship. This could be detrimental to an individual who uses his or her money for a major purchase only to see half of it taken away when the relationship ends.

If this is the case in your state, a co-habitation agreement may be a good idea. This is like a pre-marital agreement for singles. Any individual with substantial wealth or property should consult an attorney before entering a serious relationship.

-Dan Serra, CFP, MS

February is the month of love, when couples renew their commitment to each other by buying chocolate hearts and flower bouquets. But spending money is not the answer to a long relationship. In fact, not being able to spending a lot of money could help a relationship grow stronger.

Couples who develop a budget together and agree on how the money is spent are more likely to understand that love comes from the heart, not the wallet. These couples understand that time together is what is most important.

Other couples who are suffering through tough financial times also grow stronger by working together to survive. A recent survey found 38 percent of couples said recessionary times can prevent a divorce or separation, according to the National Marriage Project at the University of Virginia. And 29 percent said the recent recession deepened their commitment.

It is unfortunate that it takes a recession to make couples realize how important it is to work together toward successful financial planning. Acting as a team, a couple should plan on how to handle both prosperous economic times and deteriorating financial conditions. This way, the couple knows ahead of time what to expect when things aren’t going right, and more importantly how not to get carried away and forget about saving for the bad times when the money is flowing.

Key points that couples should plan ahead of time include:

1. Whether to keep separate bank accounts or merge into a joint account;
2. How to pay off debt and avoid debt;
3. How to avoid overspending and how to discuss how to avoid surprising each other with expenses;
4. How to discuss money secrets so that the other half can help solve issues or avoid disputes;
5. How much to save for emergencies and what those emergencies could be.

Working together as a couple not only bodes well for the relationship, but the nation.

“Research shows that marriage makes people happier, live longer, and build more economic security. Children with married parents perform better in school (and) have less trouble with the law, less teen pregnancy and fewer issues with addiction,” said Sheila Weber, executive director of National Marriage Week USA, an effort to promote the benefits of marriage.

- Dan Serra, CFP, MS