By Edward Leone Jr. CFP RFC DMD MBA
Contact Information:
edleonedds@gmail.com 303-478-6793
It is clearly a challenging time for the global economy. Troubles in Japan, China, South America and Europe have many climbing the wall of worry and viewing the US economy as improving. The more I read about the theories of Maynard Keynes the better I understand what is going on here. He prescribes a temporary government intervention with both monetary and fiscal policy adjustment in difficult economic times. Many interpret his approach as monetary only and have prescribed those fixes with less than adequate results. Europe is a prime example along with Japan. Here in the US, the Federal Reserve has admitted that it is doing all that it can with the monetary measures at hand but is not getting help from the Congress and the Executive with fiscal policy adjustment. Perhaps now that the election is over, things will change regarding fiscal policy matters which relate to taxing policies.
Much has been touted regarding the ability for those over the age of 62 to tap home equity for living expenses by engaging a reverse mortgage. A new twist to this vehicle called HECM will allow the purchase of a residence for those over the age of 62 with 1/2 the purchase price as a down payment and utilizing a reverse mortgage to pay the rest of the price yielding no mortgage payment.
You may want to check it out.
The filing of tax returns for those who have used federal subsidies to purchase health insurance in 2014 as a result of the Affordable Care Act will be a bit complicated due to the imposition of form 8962 which will require reconciliation of subsidies received with credits actually granted by entitlements. Along with this, those who had no coverage will be required to complete a quite complicated form to figure their penalty tax.
For those who are subject to AMT, be careful in using deductions such as state income tax, property tax and many miscellaneous deductions against ordinary income tax since these items are added back to income in the calculation of AMT. Don’t out smart yourself. Use a CPA for expert help.
The US dollar is strengthening against many other foreign currencies. This will make travel abroad a little less expensive. The down side may be that US exports may become more expensive for international consumers.
For those who have a 401k plan which permits loans, consumer purchases which have to be financed may be entertaining a 401k loan to accomplish purchases. This strategy is a good one when consumer lending is at a high interest rate, but not in a low interest rate environment. Other sources of finance such as credit card debt or a home equity loan if available will have influence on the correct and most efficient approach to financing such purchases. The expected return on 401k portfolio investments is also a key factor here.
The AAII Journal did a great job with an article on how to avoid beneficiary designation mistakes. Such strategies as joint tenancy, payable on death and transfer on death have significant benefits in that they are will substitutes which avoid probate. There can be problems with these strategies related to the beneficiaries health and general status along with family issues. Assigning beneficiaries to life insurance policies is also a great way to avoid estate issues, but may require some thought regarding the status of those beneficiaries. Trust documents are another way to address potential estate issues. Not naming beneficiaries and contingent beneficiaries and updating these assignments along with a lack of understanding of actions and unintended consequences of such decisions may create conflict and hardship for family upon an individual’s passing. Buy the time of a skilled estate planning attorney to get things right.
For The Record:
DJIA 17,828.24
NASDAQ 4,791.63
S&P500 2,067.56
SUGGESTED READING: “Individual Tax Planning” by Mershon and Fevurly
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