Gift Transfers

Prospective clients in their 30’s often approach me with the same question:  what should I be doing?

It’s almost instinctual that we replace “want to” with “should be” during this decade.  With our 40’s in the lineup as the next decade marker, it’s no wonder that the responsibility clock begins to tick louder prompting young adults to make important life decisions while time and energy are still on their side.

As an advisor (as well as a detail-oriented, meticulous person), it’s very exciting for me to see someone take steps to clearly define his or her goals and put in place a plan to reach them.  It’s particularly exciting to meet with a young adult since it often brings the challenge of allocating a stream of income across multiple goals that will come to fruition over the course of 30-40 years.

While it may feel as if you need to address an endless “should be” list of personal finance items, key personal financial seeds to sow in this age group towards securing your future typically fall within the following six categories:

Retirement Planning

When do you want to retire, and how?  Your answers will dictate how much you need to start saving today, whether you need to invest to potentially increase your rate of return, and how to leverage the various retirement accounts available to you.

How you save for retirement (or semi-retirement) may be one of the most important decisions you make today since the growth of your savings is a factor of time and technique.  Using a retirement calculator is an excellent way to visualize how frequency, duration and rate of return all make an impact.

Also keep in mind that not all retirement accounts are the same.  For example, a 401K plan has limited investment options compared to a Roth or Traditional IRA.  Higher income earners may also consider tax-deferred insurance-based products with principal guarantees (yet often also with surrender penalties).  An advisor can help you determine what’s appropriate for your goals.


Does anybody depend on you or your income?  Or if you looked around right now and suddenly lost something you see, would that hurt your financially?

If you answered yes to any of these questions, consider getting an insurance policy.  Insurance is available for a laundry list of things including life, health, disability, home, car, floods, and renter’s.  Even key person insurance is available for insuring against the loss of a business partner, or personal liability insurance for if you’re personally sued by someone (for example, if your dog bites your neighbor).

If you get insurance through your job, it may be cheaper than if you got a policy directly with an insurance carrier. However, you may lose coverage when you change jobs or retire.  As a result, consider getting your own policy.  If you’re young and healthy, you may be able to lock in a reasonable premium for the lifetime of your contract.

Life Events

Are you planning to have children?  Or get married?  Start a business?    You may need to weigh the financial requirements for each against you ability to save for retirement and pay for insurance.

Once again, a variety of savings techniques are available with advantages and disadvantages that could help or hurt your overall financial picture.

For example, saving to a state 529 college savings plan may provide you with a state tax write-off.  However, where you incorporate your business and the business structure you choose may incur either a higher personal tax burden or potential personal liability risks.

Estate Planning

If you pass away tomorrow, do you have a plan in place to transfer your assets to a beneficiary?  If not, you may run the risk of a judge deciding who gets your savings and even who gets the things in your apartment.  This could result in a creditor getting your prized rock guitar collection, and not a relative.

Your plan may include creating a will, ensuring that your retirement accounts and insurance plans have up-to-date beneficiaries,  or ensuring that you have a trust established to transfer assets to a child or charity with ideally a low tax burden.

Real Estate

Do you have plans to buy a home in the future?  Upgrade to a new home?  Or to buy a vacation home?  Are you considering investing in foreclosed properties, or flipping?  Are you thinking about buying commercial real estate for your business?

Success in each of the above requires lining up the right advisors, planning towards having a successful transaction that you can afford, and hedging against market changes (including property tax changes) that aren’t in your favor.

What if you’re deciding between buying and renting?  The jury is out on whether home prices will continue to decline.  But if you currently cannot afford the costs associated with buying a home, realize that other options exist.

For example, you can participate in the real estate market at a lower cost and higher liquidity with REITS (e.g., real estate investment trusts, which trade like stocks) and potentially receive a stream of income from your investment.  Or simply invest your money elsewhere to get the long term return that you may be seeking.

This is not intended to be the complete list of areas that you need to consider since all situations are different.  However, this may be a good place to start to begin organizing your “should be” list before the ticking clock turns into time bomb.  If it ends up being all too complicated or if you’re concerned about putting the right plans in place, then you may need to speak with an advisor that you know and trust.  That’s what we’re here for.

View on The Wall Street Geek’s business website Price Capital.

With all of the activity that occurs in Washington and considering that it’s primarily the sensational news that bubbles up to the top of the fold, it’s often easy to miss news about subtle areas of legislation that may ultimately impact your family’s finances.

On December 17th, 2010, just such an event occurred.  President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010.

For individuals and families with an estate plan in place, this Act may prompt revisiting certain planning strategies and decisions for the 2011 and 2012 calendar years (the years affected by the Act)–in particular, regarding estate and gift transfers.

The Act reduced the top estate, gift and generation-skipping transfer (GST) tax rates to 35%, and established a higher exemption amount of $5M per individual.  This has the benefit of excluding more assets from federal estate taxes.  However, keep in mind one’s state estate tax exemption amount and whether state taxes would be due on the difference if your state estate tax rate is lower — in particular, for non-marital dispositions to (for example) beneficiaries.

The reduction in the top tax rate also allows more assets to pass to non-charitable beneficiaries, and may be a factor in revisiting your dispositive plans as well as your taxable gift plans during one’s lifetime.  In particular, since the likelihood of gifts resulting in gift taxes has now been reduced.

The Act also allows for unused exemptions to be transferred to a surviving spouse.  As a result, the surviving spouse may not need to retitle assets or leverage shelters to reduce his or her tax liability on the estate transfer.

These changes are currently targeted to sunset in 2012, so make plans to revisit any changes in your strategy that were recently implemented.  In light of the debt troubles that the US is experiencing, the chances that this Act will be allowed to sunset may be high if Washington needs additional revenue to pay down debt.

This article does not intend to address every section of this wide-reaching tax law.  Stay tuned for additional analysis on other provisions of the law and future changes.

View on The Wall Street Geek’s business website Price Capital.