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Giving Charitably and Doubling Your Tax Benefit

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 Many of you are inclined to make large charitable contributions by writing a check.  If the cash is not already sitting in cash, you many need to go to your taxable investment account to determine what to liquidate to create the cash for the donation.  Sure, this can provide you with an itemized deduction to potentially decrease your taxable income*, but might there be a way to make an even bigger impact on your current and future tax liability?

If you hold appreciated stocks or mutual funds in a taxable investment accounts, why not try to avoid paying capital gains tax when you sell to create the cash for your charitable donation?  Did you know that most charitable organizations, including churches and synagogues, can accept a donation of shares of a stock or mutual fund as a gift?  And did you know that in donating this way, you  can avoid paying capital gains tax on a security, and so can the qualified non-profit receiving organizations? 

So, by using an appreciated security, not only can you avoid capital gains tax that could be significantly higher than the 15% top rate we’ve had in recent years, but you may retain the right to use the value of the security donated as an itemized deduction. Double bonus!  (Triple bonus if this also allows you to tax-efficiently reduce an over-weighted position in your portfolio).

Before you write that big check to your favorite charity, consult your financial planner and tax advisor to see if opportunities exist to double your tax benefit by using appreciated securities instead.

This is how the capital gains rates look under the American Taxpayer Relief Act:

0% Capital Gains: 

Those in the 15% marginal tax bracket ($36,250 single filers/$72,500 married filing jointly)

15% Capital Gains:

Those in the 25%, 28%, 33%, or 35% marginal brackets

Those over $200,000/$250,000 but below $400,000/$450,000 are subject to the Medicare surtax, which means that effectively capital gains (and qualified dividends) are taxed at 18.8%

20% Capital Gains:

Those in the 39.6% marginal bracket ($400,000/$450,000).  Because of the Medicare surtax, this means that effectively, capital gains (and qualified dividends) are taxed at 23.8% (and up to 26% during the personal exemption and itemized deduction phase outs).

Sandra Adams, CFP® is a Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012 and 2013, Sandy was named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.

Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

*Note that the American Taxpayer Relief Act of 2012 implemented a phase out of itemized deductions for taxpayers with taxable income of over $250,000 for single filers/$300,000 married filing jointly.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of Raymond James.  You should discuss any tax or legal matters with the appropriate professional.

Tying the Knot: Have a Financially Harmonious Union

 Before all the wedding planning and guest lists and honeymoon booking there is one major decision … whether or not to tie the knot. Getting married is one of the “big” decisions in life.  Two people coming together with a host of unique characteristics and different life experiences as well as separate bank accounts and financial positions is expected. What isn’t always expected are money issues that can surface after the big day.  In a perfect world, both halves of a couple share the same values and goals when it comes to finances and money.  In real life, it doesn’t always work that way. 

To help smooth the way to a financially harmonious union, it is both practical and prudent to begin by pulling the individual areas of your finances together as one with transparency and disclosure.  This doesn’t necessarily mean a merger; however laying it all on the table prior to the wedding day provides the foundation to move forward with future financial decisions. 

Here are 5 Tips to help avoid post wedding day financial jitters:

  1. Emphasize partnership and avoid the power struggle
  2. Compare and contrast financial preferences focusing on understanding
  3. Create a budget strategy together that prioritizes financial objectives
  4. Dedicate resources to implement highest priority financial obligations, goals and dreams
  5. Acknowledge the need to be flexible by balancing your deliberate strategy with emergent opportunities and challenges

While combining finances with a partner can be a touchy process, the tips provided are foundational for open communication. And they provide direction for those pursuing a transition from individual financial decision making to joint management of finances.

Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

The Center Curtain Call

 The Center's Team enjoys sharing their knowledge with the press to help stories come to life, share facts and bring important topics to the forefront.  We are also honored when we are recognized by media and publications for our work and service to our profession. Here's what's new:

Medical Economics

Timothy Wyman, CFP®, JD was listed in Medical Economics November 10, 2012: Best Financial Advisors for Doctors

Candidates were selected to the list based upon client and peer references, strong recommendations from physicians, and an extensive background check.  Applicants were also required to complete an extensive questionnaire listing credentials, educational background, noteworthy professional achievements, specific areas of expertise and percentage of physician clients.

Healthiest Employers

Center Recognized as one of Michigan’s Healthiest Employers

Center for Financial Planning, Inc. was recognized as a finalist in the inaugural Michigan’s Healthiest Employers event sponsored by Detroit Business, MiBiZ and Priority Health in Fall 2012. The Center achieved this award in the Metro Detroit Region competing with companies whose workforce size is between 5 and 99 employees.

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Center Honored as one of Michigan's Healthiest Employers

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 The Center was honored as one of Michigan’s Healthiest Employers.   The inaugural award recognizes companies that show examples of innovative programs that had an impact on both the wellness of the employees but also productivity for the companies.  

Center Planner Laurie Renchik, CFP® says, “Our Health & Wellness program has been going strong since 2007 and we are proud to share our success story with others. The credit for the award and recognition goes to Center team members who make health and wellness a priority in their lives.” 

Winners were chosen from the Metro Detroit area based on the number of global employees.  The Center took honors in the 5-99 employee category.

The project was sponsored by Priority Health; data was collected by Indianapolis-based Healthiest Employer LLC. Crain's Detroit Business and MiBiz produced this promotional supplement as media sponsors of the project.

5 Charts We are Thinking About

 In December the Federal Reserve (FED) announced yet another round of Quantitative Easing (QE) as Operation Twist was coming to an end. Through QE 4 the government will purchase $45 Billion in US Treasuries…every month…until unemployment comes down to 6.5%.  So we were wondering how long this could take.  The following chart lays out some scenarios.  At the current pace jobs are being added to the economy, it should take until mid-2015.

Despite all of the money the FED has been pumping into the economy the Velocity of that money has continued to slow.  Velocity means simply the rate the money is spent.  Following is a simple example of money velocity:

  • In a year I am paid $100 for going to work
  • I turn around and spend $50 to get my clothing dry-cleaned
  • Then my dry cleaner spends $30 of those dollars to buy food

The $100 in the economy was actually used to purchase $180 of goods and services over a year.  Therefore, the velocity is 1.8 ($180/$100).  Velocity of money is significant because we won’t likely see inflation in the economy until this picks up from the current record low levels over the past 50 years.

Source: Federal Reserve Bank of St. Louis

Note:  M2 Money Supply is a measure of the total money supply.  M2 includes everything in M1 and also savings and other time deposits.

Since money is not being spent with any speed, people must be saving.  Savings have increased dramatically for individuals in the U.S. as interest rates on personal savings accounts and money markets have been plummenting.  Many have moved from equities into bonds at record rates as bond rates have reached record lows.  Overall, according to the chart below, people are saving more but fewer are investing in financial markets and investing in savings accounts instead.  As you can see in the chart below the increase in percent of savings flowing into Money Markets rose from 29 to 61% over the past 4 years while the amount invested in financial markets has come down from 71 to 39% of total savings.  If investors turn a corner and start to regain faith in the financial markets, money might start flowing back that way.  This could create long-term tailwinds for stock and/or bond markets.

The chart below shows total Inflation over the past 12 years.  For example, College tuition and fees have gone up 120.8% in the last 12 years, if a college charge $6,000 per year in 2000 to attend now it would charge $13,250!  So if inflation is similar over the next 12 years how are we supposed to keep up with rising prices while earning less than .25% on our savings accounts meaning that same $6,000 invested at .25% over 12 years compounded annually will give us a meager $6,182?

Lastly, taxes are on everyone’s mind.  On January 2nd a bill passed that will impact what everyone owes this year.  I found the table below to be a helpful summary of the impact of this bill.  For example, someone making around $85,000 per year will pay $1,147 more in taxes in 2013 than they paid in 2012.

Source: The New York Times

We use this data and more to help shape the direction our investments and financial planning recommendations for clients take over the coming years.

The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

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We don't do it for the recognition....but it's nice!

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 Our unique professional staff continues to be sought after speakers, contributors to the media, and community leaders. More news may be found in the In The News and Awards and Recognition sections of our website.

  • The Center was recognized among Michigan’s top 25 largest money managers in Crain's Detroit Business.
  • Melissa Joy has twice received national recognition as one of eight people picked by Financial Advisor and Private Wealth magazines for their Research Manager All-Star Team.** She was most recently featured in an article titled "The All Star Game" in the October 2012 issue of Financial Advisor Magazine.
  • The Center was recognized for the 5th consecutive year by the American Heart Association as a Fit-Friendly Worksite. 
  • The Center was recognized by Research Magazine as  “A Cool Place to Work”
  • In October, The Center was recognized as a finalist by Crain’s Detroit Business as one of Michigan’s Healthiest Employers.  
  • Center team members Sandra Adams CFP®, Matthew Chope CFP® and Timothy Wyman CFP®, JD received recognition by Five Star Professional in the June 2012 issue of Hour Detroit magazine. They were named to the 2012 Five Star Wealth Managers list, a select group of wealth managers in the Detroit area.
  • Team members contribute regularly to both the local and national media including; Forbes, The Detroit News, WDIV, Investment New, and The Wall Street Journal.

* Recognition based on assets under management

** Award was based on job function of the person evaluated, fund selections and evaluation process used, study of rejected fund examples, and evaluation of challenges faced in the job and actions taken to overcome those challenges. Evaluations were independently conducted by Financial Advisor Magazine.

*** Based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfuillment of firm review based on internal firm standards, accepting new clietns, one and five year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Important Information for Tax Season 2012

 As you prepare for the 2012 tax season, here is some information that you may find beneficial.

2012 Form 1099 mailing schedule

  • 1/31 - Mailing of original Form 1099s
  • 2/28 - Begin mailing delayed and amended Form 1099s
  • 3/15 - Final mailing of any remaining delayed original Form 1099s

Please note the exceptions immediately below:

Delayed Form 1099s

In an effort to capture delayed data on original Form 1099s, the IRS allows us to extend the mailing date until March 15, 2013, for clients who hold particular investments or who have had specific taxable events occur. Examples of delayed information include:

  • Income reallocation related to mutual funds, real estate investment, unit investment, grantor    and royalty trusts; as well as holding company depositary receipts
  • Processing of Original Issue Discount bonds
  • Cost basis adjustments

Amended Form 1099s

Even after delaying your Form 1099, please be aware that adjustments to your Form 1099 are still possible. Raymond James is required by the IRS to produce an amended Form 1099 if notice of such an adjustment is received after the original Form 1099 has been produced. There is no cutoff or deadline for amended Form 1099 statements. The following are some examples of reasons for amended Form 1099s:

  • Income reallocation
  • Adjustments to cost basis (due to the Economic Stabilization Act of 2008)
  • Changes made by mutual fund companies related to foreign withholding
  • Tax-exempt payments subject to alternative minimum tax

How we can help

If you have questions about your 1099’s or it would be helpful for us to discuss your tax situation with your accountant or CPA, please let us know. We are here to help with both administrative questions and planning strategies. We’ll also proactively work to keep you informed as to the status of your 1099 in the coming weeks and months.

What can you do?

If you receive an amended Form 1099 after you have already filed your tax return, you should consult with your tax advisor about the requirements to re-file based on your individual tax circumstances.

Links that may be of interest

Stay posted for additional information from Raymond James at http://www.raymondjames.com/taxreporting.htm.

Are you importing your 1099 into TurboTax®? Details on RJ import at http://www.raymondjames.com/investor/turbotax/.

Tim Wyman’s blog post: “How Will the Fiscal Cliff Deal Impact You?”

Please note, changes in tax laws or regulations may occur at any time and could substantially impact your situation. Raymond James financial advisors do not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

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Serving Our Community and Profession

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 The Center takes pride in serving our communities, our profession and each other.  Below you’ll find the many organizations supported by our team’s volunteer efforts.

  • Sandy Adams, CFP® was appointed to the Board of Visitors for the Institute of Gerontology (IOG) at Wayne State University and also serves on the Legal and Financial Advisory committee for the IOG as well as a liaison to the Board of Visitors for the last two years.
  • Marilyn Gunther, CFP® serves the Board of her community foundation in North Carolina
  • Sandy Adams, CFP® and Julie Hall, CFP® led Junior Achievement activities.
  • Dan Boyce, CFP® served on the Governing Board of an elementary charter school, as well as continuing on the Board of Trustees of Prescott College.
  • Laurie Renchik, CFP® and Tim Wyman, CFP® participated in Leadership Oakland and Melissa Joy participated in Inforum’s Executive Leadership program.
  • The Center proudly supported the local community and Gleaner’s Community Food Bank of Southeastern Michigan through the celebration of food, wine and art! The 9th Annual Vine & Dine, hosted by the Birmingham Bloomfield Chamber of Commerce.
  • Matt Chope, CFP® offered his thoughts on what it means to leave a Legacy of Value as part of the The Youth Diversity Symposium annual event developed by the Southfield Community Foundation.
  • Carrying on a proud Center legacy (and following in Marilyn Gunther’s, CFP® footsteps), Sandy Adams, CFP® was appointed to the Board of Personal Financial Education Services, an Ann Arbor based non-profit organization with a mission of promoting personal financial education in Michigan and beyond and to empower youth and adults to build more stable financial futures through financial education.
  • Dan Boyce, CFP® continued his leadership at the Institute for Sustainable Social Change in Prescott, AZ.
  • Betsey Schrock, Bookkeeper/Office Manager, was elected president of Stagecrafters, a large community theatre organization located at the Baldwin theatre in Royal Oak.
  • Troy Wyman, CFP® was elected to the Board of Directors of the Financial Planning Association of Michigan and to the executive board of the Birmingham Bloomfield Chamber of Commerce.
  • Melissa Joy, CFP® began serving on the Business Development Committee for Detroit Chamber Winds & Strings.

To find out more please feel free to contact the team member aligned with your organization of interest.

Is It Time To Refinance Again?

*   Over the holidays I enjoyed some time off with my family.  This also meant I was able to do some deep thinking about my personal finances.  One question comes up every year, “Is it time to refinance my mortgage?” 

In my somewhat short adult life, depending on your perspective of course, I have asked myself this question many times.  Over my total of ten years of home ownership (two different homes), I am considering my fourth home refinance (not including financing upon purchasing the homes!) I know, I am getting tired of this process but you can’t ignore when there is a great opportunity to be had in the form of lower interest rates! 

Long-term interest rates and thus mortgage rates have continued their precipitous drop.   The chart below shows just how low our current rates are historically, a new all-time low in fact!

 Source: Ritholtz.com

*Federal Funds Rate used in chart above

 

But just because rates are super low, doesn’t mean a refi is right for you.  I’ll share with you my list of pros and cons that I use to help me make my refinance decision*:

Pros in Refinancing

  • Lower the term of the loan
  • Lower the amount of my monthly payment
  • Reduce the amount of interest paid over the life of the loan
  • Paying off my principal more quickly which will benefit me even if I sell the home five years from now

Cons in Refinancing

  • Hassel of finding someone reputable to work with
  • Seeking out competitive pricing for upfront costs as well as the long-term rates
  • Taking time to sign the reams of paperwork required to refinance 

*Please keep in mind that this list is specific to my situation. Each individual's situation will vary. Please consult the appropriate professional before making a decision.

In my case the pros far outweigh the cons of refinancing.  So if you plan to stay in the home at least as long as it will take you to recoup the cost of refinancing (generally around 2 years) and prevailing rates are at least 1% lower than what you are currently paying it is worth a look.  Analyzing the amount of money I can save over the next 5-15 years was enough to inspire me to pick up the phone and get started.  I encourage you to get inspired as well if it has been a few years since your last refinance!  Take the first step and consult with a professional to determine if refinancing is the appropriate next step for you.

The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material.  The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.  Any information is not a complete summary or statement of all available data necessary for making a decision and does not constitute a recommendation.  Any opinions are those of Center for Financial Planning, Inc., and not necessarily those of RJFS or Raymond James.

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