04/05/2007

Do You Have an Estate Plan?

I’ve had many people tell me over the years that they want their children to have better opportunities than they had when they were growing up. When I ask what that means, I get a mixed bag of answers including: more assets, more savings, a better education, being debt-free, and an early retirement. Let’s agree that giving your children better opportunities is defined as your legacy to your family. Creating your estate plan is a great place to start.

It’s important to know that estate taxes can kick in at rates starting at 50% on assets exceeding $2 million. When adding the value of your assets, don’t forget to include the death benefits of any life insurance policies you have. If your home, personal belongings, antique collection, and investments total $2 million and you have a life insurance policy of $1 million, you can shelter the $1 million death benefit from estate taxes by transferring ownership of the policy to an irrevocable trust. This trust must be in effect for three years before you die. See why planning for your legacy is so important?

Investment accounts can be sheltered from estate taxes by naming beneficiaries on the instruments. This causes the assets to be transferred immediately to your named beneficiaries. This is easily accomplished with payable-on-death bank accounts and transferable-on-death stocks and bonds. You can also transfer ownership of your investments to an irrevocable living trust where you are the trustee and control the account. Upon your death, the investments are disbursed according to your named beneficiaries, but may still be subject to estate taxes.

Some people gift assets to their children to reduce the amount of their estate and to watch them enjoy a portion of the legacy they are leaving to them. Be careful when gifting stock because your children could sell the stock for a profit and be stuck paying capital gains tax on it. If you own the stock at your death, the basis in the stock is stepped up to that date and a transferable-on-death provision could eliminate the capital gains tax burden on your children.

Don’t forget to appoint a general durable power of attorney to handle your financial affairs and don’t forget to complete a living will or health-care directive, should you become incapacitated.

The legacy you leave will require careful planning and scheduled periodic reviews. Always consult a trusted financial advisor for help.

04/12/2007

Tax Time Is Here

April 15th can be a stressful and an emotional day, a day of reckoning for all of us who live and work in the “land of the free” and the “home of the brave.” It’s our chance to crunch numbers to see if we either owe Uncle Sam more than what we sent him or if he took too much from last year’s paychecks and now owes us.
 
Those of us who think we sent Uncle Sam more than his dues last year have probably already filed our 2006 tax returns and are anxiously awaiting that refund check in the mail or else a credit advisory from the bank confirming an e-refund has been deposited directly into our bank account. Let’s call this group the “anticipators.” I’m guessing that tax day is not too stressful for this group, but it can be very emotional depending, of course, on the amount of the refund.
 
For the anticipators, I have one recommendation: don’t blow it! Do something with your return now that will reduce financial stress in your life later. Take that refund money and pay off some small bills or use it to start a college savings plan for your kids. One day you’ll look back and be glad you did.
 
On the other hand, there are many of us who think we may owe Uncle Sam more money than we sent him and we haven’t filed our 2006 tax returns yet. Let’s call this group the “procrastinators.” Tax day can be very stressful for these individuals and highly emotional as well due to frazzled nerves and flared tempers in the final hours of filing preparation.
 
For the procrastinators, I have the following two recommendations: hurry or wait! If you hurry, be as accurate as possible when preparing your tax return or gathering the records needed to have someone prepare it for you. Remember, you have until April 17th to file this year. If you decide though to wait, Uncle Sam has a streamlined process that makes it easier than ever before to get extra filing time. IRS Form 4868 is the only form you have to complete and mail on tax day; it asks for no excuses for being “tardy” and automatically extends your filing date for six months until October 16th. Don’t forget to send the amount you think you may owe along with the extension…and don’t wait until October 15th to begin the process again!

04/19/2007

Pros & Cons of Credit Counseling

Credit counseling became a household name a few years ago when some non-profit organizations began offering debt management assistance to consumers who had more month than money left each month. These non-profit companies would assist the consumer with a plan to payoff their debts by contacting their creditors and negotiating a reduced payoff for each debt. The consumer would then write one check per month to the non-profit company and it would pay the negotiated bills for the consumer—for a fee.

This worked for many consumers who dealt with a non-profit company that genuinely wanted to help. However, many companies saw an opportunity in this business and the focus shifted from helping consumers to masking profits in a non-profit company. Just last month the IRS published results from a recent audit indicating its plans to revoke the non-profit status of 41 credit counseling agencies that were found to be more motivated by profits than helping debt-burdened consumers. Another 22 firms are still undergoing audits and some criminal investigations have begun. The IRS began investigating the credit counseling industry after receiving consumer complaints of high pressure tactics, high fees, deceptive business practices and inadequate educational services. The scrutiny of the industry has also caused only 3 of the last 100 applications to be approved from credit counseling agencies seeking non-profit status.

With the number of non-profit credit counseling agencies declining and fewer getting approved, the 2005 bankruptcy law that requires hopeful bankruptcy petitioners to first seek help from an approved credit counselor may prove hard to enforce. There are approximately 150 credit counseling agencies on the approved list of the Justice Department’s U.S. Trustee Program, and although non-profit status is not required to get on the list, most of these agencies are non-profit.

Now let’s review. The bankruptcy law was established to protect consumers from creditors. Credit counseling agencies were established to educate consumers and protect them from creditors. Now some credit counseling agencies are found to be corrupt. Has anyone ever cussed their creditor the day they left with the money? Maybe creditor protection is not the answer. Maybe some creditors—your community banker—would listen and try to help. I know I’d rather my customer talk to me first. And I don’t accept checks from credit counseling agencies.

04/26/2007

Changing Banks?

When is the best time to change banking accounts? The answer will depend on several variables and how you rank them for importance to you.

Convenience is important. Do you bank close to home, close to work, or on the internet? If you’ve moved your residence or changed jobs, you might consider changing banks to be closer to the location that you prefer. If you bank primarily on the internet, you might consider opening a local bank account for consultation and convenience.

Pricing is important. Have you compared your service fees to comparable accounts at other banks recently? Does it seem like there are always new accounts being offered at other banks that are supposedly better than what you have at your bank? Be careful! Many ads for new accounts have the ‘real deal’ listed in the fine print. Read it all and ask the account representative questions prior to opening a new account. Some ads for new accounts offer ‘teaser’ rates. These accounts boast terrific rates for a short term and then switch to a different rate after that time. If you are looking for a ‘free’ account, be sure to ask the account representative their bank’s definition of free. They may tell you that it’s free for a while or it’s free on everything except certain services.

Service is important. In fact, service is my most important factor because it can outweigh the convenience and pricing factors. If you know someone at your bank who can take care of matters for you – or at least have them ready for you when you get there – that’s convenience. Some bankers, myself included, will come to you should you have difficulty getting to the bank for a transaction. And as fraudulent situations become more common with flim-flam artists and counter-fitters, it’s nice to have friends at the bank who know you and will be willing to help you when you really need it.

Why are you banking at your current bank? Has the location changed? Has the bank’s name and staff changed? Are you so price-sensitive that you will spend a tank of gas driving for a fraction better CD rate? Does that really save/make you more money? My advice is to bank where you get exceptional service and you know the people working there genuinely appreciate your patronage. It’s your money --- and it’s your choice.

Back to President's Articles

04/05/2007

Do You Have an Estate Plan?

I’ve had many people tell me over the years that they want their children to have better opportunities than they had when they were growing up. When I ask what that means, I get a mixed bag of answers including: more assets, more savings, a better education, being debt-free, and an early retirement. Let’s agree that giving your children better opportunities is defined as your legacy to your family. Creating your estate plan is a great place to start.

It’s important to know that estate taxes can kick in at rates starting at 50% on assets exceeding $2 million. When adding the value of your assets, don’t forget to include the death benefits of any life insurance policies you have. If your home, personal belongings, antique collection, and investments total $2 million and you have a life insurance policy of $1 million, you can shelter the $1 million death benefit from estate taxes by transferring ownership of the policy to an irrevocable trust. This trust must be in effect for three years before you die. See why planning for your legacy is so important?

Investment accounts can be sheltered from estate taxes by naming beneficiaries on the instruments. This causes the assets to be transferred immediately to your named beneficiaries. This is easily accomplished with payable-on-death bank accounts and transferable-on-death stocks and bonds. You can also transfer ownership of your investments to an irrevocable living trust where you are the trustee and control the account. Upon your death, the investments are disbursed according to your named beneficiaries, but may still be subject to estate taxes.

Some people gift assets to their children to reduce the amount of their estate and to watch them enjoy a portion of the legacy they are leaving to them. Be careful when gifting stock because your children could sell the stock for a profit and be stuck paying capital gains tax on it. If you own the stock at your death, the basis in the stock is stepped up to that date and a transferable-on-death provision could eliminate the capital gains tax burden on your children.

Don’t forget to appoint a general durable power of attorney to handle your financial affairs and don’t forget to complete a living will or health-care directive, should you become incapacitated.

The legacy you leave will require careful planning and scheduled periodic reviews. Always consult a trusted financial advisor for help.

04/12/2007

Tax Time Is Here

April 15th can be a stressful and an emotional day, a day of reckoning for all of us who live and work in the “land of the free” and the “home of the brave.” It’s our chance to crunch numbers to see if we either owe Uncle Sam more than what we sent him or if he took too much from last year’s paychecks and now owes us.
 
Those of us who think we sent Uncle Sam more than his dues last year have probably already filed our 2006 tax returns and are anxiously awaiting that refund check in the mail or else a credit advisory from the bank confirming an e-refund has been deposited directly into our bank account. Let’s call this group the “anticipators.” I’m guessing that tax day is not too stressful for this group, but it can be very emotional depending, of course, on the amount of the refund.
 
For the anticipators, I have one recommendation: don’t blow it! Do something with your return now that will reduce financial stress in your life later. Take that refund money and pay off some small bills or use it to start a college savings plan for your kids. One day you’ll look back and be glad you did.
 
On the other hand, there are many of us who think we may owe Uncle Sam more money than we sent him and we haven’t filed our 2006 tax returns yet. Let’s call this group the “procrastinators.” Tax day can be very stressful for these individuals and highly emotional as well due to frazzled nerves and flared tempers in the final hours of filing preparation.
 
For the procrastinators, I have the following two recommendations: hurry or wait! If you hurry, be as accurate as possible when preparing your tax return or gathering the records needed to have someone prepare it for you. Remember, you have until April 17th to file this year. If you decide though to wait, Uncle Sam has a streamlined process that makes it easier than ever before to get extra filing time. IRS Form 4868 is the only form you have to complete and mail on tax day; it asks for no excuses for being “tardy” and automatically extends your filing date for six months until October 16th. Don’t forget to send the amount you think you may owe along with the extension…and don’t wait until October 15th to begin the process again!

04/19/2007

Pros & Cons of Credit Counseling

Credit counseling became a household name a few years ago when some non-profit organizations began offering debt management assistance to consumers who had more month than money left each month. These non-profit companies would assist the consumer with a plan to payoff their debts by contacting their creditors and negotiating a reduced payoff for each debt. The consumer would then write one check per month to the non-profit company and it would pay the negotiated bills for the consumer—for a fee.

This worked for many consumers who dealt with a non-profit company that genuinely wanted to help. However, many companies saw an opportunity in this business and the focus shifted from helping consumers to masking profits in a non-profit company. Just last month the IRS published results from a recent audit indicating its plans to revoke the non-profit status of 41 credit counseling agencies that were found to be more motivated by profits than helping debt-burdened consumers. Another 22 firms are still undergoing audits and some criminal investigations have begun. The IRS began investigating the credit counseling industry after receiving consumer complaints of high pressure tactics, high fees, deceptive business practices and inadequate educational services. The scrutiny of the industry has also caused only 3 of the last 100 applications to be approved from credit counseling agencies seeking non-profit status.

With the number of non-profit credit counseling agencies declining and fewer getting approved, the 2005 bankruptcy law that requires hopeful bankruptcy petitioners to first seek help from an approved credit counselor may prove hard to enforce. There are approximately 150 credit counseling agencies on the approved list of the Justice Department’s U.S. Trustee Program, and although non-profit status is not required to get on the list, most of these agencies are non-profit.

Now let’s review. The bankruptcy law was established to protect consumers from creditors. Credit counseling agencies were established to educate consumers and protect them from creditors. Now some credit counseling agencies are found to be corrupt. Has anyone ever cussed their creditor the day they left with the money? Maybe creditor protection is not the answer. Maybe some creditors—your community banker—would listen and try to help. I know I’d rather my customer talk to me first. And I don’t accept checks from credit counseling agencies.

04/26/2007

Changing Banks?

When is the best time to change banking accounts? The answer will depend on several variables and how you rank them for importance to you.

Convenience is important. Do you bank close to home, close to work, or on the internet? If you’ve moved your residence or changed jobs, you might consider changing banks to be closer to the location that you prefer. If you bank primarily on the internet, you might consider opening a local bank account for consultation and convenience.

Pricing is important. Have you compared your service fees to comparable accounts at other banks recently? Does it seem like there are always new accounts being offered at other banks that are supposedly better than what you have at your bank? Be careful! Many ads for new accounts have the ‘real deal’ listed in the fine print. Read it all and ask the account representative questions prior to opening a new account. Some ads for new accounts offer ‘teaser’ rates. These accounts boast terrific rates for a short term and then switch to a different rate after that time. If you are looking for a ‘free’ account, be sure to ask the account representative their bank’s definition of free. They may tell you that it’s free for a while or it’s free on everything except certain services.

Service is important. In fact, service is my most important factor because it can outweigh the convenience and pricing factors. If you know someone at your bank who can take care of matters for you – or at least have them ready for you when you get there – that’s convenience. Some bankers, myself included, will come to you should you have difficulty getting to the bank for a transaction. And as fraudulent situations become more common with flim-flam artists and counter-fitters, it’s nice to have friends at the bank who know you and will be willing to help you when you really need it.

Why are you banking at your current bank? Has the location changed? Has the bank’s name and staff changed? Are you so price-sensitive that you will spend a tank of gas driving for a fraction better CD rate? Does that really save/make you more money? My advice is to bank where you get exceptional service and you know the people working there genuinely appreciate your patronage. It’s your money --- and it’s your choice.

Back to President's Articles