Sunday, November 11, 2012

'And the Winner Is...'

46) Nor 'Easters in New York!   And the Winner Is...

o Barack Obama is, again, the President.  What does this mean for your money?

            Well, if you have a good financial plan, it will mean only adjustments since a good plan is comprehensive, and allows for flexibility and uncertainty.

            On November 13, 1789, one week after the first Tuesday following the first Monday (i.e. Election Day - although, that very first Election Day was actually held on January 7th), Ben Franklin quipped, "There's nothing certain in life except death & taxes".  So, it's timely and prudent to explore what parts of the Tax Code affect you, because some taxes are going to have to go up.  (This is a great time to start learning about the US Tax Code by watching SFN's free videos at www.WomenAndMoney.TV.)

            This could be a good year to take previously deferred income and sell anything that will have a capital gain (profit).

            Tax management usually involves doing many small things rather than one big one, so it's important to understand a wide spectrum of issues that affect you.

            Income taxes can eat up anywhere from 10% to 50% of your income.  You can't consistently generate that kind of return from securities (e.g. stocks, bonds, CDs, mutual funds, real estate, gold, etc.).  Therefore, the best, first investment you can make, other than in your financial education, is in tax management.  Saving a guaranteed 10% - 50% is smarter than trying to generate 8%, an aggressive return these days.

            Also, federal estate tax rates can eat up more than 33% of your estate, not to mention state estate taxes!  So you may want to explore the results of death!

            If you have money in a Traditional IRA or 401(k), when you die, it will be exposed to both, income tax, and estate tax!

            This means exploring legal remedies (e.g. estate planning, trusts, charitable giving, re-titling assets, beneficiary designations, etc.) to protect your money from estate taxes, and possibly Medicaid, related to long-term care issues.

            The administrative issues and costs can be as daunting as the tax & financial issues, but well worth it.  It may cost you hours and hours, and tens of thousands of dollars to protect hundreds of thousands of dollars or more.  (However, if you itemize your personal deductions on Schedule A of the 1040 tax return, you may be able to deduct some of these costs!)

            You have a responsibility to yourself and society (if not dependents, loved ones, organizations, etc.) to plan for yourself; it's part of the Social Contract.

            Besides, do you want the government to make decisions for you?  Would you trust an IRS or Medicaid officer who showed at your door, and said, "I'm here to help."?

            So who's the winner in this election?  Will Congress allow the Bush-era tax cuts to expire, changing both income and estate tax?  Will they compromise?  Will they write new tax laws?  Will the laws be retroactive?!  There’s only six weeks left!  And what about the investment markets?

            Is your financial & estate plan up to date?

Who's your Trusted Family Advisor?


1 comment:

  1. The question now is how many tax code changes will there be.

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