Instead of your spouse or partner being named as the beneficiary of your life insurance policy, you may choose to transfer the policy proceeds into a irrevocable life insurance trust account and name your partner as beneficiary of the trust.

Why would you want to do that?

When properly done, a life insurance trust allows you to designate what is done with the proceeds as well as what happens to the remainder of the trust funds when you pass away. Also, because the trust owns the policy, the policy is not considered part of the estate when you die and therefore, is not taxable as long as the policy transfers to the trust at least three years before your death. The policy will pass outside of your partner’s estate as well.

You can pay the policy premiums by annually gifting money to the trust. You can also increase the amount of the policy by transferring additional money to the trust, if you wish. One caveat to a trust owning your life insurance policy is that you cannot name yourself as the trustee of the trust. In doing so, the policy is counted toward estate assets, subject to estate taxes when you pass away. Another caveat is to carefully structure the cash or assets going into the trust to avoid gift taxes.

If you don’t have a life insurance policy at the outset, you can also create a trust and transfer assets to the trust and instruct the trustee to purchase a life insurance policy. If the trust applies for and takes out the life insurance policy initially, there is no three-year waiting period before the policy is out of your estate.

An estate planning attorney can help you plan your estate using irrevocable life insurance trusts should you desire to use this tool to avoid estate inheritance taxes and give your heirs the full benefits you wish them to receive.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Many quote the adage that “you have to spend money to make money” but that’s not necessarily true. Unless you really need the items you’re thinking about purchasing, saving your money can be a great way to make money too – especially if you place extra cash in a savings account or long term investment.

Avoid Credit Card Interest

In today’s society, buying is easy. Goods are sold everywhere. Impulse buying has become a common phrase and is one of the major reasons for high credit card debt among Americans. Before you make your next “impulse buy”, consider how much you will be paying for that item if you use a credit card. If your interest is ten percent and you have over $ 1,000 in debt, you will pay one hundred dollars per year on that debt.

When you avoid frivolous spending and credit card debt, you can begin to save money. Create a monthly budget to help you. Your budget should allow for at least ten percent of your earnings to go into a savings account each month.

Earn Savings Account Interest

A savings account is the first step to creating financial security. In case of an emergency, you should save enough money for three months living costs in your savings account. Once your emergency fund is established, it will earn interest until you need it.

Find Investment Opportunities

Savings accounts are a great place to put emergency funds, but additional nest egg savings should be placed elsewhere. If all of your money is in a savings account, inflation may lower the value over time. Look for long term investment options, such as stocks and bonds, to grow your nest egg. Investment earnings can help you pay for a house down payment, college education or your retirement.

To ensure your portfolio can help you meet your goals, you should consult a qualified financial advisor.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

Long term care insurance is a very important component of your financial strategy and the reasons to get an LTC policy are very compelling.

The cost of assisted living or nursing home care alone should motivate you to pay the premiums. AARP notes that approximately 60% of people over age 65 will require some kind of long term care during their lifetimes.[1] Furthermore, in a 2008 annual Cost of Care Survey AARP and Genworth Financial found that:

• The national average annual cost of a private room in a nursing home is $76,460 – $209 per day, and 17% higher than it was in 2004.
• A private one-bedroom unit in an assisted living facility averages $36,090 annually – and that is 25% higher than it was in 2004.
• The average annual payments to a non-Medicare certified, state-licensed home health aide are $43,884.[2]

You may have heard that LTC insurance is expensive compared with some other forms of policies. The annual premiums are minimal compared to real-world LTC costs.[3] Asset based LTC insurance policies have also provided a balanced approach of self-insuring a portion of the cost, helping to preserve retirement savings and income.

Contact us to learn more about the risk of long term care expenses pose to the value of your estate and how to properly plan to maximize the long term care insurance benefits.

[1] aarp.org/families/caregiving/caring_help/what_does_long_term_care_cost.html [11/11/08]

[2] aarp.org/states/nj/articles/genworth_releases_2008_cost_of_care_survey_results.html [4/29/08]

[3] aarp.org/research/health/privinsurance/fs7r_ltc.html [6/07]

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

If you are nearing retirement and are thinking of selling your home because you no longer want the problems of taking care of a large house, or maybe you plan to travel, you might want to reconsider. You can actually turn your home into a monthly cash flow that can help you finance your retirement.

This is a good option for retirees that no longer want to live in their home. There are a number of benefits to renting instead of selling your house, especially if you already have your house paid for. When your home is already paid for most of what you get in rental income will be profit. If you want to travel, you can hire a management firm to oversee the rental or ask one of your adult children to take care of it.

Does it Makes Sense for You To Rent Out Your Home

Assuming that your home is paid for, most of what you get in rental income will be profit, but you do have to factor in some costs, such as upkeep on your home, as well as vacancy time. Before you decide if renting your home will be the better alternative to selling, you will first have to look at the expenses.

How much will you likely be able to charge for rent? Once you have come up with an amount, you will need to add together the costs you are likely to incur, such as home insurance, repairs to the house, taxes, and possibly property management fees. The cost should be about 10%, but can be up to 20%. With these calculations, if you rent your home for $1,500 a month you should make about $1,200 a month profit. Adding this monthly income to your retirement cash flow will obviously be very helpful.

Another advantage to renting your home instead of selling is that you will still be building equity in the property, and can sell it at a later date if you choose. Your house will likely continue to increase in value over the long term so when you do sell it, you may possibly make a bigger profit than you would if you put it on the market now.

Decrease Tax Liability

When you rent out your home there are some tax deductions that can be helpful in lowering your tax obligation. All of the repairs that you make on the home can be deducted from your income, or depreciated, as well as some travel expenses, if the travel involves taking care of your rental property. You might even be able to get a deduction for a home office if you use it to manage your rental property. Travel expenses and home office deductions can be tricky with the IRS, so be sure that you get the advice of a tax professional before using these deductions.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

While retirement can be a happy occasion for some people, it can be a source of anxiety for others. Some are happy to be retired because it allows them more time to travel and do all of the things that they didn’t have time to do while working. Others worry about finances, or if they will feel needed or useful. And then for some, retirement includes a generous mixture of all these feelings.

If you want to go into retirement without the anxiety, it is best to plan your retirement, and the earlier you do this the better. No matter how old you are there are steps you can take to plan a retirement that you will feel secure and happy with. This is especially true when you consider funding your retirement.

This checklist can help you get ready for retirement, even if you are decades away from those golden years.

• The first thing to look at is what you want to do when you retire. Will you want to live in a retirement community and take life slow, visit relatives, or travel the world?
• Once you know what you want to do in your retirement years, you will then need to calculate how much money you will need for retirement. There are retirement calculators available online that can help you to determine the amount of money you need.
• After calculating how much money you need to retire, you will then be able to tell where you are financially for retirement and how much longer you will have to save and work before you can retire.
• Look for ways that you can save money for your retirement, such as an employer sponsored 401k, an IRA, as well as investing in stocks and bonds.
• Keep track of what your benefits will be from Social Security. Each year you will get a letter from the Social Security Administration that will tell you how many credits you have toward retirement benefits, and what the amount of your benefits will be.
• Find out when you will qualify for Medicare, and the best age to apply for your Social Security benefits. For some people it may make sense to delay collecting these benefits so they will have a larger monthly income.
• Get information on withdrawing money from your retirement early if the need arises, as well as the best time to start taking withdrawals for retirement.
• Don’t forget to put an estate plan into place that includes your Last Will and Testament, a Power of Attorney, and any trusts that may be necessary to protect your assets for yourself, as well as your beneficiaries.

The better prepared you are for retirement, the more you will be able to relax and enjoy this time in your life.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

2010 has been one strange year for the U.S. tax code. We have a huge estate tax issue that is still not fully resolved. Let’s take a look at where things stand for the estate tax year in terms of changes, amendments, additions and considerations.

The estate tax and GSTT have been repealed for 2010, but they may be enforced retroactively.

Even though the Obama administration preferred having an estate tax in 2010, Congress was preoccupied with other matters as 2009 drew to a close. So no action was taken, and as EGGTRA stipulated in 2001, the estate tax is 0% in 2010. [1]

So far, anyway. The longer we go with no action taken, the harder it gets for Congress to take action and put a retroactive estate tax in place. (You could easily argue that a retroactive estate tax would be unconstitutional.)

Of course, the estate tax and the generation-skipping transfer tax (GSTT) are scheduled to return in 2011. Congress may restore things to 2009 levels, $3.5 million exemption for estate tax and GSTT with 45% estate, GSTT, and gift tax rates. By doing nothing, though, estate taxes would reset to pre-EGGTRA levels in 2011 (the exemption level at just $1 million with 55% estate, GSTT, and gift tax rates). [1]

With no estate tax in place for 2010, the step-up basis rules have been replaced by carryover basis rules.

This year, assets in an estate are subject to capital gains taxes when sold based on the original price paid for the asset. This could mean some big problems for heirs if an asset was bought by Mom or Dad 20 or 30 years ago. Let’s say the asset is a stock. If Mom or Dad purchased shares off and on through the years, you’ll have quite an assignment to find that paper trail, and you may end up paying capital gains tax on the appreciation if the estate is really large. Fortunately, each estate can exempt $1.3 million of gains from the carryover basis rule, and another $3 million exemption applies to assets inherited from a spouse – so as much as $4.3 million of an estate, if transferred to a spouse, can retain the step-up in 2010. [2]

The federal gift tax rate is 35% for 2010, not 45%.

Yes, there is still a gift tax in 2010 on gifts above the lifetime exemption amount of $1 million. However, the tax bite is just 35% for 2010. Of course, if you end up gifting less than $1 million during your lifetime, you won’t have to worry about the gift tax at all but you will need to be sure to file a gift tax return.[3]

IRS CIRCULAR 230 DISCLOSURE: Tax advice contained in this communication (including any attachments) is neither intended nor written to be used, and cannot be used, to avoid penalties under the Internal Revenue Code or to promote, market or recommend to anyone a transaction or matter addressed in this communication.

[1]moneywatch.bnet.com/retirement-planning/article/estate-tax-what-you-need-to-know-for-2010/378294/ [1/5/10]

[2] articles.moneycentral.msn.com/RetirementandWills/PlanYourEstate/5bigMythsAboutTheEstateTax.aspx [4/14/10]

[3] moneywatch.bnet.com/retirement-planning/blog/financial-independence/why-is-everyone-afraid-of-the-gift-tax/843/ [4/14/10]

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.

A 401(k) is a retirement savings plan that is usually employer-sponsored. This means you, as an employee, elect to have part of your earnings placed into an individual 401(k) account, which is managed by your employer. Generally, you can select from among a variety of different investment options for your account, usually a mix of different types of mutual funds. Often, you can also use your account to invest in your employer’s stock. Some employers also “match” part or all of their employees’ contributions by putting additional funds into the 401(k) account.

Since 2006, there have been two types of 401(k)s available (although not all companies offer both types) – the traditional 401(k) and the Roth 401(k). With a traditional 401(k), your contributions are tax-deductible , meaning that the 401(k) is funded with pre-tax dollars and tax-deferred, meaning that you don’t pay income tax on the money in the account until you withdraw it. This type of 401(k) is especially attractive to higher income earners who get a significant benefit from the up-front tax break, and who prefer to postpone the income tax until their 401(k) withdrawals.

A Roth 401(k) works in the opposite way – you pay income tax on money contributed to your Roth 401(k) in the year that you put the money into the account. But, the money also grows tax-deferred, and qualified withdrawals from the account – including investment income – are tax-free. This plan is attractive to lower income earners who don’t make enough to miss the tax break during the year of initial contribution but who benefit a great deal from not having to pay taxes during retirement.

If your employer offers both traditional and Roth 401(k)plans, you may want to divide your retirement savings between the two types of plans so that you can take advantage of the benefits of both.

A new law that became effective January 1st, allows the owner of a traditional IRA or 401(k) to convert these accounts to a Roth IRA. Tax is paid on the amount converted, but future qualified withdrawals are tax-free. For this year only, you can choose to pay the tax this year, or defer the income equally to your 2011 and 2012 tax years. For more information, contact a qualified attorney, tax or financila advisor.

Securities offered through 1st Global Capital Corp., Member FINRA /SIPC 8150 N. Central Expressway., Ste 500, Dallas, TX 75206 (877) 959-8400 Investment advisory services offered through 1st Global Advisors, Inc.

Armstrong, Fisch & Tutoli is a member of the American Academy of Estate Planning Attorneys.