If you feel that you pay too much in taxes, Brett Arends of the Wall Street Journal has some tips to help you save on taxes in the future. Much of his article is tongue-in-cheek, but the suggestions are valuable ones. Of special interest to our firm and our clients are four of the tips nestled in the middle of the article:

Give to your family. “Until the end of 2012 you can give $5 million, tax-free… In addition you can give $13,000 a year to each recipient — each child or grandchild — and a spouse can do the same. So a married couple with, say, three children and eight grandchildren can give another $286,000 a year, on top of that one-off $10 million. Over ten or twenty years that really adds up.”

Put your grandkids—and great grandkids—through college. “Money paid directly to schools or colleges escapes estate taxes.” Furthermore, if you contribute to a 529 educational savings account that money can be tucked away—and eventually used by the student for whom it is intended—tax free (so long as it is used for educational purposes.)

Buy life insurance. Proceeds from a life insurance policy can go to your beneficiaries tax-free upon your death, although you may have to make some arrangements ahead of time. The article states that “Typically you put the policy in an Irrevocable Life Insurance Trust… The premiums that you pay annually are gifts to the beneficiaries… And when you die, the proceeds of the policy go to the trust, for the beneficiaries, free of estate tax.”

Talk to an estate planner. “There are other moves that can cut your estate tax, too. A Qualified Personal Residence Trust can slash the estate taxes on a residence. A Grantor Retained Annuity Trust, or GRAT, can slash them on an investment portfolio. So, too, can setting up a Family Limited Partnership. Financial planners say this is a great time to put investments — like stock — into a GRAT.”

If you have questions about these tax-saving strategies, or other strategies that can help you preserve your estate for your heirs, please contact our office. We can help you determine what your best options are to help protect your assets—and your family—in the years to come.

Automatic workplace pensions. This would require employers (with the exception of very small businesses) that do not currently offer a retirement plan to enroll their employees in a direct-deposit IRA account. Employees would have the ability to opt-out if desired.

Tax incentives to create retirement plans. This proposal would increase the value of the tax credit to small businesses that start new retirement plans.  The current maximum credit is $500/year for up to 3 years, the new proposal would increase that to $1000/year.

More Social-Security funding. Obama’s budget would allocate $12.5 billion to the Social Security Administration, up $1 billion since 2010. The primary aim of this increase would be to “reduce the backlog of disability claims and decrease Social Security fraud.”

But not all of the proposals included in the budget are beneficial to retirees.  Here are a few things you may want to watch out for:

Pension insurance premium increases. “The budget proposes giving the Pension Benefit Guaranty Corporation… the authority to adjust premiums and take into account a company’s financial condition when setting premiums.” Although this is certain to result in premium increases, the increases would be gradually phased in.

Senior Community Service Employment Program funding cut. The proposed budget would reduce funding for the Senior Community Service Employment Program by 45 percent, and would transfer the program from the Department of Labor to the Department of Health and Human Services. Seniors who hope to retrain for new jobs in their retirement years may find this more difficult to do than they expected.

Luckily, there are steps you can take right now that will help you save money throughout the rest of the year. This article in USA Today lists 5 steps you can take right now to help you save money in 2011:

1. Order your free credit report
2. Get a medical exam
3. Update your beneficiaries
4. Increase your 401(k) contributions
5. Rebalance your portfolio

All of these will help you keep your 2011 resolutions throughout the entire year, but the ones we’re most concerned with are #s 2 and 3.  Too many people “take care of business” pertaining to beneficiaries and 401(k)s when they first get hired (or open a new account or life insurance policy) and then never think of it again. But lives change over the years, and the people you listed, or the amount you contributed 5 or 10 years ago is probably not what’s best for your family right now.

The New Year brings with it new beginnings… and new hopes.  Why not take advantage of this feeling of optimistic euphoria by taking steps now that will carry you through the entire year?

Although it may seem like an easy fix to looming financial debt, don’t give in to the temptation to use your own savings.  Before you give in to fear and drain your retirement, get some professional financial advice.  This special edition recently released in the New York Times shows that it is possible to prepare for what’s coming—both for your parents and yourself.

Our first recommendation is to discuss your situation with a trusted financial advisor.  After that, one of the primary suggestions offered in the Times is to talk to your parents about their situation.  It may not be easy; be prepared for your initial advances to be met with resistance.  Aging parents often worry that they will lose control of their own finances, or that giving decision-making capacity to one child will lead to anger or hurt feelings among their other children.  Instead of gearing up for a fight, the article mentions a few ways to gently lead into the conversation (including talking about family philanthropic projects.)

Another discussion you won’t want to skip is one about Long-Term Care Insurance.  This article by Ron Leiber discusses different kinds of insurance, whether or not you’ll need it (you will), and how to pay for it.

The world of “old age” is changing.  People are living longer than their predecessers and are experiencing more long-term health issues.  In some situations, elders may be able to rely upon Medi-Cal to subsidize the cost of residence in a nursing facility, provided that appropriate planning is in place.  However, care outside of the nursing home environment usually requires reliance upon savings and/or long term care insurance if available.  For veterans, a tax-free Veterans Pension may be available, even if the disability is not related to military service.  Serious discussion and serious planning are essential to surviving the challenges of the “new” old age. 

You may think that the financial advisor recommended by your husband/father/brother will suit you just fine, but this new article in the Wall Street Journal suggests that what works financially for men doesn’t always work for women—and this includes old-school financial advisors. According to the article, when women start seriously planning for retirement, “many find that the financial-services industry is an obstacle, not an ally. In a recent Boston Consulting Group survey of women investors, respondents said they routinely feel underserved by the financial-services industry, with more than 70% expressing dissatisfaction with the service they’re getting. Among the complaints: disrespectful advisers, narrower investment choices based on the assumption that women can’t handle risks and patronizing pitches.”

This isn’t just a case of emotional discomfort; it also hits women in the pocket-book, where it’s likely to hurt the most. “A recent survey by financial-services company MassMutual found that women’s retirement accounts were, on average, just two-thirds the size of men’s.”

Not all of this can be blamed on financial advisors though. Women have a dangerous (if generous) tendency to put their spouses and families first, with little thought for their own financial security until it’s too late. In addition, married women often count on their husband’s retirement plan to take care of the both of them—only to find that his plan works for his life expectancy, leaving her without a plan when he’s no longer around.

What can women do?  The first thing each woman should do is have is her own retirement account, and contribute to it each month.  Make sure your financial advisor recognizes your unique needs and listens to your hopes and concerns.  You can plan with your partner for golden years spent together, but it’s your responsibility to save for yourself.

This is great news! This means that long-term care insurance could cost you less than $100 per month! The trick is that you have to think about it early. “Age at the time of application plays an important role in determining the cost for long-term care insurance the Association study reports. While 41.5 percent of buyers under age 61 pay between $500 and $1,499-per-year, only 20.8 percent of buyers who are ages 61-to-75 pay within this range.”

This is not to imply that if you’re over the age of 75 you’re out of luck. You’re not likely to get the same great rates as someone in their 50’s, but you still may not have to pay an arm and a leg for long-term care insurance. According to the report, of applicants aged 76 and older only 28.2% end up paying an annual premium of $4,000 a year or higher. Actually, almost half of applicants in this age range still end up paying less than $2,500 a year. This may not be the attractive $500/year you could have gotten in your 50’s, but it also isn’t the thousands of dollars a month most people seem to be afraid long-term care insurance is going to cost them. In fact, it’s only a little over $200/month.

If you’ve been thinking about long-term care insurance, don’t wait any longer. This is one situation where time is not on your side; the quicker you act the better it will be.

The search for the right living arrangement—either for yourself or for an aging family member—can be much easier if you know ahead of time the right questions to ask and the important things to look for. This article in U.S. News and World Report shares 9 things to look for in your search for an assisted living facility, including:

• Making sure the facility is licensed
• Ensuring the facility’s financial stability
• Getting referrals
• Making visits to assess the facility’s staff
• Asking what current residents have to say
• Considering whether it can meet not only your current but also your future needs
• Asking about payment options (including Medicaid, called “Medi-Cal” in California)
• And more

Having so many different options these days means we can hope that finding the right senior living arrangement is a much more personal—and pleasurable—task than it has been in the past. Some of the best retirement communities or nursing homes have long waiting lists, so starting your search early will improve your chances of finding the place that’s right for you. But be careful, nursing home and assisted living contracts can contain surprises and should be carefully considered; or better yet, have an attorney look at the contract for you. And, if you are finding a place for your parent or other infirm family member, try to avoid signing the contract yourself unless you plan on being financially responsible for payment. It is often better to ask you parent or loved one to sign the contract and, if they are unable to do so, then sign only as their “agent” if you have valid agency authority.

With the many choices now available there’s no reason not to have exactly the senior living situation you want and need.

It may seem like a small change, but the article reminds us that when planning for retirement “it’s also important to note that many people live far longer than average and life expectancy increases every year.” And time is the great equalizer, it seems. The expectancy gap between the lifespan of men and women is closing, as is the gap between Caucasians and African Americans.

What this means is that if you planned for your retirement based on an equation from 10 years ago, you may need to revisit your plan with your financial advisor. “Most financial advisers recommend budgeting for at least 20 years of retirement and preferably 30 years in case you do live into your 90s.” Planning this way means you may end up with a surplus, but “it’s better to leave something behind for your children than to use up your entire savings and have no income outside of Social Security.”

And if you do think you may have a surplus to pass on to your children and grandchildren, our firm can help you protect your retirement nest-egg right now, AND for future generations.

Retirement planning is one of the leading areas in which spouses have a failure to communicate, according to the research. After the recent market turmoil, people have new and greater concerns about their ability to retire comfortably, but they aren’t talking about it.  And lack of communication means a lack of planning: “Although couples agree about their top financial concerns in retirement, they have not developed better planning habits. In fact, nearly 10 percent fewer couples report they had completed critical plans – be that a retirement plan, an estate plan, or a will — as compared to 2007.”

Although the temptation to bury your head in the sand may be strong, talking with your spouse—and then with a trusted professional—to create quality retirement and estate plans is essential, and will bring incredible comfort and security to you and the rest of your family.  If talking about finances is not something that comes naturally to you and your spouse, a good way to get started is to make an appointment with a professional who can lead you through the process together.

Talking about money doesn’t have to be scary. Learning together and making plans for the future will not only strengthen your financial situation, it can also strengthen your relationship.