Tax Time 2012 - Wealth Management, Taxes and Beyond

Wealth management comprises various subjects including: Economics, Banking, Investments, Risk Management, Investment/Asset Management, Estate Succession, Taxation, and Trust Planning  and Retirement  Planning.

Many of us simply receive W-2 and employment income and traditional company benefits  primarily, but others who are self-employed or contractors are doing their best to utilize the system to declare income, pay for insurance, take mortgage deduction and so forth.

The good news is that that the tax code has become more amicable to the self employed over the last decade.  Self employed individuals are able to write off or deduct more of their health care expenses while also setting aside more money pre-tax into their self directed retirement accounts.

Here are some thoughts related to Wealth Management 2012

Investments: While we are not sure what will happen with taxes going forward, several of today's tax rates on income such as dividends and long-term capital gains are reasonable.  If they go up, many people may sell out of dividend stocks or other related holdings.  Dividend stocks have been particularly popular for retirees and those who don't want CDs with the rates so low. 

Thus, dividend stocks have been the alternative for income producing investments because the tax rates are at 15%.  Overall, if income taxes go up on dividend stocks at this time, the hardest hit may be seniors and those who live on a fixed income.

Retirement and Education: In light of the present  situation, we hope you are able to maximize your contributions to your retirement before April 15th each year.  Also, setting aside money in a 529 plan is a good way to fund a child or grandchild's education for the future.  The annual gifting rules and estate and gift tax rules allow you to gift cash to others during life or at death.  Therefore, now may be a good time to consider large gifts due to the generous estate & gift tax exemption for 2012.

Estates and Succession:  As for estate taxes, those rates right now are the most generous ever.  However, the large exemption may be reduced again to the Clinton era rates if nothing is done by Congress before 2013.

The other major estate management  issues are succession documents.   Do you have a valid will?  Do you have health care directives?  Have you considered limited powers of attorney for your financial affairs or health care affairs?  Have you arranged for the guardianship of your children if something happens to you?  All of these issues can be dynamic and very important?

Insurance: Other topics are risk management related.  Do you have proper life, health, and home insurance?  Have you considered an umbrella policy or disability policy?  Again, protecting yourself and your family in this way is imperative.  However, you must remember that insurance contracts have beneficiaries and that each policy can have primary beneficiaries or secondary beneficiaries. Further, these assets are not controlled by your will and the beneficiary receives regardless of what your will says. Providing the policy numbers and information to your loved ones may also be a good exercise.

Banking and Investment Accounts: Additionally, if you have bank or brokerage accounts, you should consider listing your spouse or loved one as person who receives the account upon death.  TOD "Transfer on Death" and POD "Payable on Death" accounts are typical choices for your accounts and this allows a loved one to have access to cash immediately if something happens to you.  Sometimes, rolling over or consolidating accounts is a great exercise so as to help create a better view of the totality of your investments.

Taxation: The IRS has a tax tips section which is interesting and resourceful.  Moreover, there are many great tax software  programs out there to chose from that you can use privately on your computer.  Thus, with good information coming from the Treasury Department and quality software, all of us have a fair opportunity to get our tax paperwork done on time. 

Economics: Keep in mind that there has been a number of economic cycles in the last 20 years in the USA and Internationally.   That means that we should all keep an eye on our risk tolerance and our investing  time horizon.  When you are getting closer to retirement, you should be moving out of riskier investments and into more stable investments or stocks with less volatility if possible.  Other related problems such as an election year and global debt crisis issues domestically and abroad are also now part of the macro-economic effects.

In the end, most people are concerned with financial security.  During our earning years,  all of us want to work in a labor of love, earn what we can, protect our children and retirement, and worry about taxes  later.  In the end, the key is doing what you want to do, and have the experts handle your legal, tax and wealth management for you.

*No investment, legal or tax advice is intended to be given herein.  Please see a licensed professional before making any important decision.