2014
Estate & Financial Your Northern Michigan Guide to a Secure Retirement
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Planning
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It Might Be Time to Reconsider the Stock Market If you’ve been sitting on the financial sidelines during the stock market’s recovery the past few years, feeling uneasy about jumping back in after the crash, now could be an excellent time to consider doing more than simply spectating. The last five years aren’t what industry experts would call a “normal recovery,” says Buz Zamarron, financial advisor and branch manager at Stifel, Nicolaus & Company in Traverse City. But the market indeed is on the upswing. “I would call it very slow growth—a very slow recovery,” Zamarron says. Your age and general health are vital considerations when it comes to determining whether to jump back into the game, he adds. “What’s really most important isn’t so much
when you get back into the market as much as how much time you have to be in the market. If you’re under age 70 and have expectations of living past 80, it’s a good time.” The recovery will continue to gain momentum, Zamarron believes. “I think we are going to get better and better.” STIFEL.COM.—Heather Johnson Durocher
Do You Really Need a Living Trust? City. Ashmore offers the following examples of when a trust may not be needed: • A young couple without significant assets and with all the assets left to the surviving spouse. Assets that are owned jointly with the spouse will avoid probate on the death of the first spouse.
The American Taxpayer Relief Act of 2012 provided some welcome certainty in the estate and gift tax arena—namely, for estates in 2011 and later, the limit that each person can transfer tax-free was increased to $5 million plus inflation (previously was $600,000), and the limits were made permanent. For some people, the changes mean that a living trust is still an important planning tool, but not always necessary, says Shelly Ashmore, CPA and partner with Dennis, Gartland & Niergarth in Traverse
• Couples whose combined estate (including appreciation) is anticipated to remain under $5.34 million (single exemption). This would provide 100 percent of the assets receiving a step up in basis at a later date, upon the survivor’s death. In this case, the survivor would only need their own exemption to avoid estate tax, and the loss of first spouse’s portability (transferred exemption) would not be an issue if survivor remarries. (Note: this does require leaving full control of all the assets to the surviving spouse.)
• Individuals with assets titled properly may not have probate concerns. Estates often include significant life insurance and retirement plan assets. These types of assets already avoid probate proceedings. Other assets owned jointly with rights of survivorship can also avoid probate. • People who intend to transfer their assets outright upon their death rather than wanting them centrally managed by a trustee. Asset preservation and growth, and children (beneficiaries) obtaining certain ages, are common non-tax reasons for the use of a trust. “There are various factors to consider in any estate plan,” Ashmore says, “and each individual situation is unique. It’s important to contact your advisor about your specific facts and objectives in reviewing your overall estate plan.” DGNCPA.COM.—Heather Johnson Durocher
Traverse, Northern Michigan’s Magazine | SEP’14
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Elder Law and Estate Planning For Peace of Mind and Prompt Quality, Legal Services*
*Home appointments can be scheduled
Wills • Trusts, Trust Administration Special Needs Planning Probate Estates Family LLC’s • Real Estate
For a free consultation contact Priscilla Hirt at (231) 929-3450 or email phirt@bfarlaw.com Brandt, Pezzetti, Vetmetten & Popovits,
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600 E. Front Street, Suite 102 Traverse City, MI 49686 www.bfarlaw.com
Mardi Black Attorney & Counselor Martha L. Black, PLC 421 St. Joseph, Suite 202 Suttons Bay, MI 49682
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Fiscally Smarter Ways to Buy Chronic Care/Death Insurance Policies Reaching a certain age used to mean having to fork over monthly premiums (which also increased annually) if you wanted insurance to help pay for nursing home care in later years. But monthly premium payments are no longer the only way to purchase this type of insurance, thanks in large part to Baby Boomers who demanded a financially smarter way to fund these policies. To explain how chronic care/death insurance has changed for the better in recent years, we talked with certified financial planner Brian Ursu, who serves as president of Intentional Wealth Advisors in Traverse City. Ursu, who recommends chronic care insurance to individuals in their early 50s through late 70s, says this form of insurance is still evolving and will be enhanced even more in the next five to 10 years.
First, can you please give us some background on this kind of insurance? About 20 years ago, if someone was concerned with needing to go into a nursing home or being in a chronic care situation, they would have to buy nursing home insurance. The problem was the insurance company realized the benefits are quite expensive, and so they had to raise the premiums for people. You could have bought it when you’re 60, and it was affordable, but by the time you’re in your 70s, they jacked up the premiums and people thought, I can’t afford this. It was not a really good solution. With Baby Boomers, they changed a lot of our culture, and insurance is no different. They said, “I’m not willing to pay premiums forever, and I’m not willing to subject myself to increases of 20 to 30 percent.”
So what has changed? Now insurance companies have come up with different solutions. They’ve determined that Baby Boomers, and people in general, are willing to commit idle assets if they know they can get that money back if they no longer want the insurance they’d purchased.
How does the new chronic care/death insurance work then? Say somebody has a $100,000 CD that is earning a low rate of return. If we could reposition that CD into an insurance program, and one that would get an automatic death benefit, then
if they die, their beneficiaries get that money tax-free—so that $100,000 has turned into, say, a $300,000 value. And if they don’t die, and have a chronic care need, you can tap into that. You can take two percent of the death benefit each month to cover the care.
So you’re no longer paying monthly premiums. Correct. You put in a lump sum and then never pay a premium. Now, let’s say you don’t need to go to a nursing home and you don’t die either. Five years after you purchased the policy, you decide to do something else with that $100,000 you put in—now you get your money back. You put in the money to cover that risk, but if your situation changes, you can take the money out. You receive $100,000 back.
What are the downsides to consider? If you decide to take the money back out—say the $100,000 that you put in 5 years ago—you haven’t earned any interest on that. You’ve lost purchasing power. Another downside is if you are considered uninsurable—if you are ill or too old, and you simply can’t get the insurance. But traditional long-term care insurance wouldn’t work either then. The caution we would give is not all insurance companies are equal. We need to be very careful in selecting a company INTENTIONALADVICE.COM.—J.S.
Traverse, Northern Michigan’s Magazine | SEP’14
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MEDICAID • ESTATE PLANNING • PROBATE • VETERANS BENEFITS
800-395-4347
www.myelderlawplanning.com 1020 Hastings, Suite 105 Traverse City, MI 49686 231-935-4646
R. Todd Balkema
218Maple Street, Suite A Big Rapids, MI 49307 231-796-4012
EMBRACING THE UNCONVENTIONAL. DELIVERING THE EXCEPTIONAL.
Mara Raven Spence
DEDICATED TO SERVING SENIORS & FAMILIES EMBRACING THE UNCONVENTIONAL. DELIVERING THE EXCEPTIONAL.
EMBRACING THE UNCONVENTIONAL. DELIVERING THE EXCEPTIONAL. A fee-only financial planning, wealth management, and fiduciary consulting company
John S. Marshall, CFA, CFP®, AIF®, FRM Founder, President John S. Marshall, CFA, CFP®, AIF®, FRM
OFFICE 231.348.2516 CELL 231.838.2640 Founder, President 435 Madison Street, Suite 2 • Petoskey, MI 49770 OFFICE 231.348.2516 CELL 231.838.2640 john@crookedtreecapital.com 435 Madison Street, Suite 2 • Petoskey, MI 49770 john@crookedtreecapital.com
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Uncapping Property Taxes When Governor Snyder signed Public Act (PA) 497 of 2012 in December 2012, the state created an exemption from “uncapping” of property value for property tax purposes on transfers of ownership of residential property (including vacation property) if the new owner is related to the previous owner “by blood or affinity to the first degree, and the use of the property does not change.” The law was designed to help family vacation property owners whose next generation of family members would otherwise face a huge increase in property taxes when they received ownership from their parents. Often property taxes would rise to three or four times the amount their parents paid. But cottage owners need to know that the Michigan State Tax Commission recently issued a publication stating that the new law will apply only where the new and previous owners are both individuals, not entities. They conclude that the exemption for uncapping does not apply to transfers by a trust, to inheritances under a last will and testament, or to transfers of ownership in limited
liability companies, partnerships or corporations. They conclude that the only transfers that are covered by the new law are transfers made by owners with property titled in their own name and made during the owner’s lifetime. If your family vacation property is currently titled in the name of an estate planning trust, steps can be taken to remove the property from the trust and put it in individual names before taking the next step of transferring the property to children. In addition, there is another bill now under consideration by the Michigan legislature that would change this interpretation and also exempt transfers from a trust and inheritances under a last will and testament. This bill also expands the class of people to whom the property may be transferred without uncapping to include steprelatives and grandparents and grandchildren. Final action on this bill is expected before the end of 2014, and if passed, the new law will likely go into effect on January 1, 2015. The entire field of “uncapping” property taxes is filled with technicalities, and confusing definitions and interpretations. Property owners need to be extremely careful in planning the best way to transfer vacation property to their children in order to take advantage of the current and future exemptions from substantial increases in property taxes. Discussing your situation with an experienced real estate and estate planning attorney is more important today than ever before.—David S. Fry, PLC, david@cottagelaw.com
Control and protect your legacy with an IRA trust. Learn more at ljpr.com/IRAtrusts.
The information contained is provided for informational purposes only and is not intended to represent any investment advice or endorsement, expressed or implied, by LJPR, LLC. © 2014 LJPR, LLC LJPR, LLC. © 2014 LJPR, LLC.
Traverse, Northern Michigan’s Magazine | SEP’14
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Scott & Huff, P.C. Perception, Judgement & Skill
Jeffrey Watts Senior VP – Investment Officer Financial Advisor Trina Schueller Senior Client Associate – Officer
10850 E. Traverse Hwy. Suite 5575 Traverse City, MI 49684 231-946-1630 1-800-782-0228
Kitera Hamilton Senior Registered Client Associate – Officer Investment and Insurance Products: NOT FDIC Insured NO Bank Guarantee MAY Lose Value Wells Fargo Advisors, LLC, Member SIPC, is a registered broker-dealer and a separate non-bank affiliate of Wells Fargo & Company. © 2013 Wells Fargo Advisors, LLC. All rights reserved. 1113-02329 [74127-v4] (1196424_373420)
TruNorth Financial Group
We are John A. Scott, JD, Diane Kuhn Huff, JD, Linda K. Solem and Carrie Hahn, paralegals. At Scott & Huff, P.C. we focus on trusts and estates, probate litigation, elder law, and real estate. John is a Fellow of the American College of Trust and Estate Counsel. Diane is a Certified Elder Law Attorney with the National Elder Law Foundation. Each client presents a unique challenge. We bring tried and true techniques and creative drafting to help achieve our client’s goals. We believe in being forthright and practical. Our many years of experience provide a strong basis for advising clients on what works and what does not.
Scott & Huff, P.C.
812 S. Garfield Ave., Ste #7, Traverse City, MI Phone: 231-933-5322 • scotthuffpc.com
Are you confident about your retirement?
A financial advisory practice of Ameriprise Financial Services, Inc. TNFGRP.COM
Derek Dall’Olmo, CFP®, APMA® Financial Advisor
Robert Revett, CRPC® Financial Advisor
Heather Griffith Administrative Assistant
Thomas Roop Financial Advisor
Cassie Revett Office Administrator
Bill Lee, LUTCF®, CRPC® Financial Advisor
tnfgrp.com | 3337 S Airport Rd. W, Ste. 4, Traverse City, MI 49684 | 231.947.6700 Investment advisory services and products are made available through Ameriprise Financial Services, Inc., a registered investment adviser. Ameriprise Financial Services, Inc. Member FINRA and SIPC. ©2014 Ameriprise Financial, Inc. All rights reserved. 911613ACMR0514
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t r u e s t o ry
He made it first. We made it last. At the cusp of retirement twenty some odd years ago, a successful executive needed his assets to work harder than ever. He desired to travel widely; spend summers at the family cottage; support favored charities; help the grandkids pay for college; maintain the style of living to which he and his wife had become accustomed; build a new home; and still leave enough in his personal trust to benefit heirs. With stock options, 401(k) and other assets in hand, he turned to us and said, “Put these to work. I trust you.” It was trust well placed. In the ensuing decades, we managed his wealth through three recessions and countless unforeseen events. With investment skill, discipline, and the client’s financial well being at the center of every decision we made, his wealth not only was preserved, it increased. We’re the first to say not every story has such a fairy tale ending. But with client satisfaction rates approaching 100%, and our unwavering focus on integrity and trust, it is safe to say that Greenleaf Trust clients appear to live happily ever after. If you’d like to learn how we can help you achieve financial security from generation to generation, call us. We’ll give you the full story.
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For more information about the benefits of planning with a CFP® professional go to: www.letsmakeaplan.org. Securities and Advisory services offered through: Commonwealth Financial Network. Member FINRA/SIPC. A Registered Investment Adviser.
A CFP Professional is Uniquely Qualified ®
HAVING AN ADVISOR WHO CAN PULL ALL THE PIECES TOGETHER COULD BE A TIPPING POINT IN PURSUING YOUR FINANCIAL GOALS. By Holly Gallagher, CFP®, AIF®
Holly Gallagher, CFP®, AIF® was recently voted as the #1 financial planner in Traverse, Northern Michigan’s Magazine *Red Hot Best Survey. Holly has over 22 years experience in being the personal CFO to a limited amount of clients. Her focus is on world class service, long-term relationships, diversified investment strategies and comprehensive planning. She is president of Horizon Financial and an Independent Advisor Representative of Commonwealth Financial Network, a Registered Investment Adviser, Member FINRA/SIPC. *Over 8,000 readers of the publication voted for their favorites in the Red Hot Best in 100 various categories. No specific voting criteria was required.
With over 300 registered financial advisors in the Traverse City area, how do you choose the right one for you? A good first step is to look for a CERTIFIED FINANCIAL PLANNER™ professional . Fewer than 10 percent of financial advisors are CFP® professionals. According to the CFP Board’s Standards of Professional Conduct, certification requires passing a rigorous 10-hour two-day exam, and the recent passing rate was only 56 percent. The second step is to determine if that planner practices comprehensive planning. You have insurance policies, employee benefits, investment accounts, and tax and estate documents. But... who is bringing it all together to monitor whole picture? Here are some recent *stories from Horizon Financial • A working physician couple in their 70’s- We moved their IRA assets into 401k plans, which terminated their required minimum distributions and saved them approximately $10,000 per year in income tax. • A couple planning to retire in their early 50’s, -We were able to get them the cash flow they need now by moving some of their assets from qualified accounts into an IRA and avoiding the 10% IRS penalty by exercising the IRS 72 (t) rule. • A successful business owner who had significant net operating losses due to the real estate downturn-We worked with his CPA to convert large portions of his taxable IRA to a Roth IRA. This resulted in zero current taxes today and allowed for tax-free income from the Roth IRA in the future.
WINNER
• A female client who recently became divorced-We worked with her attorney and accountant to determine what she will need to be financially secure going forward. This team approach helped uncover the best assets from both a tax perspective and a long-term income stream.
Horizon Financial
• A couple who was updating their estate plan- We completed a life insurance review and discovered the beneficiaries on file were not aligned with the wishes outlined in their trust. By updating their records, we gave them peace of mind and potentially saved them thousands in probate fees.
Red Hot Best
12935 S. West Bayshore Drive Suite 220 Traverse City • 231.941.6669 Toll Free, 800.495.3462 www.horizonfinancialtc.com hollyg@cfnmail.com
*The above are hypothetical case studies and is for illustrative purposes only. Actual performance and results will vary. This study does not represent actual clients but a hypothetical composite of various client experiences and issues. Any resemblance to actual people or situations is purely coincidental Traverse, Northern Michigan’s Magazine | SEP’14
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