Most folks know that cash accounts in banks are insured up to $100,000, per individual, per bank, by the Federal Deposit Insurance Corporation. Trusts, of course, can own bank accounts, but often have multiple beneficiaries. Recognizing this, the FDIC has issued guidelines so that one can calculate the amount of insurance coverage available for trust-owned accounts.
I'm still in catch up mode from being out a week in early August, which is the reason for my paltry postings of late, but this article on the Chicago Tribune website caught my eye. It describes the financial dangers seniors face by the hands of unscrupulous investment advisers, some of whom who call themselves "estate planners," and others out to defraud the elderly.
Estate planning attorneys can provide a good resource for seniors who are tempted by investment schemes, etc. We can provide objective advice and help investigate the reasonableness of the claims made by those promoting the investment. Attorneys with investment training and credentials can be particularly helpful in this regard.
A recent New York Times article cautions senior citizens that certain designations, such as Certified Senior Adviser (CSA), are used by unscrupulous insurance salespersons and financial advisers to imply knowledge or expertise they do not have. Many such designations are easily obtainable by taking short courses and passing simple exams, and are practically meaningless in measuring competence or ethical standards.
Other designations, such as Certified Financial Planner (CFP), Chartered Life Underwriter (CLU) and Chartered Financial Consultant (ChFC), require extensive study, rigorous exams, and background checks, and provide a much better method of judging a prospective adviser.
An article in the February 24-25 issue of The Wall Street Journal describes how 529 College Savings plans can be used to reduce estate taxes. Earnings on the funds invested in such plans are tax-free if used for qualified college educational expenses. North Carolina residents also get a small tax deduction for contributions to North Carolina sponsored plans (Click "Continue Reading" for more information).
The plans allow the owner to maintain control over how the funds are used, and even change the beneficiary to another relative or the owner himself. If the funds are not used for educational expenses, taxes are due on the gains, along with a 10% penalty.
Gift tax rules allow using up to five years of the $12,000 annual gift tax exclusion at once, so that one person can put $60,000 into a plan in one year. For wealthy grandparents with multiple granchildren, this can add up to substantial estate tax savings. The current estate tax exemption is $2 million, so persons with estates over this amount may want to consider this technique. Before establishing the accounts, however, be sure to check with a qualified tax and investment advisor. There are fees associated with 529 Plans, and investment performance in many types of plans have been lackluster of the last several years.
Check out www.savingforcollege.com for a plethora of information on 529 Plans.
Continue Reading...Being in a college town, most of my clients are intelligent and well educated, and many handle their own taxes and investments. However, there are times when a professional's advice can be invaluable. This recent article on The Motley Fool website provides some guidance about when to seek advice..
How do you choose a financial advisor? I recommend working with a Certified Financial Planner (CFP). CFPs must pass a rigorous examination on investments, retirement planning, estate planning, taxes, insurance and more. They are also required to have met educational and experience requirements and must adhere to strict standards of professional conduct. For a directory of CFPs, take a look at www.cfp.net.
In addition, just as when searching for an attorney, ask your colleagues, friends and other professional advisors for recommendations.
Ideally, your CFP will work with your estate planning attorney and CPA to develop a comprehensive plan that will ensure that your financial future is as secure as possible.
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