Fourth quarter tax tip: If you hold any mutual funds in non-retirement, taxable accounts, now is the time to begin checking on “projected capital gain distributions.”
What are projected capital gains distributions?
When mutual funds sell securities for capital gains, they don’t pay taxes on them. Their shareholders do. The funds pass the gains through to shareholders each year through reporting them on Form 1099. For many shareholders, the 1099 gains come as a surprise tax bite. The value of the fund may not have increased at all in the past year, but yet, they still have to pay tax on capital gains.
Why are these important?
Because of 2022’s roller coaster market ride, many funds are going to show larger-than-normal capital gains, regardless of what happens to their value between October and December. For the funds’ shareholders, that could mean lots of extra taxes. Even if you bought the fund mid-year, you may still get a capital gain distribution.
If you would like help in the fourth quarter – figuring out 2022 taxable income while there is still time to make adjustments before year-end, schedule a tax planning appointment with your CPA or schedule a 30-minute call to talk with us here: https://go.oncehub.com/HollyPThomas.
I had just asked a 59-year-old, “You said you can retire in 3 years. How will you spend your time after that?” Expressionless, all he gave was a blank stare.
“I never thought about it,” he replied.
Unfortunately, he wasn’t the first 59-year-old with that answer. “I don’t know” is a more common answer than most think.
More To Retirement Life Than Money
According to a study by United Capital, when asked about their financial life stories, most people talked about working and spending, not saving and investing.
Over the decades of our working lives, we tend to follow a formula: Work. Spend. (Save). Repeat. We do this knowing one day those (savings we try not to think about or touch) should equal a nice sum, hopefully enough to reach the nirvana of “financial independence.”
Along the way, we can get trapped into planning meals and vacations, but not a potential 25-year chapter of our life. If nothing trips up the formula (divorce, premature death, disability), then a milestone birthday, the loss of a parent, or the arrival of a new boss may cause one to someday dial up a financial planner and ask, “Am I there yet?”
Are You “There” Yet?
To which the answer is usually, “That depends.”
That depends…on where “there” is. “There” = how, with whom, and where you will find purpose, meaning, and happiness in life after Work-Spend-(Save)-Repeat.
Once that’s known, “there” can be translated into real financial goals. If you don’t know what “there” looks like, then attempts to answer the question are merely rough guesses. More importantly, if you don’t know, you’re not likely to enjoy that supposed nirvana time nearly as much.
There are many thought leaders contributing to discoveries about the time of life past “Working” and before “Old.” That time of life, which will be 25 or 30 years for a lucky few, goes by many names: Your Third Age. The Third Stage. The Encore Years. Your Life’s Next Chapter.
Examples of such leaders include Dori Mintzer and Mitch Anthony.
According to experts like these, retirement planned well has the potential to be a time of peak fulfillment and meaning. Not planned well or planned at all, potential paths lead to boredom and, in the worst cases, clinical depression.
Real Retirement Planning
Many people think “retirement planning” means “IRA investments” or “401K rollovers” or “pension options.” Those are certainly part of it. But the best, yet sometimes the most difficult, kind of retirement planning is not found on your retirement account statements. It’s found inside of you.
Before you click Renew – Fall Enrollment Reminders.
When it comes to employer, private health, and Medicare benefits, it’s easy to simply renew last year’s choices.
However, it can be worth the extra time to look closely at all options, and how they might have changed.
“Research shows employees only spend 17 minutes electing their benefits, while Netflix users spend an average of 18 minutes deciding what to watch,” according to Kiplinger’s: http://bit.ly/Kiplingers-Benefits.
Under 65: Health Insurance
If you are under 65, check for HSA (Health Savings Account) eligibility on your policy. Contributing to a family HSA can save roughly $2000/year in taxes (depending on your marginal tax bracket). Plus, if you are relatively healthy and do not use the HSA, your earnings grow tax-free until retirement. Click here [https://www.hollydonaldsonfinancialplanner.com/hsas-over-iras/] for the reasons why HSA’s beat IRA’s as retirement accounts.
HSA eligibility, unlike IRA eligibility, is not dependent upon having earned income. The last year you can contribute to an HSA is the year before you turn 65.
65 or Over: Medicare
If you are 65 or over, your first opportunity to enroll begins 3 months before you turn 65 and continues until 3 months after, unless you are still employed. Sign up for Part B at the first opportunity (after leaving your employer), otherwise your premiums increase 8% – 10% per year.
Enrollment for existing Medicare beneficiaries for 2022 runs from October 15 – December 7.
If you are on prescriptions, the formulary – the list of drugs that Part D covers – might have changed. Make sure your prescriptions will still be covered. Stories abound of huge jumps in co-pays after January 1. At www.medicare.gov, you can input your prescriptions and the site will advise you which Part D plan covers the meds you need.
Long-Term Care Insurance
Group long-term care offerings through employers are becoming a benefit of the past. Private policies can be bought with better coverage, but premiums are increasing. If you are at least 40 and have access to a group policy, strongly consider enrollment. Most group policies are portable if you leave the employer. Also consider shopping your group coverage against a private policy.
The younger you are, and the more education you have, then the more likely that your potential earnings capacity over your lifetime, known as your “human capital,” is your biggest financial asset. Protect it with LTD coverage.
We are all more likely to be disabled than to die. Most employers provide short-term disability for 90 days.
Long-term disability coverage, if offered, varies from 40% to 80% of compensation until age 65. Some employers provide the opportunity to purchase supplemental coverage; others don’t.
Finally, check whether you are covered for “own-occupation” or “any-occupation.”
Group Life Insurance
Many employers provide one year’s salary as a default for group life insurance, with the option to purchase more for the employee or the employee’s spouse or domestic partner. It’s usually a good deal.
If you didn’t sign up at your initial enrollment, you may need to submit to a paramedic exam if you request more coverage.
Employer Stock Options/Restricted Stock Purchases
The most common error among holders of options and restricted stock is concentration of investments, and future earnings, in that employer. This is usually because those employees own employer stock outright, plus options, plus more stock in a retirement plan through a company match. That’s a lot of eggs in one basket.
You may be highly satisfied with the company’s potential. (So were Enron employees.) Stuff happens. Before making major moves, consult a CPA or CFP. Employer stock decisions can have major tax consequences.
These are just a few of several benefits options commonly found with larger employers. Walking through elections with your financial planner is a good idea at enrollment time. Make a special appointment to do so in advance of the holiday crunch. (Book a 90-minute planning appointment for a Financial Checkup direct at: https://go.oncehub.com/HollyDMeetings)
Like many in Florida this time of hurricane season, I am remembering the not-so-distant past experience with Hurricane Irma. Below are 5 lessons from disaster checklists.
In that year, I thought I was prepared with a set of handy checklists. But in my Monday morning quarterbacking after that storm, there were areas where I did something right, intentionally or not, and others where I got to say, “Oh. NOW I get it.” I am a lifelong Floridian. I’ve been through hurricanes. Further, I love camping and have been doing it since I was little. But I take more time preparing for camping trips than I did for Irma.
All the official checklist advice didn’t sink in until I got a taste of the real deal.
Irma was a huge pain and inconvenience for several weeks, but in my immediate area no lives were lost or in imminent danger. I realize now, though, how unprepared I was if it had gone differently. With no property damage or bodily injury, I was given a chance to do a better preparation job next time.
So as we stare down another storm season and other climatic catastrophes, below are five lessons I didn’t expect to learn from Irma.
What I Thought I Did Right: When Irma was one week out, I dug up the checklists and took inventory. But I became confused. One list was for evacuating the state, one was for staying at home, and another was for going to a shelter or friend’s home. I never thought I wouldn’t know which it was going to be. With a 92-year-old mother-in-law, leaving was not a simple option. Neither was staying. As we debated for five days before it hit, I bounced between the checklists, creating triple the preparation anxiety.
NOW I Get It: This could have been avoided with a kit prepared in advance for each option.
Lesson #1: If you are evacuating, and especially going to a friend’s house or shelter, the time to go is not 24 hours before the eye arrives. By then, or even 2 days before, the 50 mph wind and flooding rain has already begun. Once tree branches start flying across the highway (gee, that does happen before the eye arrives), all the stores are closed and you can’t go home for more canned soup, batteries or underwear.
Lesson #2: Prepare the kits. Decide early on (like, 5 days out) to stay or go, and stick with it.
Flashlights and Batteries
What I Did Right: All the checklists say, of course, “flashlights and batteries.” In preparation, I dug up as many flashlights as I could find. I checked the batteries. I replaced the batteries in the ones that didn’t work. The worst of the storm was to come at night, so before bed, I placed one on my bedside table and one on the kitchen counter underneath the light switch.
NOW I Get It #1: Unfortunately I waited until the day before the hurricane to check the flashlights. We were low on batteries. Batteries were gone from the store shelves five days before that. Oh, duh.
NOW I Get It #2: When I thought about needing a flashlight, I imagined the times when power has gone out before. I imagined it would be a handy supplement to dim natural light.
What actually happened was the power went out at night. The clouds were too thick for moonlight or stars. Of course, there were also no street lights. It was truly dark, windy, and scary.
Inside, hurricane shutters blocked out any sliver of light there might have been otherwise. My house was a cave. I could not see my hand in front of my face. The flashlight was an absolute necessity, not a helpful little handy supplement. I could have used one for each room in the house. Maybe two.
Lesson #3: Change checklist to “Several flashlights.” Put on calendar on June 1: “Check flashlights, flashlight batteries and battery supply.” There’s usually a sales tax holiday in Florida that week anyway. Best time to stock up.
Food and Clothing
What I Thought I Did Right: The checklists say to have three days of food and clothing. I planned ahead for having three days of healthy food for three people. On the last day before, we realized we hadn’t checked the propane so we could cook the food. By then, propane was all sold out. We ended up cooking on a small charcoal grill. Not ideal.
NOW I Get It #1: I didn’t quite understand why three days of food and clothing were needed, especially if we stayed home. It had been too long (2005) since I had gone several days without power. 48 hours after the storm, it felt like a race against time to eat or cook the food in the fridge before it spoiled. Also, in Florida when there’s no fans or A/C after a hurricane, you sweat a lot. Ick.
On Day 3 my mother-in-law’s ALF got power so then, we did evacuate. We left to a hotel for 4 more days until our house got power restored. If we had evacuated before the storm and not been able to return, we would definitely have needed more food and clothing.
Lesson #4: Have 3 days of food and clothing packed just in case. Maybe 5.
On Your Own
One of my checklists says, “After an emergency, you may need to survive on your own for several days.”
What I Did Right: Food and flashlights. That’s about it.
NOW I Get It #1: When I read the above sentence, I thought, “On our own? That can’t mean the suburbs. That’s for people in the country.” Now I realize we were lucky our county had generators to run water and sewer services for 500,000 people for several days. Otherwise, we could have been, yeah, on our own. (Hola, Puerto Rico. I see you.)
NOW I Get It #2: Now I recognize that just because the storm is over doesn’t mean you can get home. After the eye passed and the sun was out again, 60 mph winds on Irma’s backside took down huge trees that blocked our street. It took neighbors with chainsaws a couple of days to clear them so cars could get through.
NOW I Get It #3: We had been in our neighborhood about a year when Irma hit. We had met the neighbors, had them over for Superbowl, and waved as we were coming and going. We knew them, sort of, but had no idea how much we would come together in a crisis. I did not think of counting on my neighbors, nor did I give a thought to them counting on me.
But as Irma’s track got clearer, we formed a texting group, including a young couple who moved in the week prior. We checked in as soon as the sun came up. One shared their freezer operating on a generator. Others immediately helped cut and clear fallen trees. We shared our stories and asked how we could help each other. As long as I live here, I know I will not have to survive “on my own.” We will be helping each other.
Lesson #5: There are many little lessons from Irma that I can recount, but this last one was the big V-8, SMH moment. We are not all “on our own” if we have a community. I am lucky to be part of a caring community that pulled together, whether it was unlucky tree karma in your yard or failing to buy batteries and propane in time. When I hear the same old story on the news from a natural disaster, “We all pulled together,” “This is a community who cares,” NOW I know what that kind of community feels like. I feel very fortunate about that.
Still, I will do a better job taking care of my needs so I can be better prepared next time to take care of others.
“Then indecision brings its own delays, And days are lost lamenting over lost days. Are you in earnest? Seize this very minute; What you can do, or dream you can do, begin it; Boldness has genius, power and magic in it.”
Johann Wolfgang von Goethe, Faust
Death by a thousand indecisions. As Goethe asked, are you “in earnest”? When it comes to decisionmaking, sometimes it’s quick: Ready-Fire-Aim. With other decisions, we take our sweet time. How much is indecision costing you?
Like death from a thousand cuts, indecisions can slowly deplete our energy, leaving little behind for ourselves or others.
Decisions are Draining
That’s because decisions are draining. Neuropsychologists like Dr. Moira Somers tell us that decisionmaking depletes our mental energy. According to Dr. Somers, every day we wake up with a finite amount of mental energy. As the day goes by, the more decisions we make, the less energy we have. And the bigger they are, the more energy they use.
Think about life’s transitions. One reason transition times, good or sad, are so stressful and exhausting – a move, a death, retirement, a child, a divorce – is the many seemingly small, plus a few momentous, decisions.
Further, lack of sleep, hunger, grief or even excitement can start the whole day off depleted.
Then, every indecision we “make” is a decision. In fact, a pattern of indecisions can take physical form, and stress us out every time we see it.
What does not-deciding look like? A pile of unfiled papers. Empty boxes stacked in the garage. The “miscellaneous drawer” in the kitchen. The “junk room.” Scattered financial accounts in too many places. Unfinished projects.
With a finite amount of mental energy at hand, who can blame any of us for having some kind of to-be-decided pile/stack/assortment hanging over us all the time?
Dealing with Indecision
What to do about it?
Make big decisions in the morning, before depletion sets in.
Automate it: Use a system to take care of small decisions automatically
Eliminate it: Ask often, “How important is it?”
Date-Activate it: Calendar the decision to deal with and be done
Delegate it: Ask for help
An automation example I love and have yet to implement is the decision of what to wear. Michael Kitces, a noted financial expert, famously has a closet full of the same blue shirts, pants, and shoes. One less decision each day for a busy guy.
Another example is cooking. Thanks to Cassy Joy Garcia’s book, Cook Once: Eat All Week, our household now pre-preps ingredients on Sunday. Then, each work night is 15-30 minutes to assemble and cook the ingredients with pre-planned healthy recipes. The meals are delicious, but the best part is not having to make the decision of what’s for dinner. Hallelujah.
In the summer of 2021 I began thinking about a new car. My financial plan called for me to sell my would-be 7 year old car in January 2022 and buy another one. I couldn’t decide what kind of car to buy.
Aware that the indecision was draining me, I wondered why I was having such a hard time deciding. Then it hit me. I didn’t need a new car. In fact, I didn’t need a car at all. My husband and I had both switched to working from home. Why did I need a shiny hunk of metal to sit in the garage? We had my husband’s car, which was only 2 years old. We ran a 6 week experiment without using my car to see if it caused any problems.
When we saw that it didn’t, I felt immense relief. This told me I was making the right decision. Besides, it was a good time to sell a used car. $15,000 later, we are both very happy about eliminating that decision!
My calendar rules my life. It tells me what to do, where, and when. If this is not you, then this tip might not work.
One decision that goes on the calendar every year is whether to take a ski trip and if so, where. The local ski clubs publish their trips around August/September. Ski season pass discounts usually end on Labor Day. So I have the calendar marked for that timeframe to do my research, poll my skiing girlfriends, and make the decision. While it feels sooner in the season than I would like to make a commitment, if I did not give myself a deadline, I would dilly dally into December as all of the good trips filled up. And in the meantime, I would be spending a huge amount of mental energy on something that’s supposed to be fun.
Part of my indecision problem has been the flawed belief that I should be able to do everything myself (and perfectly, which is a topic for another blog post).
However, after a divorce, when my brain was extra foggy, I had significant success with hiring a friend to help organize. At the same time, I had estate planning documents updated with a local attorney. With my friend’s insight, coordination, and diligence, I quickly had an uber-organized office AND an updated “emergency box.” I felt the fog lifting as things came together.
It turns out that hiring help accelerated my decision making and used less energy. Perhaps this is what Goethe meant by the boldness in beginning. Delegating to others can be bold.
Getting Better and Better
Goethe said in that boldness to begin the decision we find genius, power, and magic. Further, there is a spiraling effect – the fewer decisions left to make, the more time to do what we do best. This is far better than a daily slog through indecision-infused mud.
At some point, with excess energy, I felt ready to give back. Someone close to me suddenly lost her husband and her mother within a three month period. She had an overwhelming number of decisions to make about seemingly small stuff, and was in a grief-stricken state to be doing so. I feIt the capacity to help her. I could not have made that statement before I had my own house in order. I don’t know if that counts as genius, power, and magic, but it felt really good to do.
What About You?
What if you took an indecision pile and automated, eliminated, date-activated, or delegated?
Who might you then be able to help?
Genius, power, and magic are waiting, if we have the boldness to begin.
Student loan forgiveness 2022? Where do your student loans stand right now? It can be pretty confusing to figure that out. Covid deferrals, loan servicer mistakes, and now forgiveness have led to a mish-mash of options. However, the big financial mistake you can make is to assume you don’t qualify for some kind of relief.
One piece of good news on the mish-mash front, especially if you have more than one loan: Those loans can now be seen on one page at www.studentaid.gov. No more checking on each servicer’s website for your information. It has a helpful feature. The site divides your loans into those that can be forgiven (through any existing forgiveness program, not only the most recent one), and those that cannot (mostly private loans).
To use studentaid.gov, you will need an FSA ID. This is different from your loan number. Apply for one at the website, and you’re in.
6 Questions to Ask Yourself
Before deciding, like Seinfeld’s Soup Nazi, “No forgiveness for you,” (90s reference – might make no sense to recent graduates), ask yourself these 6 questions to start:
1) Were your loan payments ever on some kind of income-driven repayment plan (IDR)? If so or you are not sure, see “Income-Driven Repayment Loans,” below. 2) Have you worked in medicine, education, or for government, at all since graduation? You may have been given bad advice about Public Service Loan Forgiveness. Skip to “Public Service Loan Forgiveness,” below. 3) Does your employer offer any type of student loan reimbursement benefit? If not, might they consider one? It’s tax-free to both you and them until 12/31/25. For more info, see “Tax-Free Student Loan Reimbursement,” below. 4) Did you repay some or all of your Covid-deferred loans in the last 33 months despite the fact they were on deferral? Skip to – “Forgiveness – What We Know So Far,” below. 5) Is your household Adjusted Gross Income (look on your tax return or ask your CPA or CFP) less than $125K (single) or $250K (married)? Skip to – “Forgiveness – What We Know So Far,” below 6) If you are a parent of a current student getting loans, is your household Adjusted Gross Income (look on your tax return or ask your CPA or CFP) less than $125K (single) or $250K (married)? Skip to – “Forgiveness – What We Know So Far,” below
Income-Driven Repayment Loans
If your loan payments were ever calculated based on your income, you may be entitled to some relief. Many errors were made in the calculations of those payments, mostly in the loan servicers’ favor. Most of those errors have now been corrected. You may owe less than you think. You may also qualify for lower payments.
A study showed that nearly all applications for PSLF had been rejected over the past several years when many of them should have been approved. Additionally the loans suffered from accounting errors.
Plus, more jobs have now been added to the PSLF program eligibility.
****But in order to have your case reviewed, you have to enroll at the student aid.gov site by getting an FSA ID by 10/31/22.****
Anyone in medicine, education or government work should go ahead and enroll. Enrolling sooner than later will reduce the chance of getting caught up in a last-minute rush of applicants.
Tax-Free Student Loan Reimbursement
With the 2017 Tax Act, employers and employees were given a special benefit. Employers can reimburse employee’s student loans up to $5250 (but any tuition directly reimbursed is subtracted first). The employers get to deduct the compensation, and the employee doesn’t pay tax on it. This benefit is available regardless of salary, income, or occupation.
Because the 2017 Act sunsets in 2026, however, this means that this benefit is only available until 12/31/25, unless it’s extended by Congress.
Ask your employer if this benefit is available to you. If you work for a small-ish employer, that employer may not be aware of this benefit. Given the tight labor market, it might be a good time to make the request to add it, or to provide it for you.
Forgiveness – What We Know So Far
While many of the details still have to be worked out, you’re probably aware that the recently-enacted loan forgiveness applies if you are single with Adjusted Gross Income (AGI) of less than $125K or married with AGI of less than $250K.
Again before letting that internal Soup Nazi strike you down, remember AGI is not your gross income/salary. If you are a W2 employee, your AGI would be approximately: Salary+Bonus minus Retirement contributions minus HSA (Health Savings Account) contributions.
In addition to retirement and HSA contributions, there are many other adjustments that can affect your AGI, but they are less common. The point is that if you make $135K and think you don’t qualify, think again. If you contribute $6K to your 401K and $6K to your HSA, your AGI is $123K, so you actually do.
If you are self-employed you probably have even more deductions, so a thorough tax review would be in order. Maybe an amended return for 2021 might be worthwhile if you find a deduction that was missed.
The amounts that can be forgiven are $10,000 for all borrowers with public loans (not private ones), and an additional $10,000 if they were also Pell Grant recipients. The website at student aid.gov will tell you which loans you have that are forgivable.
What if you paid off your loans within the past year and you would otherwise qualify for forgiveness? Surprise – you will be able to apply for a refund. Details on that yet to come, though.
What if you are the parent of a current student? As long as the student had loans as of 7/31/22, and your household’s AGI falls below the income eligibility figures, your child’s loan(s) would qualify for forgiveness.
Summary – Several Strategies
In summary, now there are several strategies to employ that can help ease the burden of student loan debt. Consult with a knowledgable CPA or CFP on what opportunities there might be for you.
You can make an appointment to speak with us about your student loans or other concerns on our Contact Us page.
Money values, behaviors, habits, and change: Perhaps there is something about middle age, or a pandemic, that creates the urge to examine values, behaviors, habits, and change.
At my 25th college reunion, I had breakfast with a college friend who worked for our alma mater, Davidson College. She had attended lots of reunions.
I asked about her observations of reunion attendees. She said something like, “At the 10-year mark, everyone’s comparing notes – who has how many kids, who has graduate degrees, what they did for vacations, what kind of home they live in, etc.”
In other words, their money values tended to be focused on status.
“By the 25th, nearly everyone has experienced some kind of life event, and they are a lot more mellow. The other stuff must not seem as important.”
So, values shift as life unfolds.
Values drive behaviors, which become habits. When we begin to question the behaviors and habits, we become ready for change. And that’s how growth happens. Eventually this process can work its way into finances.
Beginning to Examine Behaviors – Eating Habits
My own path to behavior change didn’t start with money. It started with eating.
One of my first experiences with behavior change was through Weight Watchers. I was 35 years old, 5’3″ and 15 pounds overweight. I decided that I valued being healthy more than enjoying unhealthy food. I lost 20 pounds and gained 5 back, but kept it off.
How did I do it? Tracking and accountability. Whenever my clothes got tight, I would write down everything I ate. This helped me track and change my eating behaviors permanently.
Ironically, tracking and accountability had come naturally to me with money. I wrote my first budget at age 9, and had tracked my money ever since. This made me a good saver, but later I learned it didn’t necessarily mean I had a good relationship with money.
Next I moved to healthier conversation habits.
The values of listening well and feeling heard became more important. I learned that “listening” does not mean, “Wait until the other person is finished talking so I can say what I want to say.”
Listening means to suspend all noise and chatter in my head; and reflect on what I am hearing. To eliminate the noise and chatter, I acquired a rule: Anything that I want to say while someone else is talking, I am not allowed to say.
Like any other habit change, it took conscious effort at first. When I think of something I want to say, I let it go, stay present, and listen. I found that, if I truly wanted to understand someone then what I wanted to say would have gotten in the way of that.
My conversational habits, and relationships, improved.
Money Values, Behavior, Habits and Change
My money habits needed improvement too.
I used to overtrack my spending and worry unnecessarily about it. This led to a habit of denying myself some things that would have been convenient, or just enjoyable. Then, like binge eating, I would splurge on something silly or outrageously expensive. Even though the splurges never exceeded the savings, it created big regret and self-criticism.
This roller coaster of emotions tied to money was one of the hardest habits to break. The shift came indirectly through other personal changes wrought through a divorce. Working structured programs with friends who shared similar struggles helped me identify emotions sooner and do something more constructive with them.
It is easy to underestimate how difficult behavior change can be.
It’s normal to believe we can simply tell ourselves to act differently. We can “just say no” to cookies after dinner, to quit interrupting, or to quit worrying about financial things we cannot control.
Instead, it helps to have a nudge – a program, a structure, a new discipline, or an accountability partner – to complete the transformation from old habits to new ones.
Before you know it, with new habits, a lot of good physical, relational, mental, and financial growth will happen.
Enough good stuff to share at the next college reunion.
Floridians, wait until July 1 to buy that kayak, new grill, or Broadway series pass. The state of Florida has a Freedom Week sales tax holiday encouraging us to a) get outside and b) get back to sharing space with strangers.
The holiday lasts from July 1 to July 7, 2022. Depending on the county in which you live, that could mean a 6% to 8% savings.
Two Exemption Categories
The savings cover two main categories: a) outdoor activity supplies and b) events.
“Outdoor activity supplies” include everything from bug spray to gas grills (the first $500 – sorry, gourmet grillers). Reading the list of exempted items makes me want to spend the rest of the summer in the water (many of these do have limits ranging from $500 down to $10):
canoes and kayaks
water skis and wakeboards
paddleboards and surfboards
goggles, snorkels, and masks
sunglasses and sunscreen
rods, reels, bait and tackle
For woodsy type landlubbers, exempt (also with limits) are:
outdoor gas or charcoal grills
Camping supplies include stoves, tents, collapsible chairs, lanterns, flashlights, and sleeping bags. (Gee, this also reads like my hurricane preparedness list.)
Events and Annual Passes
For even more fun, “events” include tickets to any concert, movie, game, fair, festival, cultural event, or gym with attendance dates through December 31, 2022. Note: You have to buy the ticket between July 1 and July 7 for any event scheduled through the rest of 2022 to get the exemption.
Events also include annual passes to:
theaters (hello, Broadway series, orchestra, and opera)
state parks (which I didn’t know they charged sales tax on in the first place?)
Despite its property-tax-free status (for now), sorry, but Disney does not count as a state park.
No limits on the cost for the passes. So if you’re considering venturing out for the Broadway series, purchasing the pass between July 1 and July 7 might save you enough to cover dinners before the shows.
Parents, aging, and finances. Talking about aging with parents can be one of those difficult conversations we want to put off for another day. Like other difficult conversations, though, avoidance usually makes it harder.
Transitions in aging can fall into four broad categories: financial matters; health care decisions; living arrangements; and transportation. This week’s post tackles the topic of finances.
Helping Parents With Finances
The downside of the digital age is that it makes seniors more susceptible to fraud and scams. They can send or spend money anywhere, or divulge sensitive information, with one click. Without being physically present, adult children might not be as quick to catch the warning signs that a parent has become susceptible.
The most common kind of elder financial abuse occurs from people close to the parent. Sometimes it can be a new person in their lives – a girlfriend or boyfriend, a housekeeper, or a companion caregiver. Checking up on new friends and companions might not feel good, but is a necessary step.
Are parents located far away? In her wsj.com article, Veronica Dagher interviews financial advisors and aging experts on how to help parents with finances from a distance.
By volunteering to help with bill paying, the person with the DPOA can begin to get acquainted with the parent’s accounts, particularly what kind of expenses are normal and which are not.
Parents: Start Early, Small and Often
Parents would be wise to communicate early with adult children. While the topic of money is taboo in many households, it will make everyone’s life easier if the parent is open and communicative. It’s helpful to know how many accounts there are, how the accounts are managed, and approximate amounts or a range of amounts in each. Describe how the transition of help with money would go in an ideal world. Other steps:
Provide contact information for the financial advisor, investment manager, lawyer, and accountant.
Arrange an annual family meeting with any or all of the above.
Begin conversations early with small topics first. Allow everyone involved to grow into their roles.
Build on that trust to expand financial duties as time goes on.
Adult Children: Start Early, Small, and Often
For the adult children, instead of anticipating one future difficult conversation, experts recommend thinking of each topic as a continuous conversation to be had over a number of months or years. Following are some pointers.
Start the conversation with curiosity.
“Mom/Dad, if you should ever reach the point where you’re unable to (balance your checkbook, drive on the interstate, feel confident about a medical decision, feel comfortable living on your own), what would you like to have happen?”
“What would be an example of something that would indicate the point at which you would like help?”
Listen intently. Even if it is not what you would like, check for understanding by repeating back what you heard. For example, “So what I hear you saying is that, if you have a fall, that’s when you’ll ask for help. Is that true?” Sometimes when we hear things back, we change our minds, or clarify.
Things To Do Now
As noted in Dagher’s article, one of the most important documents is a Durable Power of Attorney (DPOA). If a DPOA is more than a few years old, or there has been a change in health status, have it reviewed by an elder law attorney. The attorney will make sure the powers granted are up to date with current law and broad enough for the parent’s current situation.
Since so much of our financial lives are online, it’s also wise for a parent to share emails, userids, and passwords with the person named as DPOA. Ideally, all of the financial institutions where a parent has accounts would have copies of the DPOA and confirm they recognize it as valid.
By volunteering to help with bill paying, the person with the DPOA can
begin to get acquainted with the parent’s accounts
become known to the institutions where accounts are held and
learn what kind of expenses are normal and which are not.
Additionally, it tends to work better if just one person is named as DPOA. Then name a backup or successor in case they are unavailable. Joint DPOAs can be a headache.
DPOA Does Not Work for Health Care
While the DPOA covers financial and legal matters, it does not address health care decisions. For those, a health care proxy or Designation of Health Care Surrogate is necessary. With Covid-19, family members may not be allowed in the hospital. Should an emergency happen, the health care proxy, as well as any living will, DNR (Do Not Resuscitate), or DNH (Do Not Hospitalize) documents should be provided to paramedics and/or hospital staff.
These are difficult scenarios to think about or talk about. The most important thing to do now is begin with a single step. Whether you are the parent of adult children, or the adult child of an aging parent, it’s never too early to broach the topic. Rather than waiting until it’s too late, start while it seems too soon. That kind of talk will be a lot easier.
Estate planning, opioids and addiction: Addiction is one of those common issues everyone thinks is uncommon.
But if it was talked about more, more people would realize addiction is a widespread illness, affecting many families. Before Covid-19, the opioid crisis was one of the worst epidemics to affect the U.S. Like Covid-19, there were outbreaks and hotspots. Unlike Covid-19, the opioid epidemic was brought about by unscrupulous doctors and pharmaceutical companies.
Below is an excerpt from a guest blog post by Mike Mastry, Esq. of Mastry Law in St. Petersburg, Florida. In it, he details how opioids and addiction are affecting families and attorneys as they document their estate planning.
Mike Mastry is an estate planning attorney located in St. Petersburg, Florida. Mike’s goal is to simplify the process of estate planning by crafting individualized plans that provide each client with peace of mind. He does this by maintaining a client centered practice that focuses on creating comprehensive estate plans that are tailored to fit each client’s unique circumstances.
Mike’s ideas are relevant for planning involving any kind of addiction – the kinds that are easier to see, like drugs and alcohol, as well as the kinds that aren’t – like gambling, sex, or porn.
All addictions, seen or unseen, hurt the addict and the people who love them. Having a good estate plan in place can’t take away the hurt, but it can hedge against making it worse.
Opioid Epidemic Now Impacting Estate Planning, by Mike Mastry, Esq.
“Estate planning often serves as a reflection of a family’s experiences. In this instance, estate planning is used to protect the family and individuals with substance abuse problems.
Estate planning attorneys hear all kinds of stories about bizarre family dynamics and difficult relatives. However, the national opioid epidemic is relatively new to the estate planning world. Sadly, it is likely here to stay.
The opioid epidemic has led some attorneys to get creative and establish what are being called “opioid trusts.” Some folks don’t want to leave anything outright to a child with a dependency issue, because of what can happen to the money.
Estate planning attorneys are regularly asked to create trusts for beneficiaries with intellectual disabilities, who are entitled to public-health benefits through Social Security or Medicaid and receive supplemental trust payments that add to those. However, the so-called opioid trust is somewhat different.
Parents may be paying for the child’s basic support needs. However, is that money going to buy drugs? If so, have they cut him or her off completely?
With an opioid trust, there’s no support to the child. This sounds cruel, but medical experts say it’s to get the child to embrace recovery. The goal is to get him into recovery and, eventually he might be able to stay clean long-term. An opioid trust is created to pay recovery-related expenses, such as rehabilitation bills, therapist payments and treatment bills. Optimally, the child gets a job. It’s this “tough love” that’s the only way this type of trust will work.
The money is never distributed directly to the beneficiary, nor is any property that could be easily converted into drug money. However, you can give them other, in-kind benefits, like the use of a car-but not the title to the car.
Naming a Trustee
Naming a trustee can be challenging in this kind of situation. This is a situation where a professional trustee, rather than a family member, may be a better choice. Achieva, a Pittsburgh-based organization, handles standard trust disbursements and has a team of social workers and counselors who work with trust beneficiaries.
An estate planning attorney will be able to help your family distribute assets through an estate plan that protects the family from the impact of addiction.“
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I find it is most helpful to offer an initial phone consultation so I can better understand your issues and concerns. After the call, we will both know whether there is a fit, or if it makes sense to schedule an appointment. We’ll chat about your needs, your goals, and what steps are right for you.