Mac’s Blog

As we move quickly toward the New Year, Tax Planning will change; several issues to be aware of : 

1. Estate Tax is supposed to terminate on January 1, 2010 whether it does or does not is open to debate and will most likely be continued by the Democratic Congress using a bill retroactive to January 1, 2010.  However, the Estate Tax’s demise was to do away with one significant favorable tax provision.
   1. Step up in basis for property passed due to death will terminate and Capital Gains will then be based on the original property cost.  This will cause significant problems for long held family property.
2. On January 1, the Generation-Skipping Tax will terminate.  But will Congress leave it alone?
3. Does any one believe that All Tax Rate will not be increased in 2011?  2010 may be the last year for the current lower rates.
4. So far there has been no attack on Roth IRAs and 2010 allows individuals with Adjusted Gross Income above $100,000 to convert from traditional IRAs and other qualified plans to a Roth and then pay the tax over a 2 year period.  At present this is a benefit having limited life and may not be renewed now or made available ever allowed again.
5. AMT; is not indexed for inflation and in previous years law makers have provided some help to mitigate this problem.  So far there is no such fix and millions of taxpayers will fall prey to this parallel tax system.
6. With the Obama proposed increased levy on capital-gains and dividend tax rates, current planning is required.
7. Deferring income has been profitable for many especially those in higher tax brackets.  Deferring past 2010 may not be a good idea give the potential for much higher taxes.  However, were possible delaying deductions you might be able to take in 2009-2010 might be more valuable in 2011.
8. Some Bush era tax cuts have not phase out yet but will soon.  One; reduction in value of itemized deductions for individual in higher tax brackets,  has progressively reduced and higher-income individuals now may take full advantage of itemized deductions and exemptions without facing this reduction.  This benefit will end after 2010 and the tax will be back to full force.

After 2010 election we may see draconian tax-reform (Change) impacting not just those above $250,000 but all of us either through direct taxes or indirect taxes.  Each tax payer must be aware of change taking place and just because the change doe not currently affect you don’t think it will not later on, directly or indirectly.

Hubert McMinn Jr.

Hubert McMinn is a retirement planning specialist working within Texas, USA and located in the Houston area. To better understand how to develop a better retirement foundation, contact Hubert McMinn by email at  hmcminn@plannedassets.com  or  for retirement planning ideas and concepts, visit him at: www.plannedassets.com.

Like most, I often receive faxed unsolicited information concerning Health Insurance and offers to provide my family coverage.  No matter what I do, I can only get these fax or email stopped for a short while and then they start again.  Since I am in the insurance business and provide my clients with individually designed coverage, I sometimes request additional information concerning these offers. 

Never have these been offers for Major Medical insurance or significant health coverage to be counted on for any significant illness or major accident.  Most advertisement is discount or limited benefit plans purported to provide more coverage than they really do. Generally these advertisements will not address themselves as “insurance” unless regulated by a State Insurance Agency, which most are not. 

If a fax or an internet advertisement appears interesting and you make the call, your first question should be is this product regulated by my State Board of Insurance and the second, is this a Major Medical product?  If the product is not regulated by your State Board of Insurance, hang up.  Obtaining this type coverage puts you at risk with no real legal support.  Discount plans are not insurance, are not regulated by any State Board of Insurance and generally not effective when you most need them, if they work at all. 

On the other hand, if you receive an advertisement like I did the other day from “Reformed Health Care Plans” it may turn out to be a limited benefit plan.  When I ask, I was told the product was regulated by the Texas State Board of Insurance, which I doubt because the ad did not meet specific requirements of the Texas State Board for advertisements of this type and they would not/could not tell me who underwrites the product.  At this point I should have hung up and reported the ad, but I was interested because the “Summary of Benefits” looked so good.  Remembering that if it looks too good to be true it normally isn’t and it is always to expensive in the end, I got as much detail as the telemarketer could provide.  

The product had/has the same cost for all, based on number in family.  For a family of 4 it was $580 or $420 per month with a $125 application fee.  Based on premium the product covers either 90% or 80% to maximum benefit of $7,500 per incident.  No deductibles but a series of co-pays and like I have already said, a very interesting list of benefits.  If the product met requirement of a legal and honest offer and is in fact regulated by the Texas State Board of Insurance, at best it might be a very interesting but very expensive supplement to the Major Medical policy I have. 

My point: Every State has a State Board of Insurance or an agency that over sees all insurance; most agencies, like the Texas Board are very easy to work with and welcome email or phone calls.  Consult with your agency or a qualified agent before making a decision you most likely will regret. 

Hubert W. McMinn Jr.

For additional information or questions, email hmcminn@plannedassets.com.

Titling of a CD may affect how much of the CD is actually insured.  Titling these supposed simple investments can be misunderstood when selecting owner and beneficiary.

If you are parking assets in a CD or any other bank account; given the state of the economy and what has happen to several banks over the past year it may be a very good idea to actually become familiar with the meaning of FDIC insurance.  A reasonable amount of information may be found at www.fdic.gov and is quite readable. 

The current maximum amount of insurance for an individual titled ownership category is $250,000.  This limit has now been extended to 2013.  At expiration of this extension, insurance coverage could quickly revert back to $100,000, be further extended at $250,000 or even increased. 

Titled or Ownership Categories for individuals and business are as follows:( www.fdic.gov)

1. Single Accounts: All single accounts owned by the same person, sole proprietorship, decedent’s estate or any account that fails to qualify for coverage under another ownership category at the same insured bank.
2. Certain Retirement Accounts: IRAs, Section 457, Self-directed defined contribution plan accounts and Self-directed Keogh plan Accounts (or H.R. 10 plan accounts) listed by the same person in the same FDIC-insured bank are added together and the total is insured up to $250,000.
3. Joint Accounts: Deposits owned by two or more people.  All co-owners must be people to qualify.  This category has specific requirements to qualify and correct information must be obtained before affecting this time title.
4. Revocable Trust Accounts: This titling becomes more complex and is based on the beneficiaries.  As with 3 above this category can become complex, even more so if a beneficiary should die before the grantor.
5. Payable-on-Death Accounts: See 4 above.
6. Irrevocable Trust Accounts: See 4 above.
7. Employee Benefit Plan Accounts: Coverage for a plan’s deposits is not based on the number of participants, but rather on each participant’s share of the plan and is insured up to $250,000 for each participant’s non-contingent interest in the plan.
8. Corporation/Partnership/Unincorporated Association Accounts: Deposits owned by these entities are insured up to $250,000 at a single bank, but insured separately from the personal accounts of the entities. (Stockholders, Partners, or members)

The concept of titling or ownership categories to obtain FDIC coverage can be more complex than you might think.  How you title a deposit or investment under FDIC coverage and requires more than just knowing you are working with an FDIC insured bank or credit union.

Hubert W. McMinn Jr.  

 For additional information or advice, email: mcminn@plannedassets.com