Even if you have years before you qualify, why focus on Medicare and Medigap now? Because as big changes happen in our healthcare system, those who understand the programs and products ahead of time will not only be better equipped to plan for their post-retirement healthcare options, but they’ll have a better understanding of these critical federal programs change over time.

A visit with a CERTIFIED FINANCIAL PLANNER^TM professional, like the ones at MHB Financial Group, can give a broader view of what the federal government will and won’t pay and how you should plan your coverage going forward.

Here’s a summary:

Who is eligible for Medicare? More people than you might think believe Medicare is available to anyone over the age of 65 who is a U.S. citizen or a permanent legal resident for five continuous years. Yet people under the age of 65 qualify under certain circumstances, including: If they are permanently disabled and have received Social Security disability payments for the last two years, or if they need a kidney transplant, are under dialysis for permanent kidney failure or have Amyotrophic Lateral Sclerosis, also known as Lou Gehrig’s disease.

How does Medicare cover expenses? Medicare coverage is divided into three primary parts: Part A, Part B and Part D. And yes, there is a Part C. Here’s what each part covers:

• Part A is the segment of the program most associated with hospital care. It covers hospital inpatient care, a limited amount of care at some skilled nursing facilities, some specific home health care alternatives and hospice care. Most people are enrolled automatically in Part A when they reach 65 and they get this coverage for free. What’s important is that Medicare doesn’t cover long-term nursing home expenses, so that’s why long-term care planning is necessary for all individuals.  
• Part B is all about outpatient services. This is the part of the plan that covers doctors’ visits, outpatient care and some other medical services that Part A doesn’t cover, such as the services of physical and occupational therapists, and other aspects of home health care. You do have to pay a monthly premium for Part B coverage with a deductible – in 2009, the basic premium is $96.40 per month though it might be higher for some people based on income. By the way, you’ll sometimes hear people refer to Part A and Part B coverage as “Original Medicare.” 
• Part D is Medicare’s prescription drug coverage. Part D is administered by a number of private insurance companies that operate in various areas of the country, so this requires some shopping on your part to make sure you’re getting the right drugs at the right price. Financial assistance might be available if you need it. 
• Part C is actually the Medicare Advantage Plan, which is an optional plan individuals may choose so they receive their Medicare benefits through private health plans. You’ll also hear this plan referred to as Medicare+Choice. These private plans include conventional HMOs and PPOs and are required by law to offer benefits that cover everything that Medicare covers, but they don’t have to cover everything exactly as Medicare Part A and B do. There might be some customized options that allow for lower copayments or lower total out-of-pocket expenses. In simplest language, Medicare Advantage plans blend the benefits of Original Medicare and Medigap plans (more on this below). By law, you can’t buy Medigap supplemental insurance if you’ve chosen Medicare Advantage. However, it’s very important to get some expertise on the choice between Original Medicare and Medicare Advantage plans based on your anticipated health needs to make sure the coverage you buy covers what you really need.

What about Medigap? So-called “Medigap” coverage is supplemental coverage that’s available for people who opt to be covered under Original Medicare – Part A and B coverage. You buy Medigap insurance from a private insurer, and your primary goal is to determine whether that supplementary coverage actually pays for the things you know you’ll need that Medicare doesn’t cover. You do have to pay a monthly premium for this coverage. And again, if you choose Medicare Advantage (Part C) coverage, you’re not allowed to buy Medigap coverage. 

To compare Medicare and Medigap coverage, visit the Medicare Personal Plan Finder on the Medicare.gov website.

When do I enroll for Medicare? You have a six-month window to enroll for Medicare that starts three months before your 65^th birthday and ends three months after. As mentioned above, if you’re already receiving Social Security at age 65, you’ll automatically be enrolled in Part A, but if not and you enroll more than three months after your 65^th, you may be subject to a late enrollment penalty.

By the way, what’s Medicaid? This is the name for the federal program – and corresponding state programs – that pick up healthcare costs for indigent children and adults. Unless you’re below the poverty line or you spend out your assets in your senior years, this won’t be part of the discussion.

October 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

As the nation continues to work its way out of recession and investors begin to take stock of what looks like a lost decade in their portfolios, it might make sense to execute some simple ideas now that will give better preparation for possible tough times in the future.  After all, disaster can’t be predicted, but it can be blunted by preparation.  Here are a few ideas to implement as the economy recovers.

Start with expert advice: A fresh financial start should begin with some solid, up-to-the-minute advice. Consider making a trip to talk over your current finances and retirement picture – no matter what state they’re in – with the tax experts and Certified Financial Planner^TM professionals at MHB Financial Group.  Many people feel they’ve made mistakes that they’ll never be able to repair with their money, and the only way that might be certain is if they don’t properly assess what they’ve done and should do in the future. Getting trained, experienced advice is one way to change that.

Pay down your debt: There was once a time when mortgage debt was referred to as “good debt,” but even that perception has changed for many families in recent years.  While mortgage debt has tax advantages, the relatively recent tendency for homeowners to look at their property as a piggy bank looks headed for permanent change. And with new credit card lending rules on the horizon, Americans’ relationship with plastic is bound for big changes as well. Resolve to get a better handle on existing debt and above all things, resolve to pay it off in sensible fashion, attacking the highest-rate and less tax-advantaged balances first.

Reevaluate your career plan: It’s true that many Americans will have to work longer than they planned to assure a healthy retirement given the events of the last decade.  But you shouldn’t stop there in making that assessment. As the country comes out of this economic slump, you should also be considering whether your current career meets your personal as well as your financial needs. A chance to earn extra money would certainly be great, but if you’re unhappy doing what you’re doing or you see your industry going nowhere, then it might be time to retrain or research a change.

Get serious about an emergency fund:  If you suddenly lost your home, your job, or were disabled with limited health or disability benefits, how would you afford a hotel, transportation or medical bills? How would you pay for all that? Credit cards? Okay, but how would you pay off those cards? An emergency fund needs to be three to six months worth of cash at a minimum kept in an easily accessible place-not as accessible as a mattress, but not in a stock fund or some other investment that might fluctuate in value and then be tough to access for a week or more. You need to treat that cash as money that isn’t there unless a disaster occurs.  And try to open it with a high enough balance so you’ll keep it from being eaten away by any account maintenance fees.  Write down a list of things that are potential emergencies and sign it as a personal contract with yourself. That agreement should state that you will not touch the funds except in case of some of the following:

• Loss of employment;
• Medical bills that exceed your insurance payments (if you have insurance);
• Emergency home or car repairs in excess of insurance that are required to make the home livable or the car drivable.

Insure yourself properly: Insurance exists to prevent financial devastation. You owe it to yourself to buy whatever coverage you can afford for risks that affect you directly. Not everyone needs life insurance or particular forms of liability insurance, for example. But most of us need help knowing what coverage to buy, and that’s where the help of a financial adviser might come in handy-there is no one-size-fits all insurance solution. It’s a good time to evaluate whether your coverage in any of the following types of insurance is adequate:

• Health insurance
• Life insurance
• Home or rental insurance
• Disability insurance
• Auto insurance
• Liability insurance related to a particular business or work activity.

Create a worst possible scenario: It’s not the easiest thing in the world to do, but based on your own personal circumstances, what would be the biggest potential risks you might face financially? Some examples: 

• If there was hereditary evidence cancer or heart disease among your closest relatives, how would you pay for treatment if your insurance didn’t fully cover the costs?
• If you live in a flood plain, do you have adequate federal flood insurance?
• If your company has been losing money for the last year, how likely is it you might be laid off?
• Will you need additional training or education to stay in your job going forward?
• If you were disabled, how would you make up your lost salary?

August 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

If your parents are at least 62 years of age and have significant equity in their home, a reverse mortgage can turn that equity into tax-free cash without forcing them to move or make a monthly payment.  

If it’s right for them, it’s a worthwhile financial tool. If not, they could make some serious mistakes with their financial future. 

A reverse mortgage gets its name because of the way it works. Instead of the borrower making payments to the lender, the lender releases equity to the borrower in a number of forms: 

• A lump sum cash payment;
• A monthly cash payment;
• A line of credit (which tends to be the most popular option);
• Some combination of the above.

When the owner dies or moves away, the house can be sold, the loan paid off and any leftover equity value can go to the living owner or the designated heirs.  Heirs don’t have to sell the house. They can either pay off the reverse mortgage with their own funds or refinance the outstanding loan balance within six months with the option of two 90-day extensions that must be applied for.

There are three basic types of reverse mortgages:

• Single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations;
• Home Equity Conversion Mortgages (HECMs) are federally insured reversed mortgages backed by the U. S. Department of Housing and Urban Development (HUD); and,
• Proprietary reverse mortgages are private loans that are backed by the companies that develop them.

The size of a reverse mortgage is determined by the borrower’s age, the interest rate and the home’s value. The older a borrower, the more they can borrow, but the amounts are capped by the maximum FHA loan limit for each city and county.

Reverse mortgages have traditionally been chosen by older Americans who can’t cover everyday living expenses or who otherwise need cash for such things as long-term care premiums, home healthcare services, home improvements or to pay off their current mortgage or credit card greater than their income can support. More recently, though, they’ve become popular with individuals who see them as a better alternative to home equity lines. Some use the proceeds to supplement monthly income, buy a car, fund travel and second homes and evaluate with the help of a financial adviser if reverse mortgage funds can be used to restructure estate taxes.

Elderly borrowers will have to consult with a financial advisor before they’re granted this loan – that’s one of the requirements. They should consider a Certified Financial Planner ^TM professional to do this because reverse mortgages can be complex and risky. This step can be completed within the first few days of the process. The basic loan closing now takes place in about 30-40 days from the date of application. Generally the only out-of-pocket cost is an appraisal fee ranging from $300- $500.

Here are other things to consider:

Cost can be substantial: Reverse mortgages are generally more expensive than traditional mortgages in terms of origination fees, closing costs and other charges. The basic FHA-backed HECM loan finances these fees into the initial loan balance, and they can run between $12,000-$18,000. The loans are based on anticipated home value appreciation of 4 percent a year, so if the housing market is healthy, those costs are generally recovered in a short period of time. But if the housing market sours, it will definitely take longer to recoup those fees.

Seniors need to make sure they’re not endangering their Federal retirement benefits: The basic FHA HECM is designed as tax-free income to the senior receiving their Social Security income. However, if their total liquid assets exceed allowable limits under federal guidelines, they might endanger your benefits. This is another critical reason to work with a financial adviser on this decision.

Rates can be higher: Reverse mortgages have rates that are typically higher than those charged on conventional mortgages. Interest is charged on the outstanding balance and added to the amount they owe each month.  Again, check the total annual loan cost.

The mortgage can be called: The homeowner or estate always retains title to the home, but if they fail to pay the property taxes, adequately maintain the home, pay the insurance premiums, or change the primary residence, the lender can declare the mortgage due or reduce the amount of monthly cash advances to pay those overdue amounts.

The family needs to talk. If your parents’ house is their major asset, getting involved in a reverse mortgage may not leave much to the next generation – if it appreciates, there may be some difference that the kids can have. That’s why in addition to discussing a reverse mortgage with a financial adviser, parents and their adult children need to talk with their family.

August 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Consider then, the one single element that can turn this difficult process into a lengthy nightmare and potential financial disaster for a surviving spouse – the deceased’s outstanding debt. 

Married couples — particularly those who hold credit cards jointly and keep month-to-month balances on them – really need to pay attention. And we’re not simply talking about elderly spouses. A spouse can die at any time.

The earlier a married couple focuses on the joint issues of credit management and estate planning, the better. And a financial advisor like those at MHB Financial Group can tie the necessary elements of estate, retirement and debt planning together because they absolutely need to be.

While the following information can be a guide for individuals who have lost a spouse, it’s a much better guide for couples in good health who want to alleviate major financial problems for their survivors later on.

Just remember: The worst time to deal with joint or separate credit issues is after the funeral. Some key points to consider:

Joint credit in moderation…or not at all:  If spouses have separate credit, then their rating won’t be affected by the spouse’s bad credit behavior (late payments, charge-offs, bankruptcies, etc.).  Joint credit leaves the surviving spouse with a total obligation for any debt remaining on a car loan, credit card, mortgage or any other kind of debt.  

Watch those “additional card” offers: Again, it might seem like a great idea for both spouses to carry credit cards on the same account, but in death, outstanding balances are often treated the same way as joint account is. It’s not unusual for an issuer to come after the holder of the additional card for that outstanding debt.

They will find you: You’ve never met Big Brother until you’ve tussled with today’s toughened-up lenders. Particularly as problem credit has grown to epidemic proportions, credit card companies in particular have gotten a lot better about determining whether customers have died so they can make a claim against the deceased’s assets. Most states have specific laws that put a timetable on a lender’s ability to make claims against an estate, and executors may have certain responsibilities under those laws to inform those creditors.  A planner or estate attorney can help you go over those requirements in your home state as you’re addressing your estate, retirement and debt issues.

Keep in mind that keeping separate credit won’t protect the estate’s assets: Granted, a deceased partner’s bad credit may not affect your ratings on your separate accounts, but creditors will go after the assets of your shared estate to settle up. So what’s the message here? Keep debt under control at all times.

If the worst happens, what’s the process? It’s important to contact all lenders swiftly to let them know your spouse has died for several reasons. First, identity thieves are getting more sophisticated about checking death notices and tracing that information to their credit accounts. Dealing with a deceased spouse’s debt is one problem. Dealing with an identity theft calamity based on your spouse’s accounts is even worse. Also, if you do have joint accounts, ask the issuer if it will issue the card in your name only, and keep in mind that you will still need to maintain payments on those balances to preserve your credit rating as a single person. Lastly, lenders tend to look askance at customers who fail to make disclosure of a spouse’s death. So matter how tough things are, you need to make these calls.

What about the last joint accounts? For joint accounts, removing the deceased’s name from the account should have no impact on the survivor’s credit score, but the survivor should think twice before he or she closes the account, because it cuts back the amount of credit available to the survivor.

Just get rid of the debt:  Debt-free is the best way to go through any crisis. Couples should strive to be debt-free not only for the good times, but for the awful ones as well.

July 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Business owners on the brink of retirement are facing potentially the worst conditions for selling or handing off a business in decades. But their circumstance should serve as a lesson to their younger counterparts. It’s critical to build an exit plan that works under both sunny and stormy conditions.

Exit plans are essential in companies large and small, and not strictly for the purpose of letting the owner and founder retire. They certainly set in motion a series of triggering events for the owner to get his or her money out of the business at retirement, but they also incorporate succession and other strategic moves a company might make to assure its future in family hands or in the hands of a new owner.

That said, an exit plan isn’t born in a day. In fact, many financial experts in investment, tax, valuation and estate planning disciplines think it’s wise for business owners to come up with the first broad strokes of an exit plan when they start a company if possible, and if not, within 3-5 years of the date they’d like to exit.  The professionals at MHB Financial Group can be a helpful liaison that works with  other key professionals to help owners find answers to the broadest issues in any company’s exit plan, including: 

•  The family’s business legacy – should a business be passed on to family or associates, or should it simply be sold or closed?
• The owner’s own career goals – does he or she want to do this for the rest of their life, or should they make way for other professional or personal directions?
• The company’s overall creation of wealth – too many people think of a business as a job and a paycheck instead of a creator of wealth that can support one or more generations of a family. A paycheck supports short-term goals; wealth is accumulated money that can either be invested smartly in the business or outside the business to support philanthropy, or family and personal goals.
• The owner’s retirement strategy that allows them to do everything they’ve dreamed after they leave.

At MHB Financial Group we can also help owners get to more specific questions based on the broader goals they’ve discussed with family members:

•  How many more years does the owner want to run this business?
• What’s the optimal way to get rid of the business when I’m ready to go – sell it, transfer it to family or associates or just close it down?
• What’s the value of the business now and how can it be made more valuable to potential buyers or for transition to the next generation?
• If the company is being transferred or sold to family members, is there a growth plan in place that they have contributed to and are therefore likely to follow?
• What happens if there’s an unforeseen event or market downturn that threatens the business or the industry as a whole? Are there healthy relationships in place with potential acquirers?
• What if there was a great offer on the business tomorrow?
• If the business is sold, how do owners protect themselves from a personal and business tax standpoint?
• How does the owner communicate his or her ideas with spouses, children and other family members with a stake in the business?
• What about employees, clients and customers? How will they be protected if the owner dies or leaves the business?
• How much money does the owner want after leaving the business and how should it be handled?
• How should investors in the business be compensated if the owner leaves?
• Are there specific goals that should be met by the business before the owner leaves?

An exit plan allows an owner not only to move out of a business, but also to make a wholesale career change. No one has to stay in the same industry – or company – for life, and with an exit plan, owners leave open the possibility for an endpoint that will allow them to travel, become philanthropic or engage in any number of new activities in business or other walks of life.

While the economy is struggling back from the brink, many smart exit planners realize that there are ways to manage delayed transitions without losing valuable employees. For instance, many owners may elect to take a sabbatical while allowing next-generation leadership to get behind the wheel before an official transition takes place. Such a move lets the next generation steer the boat on the schedule they hoped for instead of standing in place while the owner found her best opportunity to go. The owner, meanwhile, benefits from the chance to step away from the day-to-day operation to better plan their future and the company’s.

July 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Summer’s actually a good time to do this task because there’s still enough time to correct lapses in savings, spending or tax planning. Here’s what most people should cover:

Retirement savings: Given the state of the economy, it’s not a bad time to review your retirement funds and your current investment allocation. If you are on schedule to max out your contributions to your company retirement plan this year, great. But don’t forget to check your existing IRAs and other retirement accounts to see if you’ll have enough cash on hand to contribute the maximum in each account by their respective deadlines next year.

Health and health insurance: Increasingly, what we pay for health insurance will be tied to the state of our health. While the weather is good, commit to a plan to walk or hit the gym a specific number of hours a week. Many insurers reset premiums at mid-year in a rising cost environment, so make sure you’re ready to switch plans or negotiate different coverage if necessary during open enrollment in the fall.

Taxes: If you got a sizable refund in April or found it necessary to empty savings to pay Uncle Sam, it’s definitely time to reassess what you’ll owe at tax time next year.  Also, if you think you’ll have some losing stocks in your taxable investment accounts, keep an eye on those in case you’ll need to offset gains in your portfolio at the end of the year.

Spending: Either on your computer or on paper, take the time to figure out where you’re money’s going.  A look at the last six months of spending may reveal opportunities to reduce spending and redirect money toward more necessary goals. Also, take a look at such things as gym memberships, magazines that are piled up and coffee expenses. If you’re not using these things, you can probably live without them. Doing this exercise can identify a surprisingly large amount that’s unaccounted for that can be redirected to debt payment, savings and investments.

Reserve fund: Most financial experts encourage you to have between three and six months of living expenses in an emergency fund.  If you don’t have that minimum, go back to your spending review and see where you can start socking money away.

College savings: If you are saving for your child’s education or your own, check to see if you’re on track with the goals you made for the year. It’s also a good idea to read the latest news on financial aid since schools change their financial aid policies annually.  Even if your kid’s still in grade school, it’s a good idea to learn as much about college financial aid while you’ve got plenty of time to learn.

Special goals: If your car is suddenly looking like it will need to be replaced or if this might be the last year for your furnace, see if you can direct more money into a reserve fund to cover replacement costs or at least a heavy down payment. If there’s a vacation you want to take by the end of the year or a special household purchase you want to make, focus on the cash you’ll set aside to make that happen.  Of course, if you have credit card debt rolling over from one month to the other, maybe that should be your initial focus.

Credit: If you haven’t set a schedule for receiving your three credit reports throughout the year, do it now. You have the right to get all three of your credit reports – from Experian, TransUnion and Equifax – once a year for free. You can do so by ordering them at www.annualcreditreport.com. By staggering receipt each of your credit reports at different points in the year, you’ll get a continuous picture of how your credit picture looks. Also, you’ll have the opportunity to focus on possible errors in a single report, which will give the other two credit agencies time to update their files.

June 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

It makes sense to get advice from tax, estate and financial planning experts in the preparation of an estate plan. A meeting with the financial professionals at MHB Financial Group is a good choice to start the process.

It also makes sense to have an idea of how that year will go, so here’s a list what needs to be done at critical intervals of the process.  But this is not just a list to help survivors. This can be a key estate-planning tool for you as well. Remember the way that you handle your estate, financial and funeral arrangements can lighten the load on family members.  Tailor the following list to your own needs, and discuss it with your chosen executor while you’re in good health. And if you need to make changes, keep them informed:

Step #1 – Start rounding up key documents: An executor has to find, identify and organize a deceased person’s financial records, tax returns, and other key papers to figure out what the decedent owned or controlled. If that individual was working closely with a financial planner or investment manager, they may have all that material summarized in one place. But otherwise, the executor needs to look for bank accounts, brokerage accounts or other investments, life insurance or annuity policies, retirement plans, deeds to real estate, automobile titles and other evidence of assets with value. She will also be looking to see if the decedent had a will or trust that directs what they want done with the previous items. Also, the executor needs to track down all records of outstanding loans, mortgages or credit card bills. Make sure at least 10-20 copies of the death certificate are ordered. Note: This won’t be done in a day, even if the deceased was extremely well organized.

Step #2 – Start making key phone calls: The executor needs to inform key contacts that the person has died. Make sure they contact:

• Social Security if the deceased was receiving benefits;
• The Veterans Administration if they were a qualified veteran for burial benefits;
• Their employer, health insurer, credit unions, mortgage company and credit card companies for possible death benefits;
• Life insurance agent for possible death benefits;
• Automobile insurance agency if they owned a car;
• All creditors – mortgage companies, credit card companies, any organization that’s owed money by the deceased – needs to be notified that their customer has died. They’ll probably request a copy of the death certificate, so make sure you have enough copies.

Step #3 – Get permission to check safety deposit boxes: If there isn’t a will in an easy-to-find place or an at-home lock box, the executor may need to try and get into a bank safety deposit box, which can take a bit of time. The procedures vary from state to state, but the bank should be able to direct the executor. (NOTE: This is why it’s good to keep important papers in an at-home lock box.)

Step #4 – Filing the will for probate: If you find a will, the executor named in the will should be notified, and a decision should be made about whether to file the will for probate. It is usually not necessary to probate a will unless there is property in the name of the decedent that needs to be transferred, so if everything is in joint names with a surviving spouse or surviving children, there may be nothing to pass under the will. This is something which may require the advice of a lawyer. If there is a trust document, the trustees or successor trustees should be notified.

Step #5 – Bring in a lawyer if necessary: The executor may or may not to choose to work with an experienced estate attorney. Generally, it can be a good idea. If there is no will and no trust, the property owned by the deceased will pass to the “intestate” heirs determined under state law, and one or more of those heirs (or some other qualified person) will need to file a petition for “letters of administration” in order to sell or transfer the decedent’s property. The procedures for probating a will, or petitioning for letters of administration, vary from state to state, and may require the services of a lawyer.

Step #6 – Make sure bills get paid: The executor needs to make sure that all the deceased’s bills and other outstanding debts continue to be paid until they are disposed of.  If assets are insufficient to cover these debts, the executor will have to find another way to pay them or make sure talks take place to lower the amounts.

Step #7 - Make sure taxes are paid: The executor needs to make sure there is a final tax return filed on behalf of the deceased.  A federal tax return needs to be filed if the gross estate is more than $3.5 million in 2009.

Step #8 – Make sure assets are properly distributed: The executor, working with estate and tax experts, can determine after all expenses and taxes are accounted for, that all of the assets are distributed properly. Only at that time can the estate be truly closed.

June 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

A visit with a tax expert or a financial adviser such as a the professionals at MHB Finanical Group can help you determine the best ways to use the following provisions that may affect you. It’s also a good idea to get a financial checkup in an uncertain economy for the following reasons:

• As much as it might hurt to look at the performance of your current retirement accounts and other investments, the economy will recover. When an upturn comes, it’s wise to position your holdings to take full advantage of the recovery.
• Your future plans with regard to spending for your home, your family and your education come into sharp focus under the stimulus plan, and making these provisions work for you in the short-term should be part of a long-term plan.
• If you fear your job might be in danger in the coming months or you might be facing pay or benefit cuts, it’s good to talk through your personal finances before your employer makes a move. The best time to prepare for a job loss is while you’re still making a salary. Not only is it a good opportunity to build an emergency fund, but it’s generally easier to look for new opportunities while you still have your current one.

Here’s a quick summary of the stimulus plan provisions that could affect your finances.

Educational provisions:

College student aid: The package awards $15.6 billion to increase maximum individual student Pell grants by $500.

American Opportunity Tax Credit: This credit temporarily provides taxpayers with a new tax credit of up to $2,500 of the cost of tuition and related expenses, though it phases out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly).  Forty percent of the available credit is refundable.

529 Plans: The scope of allowable education expenses expands to include computers and computer technology.

Tax credit provisions:

One more cap for the Alternative Minimum Tax (AMT): Lawmakers put one more patch on the AMT to protect a wider number of people from getting hit. This latest break for potential AMT targets increases the exemption amounts to $46,700 ($70,950 for married couples). The bill would also exclude interest on all private activity bonds issued in 2009 and 2010 from the AMT.

“Making Work Pay” Tax Credits:  This is the refundable tax credit of up to $400 for individuals and $800 for families for 2009 and 2010 that would phase out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 for married couples).  This isn’t a lump sum payment, but instead is reflected in reduced payroll taxes.

Car Buyers Tax Credit: This allows a deduction for state and local sales and excise taxes paid on the purchase of a new vehicle through 2009. This deduction is phased out for taxpayers with adjusted gross income in excess of $125,000 ($250,000 in the case of a joint return).

Expanded Child Credit: This increases the eligibility for the refundable child tax credit in 2009 and 2010 by reducing the minimum income for eligibility to $3,000.

Earned Income Tax Credit: This provision will create a temporary tax credit increase for working families with three or more children.

Housing provisions:

Refundable First-Time Homebuyer Credit: First-time buyers can claim a credit worth $8,000 – or 10 percent of the home’s value, whichever is less – on their 2008 or 2009 taxes.  The added bonus is that the credit is refundable, which means that filers will see a refund of the full $8,000 even if their total tax bill was less than that amount.

Unemployment and healthcare-related benefits:

Extension of Unemployment Benefits: The package provides 33 weeks of extended benefits through Dec. 31, 2009.

Unemployment Compensation: The first $2,400 a person receives in unemployment compensation benefits in 2009 won’t be taxed.

Short-Term COBRA Subsidy for Involuntarily Terminated Workers: This provides a 65 percent subsidy for COBRA premiums for up to 9 months, which will put a dent in the considerable cost of COBRA health benefits for the unemployed.

April 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

That would mean that estates worth up to $3.5 million for individuals and up to $7 million for couples would be exempt from any taxation and those above those amounts would be taxed at 45 percent. (At the end of the Clinton Administration, estates of less than $1 million would be excluded with the rest taxed at a 55 percent rate.)

Even with the downturn in the real estate and stock markets, it’s a good time for high net-worth individuals and couples to look at ways to shelter their estates from the possibility of taxes going forward.  One possibility for couples who have a substantial investment in real estate they consider a residence is the Qualified Personal Residence Trust (QPRT).  A QPRT is a trust that owns the home at a discounted value for a specific term while allowing the parents to continue living in the home.

The QPRT works best for those people who expect to live another decade or so. The longer the term of the trust, the greater the benefit to the kids. Yet you’re essentially playing a game of chicken with the Grim Reaper-if one or both of the parents die before the trust expires, the heirs have to pay the estate tax on the value of the house at the time the parent died.

A good first step in finding out if a QPRT makes sense is a trip to see the financial professionals at MHB Financial Group or your estate planner. Such a trust has to be set up carefully with a thorough review of actuarial tables and a discussion of each parent’s financial history.

Technically, QPRTs make the most sense when interest rates are high, because the higher the interest rate, the greater the discount applied to the property, which, in turn, increases the tax savings.  A QPRT is based not on the current value of the house at the time the trust is being written, but what is determined to be the present value of a future gift, which is actually a discount to the current value.  When a home is put into the trust its value is not the current value of the house, but what is called the “present value” of the future gift – a decrease of 25-50 percent in value.  The Internal Revenue Service calculates these formulas, so ask your expert how current calculations will affect the value of your estate.

Another potential benefit of the QPRT is that if the parent runs into trouble with high hospital or medical bills, the hospital cannot demand any money gained by refinancing or selling the house, since the occupant does not have any right to that money.

If the rough real estate market has devalued your home at least a little, chances are that the market may rebound sometime during the term of the trust and if you outlast the trust at its expiration, the strategy may work out very well for your heirs.

Obviously there are a number of considerations here, not the least of which involves the current value of the property. Your adviser should help you consider all these issues, and you should keep an eye on the news for what eventually happens with the capital gains tax as well as what ends up happening with the estate tax.

If the parent outlives the trust, the parent can continue to live in the house by paying the kids fair-market rent.  There’s one more wrinkle to try if the kids want to avoid income taxes on the rent they’ll receive from their parents-they can form a grantor trust for the property so the rent is paid to the trust.

March 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA.

Roth IRAs: The Roth option is a good one if you want to help them start a retirement fund of their own or if you want them to inherit a Roth where they can make tax-free withdrawals after your death.

Roth IRAs aren’t a useful alternative for very young kids because the rules state that all Roth holders have to have earned income to be able to make contributions. If they fit that description – as many kids working in high school do – either their parents or guardians can open the account and grandparents can make contributions to match the percentage of earnings kids put in their Roth IRA. Grandparents simply match that contribution.

Also, if you have a Roth IRA, you can benefit your grandchildren by naming them as your primary beneficiaries, and when they inherit it, they’ll be able to make tax-free withdrawals for a home, an education or any other purpose.

Parents or grandparents may want to consider setting up and funding a Roth IRA for their children or grandchildren as soon as the children or grandchildren have enough earned income from part-time or summer jobs. This will ensure that the five-year requirement is met when the individual for whom the Roth IRA is established is ready to make a withdrawal to buy a home, for example.

529 Plans: Another great tool for grandparents is the 529 college savings plan. Grandparents can fill out a plan enrollment form designating a grandchild as beneficiary, select the investments from the plan’s options, and make future contributions either by check or by automatic contribution.  It’s also fine for grandparents to make their contributions directly to a 529 account already owned by the grandchild’s parents.

As a refresher, 529 college savings plans – named for the federal law that created them in 1996 – allows a parent to open a tax-deferred college savings plan with as little as $25 to start in some states.  A 529 college savings plan is not the same thing as a 529 prepaid college tuition plan. Prepaid tuition plans are just that – tax-deferred savings plans that allow you to save for tuition for in-state schools (though some plans allow you to transfer out a portion of those assets to out-of-state schools). Also, it’s important to note that prepaid tuition plans are not an automatic guarantee a student will get into that college.

Since 2006, withdrawals from 529 plans have been permanently tax-free. In some states, contributions may also be deductible on state tax returns. All 50 states now have 529 plans college savings plans, and a majority of them provides additional incentives, such as a state-tax deduction to in-state residents who invest in their respective plan.

It’s a good idea to have the financial professionals at MHB Financial Group help you sort through the details of various state plans. There are various services – including Morningstar Inc. – that now rank the offerings of each state’s plan.  www.SavingforCollege.com and www.FinAid.org are leading sites to help educate you in how these plans work.

Grandparents can treat their contribution as complete gifts, which means they can apply the $12,000 per year gift tax annual exclusion or an accelerated contribution of up to $60,000, with a special five-year, gift-spreading election. Anyone contemplating such a gift should consult with either their personal tax adviser or the tax experts at MHB Financial Group.

Another great benefit is that a 529 plan owned by grandparents should not affect the grandchild’s eligibility to receive federal financial aid because a grandparent’s assets are not reportable on the free application for federal student aid, or FAFSA, and the tax-free withdrawals from a grandparent-owned 529 plan are not counted as student income or student resources.

Coverdell Education Savings Accounts: For grandchildren heading to private school who are under the age of 18, most grandparents – check your eligibility with a tax professional first – can contribute up to 2,000 dollars annually per grandchild to a Coverdale Educational Savings Account.  Coverdell earnings accumulate free of federal income taxes, and can be taken to pay for private elementary, secondary or college. Yet, your income is a factor. You can make a Coverdell contribution as long as your modified adjusted gross income is between 95,000 and 110,000 dollars if you’re single or between 190,000 and 220,000 dollars if you’re a married and filing jointly.  Yet, if you exceed either of these requirements, you can ask the parent of the adult child to open up the account and make the contribution, though you will have to give up control over the account.

Make a direct gift of your grandchild’s tuition: Under current tax law, you can make gifts of any amount to cover your grandchild’s tuition. Yet, you’re going to need to pay the college directly and you need to be aware that it won’t dent your federal estate tax exemption (3.5 million dollars in 2009), but it will cut the overall amount of your taxable estate.  You can, however, go ahead and make additional gifts per grandchild of $13,000 to help with other college expenses.

March 2009 – This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Steven J. Bloch, Esq., CFP^®, a local member of FPA