A List Of Your Priorities For A Meaningful Financial New Years Resolution

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By Tricia Mulcare

December 17, 2019

Year-end is a busy time as clients want to meet to wrap up the year. While many are interested in discussing how their portfolio has performed, most are eager to set their “Financial New Year’s Resolutions”.  Oftentimes good investment performance can lead to resolutions of splurging, whether that be throwing a large family party or a big vacation to commemorate a milestone birthday or anniversary. Sometimes our clients’ resolutions are simply to straighten up their financial homes. For example, my client recently forewarned me that she’s serious (this time) about getting a better handle on her monthly spending. We discussed utilizing one of the many systems available: computer programs such as Quicken or Mint.com, building a spreadsheet, or using an old fashioned notebook to track every single expense. I often recommend purchasing the system in November or December to ensure that it is in place for January 1. After all, most people don’t wait to purchase their annual planner during the second week of January because they don’t want to miss sending cards for the early January birthdays, etc.

Resolutions for the new year often include the dreaded task of reviewing (and possibly updating) estate documents. Clients will insist that nothing has really changed or that they are still healthy. Ironically, when we dust off their existing estate documents, clients are often shocked to see a now deceased relative named as their executor…or worse yet an estranged friend named as the guardian for their children. For many of my suddenly single clients, we immediately review the beneficiary designations to ensure that an ex-spouse is no longer the primary beneficiary of a retirement account or life insurance policy (unless required under the divorce agreement).  In conjunction with these decisions, we will review those named in financial powers of attorney and medical directives. Following a divorce, clients typically prefer to name someone other than their ex-spouse as the person making medical decisions on their behalf.

With the new year right around the corner, now is a great time to make the list of your priorities and develop a meaningful financial resolution.

Tax Tips For Year End

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By: Tana Gildea

12/10/2019

With the stress of the holidays, who has time to think about taxes? No one, but there are a few important questions worth considering before 2019 fades away:

  • Do you have to take a distribution from your IRA or retirement plan this year? If you are over 70 ½, then required minimum distributions are, well, required. The penalty for failing to take one is hefty – a whopping 50%! You want to make absolutely sure that your distribution is processed by December 31. Contact your account custodian or advisor if you have questions about it.
    • Is giving to charity part of your spending plan? If so, consider making a “Qualified Charitable Distribution.” This technique sends money from the IRA to the charity directly, and you do not report it as income. It satisfies the required distribution and saves you taxes – It works like a tax deduction without needing to itemize your deductions! Note that only people required to take a distribution (those over 70 ½) are able to use this strategy.
  • Which tax transactions must be completed by December 31 to apply for 2019?
    • Charitable donations, medical expenses, mortgage interest, and state or property tax payments must be paid by December 31 to be considered for the 2019 tax year. These are all itemized deductions that you would report on Schedule A. With the standard deduction at $12,200 for single taxpayers and $24,400 for married couples, many people find that they don’t have deductions surpassing the standard deduction. You can take a look at your 2018 return to see if you itemized or took the standard deduction.
    • Required minimum distributions for most people must be completed by December 31. There is some wiggle room if you turned 70 ½ in 2019 (but remember, if you push it off until 2020, you still have to take 2020’s distribution as well! Check with your tax advisor to see what is right for you.)
    • Income received in 2019 must be reported on your tax return even if you didn’t deposit the check until 2020.
  • Aren’t there some tax items that can be pushed off to 2020 and still be shown on a 2019 tax return?
    • IRA contributions and health savings account contributions do not have to be complete by December 31; those are due by April 15th. If you want to make these contributions, start setting aside the money now. Remember, you must have earned income to contribute to an IRA and you must have a high deductible, health savings account qualified health plan to fund the HSA.
    • Retirement plan contributions for the self-employed generally must be made by the due date of the tax return with extensions.  That means that you may have until October 15 of 2020 to make those contributions. Check with your plan specialist to understand the deadlines applicable to your plan.
    • Distributions to beneficiaries from estates and certain trusts may be made up to 65 days after year-end and still be considered 2019 distributions. This allows the trustee some time to determine the income and process the distributions. If you are a trustee, discuss the timing with your advisor to see if this applies to your situation.

Taxes never put anyone in the holiday spirit but spending a little time focused on these few tax items that are time-sensitive might just make your April 15 a little bit brighter.

Stephanie Lang Featured In Citywire RIA

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HB’s very own CIO Stephanie Lang was recently featured on the cover of Citywire RIA magazine. Stephanie touched on her career over the years, HB’s investment philosophy and on having the confidence to be a decision maker.

To read Stephanie’s full article click here. To read the full Citywire RIA issue click here.

 

 

 

Common Estate Planning Mistakes We See At HB

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By: Bill Bolen

12/03/2019

Common Estate Planning Mistakes We See At HB

Estate planning is complicated.  There are a lot of moving parts to organizing your finances and determine where they will go after your death.  And in many cases, people simply sign a stack of documents at their attorney’s office and think the job is done – and maybe never look at those documents again!

The result?  A lot of mistakes and confusion – and unfortunately sometimes an estate that is not distributed the way that the person might have intended.  Here are some of the top issues we see when new clients arrive at HB or see in articles about unfortunate estate disputes.

Naming the wrong executor or beneficiaries. 

Executors are the people who are appointed to take legal control over the assets when you pass away.  Executors collect all the assets of the deceased, pay final debts and expenses, and file federal and state estate tax returns (if needed).    Unfortunately, it is not uncommon for the named executor, years after the documents have been signed, to be deceased or no longer suited for the position because he/she is too elderly.  And the backups listed may no longer be relevant.  The same issue can arise with beneficiaries of retirement accounts – there are many tough stories about couples getting divorced and forgetting to change their beneficiaries, not realizing that the will does not control how those assets are distributed.  You do not want your ex-spouse to receive the big retirement account all because you never changed your beneficiary.

Solution: Periodically check to see who has been named as the executor in the estate documents and who your beneficiaries are for your retirement accounts.  Are they all still appropriate?  We make a habit of reminding our clients to make sure that the right names are on the documents.

Not updating documents to reflect the maturity and financial conditions of the children. 

Estate planning documents that were created when children were young will have named a guardian, but when the children reach maturity, that would no longer be necessary.  The document may leave assets to trusts on behalf of the children, when it makes more sense to distribute them directly to the adults they have become (or not).  And in some cases, an unequal distribution of assets might make sense, if one adult child has become financially successful while others are struggling.  Finally, when children are minors, they typically don’t need health care powers of attorney, living wills or advance health care directives.  Once they become adults, they should consider having these documents in their own right.

Solution: Check to see the provisions in your will or trusts that relate to the children, and update as necessary.  We remind clients when their children become adults to make sure and get their own documents when appropriate, and we help clients understand how their estate plans affect how much their kids receive and how they receive it.

Inappropriate or missing health care directives. 

Under the Health Insurance Portability and Accountability Act, every individual’s medical records and other personal health information is confidential, meaning it cannot be shared with anyone, including family members, without written authorization.  Lack of this information and specific directives could impede decision-making by others when you’re incapacitated or approaching the end of your life.

Solution: Check and update your family’s health care powers of attorney, living wills and advanced health care directives – including for the children if they are adults!  Make sure you have these documents and that the right people are named.

Inappropriate provisions based on the latest estate tax laws. 

In 2019, individuals are legally permitted to transfer assets valued at $11.4 million ($22.8 million for married couples) free of federal estate and gift taxes.  But outdated estate documents might include planning that was appropriate for much lower exemption values—for example, forcing a trust for the heirs to be funded up to the applicable exclusion amount, which might impoverish the surviving spouse if not written correctly.

Solution: Review the formulas in the estate documents with your attorney and/or financial advisor.  We often point these types of issues out when we first take a look at a new client’s documents – and the key is to stay on top of changes as the laws continue to change.

Estate documents drafted in a state where you no longer reside. 

Every state has its own estate and income tax laws; some are common law property states while others are drafted with community property laws.  There can be significant differences between them when it comes to transferring assets.  Moreover, 17 states also impose some form of estate or inheritance tax, with different exemption amounts.  Some estates that would not be subject to a federal estate tax might be subject to state estate taxes.  If your documents were drafted in a different state from where you currently reside, they could be outdated and misapplied.

Solution: Review your estate plan to see if it is still appropriate, with an eye toward reducing state estate taxes and making sure they reflect your current residency.

Not utilizing your estate tax exemption portability. 

The federal estate rules say that a surviving spouse can take advantage of any unused portion of the spouse’s exclusion amount.  But that’s only true if the estate files a federal estate tax return within nine months of the deceased’s passing.  (This can go up to 15 months if an extension is granted.)  In the normal case where the deceased’s estate would not have to pay estate taxes, often nobody realizes that the federal estate tax return (showing zero taxes have to be paid) has to be filed.  This can be costly in some larger estates, where the second spouse dies with more than $11.4 million in wealth.

Solution:  Some families set up a credit shelter, bypass, family or exemption trust that would be funded with assets from the first spouse’s estate.  That preserves not only the portability of those assets, but any growth in those assets would not be counted in the estate tax calculation.  The surviving spouse could also disclaim part of the deceased’s assets, allowing them to pass to the children.  Or the executor of the estate can file the federal estate tax return, preserving the portability of $11.4 million of additional estate tax exemption.  You would want to review these types of options with your estate attorney and financial advisor.

These are only six examples of all of the interesting issues that you need to monitor as your family situation and estate laws change over time.  We help our clients understand the implications of their current estate plan documents today and in the future, in order to then figure out if they need to discuss making adjustments with their estate attorney.

Tips To Help Reduce The Stress And Financial Drain Of The Holidays

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By: Tana Gildea

11/26/2019

The holidays can be stressful for any number of reasons, not least of which is the expense of special meals, gifts, and parties. To help reduce the stress and the financial drain, here are a few ideas:

  • Start setting aside money now to save up – tucking away $10 here and $5 there can add up. Make it a game to forego something small today so you can stash the cash. Think of how great it will feel to pay for your holiday purchases with cash this year and avoid the “holiday hangover” of a credit card bill!
  • Set your budget for what you can spend and allocate before you get to the store. If “making a list and checking it twice” is good for Santa, it’s good for us, too. Rather than facing that “Rats! I forgot about _____” moment, think through your friends, neighbors, work buddies, and family members to identify who should be on the gift list and who it is important for you to connect with this holiday season. Stick to your price-guidelines – spend “thought time” rather than money as you carefully choose the right gift at the right price.
  • If you are sending cards, remember to add in the cost of postage to your budget – it all adds up!
  • Plan ahead and consider each person individually so that you can select something meaningful rather than grabbing a gift.
  • Think about your talents and how you may be able to create unique gifts at a low cost – those typically require more time than money so planning ahead is key.
  • Focus on creating great moments rather than buying a lot of gifts. Dan & Chip Heath’s book, The Power of Moments, talks about this beautifully. Their website, https://heathbrothers.com/the-power-of-moments/, has some great resources. (I’m a fan, not an agent!)
  • Make plans to have everyone contribute to big meals so that all of the expense (and work!) is not on one person or family.
  • Exchange names with friends and family and work colleagues so that everyone is not buying for everyone or consider foregoing gifts and pooling money for a favorite charity.
  • Talk with kids about getting one or two special gifts rather than feeling that more is better. Most religious traditions have gift stories that can guide us.

The holidays should be about connection and joyous giving, not stress and over-spending. I hope this is the year I can slow down and make conscious choices that honor the people I love and bring me closer to those I care about. May your holidays be bright, meaningful, and bring you love and laughter.

 

Homrich Berg Crosses $6 Billion AUM Mark And Will Add Sandy Springs Office Via Planned Merger With Cedar Rowe Partners

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ATLANTA – November 20, 2019 – Homrich Berg is pleased to announce that Cedar Rowe Partners has signed an agreement to join Homrich Berg, giving HB a Sandy Springs office location and an addition of talent and clients. Under the terms of the agreement, Sean Cook will join HB as a Principal along with three other client service professionals.  The deal is expected to close on December 31 of this year.

This event is part of the continuing growth story at HB, which will soon have twenty-four principals and four offices in metro Atlanta including Buckhead, Alpharetta, Cobb, and now Sandy Springs.  Recent firm growth has resulted in Homrich Berg now managing assets of over $6 billion for clients in 45 states even before this merger event. HB continues to build a regional presence, with the scale and expertise of a large firm combined with the high touch client service of a boutique firm.

“We are very pleased to have Sean and his fine firm join HB,” stated Andy Berg, co-founder and CEO of Homrich Berg. “We feel comfortable knowing that we share common core values with a clear focus on serving our clients. We are highly confident that this merger will be additive for clients and employees.”

“Homrich Berg has a reputation as a leading firm in the Southeast, and we felt joining HB was the best fit for our team to allow us to continue to grow while serving our clients,” said Sean Cook. “Through this partnership, we look forward to leveraging the expertise of Homrich Berg to offer our clients enhanced services while continuing to guide them to their financial goals.”

About Homrich Berg

Founded in 1989, Atlanta-based Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients including high-net-worth individuals, families, and not-for-profits. Homrich Berg manages over $6 billion for over 1800 family relationships nationwide. For more information, please visit www.HomrichBerg.com.

Homrich Berg Welcomes Jimmy Trimble, CFP® As A Director

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Atlanta – November 1, 2019 – Homrich Berg is pleased to announce the appointment of Jimmy Trimble, CFP® as a Director. He brings over 26 years of experience in the fields of Wealth Management and Financial Services where he has enjoyed helping many individuals, families, and businesses with their planning needs.

Prior to joining the firm, Jimmy served as an Advisor with the firm of Nease, Lagana, Eden & Culley. He also founded and led the Private Banking Group of Fidelity Bank from 2007-2014 and prior to that served in various banking roles including Private Banking and Commercial Lending.

Jimmy is a graduate of the Scheller College of Business at Georgia Tech and earned an MBA with a concentration in Finance from Georgia State University. He has also held the Certified Financial PlannerTM designation since 2002 and is a graduate of the Stonier Graduate School of Banking.

Jimmy serves the community in various roles including as a Board Member of the Atlanta Estate Planning Council, Treasurer of Northside United Methodist Church, Chair of Boy Scout Troop 298, and member of the Pace Academy Annual Fund Committee. He is also active in the men’s ministry at Northside Methodist Church.  Previously, he served as a Georgia Tech Alumni Trustee, including three years on the Executive Committee. He was a member of the Advisory Committees of the Georgia Tech Scheller College of Business and the Georgia Tech College of Interactive Computing. Jimmy has also chaired several non-profits and civic organizations including the Academy of Medicine, Camp Evergreen, and Proactive Ministries.

Jimmy and his wife Laura live in Buckhead and have a daughter at UGA and a son at Pace Academy.

Andy Berg Named to Barron’s Hall of Fame

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Congratulations to Andy Berg for being apart of Barron’s Hall of Fame for Financial Advisors. This is an award honoring a group of advisors who exemplify long-term success and commitment to their clients. Each member of the Hall of Fame has appeared in 10 or more of Barron’s annual Top 100 Advisor rankings, and their long-looking commitment to excellence is a hopeful example for the industry to follow.

Annual Open Enrollment Tips to Save on 2020 Taxes

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by David Kochamba

10/31/19

2019 is flying by, temperatures are cooling down (finally), college football is in full swing and the holidays are rapidly approaching. This also means that the annual open enrollment benefit period will commence soon for those who are currently working.  Many workers dread receiving the annual enrollment email from their human resources team with multiple attachments detailing their benefit options for the upcoming year.  However, a little short-term pain in reviewing your options and determining the benefits appropriate for you and your family can yield tax savings in 2020.

Many employers offer employees a high deductible health care plan (HDHP) and a health maintenance organization (HMO) or preferred provider organization (PPO) plan.  Two benefit accounts that can help pay for medical expenses depending on the medical plan you choose are a Health Savings Account (HSA) and a Flexible Savings Account (FSA).  Those choosing a high deductible health care plan have the option to contribute to a HSA. This is an account that lets you save for future medical costs. Money put in the account is not subject to federal income tax when deposited. Funds can accrue and be used in the year saved or in future years when medical expenses occur.  HSAs must be paired with the High Deductible Health Plan only.  In 2020, an individual with self-only coverage under a HDHP plan can contribute a maximum of $ 3,550 and those will family coverage can contribute a maximum of $ 7,100 to a HSA.

A FSA is a way for employees to set aside pre-tax dollars directly from their paycheck to pay for medical expenses (Medical FSA).  With a HMO or PPO health care plan, individuals were able to contribute a maximum of $ 2,700 to a flexible savings account (FSA) in 2019.  2020 FSA contribution limits have not been announced yet.   It’s important to remember that contributions into a HSA account are not required to be spent in the calendar year made unlike a FSA, where if the funds aren’t spent, you could potentially lose whatever is left in the account at year-end.  If an employer’s health FSA plan has a carryover feature, participants can roll over up to $500 of unused FSA dollars to the next year but will forfeit any excess over $500 at year-end. An optional grace period gives employees an additional two-and-a-half months to incur new expenses using prior-year FSA funds. At the end of the grace period, all unspent funds must be forfeited.  Plans can offer either the carryover feature or a grace period, but not both.  As a result, it’s important to carefully estimate your out of pocket medical expenses before submitting your contribution amount.   Both HSA and FSA contributions are funded with pre-tax dollars and are exempt from the 7.65% Social Security and Medicare tax, reducing your taxable income.

Many employers will also offer their employees a dependent care FSA.  This is a pre-tax benefit account used to pay for dependent care services while you are working.  For 2019, the maximum contribution amount is $ 5,000. To be eligible for a dependent care FSA, you and your spouse (if applicable) must be employed, or your spouse must be a full-time student or looking for employment.  Funds can be used to pay for care of children under age 13 when they’re claimed as qualifying dependents.  A dependent care account covers a number of services, such as preschool, summer day camp, before- and after-school programs, and childcare.  It’s important to note that like a flexible savings account for healthcare, any balance remaining in the dependent care account at year-end will be lost if not spent.

It’s not too early to start thinking about what benefits are most suitable for you and your family.  Planning now will enable you to be a little less stressed when you are given your deadline to make your final benefit decisions for 2020. Knowing you will be saving money on your 2020 taxes may just change your mindset on receiving your annual open enrollment e-mail in future years.  Below, please find a summary chart of HSA and FSA plans.  Here’s to you saving money in 2020.

 

Health Savings Account (HSA) Flexible Spending Account (FSA)
Who owns? Employee Employer
Who contributes? Employee and/or employer Employee and/or employer
Contributions Via payroll deduction, check, or transfer Via payroll deduction only
Must be enrolled in a HDHP? Yes No
Can funds rollover from year over year? Yes Up to $500 can be rolled over depending on the plan
Are funds portable if you change jobs? Yes No
Do funds accrue interest? Yes, depending on the plan No
Can funds be invested? Yes No
Do I have to submit receipts or documentation? No, but the account holder should keep receipts in the event of an audit Yes, receipts are typically needed for reimbursement
Contribution limit For 2019 – Self-only: $ 3,500; Family: $ 7,000; Catch-up contributions $ 1,000 (age 55 and older) For 2019 – Health FSA: $ 2,700; Dependent Care FSA: $ 2,500 or  $ 5,000 depending on tax filing status