There is some standard thinking about setting up your affairs with children who have special needs:

Families realize that they have to support these children for the rest of their lives. So, they typically write wills and take out significant term life insurance policies. They are careful to name a trust as the beneficiary, because if their child has more than $1,000 in assets upon reaching age 18, he/she will no longer be eligible for some government benefits.

However, while these families are indeed on the right track, parents with special needs children also need to:

1. Set up a second trust. The purpose of this additional trust would be so that friends and family members can contribute to the child’s care while the family is still alive–without causing the child to lose eligibility for federal disability benefits.

2. Increase savings. These families need a much larger emergency fund than most, and they also need to create a “reserve fund”. They should concentrate on savings–rather than paying off debt–especially if interest rates on loans are low.

3. Plan for three retirements. These families not only have to plan for their retirements, but also for the child’s long-term care. They should maximize their savings and take an aggressive approach with their portfolio to maximize returns over the long run.

I thought these tips were so important that if you find yourself in this situation, you should raise them with your professional advisors. And, of course, we’re here to help.

I’m holding my family closer this week. I imagine you are, as well. Let’s do everything we can for them, together, shall we?

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

You’ve probably seen this, as I have: The second half of marriage can either be the best time of life … or it’s the time when a marriage breaks up. The transition can catch unsuspecting couples off guard.

A survey from the book “The Second Half of Marriage” surveyed couples’ responses to the question: “What are the areas that cause the greatest stress in your marriage?” In every decade of life, the number one answer was “finances.” Budgeting, retirement planning, and other money issues can easily ruin what might otherwise be a time of remembering why you got married in the first place.

Times of transition are particularly hard on marriages. As the work of raising a family wanes, couples often look to each other for help in redefining their calling in life. Mothers who have devoted years to caring for children may want to fulfill one of the dreams they postponed decades ago. They may want to go back to school, take on a new career, or be more involved in charitable causes. Husbands, on the other hand, may find they are ready to scale back their careers.

While having a close friendship and spiritual commitment are the most important ingredients of a fulfilling relationship, financial troubles are usually the primary point of contention.

If you and your spouse are approaching this season of transition, take this opportunity to check-up on your retirement money, your marriage, and your mission.

First, get your retirement plan together. A retirement plan, like a spending plan, helps a couple limit their disagreements to only those issues outside the plan.

For most couples, expenses drop significantly after their children finish college. Although saving in the early years of marriage is ideal, when the kids are finally off on their own, couples get one last chance to save for retirement.

These years before retirement are critical in determining whether you have sufficient assets to retire. As your financial planner may tell you, by the first day of retirement, you should plan on having about 23 times your annual income.

Next, reestablish opportunities for communication with your spouse! The period just before the children leave home is often the most difficult on the marriage relationship. After a quarter century, the communication focus of most couples is their children. So create new ways to communicate–outside of the lives of your children.

By the way, know that it’s not your fault. The natural course of relationships is to drift apart. So, don’t be down on yourself if you and your spouse are ‘working’ on your marriage. The fact is, if you aren’t working on your marriage, it is probably headed in the wrong direction.

Finally, find your mission for this new phase of your life. It’s real easy when you are young to think you have all the time in the world for the good things in life. First your job, then the kids (rightfully) occupied much of your time. But, as these responsibilities begin to ease, take another look at the bigger life questions which are so important, even if they aren’t immediately urgent.

There’s a good book you can check out, The Seven Stages of Money Maturity by George Kinder, and in it are three questions to help people see what is really driving them. Perhaps you should take the time to write out some answers honestly and thoughtfully, and then share your thoughts with your spouse:

1. If you knew you would have all the money that you needed, now and in the future, from this moment forward, how would you live your life?

3. If the doctor told you that you would be dead within twenty-four hours, what feelings, regrets, longings, and unfulfilled dreams would haunt you?

Let’s be honest: Sometimes the vague answers that we live by are not ultimately satisfying. Reevaluating our purpose can give renewed meaning to our lives and relationships, especially in a season of change.

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia

I’ve pulled out the important provisions for you today, but this is, by no means, an exhaustive list. For an even more complete listing of tax provisions (and the primary reference I used for this article), go here: http://www.journalofaccountancy.com/News/20125972.htm

IMPORTANT NOTE: This article is ONLY about the ACA, aka “Obamacare”. There are a whole host of tax changes coming on January 1st which have nothing to do with this law per se (capital gains increase, tax rate increases, etc). Here, I’ve simply tried to highlight what’s in this law only.

Medical Expense Deduction Now With Higher Threshold: The medical expense deduction that currently applies to medical expenses over 7.5% of adjusted gross income will increase to 10% making that even more difficult to receive a medical deduction.

Medical FSA’s Gutted: Under current law, you can put an unlimited amount — up to your earned income — in a medical flexible spending account. Beginning in 2013, that limit will decrease to $2,500 as a result of the government’s efforts to raise funds to supplement public health insurance.

Medicare “Contribution Tax”: This 3.8% tax will be paid by those individuals with an income above $125K (filing separately; $250K for filing jointly). The Medicare contribution tax is on net passive income — investment income, interest and dividends, royalties, rents, capital gains, annuities, etc. — in which high-income individuals will pay an additional 3.8% on that income over those levels. For example, if you are married filing jointly and your total income is $260,000, with $20,000 of it from interest, only $10,000 will be subject to that 3.8% tax.

Further, for high-income earners, a hospital insurance tax of 0.9% will be levied ($250K married filing jointly, or $125K single) effective after Dec. 31, 2012.

Again, as I noted above, this is ONLY related to Obamacare. There’s much more to deal with, from a tax perspective, coming down the pike in other bills. Call us with any questions: 800-279-3768

Financial Advisor Richmond
Financial Planner Richmond
Financial Planners Virginia