Category Archives: Financial Planning

NEW 401(k) FEE DISCLOSURES

Posted on March 22, 2012 | Leave a comment

The Department of Labor (DOL) has recently issued final regulations requiring covered service providers of pension benefit plans to disclose comprehensive information about their fees and potential conflicts of interest to ERISA-covered plan fiduciaries. These new regulations are effective July 1, 2012. Service providers not in compliance will be considered in violation of ERISA’s prohibited transaction rules and subject to penalties under the Internal Revenue Code.

In addition to these regulations, plan administrators will also be required to provide participants in participant-directed individual account plans information about plan and investment costs. Plan administrators for calendar year plans must now make the initial annual disclosure of “plan-level” and “investment-level” information (including associated fees and expenses) to participants no later than August 30, 2012, and the first quarterly statement (for fees incurred July through September) must be furnished no later than November 14, 2012.

As a plan sponsor what do these new fee disclosures mean to you?  Historically, it has always been a challenge for plan sponsors and participants to have a clear understanding of the fees associated with the services being provided to them. Without this understanding, it can be difficult for plan sponsors and participants to make informed decisions related to their investment options.  Part of the fiduciary duties of plan sponsors should be to compare their plan fees with plans similar to their own.  As a plan sponsor, you do not need to have the lowest cost provider servicing your plan; you just need to be able to conclude that the fees you are paying are reasonable when compared to other similar plans.  Communicating your due diligence to plan participants will be important in educating your participants as to what they can expect with these new disclosures.

We would be happy to discuss these regulations with respect to your plan in more detail.

By: Kristin Metzger, CPA

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Posted in Financial Planning

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Helping Those Less Fortunate: Do we Know Where our Money Is Going?

Posted on December 8, 2011 | Leave a comment

It is that time of year, when despite how little cash we may have in our own pocket, we try to give to others who may be in a less fortunate position than ourselves.  With the seemingly disproportionate amount of 501(c) 3 organizations in the Northwest Ohio region, deciding which charity to give that money to can be a daunting task.

Personally, I tend to revert to the big names that I know have a good record for actually benefitting their stated cause.  There are many organizations that by name or promotion appear to benefit a good cause, but unless I spend a lot of time researching the actual statistics, I don’t know where my money is going.   There was an article in the Wall Street Journal a few weeks ago titled “Putting Charities to the Financial Test”.    The purpose of the article in essence states just what I summarized- you need to do your homework before opening up your wallet.   The article recommends “digging into the charity’s financial statements, visiting the organization, meeting with management, and talking to third-party observers”.  Really? 

I can’t even find time to finish my Christmas shopping let alone do all of the above before I decide to write a check.  What this article did NOT mention was that the Better Business Bureau (BBB) publishes a Wise Giving Guide  to help people just like me make the right choice about where my money goes!   The Better Business Bureau rates hundreds of charities, both local and national. We use the 20 BBB Standards for Charitable Accountability, the toughest evaluation system for charities in America. They look at governance and oversight, effectiveness, finances, fundraising and informational materials in order to assign each charity a letter grade. Grades go from A+ to F, with charities that meet all Standards receiving A+.  All BBB ratings are free, and charities do not ever pay a penny for a BBB rating.  If you meander through the BBB website, you will note that they provide the specifics on these Accountability Standards that Charities have to meet to qualify.  Using the giving guide and following the letter ratings is a much shorter route to follow than as advised by the WSJ article.

The Toledo BBB has done the work for us!  If, like me, you are planning on writing a check to help out those less fortunate than yourself during this holiday season, you are guaranteed to make a good investment if you write the check to one of these local charities that has been given an A+ grade from the Better Business Bureau.   

In addition, in case you want to give to a local charity that is not on this list, you can find it at the Toledo web site,  or call Mollie Morris at the BBB, (419) 531-3116 or 800-743-4222.  Make your giving worthwhile!

By: Jennifer Kinzel, CPA, CMA

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Posted in Financial Planning, Non-Profit, Tax

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Tax Planning? Do I not need that?

Posted on November 22, 2011 | Leave a comment

It’s April and Mr. Taxpayer is in sticker shock. “I owe – WHAT? I thought I was getting a refund!”

Has this ever happened to you? Assuming you were getting a refund as normal or owing your usual couple hundred dollars, but find that you owe a large sum of cash that you were not prepared to pay? Could anything have been done? What changed that caused this tax hike? Tax professionals can assess each person’s individual situation with tax planning.

Each November and December, we like to advise our clients to start accumulating their basic tax information together in order to run an income projection.  Information each taxpayer should provide would be:

  • Most recent paystub
  • Most recent Profit & Loss / Balance Sheet (if business owner)
  • Any significant changes to investment  income
  • Any significant changes to itemized deductions (i.e. mortgage interest, real estate taxes, charitable donations, etc)
  • Any tax estimates paid thus far

With this basic information, your tax advisor can run a calculation to see where your tax position is expected to be in April. Another plus to tax planning is that each taxpayer will be provided with suggestions on tax strategies to lower your tax liability that you pay with your income tax return. These calculations can help make the most of your money and your tax professionals can advise you on scenarios like:

  • Should you pay your state and local estimates before year end?
  • Should you pre-pay your real estate taxes or contribute to charity?
  • How much tax benefit would you receive if your business spent an additional $5,000 in expenses? Or $20,000?

Tax planning can also help prepare you on what you will owe and help give you options of saving for that payment or paying part of it with a tax estimate. Remember in some cases prepaying things like your state taxes can actually make your tax situation worse due to alternative minimum tax (AMT), so always be sure to contact your tax advisor on your individual situation.  Do not wait until it’s too late, most tax planning strategies need to be completed by December 31st, and tax planning can be beneficial for all income levels, not just people with higher income. 

By: Jill Blakeman, CPA

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Posted in Financial Planning, Tax

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New Student Debt Repayment Plan

Posted on November 17, 2011 | Leave a comment

In response to record student loan debt and increasing default rates, President Obama issued an executive order on October 26, 2011 to help college graduates pay back their federal student loans. It takes effect in 2012.  There are two components to the plan. 

Students who hold both direct federal student loans and federal student loans made by private lenders under the now defunct Federal Family Education Loan Program would be able to consolidate their loans between January and June 2012 into a single government loan at an interest rate of up to 0.5% less. The White House estimates this part of the plan could help approximately 5.8 million borrowers. 

Additionally the President’s plan will cap monthly student loan repayments at 10% of income and forgive any remaining debt after 20 years.  This accelerates and enhances a plan approved by Congress last year.  This provision is estimated to help 1.6 million borrowers. 

According to the U.S. Department of Education, to qualify for loan consolidation, borrowers must have both a direct federal student loan and a federal student loan under the Federal Family Education Loan Program. To qualify for the income-based repayment plan, borrowers must take out a loan in 2012 or later and have taken out a loan sometime between 2008 and 2012. Borrowers who are already in default won’t qualify. 

For more information on the new programs, you can click on or call the office of Federal Student Aid, a division of the U.S. Department of Education, at 1-800-433-3243 (1-800-4fedaid).

By: Sandra L. Towns, CPA/PFS, CFP®

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Posted in Financial Planning, Tax

National Estate Planning Awareness Week, Day 5 – Get Your Estate Checkup

Posted on October 21, 2011 | Leave a comment

While the old rule of thumb might have been to review your estate plan at least every 3–5 years, or if a significant life event occurred (marriage, divorce, new child, or significant financial change), the “new normal” of estate planning is to review your plan every year. An hour or two of time to assure that the issues discussed in this post, along with a host of others that might affect you, are addressed is essential to keep your finances and family safe, trusts properly maintained, and your estate plan current.  The economic, legal, and tax changes have become so significant and frequent that an estate checkup should be as routine as an annual physical. We can facilitate the process by creating the balance sheet and financial data essential to the review and, if you wish, coordinating the meeting of your advisers.

If your will was not reviewed since the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 passed in December 2010, you should have it looked at; given the changes in the law, formula clauses typically used in many wills can have varying impact. 

Estate planning is critical for everyone to address. The process requires a regular review and coordination of your advisers, but to obtain the protections you and your loved ones need, much more than a will needs to be addressed. Let us know how we can help. 

By: Sandra L. Towns, CPA/PFS, CFP®

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Posted in Financial Planning, Tax

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National Estate Planning Awareness Week, Day 4 – Your Financial Plan

Posted on October 20, 2011 | Leave a comment

Do you have a budget and financial plan? Even very wealthy people will benefit from going through the process. Determining your future financial needs and goals is an integral part of determining how much investment risk your portfolio should have, what gifts you can make, what your insurance needs are, and much more. A financial plan is the foundation of every estate and retirement plan. We can assist you in assembling the data for a budget, preparing projections, and other steps.

Tomorrow – is it time for a checkup?

By: Sandra L. Towns, CPA/PFS, CFP®

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National Estate Planning Awareness Week, Day 3 – Asset Protection

Posted on October 19, 2011 | Leave a comment

If you don’t have adequate excess liability coverage, a simple accident could devastate your estate and leave you struggling financially. When was the last time you had a comprehensive review of all your property, casualty, and liability coverage? To ensure a proper analysis, we can coordinate this review so that your insurance consultant understands, among other areas, which trusts or entities may own certain assets, and information about the values of your estate. 

Did you know that courts can pierce through corporations, partnerships, and limited liability companies if you don’t respect the formalities of these entities? That could put your home and much of your savings at risk. Do you have the appropriate entities to protect your interests? We can review these issues with you.

A look ahead to Day 4 – Your Financial Plan

By: Sandra L. Towns, CPA/PFS, CFP®

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Posted in Financial Planning, Tax

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National Estate Planning Awareness Week, Day 2 – Planning for Aging and Disability

Posted on October 18, 2011 | Leave a comment

Elder financial abuse is so prevalent that it has become a new specialty area of the law. Traditional estate planning documents, such as a will and health proxy, do nothing to address this. We can assist you with some simple, low-cost steps to minimize these risks.  

Twenty-six percent of Americans age 65–74 have a chronic illness that has had a significant impact on their lives. Does your plan protect you? How you organize and handle your investments and finances, bill paying, and other routine matters can make it dramatically easier for you or your loved ones to cope with future health issues. We can help you plan now to avoid financial trauma later. Do you have an estate planning team? Many clients do, but have not coordinated the members of their team. Something as simple as a conference call (or Web conference) with your attorney, wealth manager, CPA, and key family members can create a coordinated team of advisers from what otherwise are only independent planners working without a plan.

Coming up on Day 3 – Asset Protection

By: Sandra L. Towns, CPA/PFS, CFP®

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Plan First

Posted on October 17, 2011 | Leave a comment

Welcome to National Estate Planning Awareness Week, Day 1!! An estimated 120 million Americans  do not have up-to-date estate plans to protect themselves or their families in the event of sickness, accident, or untimely death. Don’t dismiss this risk just because you happen to have a will.  Estate planning involves more than just a will and much more than planning for death.  It’s not only for the elderly, but a process everyone over age 18 must address. And, don’t dismiss the planning process because of uncertainties within the tax law. Taxes are only one component of an estate plan, and uncertainty doesn’t mean planning is not possible or critical—only that the planning has to be more flexible. 

You need to start with planning for the future.  A Roper poll commissioned by the AICPA found that two-thirds of Americans over age 65 believe they lack the knowledge necessary to adequately plan for retirement. You may have questions similar to the findings in the survey:

  • If your retirement plan is not adequate, what might be left for your heirs?
  • Is spending down your estate what you really envisioned as the way to reduce potential estate taxes?
  • Did you know that, for many people, their beneficiary designations (individual retirement account or life insurance, for example) control the distribution of most or almost all of their assets? Many of these people spend considerable money and time obtaining a complex will that may only direct where a small portion of their estate is distributed.
  • If you want to make gifts to children or other heirs, have you first projected whether you’ll have sufficient funds for your later years? Gifts are a wonderful way to help heirs while you’re alive because you can enjoy seeing your heirs benefit, but even many wealthy people overestimate their available resources. Plan, first. 

Check back tomorrow for Day 2 – Planning for Aging and Disability!

By: Sandra L. Towns, CPA/PFS, CFP®

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Posted in Financial Planning, Tax

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Roth IRA Conversions

Posted on September 23, 2011 | Leave a comment

As a result of the recent downturn in the securities market, many individuals have seen their portfolios devalued significantly over the last year.  For individuals who converted amounts from an IRA to a Roth IRA in 2010, this is even more disconcerting because they may now owe taxes on amounts they no longer have in their retirement accounts.  The good news is if you converted to a Roth IRA in 2010 and your account has become devalued you have until October 17, 2011 to undo the conversion.

If the investments in your new Roth IRA lose value after the conversion, you’ll have an adverse tax outcome, because the taxable distribution from the conversion will still be based on the value of the account on the conversion date. In other words, you’ll wind up owing taxes on money you no longer have. Let’s say the value of the Roth IRA drops from the initial conversion value of $50,000 to $35,000. You’ll still have a $50,000 taxable distribution from the conversion (assuming you have no tax basis), even though the Roth account is now worth only $35,000.

Fortunately, you can avoid this unfavorable outcome by reversing the Roth account back to traditional IRA status. The IRS calls this process “recharacterizing” the account. Once the recharacterization is complete, you’re right back where you started, tax-wise—though your IRA is now worth $35,000 instead of $50,000. To summarize: the conversion is reversed, the $50,000 taxable distribution disappears, (along with the related tax liability), and the account is again a traditional IRA, now worth $35,000.

If you have a 2011 Roth conversion that you want to recharacterize, you have another year – until October 17, 2012 – to do so.

Whether it makes sense to recharacterize your Roth conversion depends on several factors, including the extent of the losses in your Roth IRA, the potential value of the special 2010 tax deferral rule to you, and your expectations of where the markets may be headed. Your William Vaughan Company professional can help you decide if a recharacterization is right for you.

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