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C.H. Robinson

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A Quick Update on Estate Taxes

Written by Bruce Primeau on .

Here are some important items to note for estate taxes as we move forward into 2018:

  • For 2018, the federal estate tax exemption is rising to $5.6 million per person while the top federal estate tax rate remains at 40%. The estate exemption portability remains in place meaning (at least for now) that if the deceased spouse does not use his / her $5.6 million exemption, the unused portion transfers to the surviving spouse.
  • The annual exclusion amount for gifts made in 2018 is increasing to $15,000 per person or, for married persons, they could give up to $30,000 per person without having to file a gift tax return.
  • For Minnesota residents, the MN estate tax exemption is scheduled to increase to $2.4 million per person in 2018. Note however that the MN estate exemption is not portable like the federal exemption is.

If you have any questions about how the above estate tax changes will impact you, please contact us to discuss.


A 529 Tax Incentive for Minnesota

Written by Jon Govin on .

Minnesota recently introduced a 529 benefit this year that will help just about everyone who contributes to a 529 plan and not just the Minnesota 529 Plan. However, this benefit applies only to Minnesota taxpayers.

Minnesota taxpayers contributing to a 529 plan have the option of claiming either a tax credit or deduction for contributions to any state's 529 plan, depending on your adjusted gross income. Minnesotans can only claim one of the two benefits in any given tax year, and the benefit phases out as taxpayer income increases.

Minnesota taxpayers may:

  • Take a deduction: Up to $3,000 for a married couple filing jointly or $1,500 for all other filers for contributions made to a qualified 529 account, or
  • Take a credit: A credit can be claimed on half of contributions up to $500, subject to phase-out starting at a federal adjusted gross income of $75,000. The credit is reduced by any withdrawals made by that taxpayer during the taxable year.

The tax deduction is pretty straightforward, and works much the same as other deductions. The trouble comes in interpreting whether a taxpayer will benefit more from the deduction or credit when they fall in between the income brackets, because the language of the legislation is confusing, at best.

The wording reminds you of those dreaded "word" problems in your elementary math class. Thankfully, if you have adjusted gross income below $75,000 it is pretty simple, take the credit. Beyond adjusted gross income of $75,000 the math (and rules) gets a bit more complicated. You will need to rely on your tax preparer to calculate the most beneficial outcome for your circumstances. Of course, we will pay particular attention for the deduction or credit in our review of tax projection and tax returns of our clients that we know are contributing to 529 plans.

The bottom line is that it is advantageous for Minnesota taxpayers to contribute to a 529 plan this year. If you are unsure what to do, talk to your tax preparer or financial advisor who should be well versed in tax laws.


A Little Help Can Be Worse Than No Help At All

Written by Matt Wright on .

My wife recently received a "Retirement Evaluation" in the mail, related to her 401(k) account. You may receive something like this from time to time, too. It is either intended as a free, helpful service from your company retirement plan or it is intended to alert you to potential problems with your plan that a third party can assist you with, for a fee.

This particular evaluation alerted her that she might be investing too conservatively, could benefit from saving more each paycheck (couldn't we all?) and her account value may be insufficient to produce the income she'll need in retirement. To remedy the situation, she could sign up for a program that will manage her account and provide advice for a monthly fee.

Of course, SWA is also in the business of managing investment accounts and providing advice, so we obviously think there is value in doing so. The difference is that SWA provides this advice on a comprehensive basis by incorporating all of your family's assets, incomes, expenses, tax rates, insurance coverage, etc. The "Retirement Evaluation," on the other hand, is looking at just one piece of the puzzle.

For example, here are a few of the many things not considered in my wife's "Retirement Evaluation:"

  • Is her 401(k) invested conservatively because it is just one part of our combined family asset allocation and we are optimizing the mix of investments across all of our accounts?
  • Is her savings rate to the 401(k) not particularly high because she is also saving to a Health Savings Account, which can potentially result in much more favorable tax benefits than a 401(k)?
  • Does her account value seem too low to fund her retirement because it is less than 10% of our family's combined assets?

When you think about all the external variables, it becomes clear that the 401(k) management program has limited value in addressing the spectrum of financial decisions we each face. It will likely provide you with a set of cookie-cutter recommendations that might have you increasing your 401(k) savings even if, for example, the most critical need in your family right now is to get some term life insurance coverage in place. In a situation like this, it could certainly result in a little help causing more harm than good.

Only by looking at the whole picture can SWA work with our clients to prioritize their most important needs and help them to meet their goals through a variety of strategies. We are always hesitant to offer advice on a limited scope as just one missing piece of information can impact a recommendation.


Q and A on Medicare

Written by Tim Schatz on .

The following was written by one of our professional contacts, Tim Schatz, Medicare Specialist with MN Health Insurance Network:

With the Medicare Annual Election Period quickly approaching, now is the time to prepare!

What is the Annual Election Period?
The Medicare Annual Election Period (AEP), otherwise known as Medicare open enrollment, allows Medicare beneficiaries the ability to make changes to their current Medical and or prescription drug (Part D) coverage. The AEP begins on October 15th and runs through December 7th. Coverage changes made during this time will become effective on January 1st.

How do I prepare for the AEP?
All Medicare beneficiaries will receive an annual notice of change letter from their current medical and prescription drug insurance in early October. The letter from the insurance providers will clearly state specific changes to the Medicare beneficiary's insurance that will take effect in the new calendar year. It is of utmost importance that Medicare beneficiaries review these letters and determine whether they are happy with their insurance plan or wish to shop their insurance. Members happy with their current plan and any proposed changes will automatically renew, provided their plan is continued in the new calendar year. Members who would like to review their insurance options or change to a new plan are encouraged to do so during the AEP (October 15 - December 7).

How do I know if I have good insurance?
The two most common reasons why Medicare beneficiaries make changes to their medical and/ or prescription drug plans is that the plan itself has changed or the beneficiaries' medical needs have changed. In either of these situations, most Medicare beneficiaries are able to change to a new plan without having to medically qualify, provided they enroll during the AEP. When evaluating health or prescription drug insurance this AEP, beneficiaries will want to ask themselves the following questions:

• How Much Is My Insurance Really Costing Me?

  • It is important to calculate the projected "total cost" of your medical insurance and prescription drug plans. To calculate "total cost," be sure to include the premium cost, copay costs and coinsurance expenses you incur for both your medical and prescription drug plans.

• Where Can I Receive Care?

  • Most providers have a very large network, especially when in the residence state. However, many providers offer reduced network access when traveling outside of your residence state. If you plan on vacationing for more than two weeks out of the year, you will want to look into how you are covered under your plan.

• Are My Medications Still Covered?

  • Each year, prescription drug insurers make changes to either their list of approved medications or the level of the drug coverage. One little change in this area can mean an enormous cost increase to a Medicare beneficiary. Beneficiaries with costly medications will want to check with their prescription drug insurance provider each year to confirm that their medications are covered and at what cost.

I Need Help! Now What?
For the "do-it-yourself" beneficiaries that like to research options on their own, one good resource is the www.medicare.gov website often referred to as the "Bible" of Medicare. Here you will find resources to better understand Medicare, enroll in Medicare and run prescription drug analyses to your heart's content. For others that would like no cost personalized assistance, contact your Financial Advisor for a recommendation to a local Medicare Specialist.


Following the Equifax Data Breach, How Safe Are Your Assets?

Written by Matt Wright on .

One thing confirmed by the recent massive Equifax data breach is that we should all assume our Social Security Number and other personal data has been compromised and act accordingly. This may include adding credit freezes at each of the credit reporting bureaus, a credit monitoring program, regular reviews of asset and credit statements, and additional measures to safeguard your account login details.

We want to specifically address the assets that we manage for you that are in Schwab's custody. We want to make sure you're aware of the protections already in place and additional measures you might take to reduce the risk of unauthorized withdrawals from your accounts. First, note that Schwab offers a security guarantee that covers 100% of any losses in a Schwab account due to unauthorized activity. Please review the details of the Schwab Security Guarantee here.

If a member of the Summit Wealth Advocates team receives an unexpected withdrawal request, we are obligated to verify the request with our client by phone to confirm that it is legitimate. If someone were to call Schwab directly in an attempt to impersonate you and access your accounts, they would need to answer several verification questions (not including your Social Security Number).

The next level of security by phone is that the default methods for a withdrawal are to mail a check to the address on record or transfer it via ACH to a bank account on file. Any attempt at directing money elsewhere (different address, new bank account number, wire transfer, etc.) would require additional verification or paperwork, signed by the client, to authorize the withdrawal.

For the best online security, use unique usernames and passwords as often as possible. The risk is that a data breach somewhere else on the web could be used to hack multiple logins if, for example, you use the same password for all of your online accounts. In addition, do not click on email links to access your accounts, as they may be part of a phishing attempt. Instead, type the website address directly into your web browser.
Schwab also offers several optional security measures that we encourage you to consider. Call 1-800-435-4000 if you'd like to set up any of the following options or to get more information.

  • Dual authentication – for online access, this requires a unique one-time code provided to you, in addition to your password, each time you log in to your accounts.
  • Voice recognition – access to your accounts by phone will require a voice match to one you provide
  • Verbal password – this is a password used to verify your identity by phone, separate from your online password.

For more information on Schwab's account security, review the SchwabSafe website or let us know what additional thoughts or questions you might have.

North Metro: 763.355.5873
227 East River Parkway
Champlin, MN 55316-5873

South Metro: 612.987.9112
5871 Crossandra Street SE
Prior Lake, MN 55372-3337

West Metro: 763.639.3425
322 Greenhill Lane
Long Lake, MN 55356

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