Wealth Management

‘Can You Give Me Some Seed Money for My Business?’

Let’s say your brother-in-law is starting a new business. You listen to his idea, read his business plan and think the endeavor sounds promising. Your brother-in-law asks if he can have $20,000 to help get the business off the ground. Should you just pull out your checkbook and shake hands? You may think that a casual agreement to help out a family member or friend is enough. After all, you trust the person and want to help the start-up company succeed. Do yourself a favor and take these steps: 1. Don’t agree immediately. Tell the family member or friend you’ll think about it. Take…

Consider Hosting a Family Meeting about Your Estate Plan

If you’re a business owner and a high-net-worth individual, you may want to gather your family members together to discuss the details of your estate plan. This can be especially important if you own a business that employs family members. These meetings are a little like the Scottish clan gatherings held hundreds of years ago by clan chiefs to discuss their succession and inheritance plans. The Purpose of Gatherings For centuries, some Scottish clans had a tradition of getting together periodically. When communication and travel were difficult, these gatherings provided a way to prepare for the future. Estate planning was…

Getting Married? Issues to Consider When Purchasing Property Before the Wedding

Let’s say a couple is engaged to be married. However, before the marriage ceremony, the couple decides to purchase a marital home. Possibly, they want to buy a first house, condominium or cooperative apartment. Prior to doing so, there are certain potential concerns to address. The options for purchasing the property vary: One party may want to provide the down payment. The couple may decide to buy the home with title in one name only. They may decide to purchase it together with both names on the title but one person out the mortgage. With these and other scenarios, the couple…

Advantages and Disadvantages of Roth IRAs

Saving for retirement is critical to financial security. Fortunately, the government provides some tax incentives, if you qualify.  Even though Roth IRAs have been around for more than a decade, many people are not aware of exactly how they work. They also may not know that there are no longer income restrictions in place to convert a traditional IRA into a Roth. If you qualify, you can make a contribution to a Roth IRA of $6,000 in 2019 or $7,000 if you are age 50 or older (up from $5,500 in 2018). Here are the basic advantages and disadvantages of…

Estate Planning: Check Your Beneficiary Designations

Regardless of your income or net worth, there’s one estate planning move you should probably make right now: Check the beneficiary designations for your life insurance policies, bank accounts, brokerage firm accounts, retirement accounts, and other assets. If you’ve not yet turned in the proper forms to designate beneficiaries, do it now. If your forms are out of date, update them. The consequences of failing to take these simple steps can be serious. If you don’t believe it, consider the following real-life horror stories. Horror Story Number 1 In Herring v. Campbell, the Fifth Circuit Court of Appeals ruled that…

Higher-Income Taxpayers: Open the Door to a Roth IRA

If you expect to be in a relatively high tax bracket during your retirement years, you should consider pumping as much money as you can into Roth IRAs. However, your ability to make annual Roth contributions may be reduced or eliminated by a phase-out rule that affects high-income individuals. Good news: You can circumvent the phase-out rule by making an annual non-deductible contribution to a traditional IRA and then converting the account into a Roth IRA. This article explains that strategy after first covering some basics about Roth IRAs and the contribution rules that apply to them. Making Annual Roth…

Gauging a Stock’s Risk

Stocks are primarily affected by two types of risk — market risk and nonmarket risk. Nonmarket risk, also called specific risk, is the risk that events specific to a company or its industry will adversely affect a stock’s price. Market risk is the risk that a stock’s price will be affected by overall stock market movements. Nonmarket risk can be reduced through diversification. By owning several different stocks in different industries whose stock prices have shown little correlation to each other, you reduce the risk that nonmarket factors will adversely affect your total portfolio.   From the SEC “All investments…

Don’t De-Worse-ify When You Diversify

For an investor, managing money is a lot like managing manure for a farmer. Both live by the credo, “spread it around and it will grow.” But as both successful investors and farmers know, you’ve got to know how and where to spread money and manure, or they end up yielding stinky results — or even getting flushed away. While we can’t help with a manure problem, we do have definite thoughts about spreading money around — in a way that doesn’t cause your portfolio to take a turn for the worse when you try ma king it more diverse….

Let Logic, Not Emotion, Prevail Over Your Portfolio

Imagine this scene: You’re at your favorite clothing store when you see a shirt. You pick it up, consider it, then put it back. It’s not your color. As you move away, you notice another customer picking up that same shirt. Suddenly, you think that maybe it would look good on you. But it’s the last one. You can’t wait for the other customer to set it down so you can snatch it up. It’s a fact of human nature that emotions can wreak havoc on our decision-making abilities. A growing field of study called behavioral finance seeks to identify the…

Tax-Smart Cash Flow Solution for Seniors with Appreciated Homes

Many older people own greatly appreciated homes but are short of cash. A side effect of large appreciation is the fact that selling the property to raise cash will trigger a gain well in excess of the federal home sale gain exclusion (up to $500,000 for joint-filing couples and up to $250,000 for unmarried individuals). The federal and state income tax bills could easily reach into the hundreds of thousands of dollars, and all that money would be gone forever. Thankfully, there’s a potential solution that involves taking out a reverse mortgage on your property instead of selling. That way,…