Massachusetts Estate Planning & Asset Protection Blog

Reinvesting Your Wealth: 9 Ways to Use Your Tax Refund

Posted by Dennis Sullivan & Associates on Tue, Mar 10, 2020

With tax season here, many individuals are looking forward to receiving a tax refund soon. However, while it is nice to spend the extra funds on vacations and material things, reinvesting your wealth into your retirement savings, contributing to your bills, or updating important legal documents might be the more important route. Here are a few suggestions on what to do with this money:

1. PREPAY MORTGAGES AND LOANS. This might seem like a huge commitment in the beginning, but it can be worth it in the end, depending on what your needs are. In this case, it is best to consider where you stand financially. If you have recently downsized to a smaller home with your spouse, you may want to use your tax refund to get a head start on paying off your mortgage, which may be one of the largest expenses you owe every month. In addition, think about any outstanding loans you have.

2. REINVEST IN YOUR HOME BY MAKING HOME IMPROVEMENTS.This is a great step to take if you are aiming to sell your home in the near future. After all, remodeling can increase your resale value if done correctly. Also, keep in mind that certain home improvements can be tax-deductible, so consider this as you begin to plan which changes you want to make.

3.INVEST IN YOUR CHILD OR GRANDCHILD’S EDUCATION. Although paying off your own expenses is nice, you might also want to think about contributing to your child or grandchild’s college fund while you have the ability to do so. One of the tax planning strategies we suggest to our clients is utilizing a tax-advantaged 529 plan, which will give you the ability to pre-fund an education with $70,000. With a 529 plan, your money can also grow tax-free as long as the money is used for tuition. Keep in mind that if your child or grandchild chooses not to pursue a college education, you still have control of these funds.

4. PAY OFF HIGH CREDIT CARD DEBT. The U.S. credit card debt has reached $930 billion, and many individuals are having a difficult time meeting their payments. With that being said, consider using your tax refund to help pay off some of your debt, especially if your card has a high-interest rate. If you own multiple cards, spend time going through each one to see what you owe. It is incredibly important that you have a plan on how to pay off this debt instead of letting it sit for months and months.

5.PUT MONEY AWAY FOR EMERGENCIES. If you are still working, you are probably already taking advantage of an emergency fund. If not, make this a priority! Increase your dollars in this area by utilizing some of the money you received from your tax refund. It is better to be prepared now for an emergency than to worry later.

6.INCREASE YOUR 401 (K) CONTRIBUTION.As you may already know, contributions made to a 401 (k) are all done on a pre-tax basis. This is also true of pensions, IRA’s, 457 plans, 403 (b) accounts, and profit-sharing accounts. Because the money in a 401 (k) account is contributed on a pre-tax basis, your taxable income is reduced. Furthermore, you should contribute as much as you can to this retirement savings account. This year, you can contribute up to $19,500. With that being said, discuss with your employer what percentage of your salary they will match, and try to meet this amount. If, for good reason, you have reached the contribution limit, consider investing your tax refund into your IRA or another retirement savings account.

7.CONTRIBUTE TO YOUR IRA. According to a 2020 TD Ameritrade report, one out of five Americans in their 70’s has less than $50,000 saved for retirement. While it is recommended that you contribute what you can to your individual retirement account (IRA) every month through earned income, some individuals may find this to be challenging, especially if you have outstanding balances that require your attention. With your next tax refund, think about using it to fund your retirement.

8.CONTRIBUTE TO YOUR HEALTH SAVINGS ACCOUNT. A health savings account (HSA) is an excellent way to put aside your funds (pre-tax) in order to pay for your medical bills. Knowing how expensive hospital visits and doctors’ appointments are, this could be a great option. If you currently invest in one, consider adding some of your funds here. According to healthcare.gov, for the 2020 year, the maximum amount of money you can contribute is $3,500 for self-only coverage, and a maximum of $7,000 for family coverage.

9.CREATE OR UPDATE YOUR LEGAL DOCUMENTS.Surprisingly, only 47.9% of adults age 55 or older have estate planning documents. With that being said cost may play a factor; there is often a hefty fee associated with updating or establishing essential legal documents such as a living will, power of attorney, and medical directives. For example, if you are creating a will for the first time with the help of a lawyer, you may be paying between $300 and $1,000. If you have the extra funds to spare from your tax return, consider making this a priority. These documents are not only beneficial for you to have, but they are also beneficial for your family.Stay open-minded. With that being said, these six points are just a few common suggestions, so do not only stick with these if you have other ideas for how to utilize your tax return funds. Everyone has different needs, and it is important that you consider this when it comes to helping yourself and your family. Let us know what you think about these tips in the comments below. Also, how have you reinvested your tax-return before? What advice would you share with others when it comes to this topic? If you have further questions about how to protect your home, spouse, and life savings… attend a FREE discovery workshop by calling 1-800-964-4295 (24/7) or visit DSullivan.com – Reservations Required.

Tags: Tax Bill, 2020

Understanding Long Term Care Planning

Posted by Dennis Sullivan & Associates on Fri, Jan 19, 2018

Facing the enormity of long term care, whether it is the financial, healthcare, emotional or psychological issues, it is so overwhelming. 

It's needs a team effort!  With the help of family, friends and our team here at Dennis Sullivan and Associates you can make the enormity of long term care manageable 

 

What exactly is "Long Term Care Planning" ? 

Here's one way to look at long term care planning: 

In today’s world, the question is no longer only, “What happens when I die?, but now we need to plan for “What happens if I live?” An estate plan covers the scenario of, What happens when I die.  But long term care covers a large variety of other factors and scenarios that sometime families forget to consider such as what happens if I live but am not healthy and have increased health-care costs and need to rely on others for assistance, either temporarily or on a permanent basis. The estate plan does not address this need. An estate plan can help you answer the first question, but a long-term care plan can help you answer both the first and second questions. Let’s put it another way. An estate plan insures that if you have assets when you die they will be passed in the manner you wish. The key word is “if.” The plan will not, however, guarantee that there will be anything left at that time to pass. Your assets could be mostly or entirely wiped out by a lengthy illness, hospital, and/or nursing home stay, leaving your spouse and other heirs with nothing.

 long Term Care and Medicaid:

I had a conversation last week with a married couple for whom we are preparing a Medicaid application. John is in a nursing home, and Mary is healthy and living at home. I explained to them that Mary can keep half of their countable assets, in their case $75,000, but that they must spend down to below that dollar amount by the last day of the month directly preceding the month we want to qualify John for Medicaid. I have had this conversation numerous times with clients in John and Mary’s situation, and know all too well that this simple instruction is not always followed. The largest part of most spend downs typically goes to the nursing home. But, as most people do, myself included, we wait until we get a bill before we pay it. If I owe you money, I’m not going to chase after you for a bill. Whenever you get around to it and invoice me, then I’ll pay it. The longer the money stays in my bank account, the happier I am. However, this can get you into big trouble and cost you tens of thousands of dollars if you wait for the nursing home bill. If we want John to be eligible for Medicaid next month and we know that he owes the nursing home $20,000 for the past two months of care, but the nursing home hasn’t yet presented Mary with a bill, it does not matter that Mary and John legitimately owe the facility the money. If that $20,000 is still sitting in their bank account next month, causing their account balance to exceed $75,000, John cannot qualify for Medicaid. Even worse than that, he can’t even qualify for next month. He has to wait until the following month, which means they will owe the facility another $10,000, leaving Mary with $65,000 to live on.


So Much to Discuss

For more information on Long Term Care Planning we encourage you attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy. January sessions are filling up fast call or register on line to reserve your seat today.  

At the Estate Planning & Asset Protection Law Center, we help people and their families protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future. 


Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Retirement, Estate Planning, Baby Boomers, Elder Law, Attorney, GST tax, Massacusetts Estate Tax, Financial Planning, taxes, coverage, tax liability, tax exemption, Tax Savings, tax deductions, tax reform, New estate tax law, IRS, federal, Estate Planning Tip, Massachusetts, senior, Estate Planning Recommendations, Dennis Sullivan, tax, Capital Gains Tax, new regulations, New Tax Bill, Tax Bill, 2018 Tax Bill

New Tax Bill: What you need to know

Posted by Dennis Sullivan & Associates on Fri, Jan 05, 2018

How does the new tax bill affect you and your family now and in the future?

The new tax bill has officially been passed by Congress and signed by President Trump, what does this mean for us?  The answer to this depends on many variables discussed here. 

 

First of all, these changes don’t apply until you file your 2018 taxes, meaning that you won’t have to worry about the new law when filing your 2017 income tax returns this spring.  That being said, still we will be experiencing the greatest overhaul of the tax laws in more than 30 years.  The last major changes having been made under President Reagan in 1986. 

One change you can expect to see is that both corporate tax rates and personal income tax rates will drop.  There are also other changes which limit or eliminate personal deductions.   The changes that affect corporate tax rates are permanent, and the changes that affect individual tax rates and deductions are not.

Also in the new tax bill you will find a “sunset” provision, meaning that the new law – as it applies to individuals – will expire on December 31, 2025.   That is, unless Congress agrees to extend the law.  That, of course, will depend on the political and economic climate 8 years from now, including whether the economy responds the way Republicans say it will

       Now let’s take a look at the changes that are likely to affect the average senior.  Good news, the tax rates have been lowered a bit.  There are still 7 tax brackets but the rates have changed with the top rate lowered from 39.6% to 37% and the threshold at which each rate is reached has been altered. (The corporate rate reduction is much greater, from 37% to 21%).

       Some of the most significant changes relate to deductions.  The standard deduction has been doubled to $12,000 for a single person and $24,000 for married couples but personal exemptions have been eliminated.  The deduction for state and local taxes will be capped at $10,000, something that could hurt many Massachusetts residents and especially homeowners because we have high real estate and state income taxes.  


So Much to Discuss:

For the first time in decades major overhauls to the tax system are happening! This is an enormous change that can affect your estate planning and asset protection as well. Be sure to stay tuned as we will discuss more about this new tax bill in our next blog post!    

For more information we encourage you to attend one of our free educational workshops, call 800-964-4295 and register to learn more about what you can do to enhance the security of your spouse, home, life savings and legacy. January sessions are filling up fast call or register on line to reserve your seat today.  

At the Estate Planning & Asset Protection Law Center, we help people and their families protect their home, spouse, life-savings, and legacy for their loved ones.  We provide clients with a unique educational and counseling so they understand where opportunities exist to eliminate problems now as they implement plans for a protected future. 


Click Here to Register For Our Trust, Estate & Asset  Protection Workshop

Tags: Retirement, Estate Planning, Baby Boomers, Elder Law, Attorney, GST tax, Massacusetts Estate Tax, Financial Planning, taxes, coverage, tax liability, tax exemption, Tax Savings, tax deductions, tax reform, New estate tax law, IRS, federal, Estate Planning Tip, Massachusetts, senior, Estate Planning Recommendations, Dennis Sullivan, tax, Capital Gains Tax, new regulations, New Tax Bill, Tax Bill, 2018 Tax Bill

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