october 2014 news

8/11/2019 October 2014 News

1/4

Income Solutions WealthManangementLance A. Browning, RICPSr. Vice President/Founding Partner3200 Troup Hwy, Suite 150Tyler, TX [email protected]

www.lancebrowning.com

October 2014Prepare Now for a Year-End Investment Review

Retiring and Relocating? Don't Neglect StateTaxes!

Leaving Assets to Your Heirs: Income TaxConsiderations

What factors could negatively impact my creditreport?

October 2014

Prepare Now for a Year-End Investment Review

See disclaimer on final p

Getting organized for your year-end investmentreview with your financial professional may helpmake the review process more efficient. Hereare some suggestions for making your meetingas productive as possible.

Decide what you want to know

One of the benefits of a yearly investmentreview is that it can help you monitor yourinvestment portfolio. A key component of most

discussions is a review of how yourinvestments have performed over the last year.Performance can mean different things todifferent people, depending on their individualfinancial goals and needs. For example, aninvestor who's focused on long-term growthmight define "performance" slightly differentlythan an investor whose primary concern isn'toverall growth but trying to maintain a portfoliothat has the potential to produce current incomeneeded to pay ordinary living expenses.

Consider in advance what types of informationare most important to you and why. You maywant to check on not only your portfolio'sabsolute performance but also on how it fared

compared to some sort of benchmark. Forexample, you might want to know whether anyequity investments you held outperformed,matched, or underperformed a relevant index,or how your portfolio fared against ahypothetical benchmark asset allocation.(Remember that the performance of anunmanaged index is not indicative of theperformance of any specific security, andindices are not available for direct investment.Also, asset allocation cannot guarantee a profitor eliminate the possibility of loss, including theloss of principal.)

Almost as important as knowing how yourportfolio performed is understanding why it

performed as it did. Was any overperformanceor underperformance concentrated in a singleasset class or a specific investment? If so, wasthat consistent with the asset's typical behaviorover time? Or was last year's performance ananomaly that bears watching or taking action?Has any single investment grown so much thatit now represents more of your portfolio than itshould? If so, should you do a little profit-taking

and redirect that money into something els

Are any changes needed?

If your goals or concerns have changed ovthe last year, you'll need to make that cleaduring your meeting. Your portfolio probabneeds to evolve over time as yourcircumstances change. Making sure you'vecommunicated any life changes will make ieasier to adjust your portfolio accordingly a

measure its performance appropriately nexyear.

If a change to your portfolio is suggested bon last year's performance--either positive negative--don't hesitate to ask why the chais being recommended and what you mighreasonably expect in terms of performancepotential risk as a result of a shift. (Howevewhen looking at potential returns, remembethat past performance is no guarantee of furesults.) Don't be reluctant to ask questionsyou don't understand what's being presentyou; a little clarification now might help premisunderstandings and unrealistic expectathat could have a negative impact in the fu

Also, before making any change, find out hmight affect your investing costs, bothimmediate and ongoing. Again, a few quesnow may help prevent surprises later.

Think about the coming year

Consider whether you would benefit next Afrom harvesting any investment losses befothe end of the year. Selling a losing positiocould generate a capital loss that couldpotentially be used to offset either capital gor up to $3,000 of ordinary income on yourfederal income tax return.

If you've amassed substantial assets, you cexplore whether you might benefit fromspecialized assistance in dealing with issuesuch as taxes, estate planning, and assetprotection. Finally, give feedback on the reprocess itself; it can help improve next yeasession. Note: All investing involves risk,including the potential loss of principal, andthere can be no guarantee that any investinstrategy will be successful.

Page 1


2/4


3/4

Leaving Assets to Your Heirs: Income Tax Considerations

An inheritance is generally worth only what yourheirs get to keep after taxes are paid. So whenit comes to leaving a legacy, not all property iscreated equal--at least as far as federal incometax is concerned. When evaluating whom toleave property to and how much to leave toeach person, you might want to consider howproperty will be taxed and the tax rates of yourheirs.

Favorable tax treatment for heirs

Roth IRAs

Assets in a Roth IRA will accumulate incometax free and qualified distributions from a RothIRA to your heirs after your death will bereceived income tax free. An heir will generallybe required to take distributions from the RothIRA over his or her remaining life expectancy.(Of course, your beneficiaries can alwayswithdraw more than the required minimumamounts.) If your spouse is your beneficiary,your spouse can treat the Roth IRA as his orher own and delay distributions until after his orher death. So your heirs will be able to continueto grow the assets in the Roth IRA income taxfree until after the assets are distributed; anygrowth occurring after funds are distributed maybe taxed in the future.

Note:The Supreme Court has ruled thatinherited IRAs are not retirement funds and donot qualify for a federal exemption underbankruptcy. Some states may provide someprotection for inherited IRAs under bankruptcy.You may be able to provide some bankruptcy

protection to an inherited IRA by placing theIRA in a trust for your heirs. If this is a concernof yours, you may wish to consult a legalprofessional.

Appreciated capital assets

When you leave property to your heirs, theygenerally receive an initial income tax basis inthe property equal to the property's fair marketvalue (FMV) on the date of your death. This isoften referred to as a "stepped-up basis,"because basis is typically stepped up to FMV.However, basis can also be "stepped down" toFMV.

If your heirs sell the property with a stepped-up

(or a stepped-down) basis immediately afteryour death for FMV, there should be no capitalgain (or loss) to recognize since the sales pricewill equal the income tax basis. If they sell theproperty later for more than FMV, anyappreciation after your death will generally betaxed at favorable long-term capital gain taxrates. If the appreciated assets are stocks,qualified dividends received by your heirs willalso be taxed at favorable long-term capital

gain tax rates.

Note:If your heirs receive property from youthat has depreciated in value, they will receivea basis stepped down to FMV and will not be

able to claim any loss with respect to thedepreciation before your death. You may wantto consider selling depreciated property whileyou are alive so that you can claim the loss.

Not as favorable tax treatment for heirs

Tax-deferred retirement accounts

Assets in a tax-deferred retirement account(including a traditional IRA or 401(k) plan) willaccumulate income tax deferred within theaccount. However, distributions from theaccount will be subject to income tax atordinary income tax rates when distributed toyour heirs (if there were nondeductiblecontributions made to the account, the

nondeductible contributions can be receivedincome tax free). An heir will generally berequired to take distributions from thetax-deferred retirement account over his or herremaining life expectancy. (Of course, yourbeneficiaries can always withdraw more thanthe required minimum amounts.) If your spouseis the beneficiary of the account, the rules maybe more favorable. So your heirs will be able todefer taxation of the retirement account untildistribution, but distributions will generally befully subject to income tax at ordinary incometax rates.

Note:Your heirs do not receive a stepped-up(or stepped-down) basis in your retirement

accounts at your death.Even though distributions are taxable, yourheirs will nevertheless generally appreciatereceiving tax-deferred retirement accounts fromyou. After all, they do get to keep the amountsremaining after taxes are paid.

Toxic or underwater assets

Your heirs might not appreciate receivingproperty that is subject to a mortgage, lien, orother liability that exceeds the value of theproperty. In fact, an heir receiving such propertymay want to consider disclaiming the property.

Always nice to receive

Life insurance and cashLife insurance proceeds received by your heirswill generally be received income tax free. Yourheirs can generally invest life insuranceproceeds and cash they receive in any way thatthey wish. When doing so, yours heirs canfactor in how the property will be taxed to themin the future.

An inheritance is generallyworth only what your heirsget to keep after taxes arepaid. Here we have focusedprimarily on federal incometaxes. Depending on yourcircumstances, you maywish to also considerfederal estate tax and stateincome, estate, andinheritance taxes.

Note: It is generallyrecommended that youdesignate IRA and otherretirement planbeneficiaries, their shares,and any backupbeneficiaries on the planbeneficiary form. This willhelp assure that retirementplan benefits pass as youwish at your death and thata beneficiary will be able tostretch distributions over

his or her remaining lifeexpectancy.

Page 3 of 4, see disclaimer on final page


4/4

Income SolutionsWealth ManangementLance A. Browning, RICPSr. Vice President/FoundingPartner3200 Troup Hwy, Suite 150Tyler, TX 75701903-787-8916lance@incomesolutionstx.comwww.lancebrowning.com

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

The opinions voiced in this materialare for general information only andare not intended to provide specificadvice or recommendations for anyindividual. To determine whichinvestment(s) may be appropriate for

you, consult your financial advisorprior to investing. All performancereferenced is historical and is noguarantee of future results. Allindices are unmanaged and cannotbe invested into directly.

The information provided is notintended to be a substitute forspecific individualized tax planning orlegal advice. We suggest that youconsult with a qualified tax or legaladvisor.

LPL Financial Representatives offeraccess to Trust Services through ThePrivate Trust Company N.A., anaffiliate of LPL Financial.

Lance A. Browning is a RegisteredRepresentative with and Securitiesand Advisory Services offeredthrough LPL Financial, a RegisteredInvestment Advisor. MemberFINRA/SIPC.

I'm looking to buy a home. What are some commonmortgage mistakes to avoid?Navigating the complex worldof mortgages can be difficult.As a result, it's easy to makemistakes when applying for a

mortgage loan.

Here are some common mortgage mistakesyou should try to avoid:

Taking on a mortgage that is too big for youto handle. The mortgage you are qualified orpreapproved for isn't necessarily how muchyou can afford. Be sure to examine yourbudget and lifestyle to make sure that yourmortgage payment--including any extras,such as mortgage insurance--is within yourmeans.

Neglecting to read the fine print. Before you

sign any paperwork, make sure that you fullyunderstand the terms of your mortgage loanand the costs associated with it. For example,are you are applying for an adjustable-ratemortgage? If so, it's important to be aware ofhow and when the interest rate for the loanwill adjust.

Overlooking your credit. A positive credithistory may not only make it easier to obtain

a mortgage loan, but potentially could alsoresult in a lender offering you a lower interestrate. Be sure to review your credit report andcheck it for inaccuracies. You may have totake the necessary steps to improve yourcredit history, such as paying your monthlybills on time and limiting credit inquiries onyour credit report (which are made every timeyou apply for new credit).

Putting down too little. While it is possible toobtain a mortgage with a minimal downpayment, a larger down payment may helpyou get more attractive mortgage terms. Inaddition to requiring private mortgageinsurance, lenders generally offer lower loanlimits and higher interest rates to borrowerswho have a down payment of less than 20%of a home's purchase price.

Forgetting to shop around. Be sure to shoparound among various lenders and comparethe types of loans offered, along with thecosts and rates associated with those loans.Consider each lender's customer servicereputation as well.

What factors could negatively impact my credit report?Having a good credit report isimportant when it comes topersonal finance, because

most lenders use creditreports to evaluate thecreditworthiness of a potential borrower.Borrowers with good credit are presumed to bemore creditworthy and may find it easier toobtain a loan, often at a lower interest rate.

A number of factors could negatively impactyour credit report, including:

A history of late payments. Your credit reportprovides information to lenders regardingyour payment history over the previous 12 to24 months. For the most part, a lender mayassume that you can be trusted to maketimely monthly debt payments in the future ifyou have done so in the past. Consequently,if you have a history of late payments and/orunpaid debts, a lender may consider you tobe a high credit risk and turn you down for aloan.

Too many credit inquiries. Each time youapply for credit, the lender will request a copyof your credit history. The lender's requestthen appears as an inquiry on your creditreport. Too many inquiries in a short amount

of time could be viewed negatively by apotential lender, since it may indicate that theborrower has a history of being turned down

for loans or has access to too much credit. Not enough good credit. You may have good

credit, but not enough of it. As a result, youmay need to build up more of your credithistory before a lender deems you worthy totake on any additional debt.

Uncorrected errors on your report.Uncorrected errors on a credit report couldmake it difficult for a lender to accuratelyevaluate creditworthiness, and could result ina loan denial. If you have errors on yourcredit report, it's important to take steps tocorrect your report, even if it doesn't containderogatory information.

Finally, if you are ever turned down for a loan,there is a way to find out the reason behind it.Under federal law, you are entitled to a freecopy of your credit report as long as yourequest it within 60 days of receiving notice of acompany's adverse action against you. Formore information, visit theFederal Trade Commission's website.

Page 4 of 4
http://www.consumer.ftc.gov/

october 2014 news

Documents