Estate Planning is important for people of all ages.  Lighthouse Financial Advisors is here to help with our clients’ Estate Planning.  If you do not have one in place, please feel free to contact us to schedule an appointment to discuss and plan for yours.

Here are some tips to help you with your Estate Planning:

Important steps when creating an Estate Plan:

• Create Healthcare Directive or Living Will –

Choose a Medical Agent – to carry out your wishes for medical care in the case you are incapacitated and cannot make decisions for yourself.

• Create a Durable Power of Attorney

Choose a Financial Agent – name this person or persons as your Power of Attorney, who can carry out your wishes and keep your finances in order if you are incapacitated.

• Draft a Will –

Choose an Estate Administrator (Executor of Will)

Make a List of Assets as well as a list of your debts

Itemize Your Inventory (Financial as well as personal properties)

Decide the Beneficiaries

Once Will is finalized, Sign, Date and Keep in a Secure Place (and let your Executor know where it is and have access to it upon your demise)

• Update Your Life Insurance
• Create a Living Trust – if you have the need for one.

**Which is better, A Will or a Trust? 

A will does not go into effect until after you die, whereas a living trust is active once it is created and funded. This means that a trust can provide protection and direct your assets if you become mentally incapacitated, something a will is unable to do.

As we head into the holiday season, we can’t help but reflect on all there is to be grateful for personally as well as here at Lighthouse Financial Advisors. Whether at home or at work, we value and appreciate the long-lasting relationships we’ve built and know how fortunate we are. In this time of reflection, it makes us realize how much gratitude, as a tool, can help with maintaining a positive mindset, keep us grateful for what we have, and to motivate us to stay on track with our goals in our everyday lives.
Gratitude is defined as “the quality of being thankful; readiness to show appreciation for and to return kindness.”
With the onslaught of Black Friday and Cyber Monday deals, advertisers aim to trigger an emotional response for something consumers are missing in their lives that only their product can solve. With a gratitude practice in place, you routinely take stock of what you have, and it has been shown that this helps to ease temptations for instant gratification. Although this year, instant gratification might not be so instant given the shipping and supply chain delays, reminding ourselves to be thankful for what we already have will help cut down on unnecessary spending and stay the course with our long-term goals.
Don’t get us wrong, we are always supportive of finding a deal or sale on an item you need or something that you’ve worked so hard to get. If that item is on sale, go for it! In that case, we are grateful you found it on sale!
“Remember, happiness doesn’t depend upon who you are or what you have, it depends on what you think. So, start each day by thinking of all the things you have to be thankful for.” — Dale Carnegie

The Chinese developer Evergrande has been in the news, the fear is they are over-leveraged and will soon miss interest payments to investors. This caused a big sell-off in the stock market on Monday and spooked some investors to the sidelines. As I write, the markets have recovered from the one-day sell-off. Investors who invested in over-leveraged products to earn a higher yield are now worried about the return of their principal ouch! The current risk-free return is close to .4% and with 2 plus % inflation the real rate return after inflation is negative -1.5% to -2% on cash, but you still have all your principal to spend yeah! We hear a lot where I can go for yield. Our recommendation has always been to build a spending plan (put those funds in the pantry savings accounts, savings bonds, A-rated bonds), own your house with a 30-year fixed mortgage (hedge against higher interest rates), and build a low-cost diversified stock portfolio (crops in the field). Most investors have done very well with this approach over the last 2 years balancing the negative interest rates with oversized equity returns. Everyone’s situation is unique, and we are constantly making changes so you can enjoy the ride. Legg Mason analyst Raymond DeVoe said it best: “More money has been lost reaching for yield than at the point of a gun.” And as our own Sean Lane likes to say, “Let’s bubble wrap the cash so you can spend your hard-earned savings.”

Biden tax plan – highlights from webinar “The Washington Update” from Andy Friedman

The immediate take away Andy thinks it won’t be 3.5 trillion but be closer to 1.2 & 1.5 trillion still a huge number. President Biden is sticking to his pledge those making less than $400,000 will not see a tax increase. The plan would take effect January 2022 and not be retroactive to 2021.

1. Tax rates – top rate moved from 37% to 39.6%

———–a. Over 5 million income 3% excise tax on the amount over

———–b. Major marriage penalty

———————————-i. $400,000 for Single

———————————-ii.$450,000 for Married (War on working couples)

2. Capital gains will move from 20% to 25% – not the 39.6% the president wanted on incomes -over $400K (COULD be retroactive to 9/13/2021)

3. Phase-out of section 199A 20% business income deduction for incomes over $400K

4. Another big hit to small businesses 3.8% Medicare surcharge on Sub Chapter S Income

5. Roth conversions and back door Roth’s

————a. For Roth conversions income must be below $400,000

————b. Eliminating back door Roth’s

6. The favorable treatment for carried interest will be pared back to require 5 year holding period for long term capital gains

7. Legislation will go after “BIG” IRAs value cannot exceed $10 Million amount over must come out & taxed right away. And they just wanted to be funny, if the IRA is over $20 million then 100% is tax immediately – WOW some tax hit in one year with the state tax close to 60%

8. Also, for IRA’s only allowed to hold SEC registered investments

9. Estate taxes

————a. Looking for a reduction in the exemption from $11.7 Million to $5 Million

————b. Step up in basis will be preserved

10. Corporate tax rate will move from 21% to 25%

11. Corporations with overseas net income will have to pay 16.5% on those earnings

12. No repeal on 1031 exchanges

13. To get votes might increase the SALT deduction from $10,000 – for high tax states CT, MA, MD, NJ, NY, CA

We are staying on top of all the changes above. We constantly monitor your unique tax situation and will make changes to stay one step ahead of Uncle Joe.

Social Security Trust Fund In The News

Social Security Trust fund is set to run dry in 2034, one year earlier than last year when it was expected to run out in 2035. We can thank the pandemic. Given the current situation in Washington, DC expect this issue to be pushed out a few years. Potential ways the solve the problem, increase the tax base on income on which Social Security is taxed (Yes, another tax increase on both employers and employees, a double whammy for self-employed) Move the age you can claim benefits from 62 to 65, full retirement age from 67 to 70 & full benefits at age 73. If your income is over a certain amount, you would receive no Social Security. Of course, this would be subject to a phase-in – NO current Democrat or Republican will touch this with a 10-foot pole. It will be a mad scramble as we get closer to 2034.

The number one way younger people can protect themselves is to take full advantage of retirement plans and save, save. If you’re a boomer & see a working millennial or Gen Z, give them a hug. Gen Alpha good luck you’re on your own!