Yet, the market moves higher. The S&P return for 2012 was 13.41% but we are so much more than simple returns on a portfolio. For the number junkies, the S&P 500 finished at a record high of 1569.19, just above the previous high of 1565.15 all the way back in October 2007. I actually see new clients come in and they are still holding the funds they held back then, just waiting to break even. So, to start 2013 off with a bang; the S&P 500 increased 10.1%. Is this sustainable? I don’t think so. Will a correction be coming? I believe a correction is due and we will treat that as a buying opportunity.

If you greatly desire something, have the guts to stake everything on obtaining it.   Brendan Francis                                                                                                                                                  

What makes up your FICO score?

A credit score is a number used to predict the likelihood of someone not paying back loans. The score is determined by taking into account 35% payment history, 30% amount owed, 15% length of credit history, 10% new credit, and 10% types of credit. Payment history is the most important category. The next most important variable to watch is the amount owed. Having debt doesn’t mean you are a high-risk borrower. Keep in mind that if a high percentage of your available credit has been used, it may suggest that you take on more debt than you can probably handle.    Did you see our recent blog about credit cards and scores? Be sure to follow our blog for news that we think is relevant or timely. Make sure you are signed up.

Notes from Carol:

Sandy and I were both honored to be named as one of 2013 Orange Coast Five Star Wealth Managers. This is Sandy’s 5th time and my 2nd time receiving the award. This was published in the April Orange Coast magazine.


Living trusts and the $5,250,000 estate tax exemption

In 2013, Congress made the estate tax exemption of $5,000,000 permanent and adjusted it for inflation making the exemption $5,250,000 in 2013 for singles and $10,500,000 for married couples.   This was good news for many of our clients. I recommend that married couples review their living trust carefully especially if it was prepared when the estate tax exemption was $750,000 (early 2000’s). Many trusts have a clause that requires that the trust be split into 2 trusts at the death of the first spouse. This was put into the trust to avoid estate tax by sheltering the amount over the estate tax exemption into a separate trust. We have had quite a few clients being required to split the trust even though their estate is less than $10,500,000. This creates an added expense because you have to file a separate tax return for the new trust and the survivor spouse is not allowed to touch the principal of the new trust. I recommend that you amend the trust to allow the survivor spouse choose to split the trust or not. We can help review your trust to see if this applies to you, but you would still need an attorney to prepare the amendment.

Is it still a good idea to have a trust? Yes – avoiding estate tax was just one reason. The biggest advantage is to let your assets pass to your heirs without having to go through probate. A trust also allows for your assets to be managed the way you designate in case you become disabled or incapacitated or have minor or special needs children that need providing for.

Notes from Erin:

Divorce Planning

Unfortunately, with the improvements in the economy and stock market, divorces are on the rise as couples who did not think it was economic feasible a few years ago are deciding to move on now. I have witnessed this first hand as I have had more clients coming in for help either during the divorce process and or planning for the after on a single income. From my experience, I like to share a couple of the many nuances to be aware of in case you or a loved one experiences this very financial significant event.

Splitting things 50/50 may be the easier route but it comes with hidden costs. For example, couples with defined benefit pensions might elect to each take half of each other’s pension out of ease; however, most plans have restrictions for the non-participant spouse such as when payments begin, extra fees to insure the payments continue if the main participant dies, and no death benefit for the non-participants beneficiaries which could be an issue if remarriage happens down the line.

Think twice before getting your heart set on keeping the family home. Deferred maintenance, tax basis, and capital gains all need to be considered. A big mistake I often see in divorce divisions is basing the home’s value solely on the real estate appraisal which never shows the whole picture. Most appraisals stick pretty close to valuing a house based on neighborhood comps price per foot and underestimate the true costs for upgrades or deferred maintenance. Anyone that has done a home remodel project knows just how costly it can be. Additionally, appraisals don’t consider tax. Will the person keeping the home enjoy lower property taxes? What will be the capital gains owed on the house if sold as a single filer? Would it make more sense to sell now and take advantage of the capital gain exclusion as a married couple?

I could really go and on about all the financial caveats to consider in a divorce division. But each person situation is unique and emotional aspects also must be a part of the equation. We are here to help if you or a loved needs expertise in divorce planning.