The Fiscal Cliff......Maybe?

Based upon what is being leaked to the press tonight, there may be a deal that curtails many of the potential tax increases. This could prove positive for 2013.  That said, there is little, if any good news on addressing the longer term problems of the U.S. economy.

Five Big Retirement Mistakes

1. Not paying for independent financial advice: There is no such thing as a free lunch.
2. Investing in something you do not understand.
3. Supporting adult children: When you are unsure if you do, or will have enough assets.
4. Lowballing elder-care costs: Helping out aging parents can be costly.
5. Underestimating how much you will need in retirement.

Here are three little-known facts about 529 plans

1. Accelerated gifting. A 529 plan is the only investment vehicle allowing five years of tax-free gifts in a single year — up to $130,000 per beneficiary.

2. Estate tax benefits. All 529 plan gifts and investment earnings are excluded from federal estate taxes due to rise from 35% to 55% next year if the Bush tax cuts expire. 

3. Legacy planning. Multiple family members and friends can give to the same 529 plan account to help create larger college funds and lasting legacies.

Last Minute Tax Commentary

For many, the idea of taking capital gains in 2012 to take advantage of lower tax rates vs. what is coming in 2013 is a winner.  When you combine the proposed capital gain rate change of 5.0%, with the 3.8% Medicare surtax, this represents an increase of $8,800 per $100,000 of gain for taxpayers with taxable incomes exceeding $250,000 (married filing joint) and $200,000 (single).  

That is a 58.7% increase in capital gain tax

You could consider selling a major stock position and paying the tax and then buying the stock back if you believe it is rising or it pays a great dividend.  Also, it may be a time to recognize diversification if you have been holding off not wanting to pay taxes. Paying taxes on gains is likely not going to get any cheaper than in 2012 for many years and you have about 13 days to decide!

At my company, we have been diligently working with clients with proactive tax planning all of 2012.

Note: In an effort to increase the number of blogs I write, please excuse any typos!