June 2, 2009
Vol 2, Issue 6
Jean Keener
Jean Keener
Good morning.  I hope this newsletter finds you well!   
We  continue to have good news to report from the stock market.  The S&P 500 is now up 39% from its March low and is actually up 4% year to date.  We've just finished the S&P's best three-month performance since 1938, and the Dow's 20% gain since the end of February is its best three-month stretch since the market peak in October 2007. 
This newsletter comes out during the first week or two of every month.  If you'd like to get more frequent financial updates, I blog on various financial topics and you can subscribe to receive those via RSS feed at www.KeenerFinancial.com if desired.  The link is in the upper right corner of the home page right below the search field.
In this newsletter, we have information on the new credit card law provisions, energy efficient tax credits, how to boost your social security, and estate planning for a second marriage.  As always, feel free to e-mail me at jean@keenerfinancial.com with requests for newsletter topics you'd like to see covered.  Thank you, and Live Well.
In This Issue
Credit Card Law Provisions
Energy Efficient Tax Credits
Boosting Social Security Benefits
Estate Planning for Second Marriage
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New Credit Card Law Provisions
Time is an issueOn May 22, 2009, President Obama signed the Credit Card Accountability Responsibility and Disclosure Act of 2009 (the Credit CARD Act of 2009).
I've heard a lot of talk about how these changes might make it more difficult to get credit and could result in higher fees in general and annual fees in particular for people who are using credit responsibly right now.  It's possible, but I tend to think that these issues were more a result of lobbying by the credit card companies than anything that will come to fruition.  There will still be competition for credit card usage, and providers will need to make their cards attractive - especially to those that are the best credit risk.  So while it may be harder to find cards with no annual fees, my guess is that a year from now there will still be options available to those with a solid credit history.  We'll have to wait and see, and in the meantime enjoy the increased communication and more reasonable policies from the credit card companies.
Amending the Truth in Lending Act, the Credit CARD Act of 2009 requires a creditor on an open end consumer credit plan (credit card) to notify a consumer in writing of any change in the annual percentage rate (APR) on the account at least 45 days prior to the change. The notification shall also inform the consumer of the right to cancel the account before the effective date of the rate increase. If the consumer cancels the account, this action shall not constitute a default on the account, and shall not trigger an obligation to repay the account in full.
Creditors are further prohibited from increasing the annual percentage rate (APR) applicable to an existing balance on an open end consumer credit card account unless specific conditions apply. The APR may be increased only if: (1) the index on which the rate is based changes, (2) it is a promotional rate that has expired, (3) a consumer fails to comply with a hardship workout plan, or (4) the account falls 60 days past due.
What's more, if a rate increase is due to the consumer falling 60 days past due on the account, the creditor must inform the consumer that the rate increase will be terminated (and the rate restored to what it was before the increase) once the creditor receives the minimum payments due in a timely fashion for six months.
For the rest of the major provisions, go to www.KeenerFinancial.com.
Energy Efficiency Tax Credits
To encourage energy savings, the American Recovery and Reinvestment Act of 2009 expanded the tax credits related to energy-efficient home improvements.
For 2009 and 2010, you may be able to claim a tax credit equal to 30% of the cost of energy-efficient property that you install in your principal residence. Qualified products can include new windows, doors (exterior and storm), insulation, roofing, HVAC systems, nonsolar water heaters, and biomass stoves (e.g., those that use plant-derived fuels, including wood and wood pellets) for your existing principal residence. (Note that installation costs are covered for HVAC, biomass stoves, and nonsolar water heaters, but not for the other products listed here.) A total combined credit cap of $1,500 applies to all 2009 and 2010 improvements.
For property placed in service in 2009 through 2016, you may be able to claim a separate tax credit for 30% of the cost of buying and installing qualified geothermal heat pumps, solar panels, solar water heaters (pool or hot tub heaters do not qualify), small wind energy systems, and fuel cell power systems (limited to $500 per 0.5kW of power capacity); generally, no cap applies to these improvements. This tax credit is available for products installed in both new and existing homes. With the exception of fuel cell systems (which, to qualify, must be used in a home that is or will be your principal residence), these products may be used in a second or vacation home as well.
Only products that meet very high energy-efficiency standards qualify, so you'll need to carefully check the manufacturer's certification. It will tell you whether or not the product qualifies for a tax credit. Keep a copy of the statement, and receipts, for your tax records. A tax professional can give you more information about these tax credits. You can also visit the Energy Star website, www.energystar.gov, to find out more about energy-efficiency standards and products.
Social Security: Late Retirement Boosts Benefits
Active SeniorsIf your retirement savings have taken a beating, you may be wondering how you will make up a monthly retirement shortfall. One option might be to delay receiving Social Security benefits.
Although you can receive retirement benefits as early as age 62, the longer you put off retirement, the larger your monthly benefit check will be.

When can you retire?

How much you'll receive from Social Security every month depends mainly on how old you are when you begin receiving benefits and on your lifetime earnings. Your full retirement age is 65 to 67, depending on the year you were born. The Social Security Administration calculates your base benefit--the amount you'll receive at full retirement age--using a formula that takes into account your 35 highest earnings years.  Incidentally, there are a lot of myths around this calculation, and I recently wrote about one of them on my blog

If you begin receiving benefits earlier, you'll receive less than you would at full retirement age. If you begin receiving Social Security benefits at age 62, each monthly check you receive will be 25% to 30% less than it would be if you waited until full retirement age.  If you begin receiving benefits later than full retirement age, you'll receive more than you would receive at full retirement age, because you'll earn delayed retirement credits for each month you postpone retirement up until age 70. Delayed retirement credits will increase the amount you receive by 7% annually if you were born in 1939 or 1940, 7.5% if you were born in 1941 or 1942, or 8% if you were born in 1943 or later.
The chart at this link illustrates how the age you begin receiving benefits can greatly affect the amount of income you receive from Social Security every month. The chart assumes a full retirement age of 66, and a base benefit at full retirement age of $2,000 (which is nearly the maximum Social Security benefit an individual can receive).  Go to www.KeenerFinancial.com to view the illustration and get additional information.
Estate Planning for  Second Marriage
Second MarriageFor many individuals, remarriage later in life can create some unique estate planning issues.

If you're anything like the typical person contemplating a second (or third) marriage, you're older, you have children, you've accumulated property, and you've been enjoying a standard of living you would like to maintain. Entering into a new marriage can raise many, perhaps conflicting, concerns such as:
  • How can you protect assets you already own?
  • How can you provide for children from a previous marriage?
  • How do you share assets acquired or inherited after the marriage equally or fairly?
  • How do you ensure your prospective spouse's future financial security?
  • How can you avoid family disharmony?
How should you address these concerns?
Put your financial cards on the table.  Money is a major cause of stress in any marriage, but it can be especially so in a second one. You and your future spouse should discuss and agree on all important financial issues, and formulate plans that, hopefully, everyone can live with. Full disclosure is important!  Some areas you should consider:
Protect your assets with a prenuptial or postnuptial agreement
You're probably well aware that life is not a stroll down the primrose path, so while the suggestion of a prenup or postnup may not fan the flames of romance, you should know that this contract is important if you're bringing assets into the marriage.  I personally believe that just the process of discussing the issues with each other and drafting an agreement with an attorney can help strengthen the communication about finances, and it absolutely does not mean that you're ever planning on getting divorced or are less committed to the relationship.  There may also be additional legal reasons to consider a prenup depending on your state's laws.
Revise your will and other estate planning documents

Remarriage does not revoke a will.  It is vital that you draft a new will in light of your new circumstances. While you're at it, review and update other estate planning documents, such as your medical directive, medical power of attorney, power of attorney for asset management, trusts, and beneficiary designations (for life insurance and retirement plans, for example).

Providing for your children from a previous marriage

A big concern in many second marriages is providing for the new spouse without disenfranchising children from a prior marriage. Having your assets pass into a "QTIP" trust can be part of the solution. With a QTIP, all trust income is used to support the surviving spouse while the principal is preserved for the children. And there's a bonus: assets passing to a valid QTIP qualify for the marital deduction, helping to minimize potential estate taxes at your death.

Dealing with wealth disparity

In second marriages, it's not uncommon for one spouse to be wealthier than the other. If estate taxes are a concern, equalizing your estates to take advantage of both spouses' exemptions ($3.5 million in 2009, subject to change thereafter) may be in order. Without equalization, you may lose valuable tax savings if the less wealthy spouse dies first.

Apportioning estate taxes

If both spouses have children from a previous marriage, you may want to plan for the payment of estate taxes in such a way that each child will bear the burden equally.

Each couple entering into a second marriage has unique concerns and goals. It's important to deal with your issues squarely, and create a plan that will optimize dispositions, minimize taxes, and avoid unintended results, family disharmony, or even litigation.
I hope you found this newsletter informative.  KFP offers a free, no-obligation initial consultation to start the financial planning process.  To learn more or schedule a time, call 817-993-0401 or e-mail jean@keenerfinancial.com.
Jean Keener, CRPC, CFDP
Keener Financial Planning

Keener Financial Planning provides hourly, as-needed financial planning and advice on a commission-free basis to people at all financial levels.