August 12, 2013Vol 6, Issue 3 
DFW Financial Planning

Jean Keener, CFPGood morning, and happy August.


In the investment markets, large US companies have held onto their gains for the year in spite of some ups and downs and are now up more than 20% year-to-date.  International developed-market stocks are up more than 12%.  Emerging markets stocks have had a rough several-month period and are now down approximately 8% year-to-date.  And the broad US bond market is down just over 2% for the year as we've seen some interest rates start to increase.  We have more information on how the bond market changes may affect your portfolio later in the newsletter.


Voting for the Keller Citizen Best of the Best is going on now through this Sunday the 18th.  I've been honored to receive the "Best Financial Planner" recognition for the past four years.  If you have a chance to vote this year, I would greatly appreciate your support.  The link is on the right side of the page at or click here to go directly to the survey.  Thank you!


In this edition of the newsletter, we have information on how the the recent supreme court rulings affect financial planning for same-sex couples, how to correct an error on your credit report, the schedule for this fall's retirement workshops at the Keller Library, and more. 


Please let me know if you have suggestions for newsletter articles or questions on your financial planning world, and enjoy these last few weeks of summer.  Thanks for reading, and Live Well!

In This Issue
Financial Planning Effect of Supreme Court Rulings on Same Sex Marriage
Bonds in Your Portfolio
Fixing an Error in Your Credit Report
Home Office Deduction Rule Changes
Payable on Death Designation
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Effect of Supreme Court Rulings on Same Sex Marriage

Supreme Court Same Sex Marriage Ruling On June 26, 2013, the U.S. Supreme Court announced its rulings on two landmark cases related to same-sex marriage. The 5-4 decisions bolster the federal benefits available to same-sex married couples and clear the way for same-sex marriages in California.


In the first case, the court struck down Section 3 of the Defense of Marriage Act of 1996 (DOMA), which defined marriage as the union of a man and a woman. This case involved a claim by Edith Windsor, who sought a refund from the IRS of the $363,000 in estate taxes she paid because the federal government did not recognize her marriage to her long-time partner and spouse, Thea Spyer. Her suit contended that DOMA violated the principles of equal protection.


In their written opinion, the court's majority agreed, stating that DOMA "violates basic due process and equal protection principles applicable to the Federal Government ... Its unusual deviation from the tradition of recognizing and accepting state definitions of marriage operates to deprive same-sex couples of the benefits and responsibilities that come with federal recognition of their marriages."


The second case, Hollingsworth v. Perry, concerned California's Proposition 8, which banned same-sex marriage in that state. The justices ruled that the petitioners did not have standing to defend Proposition 8 in federal court. This left in place a lower federal court decision that threw out the ban on gay marriage in California, effectively legalizing same-sex marriage in that state. 

What effect do the rulings have for Texans? 


In Texas and other states where same sex marriage is not legal, the ruling doesn't change much today from a financial planning perspective.  Federal agencies have numerous definitions of how marriage is defined.  Two of the most significant agencies from a financial planning perspective -- social security and the IRS -- base their definition on your state of residence.  So even if you were legally married in another state or country that permits gay marriage, if you are a resident of Texas, you are still not considered legally married and are not eligible to file your taxes as a married couple or receive spousal and survivor benefits through social security.


There is one significant change that does provide an immediate opportunity for federal employees or retirees.  The Office of Personnel Management has announced that, regardless of the employee or retiree's state of residence, legally married same-sex partners will be eligible to receive federal benefits.  You have until August 26 to enroll your partner for insurance benefits, or you will need to wait until the open enrollment period.  This window of time also allows streamlined underwriting for long term care insurance which is important for those considering purchasing insurance but worried about their ability to qualify health-wise.  Retirees also have two years from the date of the ruling to add a survivor benefit for their same-sex partner to their retirement annuity which all retirees in same-sex marriages should consider in light of their overall financial plan.  To see the full memo, click here.


In states that have legalized same-sex marriage


Because the Supreme Court justices struck down Section 3 of DOMA, couples in the 13 states (including California) and the District of Columbia that have legalized same-sex marriage will be allowed to receive federal benefits and protections that were previously available only to opposite-sex married couples.


Striking down Section 3 of DOMA means that the legal definitions of "marriage" and "spouse" under federal law now include legal unions between same-sex partners as well as opposite-sex partners. The effect of this change is enormous, because more than 1,000 federal laws reference marriage or spousal status.


The following list details some of the federal benefits or protections that may now be available to legally married same-sex couples:

  • Social Security survivor's and spousal benefits
  • Certain veterans benefits, such as pensions and survivor's benefits
  • Lifetime gift tax-free property transfers to spouses
  • Estate tax relief for surviving spouses
  • Military spousal benefits
  • Family medical leave rights
  • Spousal IRA contributions
  • Spousal visas for foreign national spouses
  • Joint filing of federal income taxes
  • Private pension benefit options (e.g., survivor annuities)
  • Employer health-care benefits may be received on a pretax basis
Stay tuned


Many questions remain. It's unclear if and how the right to federal benefits will be protected when a couple marries in a state where same-sex marriage is legal, then moves to a state where it isn't. It's also unknown if and when federal policies will be updated to eliminate the disparity that now exists at the Federal level between same-sex couples living in states that recognize gay marriage vs. states like Texas that don't.  We will be closely monitoring this issue as changes occur and encourage you to call us to discuss financial planning questions for your particular situation.


Parts of this article were adapted with permission from Broadridge Investor Communications Solutions Inc.  

Why Hold Bonds

Why Hold Bonds If you hold bonds in your investment portfolio, you've likely noticed that they experienced negative returns in second quarter this year. 


Bond prices go up when rates go down, and rates have been doing just that since the Reagan Administration.  Back in 1982, 10-year Treasuries were paying 15%, and after 30 years of steady decline, they dropped below 2% last year and trended down slightly for the first part of 2013.  This remarkable three-decade drop in interest rates has been described as the ultimate bull market in bonds, perhaps the most rewarding period for bond investors in all of investment history.


In second quarter, we experienced a rise in interest rates as investors began to anticipate the end of fed's bond-buying program which has kept interest rates artificially low.  Bond prices, as we would expect, declined when rates rose.  At the same time, U.S. stocks are up, in aggregate, substantially this year.  So the obvious question is:  


Why should we have a portion of each investment portfolio in bonds?


The purpose of bonds in an investment portfolio is not to generate high returns--the past 30 years notwithstanding.  Bonds protect against the worst kind of market risk--the times when stocks suddenly, unexpectedly plunge.  The last time stocks took a nosedive, in 2008, U.S. equity markets seemed to be sailing toward another year of gains and bond prices were experiencing 30 year lows.  Why own bonds in an environment like that?  Yet by the end of the year, a mixed portfolio of bonds had achieved a 5.24% positive return, while stocks were losing 37%--meaning bonds outperformed stocks by more than 42 percentage points.  In 2000, 2001 and 2002 when stocks dropped 9.11%, 11.89% and 22.10% respectively, bonds rallied to give investors returns of 11.63%, 8.43% and 10.26%.  Over time, investors holding bonds enjoy a smoother market ride, and experience fewer losses during market downturns.


More importantly, having bonds (and cash) in your investment portfolio gives you options if and when stocks fall.  If you need income, you can liquidate the bonds, rather than having to sell stocks at a loss.  If the prices of stocks drop to the point where stocks become a screaming buy, you have some money set aside to rebalance and buy at bargain prices to make up some of the losses.  And having a diversified portfolio including both stocks and bonds helps you control the level of volatility to which your portfolio is exposed. 


As interest rates reverse themselves, and yields move up, you will experience losses in the bond portion of your portfolio.  There are ways for us to manage this risk by ensuring that all bonds are short- and intermediate-term and maintaining diversification across multiple sectors of the bond market.  But as we focus on meeting your financial goals, bonds are still your best protection against the volatility of stock market returns.  We don't know what the markets are going to do next and when or how quickly interest rates will rise, so the most prudent course is to keep protecting you against the possibility that another 2002 or 2008 is lurking somewhere around the corner.


For more perspective on this topic, please visit our website to see an expanded version of this article.  

Fixing an Error on Your Credit Report

Fixing your Credit Report Good credit is an important part of your overall financial well-being. It can impact everything from the interest rates you'll pay to being a prerequisite for employment. As a result, you'll want to try to fix any errors on your credit report and have them removed as soon as possible.   


If you haven't reviewed your credit report lately, you can get one free credit report from each of the three agencies once a year at


If you discover an error, your first step should be to contact the credit reporting agency in writing to indicate that you are disputing the information contained on your credit report. The credit reporting agency usually has 30 days to complete an investigation of the disputed information. Once the credit reporting agency investigation is complete, they must provide you with written results of their investigation.


If, during its investigation, the credit reporting agency confirms that your credit report does contain errors, the information on your report either must be removed or corrected.


If the investigation does not resolve the issue, you still have a couple of options. First, you can try to mitigate the disputed information by adding a 100-word consumer statement to your credit bureau file. Even though consumer statements are often dismissed or ignored by potential creditors, it can at least provide you with a chance to tell your side of the story. You can also try to resolve the issue with the creditor that submitted the inaccurate information in the first place. The creditor will be obligated to investigate the disputed issue and notify you of its findings.


If you believe that the error is the result of identity theft, you may need to take additional steps to try and resolve the issue, such as placing a fraud alert or security freeze on your credit report. You can visit the Federal Trade Commission (FTC) website at for more information on the various identity theft protections that might be available to you.


Finally, due to the amount of paperwork and steps involved, fixing a credit report error can often be a time-consuming and emotionally draining process. If at any time you believe that your credit reporting rights are being violated, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) at 


Some material adapted with permission of Broadridge Investor Communication Solutions Inc.   

 Home Office Deduction Rule Changes

Home Office Deduction Changes If you run a business out of your home, it's important to understand the associated federal income tax deductions that you might be entitled to. That's especially true this year, with new rules that make it easier than ever for some to claim a deduction. 


What Counts as a Home Office? 


A home office is generally a room in your home, a portion of a room in your home, or a separate building next to your home (such as a converted garage or barn) that you use to conduct business activities. In order to deduct associated expenses, though, certain requirements apply.


Basic Requirements 


Your home office must be used regularly and exclusively as your principal place of business, or as a place where you meet or deal with clients, patients, or customers, in the normal course of your business. If you have a business outside your home, but conduct substantial administrative and management tasks for your business at home (e.g., billing clients, keeping books and records) you may qualify, provided that you have no other fixed location where you could conduct these activities.


The portion of your home used for business purposes (i.e., your home office) must be used exclusively for business purposes. You will not qualify for a deduction if the portion of your home is also used for personal purposes. There are two exceptions, however, relating to the storage of inventory and product samples, and the use of part of your home as a day-care facility.


If your home office is in a separate unattached structure next to your home, like a shed or garage, the office doesn't have to be your principal place of business, or a place where you regularly meet with clients. However, to qualify for the deduction, you must use that office regularly and exclusively in connection with your trade or business.


Employees Can Claim the Deduction 


If you're an employee and use part of your home for business, you may qualify for the home office deduction. You'd have to meet all other requirements (i.e., your home office must be used regularly and exclusively as your principal place of business), and in addition, your home office must be for the convenience of your employer. You also can't have an arrangement in which you're renting that portion of your home to your employer. 


Regular Method of Determining Deduction 


Under this method, you determine your actual expenses relating to your home office. Deductible expenses can include both direct expenses and indirect expenses. Direct expenses are costs that apply only to your home office, like the cost of a second telephone line used exclusively for your business.


Indirect expenses are costs that benefit your entire home. Only the business portion of your indirect expenses is deductible as part of the home office deduction (even if you don't claim a home office deduction, some of these indirect expenses may be deductible as itemized deductions on Schedule A of Form 1040). Some examples of indirect costs include rent, deductible mortgage interest, real estate taxes, and homeowners insurance. The business percentage of your home is determined by dividing the area exclusively used for business by the total area of the home. For example, if your home is 2,000 square feet and your home office is 200 square feet, your business percentage is 10% (200 divided by 2,000). In such a case, if you rent your home, you can deduct 10% of your rent as part of your home office deduction.


New Simplified Option Available 


Starting in 2013, a new simplified option is available for calculating the home office deduction. Under this method, instead of determining and allocating actual expenses, you calculate the home office deduction by simply multiplying the square footage of the home office by $5. There's a cap of 300 square feet, so the maximum deduction available under this method is $1,500. You can't use this method if you are an employee with a home office and receive advances, allowances, or reimbursements for expenses related to the business use of your home under an expense or reimbursement allowance with your employer.


Each year, you can choose whether to use the regular or simplified method of calculating the deduction. If you use the simplified method in one year, and in a later year use the regular method, special rules will apply in calculating your allowable depreciation deduction. Additionally, if you are carrying forward an unused deduction from a prior year (because your business deduction exceeded your business income in a prior year), you will not be able to claim the deduction in any year in which you use the simplified method--you'll have to wait for the next year you use the regular method to claim the unused deduction.


Some material adapted with permission of Broadridge Investor Communication Solutions Inc.

Fall Retirement Workshop Schedule

Keller Public Library Free Financial Education Seminars We're offering the Countdown to Retirement Series again this fall at the Keller Public Library.  This is a repeat of this Spring's popular series and is designed for individuals and couples within 5 - 10 years of retirement


Part I: Creating your Retirement Plan

This session will cover how to maximize tax-efficiency in saving for retirement, assessing when it's time to retire, building a retirement budget, and making decisions on possible long term care funding needs.   Tuesday, September 24 


Part II: Maximizing your Social Security Benefit

Attendees will learn how to increase their retirement income by making smart decisions on social security benefits.  We'll cover how to decide when to file, filing strategies for couples, and how to plan for taxes on your social security benefit.  Tuesday, October 15  


Part III: Investing in Retirement

Attendees will learn how to adjust their portfolio to shift from accumulation to distribution and steps they can take to minimize the effect of a market downturn on their retirement plans.  We'll also cover the basics of how to build a low-cost retirement portfolio.  Tuesday, November 19  



Cost: Free

Time: 6:30 pm

Location: Keller Public Library, 640 Johnson Rd

RSVP: Please RSVP to  

I hope you found this newsletter informative.  KFP offers a free, no-obligation initial consultation to start the financial planning process for new clients.  To learn more or schedule a time, call 817-993-0401 or e-mail
Jean Keener, CFP, CRPC, CFDS
Keener Financial Planning

Keener Financial Planning provides as-needed financial planning and investment services on an hourly and flat-fee basis.

All newsletter content except where otherwise credited Copyright 2013, Keener Financial Planning, LLC.