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Life Planning Partners, Inc.


Carolyn's Blog:

"The Quest for Simplicity" 



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Thank goodness the election is over! Hopefully, this country will heal and Congress will have heard our calls to work together to solve problems. And we definitely have some problems coming down the pike.


The first problem our leaders will address is the "fiscal cliff" -this is payback for all the years the can was kicked down the road. The fiscal cliff is a combination of items that occur all at once at the beginning of the year:


1.) The expiration of the Bush tax cuts. These are the highlights that matter the most.

  • Tax brackets will change.
    • Those in the 25% tax bracket will move to a 28% tax bracket.
    • The 28% tax bracket will move to 31%.
    • The 33% bracket will move to 36%.
    • The 35% bracket will move to 39.6%.
  • Personal exemptions will phase out for those making more than $122,500.
  • Long term capital gains will increase from 15% to 20%.
  • The estate tax exemption will return to $1 million.
  • The tax rate on qualified dividends could rise from a top rate of 15% to 43.4%.

2.) The taxes in the health care law will take effect.

  • 0.9% additional tax on earned income above $200,000 for individuals and $250,000 for couples.
  • 3.8% tax on unearned income above $200,000 for individuals and $250,000 for couples - dividends, capital gains, interest income, and annuity income are some examples.

3.) The 2% temporary payroll tax cuts expire.


4.) The government is required to do an immediate and sharp reduction in spending of $1.2 trillion over the next ten years.


Many economists agree that allowing all of these events to happen could result in another recession. Congress and the President must find a balance that reduces the deficit yet does not slow the economy too much. Can it be done?


What are we doing to prepare you for potential tax changes? Most of our clients will be affected by the outcome in some form or fashion. Our job has always been to position your financial life in the best way possible to legally and fairly take advantage of the tax breaks available to you. Here is what we will do in the next couple of months:


1.) We have almost completed everyone's "regular planning" for the year. This frees up our calendar to fully focus on tax planning in the month of December.


2.) If our leaders make an early decision (which we would love but don't expect) - we will work through each client's situation to determine:

  • Should they be aggressive in taking capital gains this year?
  • Should they accelerate income or defer deductions and charitable contributions?
  • Should they take larger retirement plan distributions this year?

3.) As the month progresses, and if we still don't have answers from Congress, we will start implementing actions based on our "best guess" - agreed to by us and the client. We wish this would be an exact science, but we can only do the best we can with the information available.


December will be an exciting month. For us to get through this successfully, Life Planning Partners plans the following:


1.) To be fresh and ready, Carolyn is taking an official vacation starting November 15th through the end of Thanksgiving weekend to celebrate her husband's 50th birthday and their anniversary. During that time, please email Tim, Krissy, or Victoria if you have any urgent items that need to be addressed. Carolyn has warned Trib she will be in seclusion most of December after they get back from vacation.


2.) We are finishing up the few regular planning meetings we have left by the first week of December.


3.) We will begin combing everyone's tax return and contact you with our thoughts and actions we think need to be taken.


4.) We ask that if you have any regular planning questions that are not urgent, call Krissy and let her know you would like to schedule an appointment, realizing that we will put these appointments on the calendar after we are done with the tax planning for the year. Of course, if you have an immediate issue, we are always available.


Other items coming up:


1.) For 2013, we plan to shift how we accomplish your regular planning. Previously we tackled one item per quarter - insurance, investments, estate planning, cash flow, tax planning, and projection planning. Going forward, we are going to break the financial planning into two "blocks" - the first half of the year will focus on insurance and estate planning, and the second half will focus on projection planning, cash flow planning, and tax planning. Of course, we will address any need you have at any time, but the new schedule is geared toward smoothing out work flow through the year.


2.) Tim will work with you on the investment piece of your planning throughout the year. In addition to reviewing your yearly investment policy statement, he will provide more in depth investment education and ongoing reminders of why we do what we do. He will contact you and schedule times and methods of meeting that work best for you. We realize that not everyone will be interested in going more "in depth" and you can discuss what your needs are in this regard with Tim when he reaches out to you.


3.) As a reminder, we revisit our fees at the end of every "even" calendar year, and 2012 is one of those. We will be sending out new client agreements early in December. For our fairly new clients, you will not see any changes. For longer term clients, if there is a significant change in your fee, we will call you in advance and explain why. Our fees are based on client needs and complexity. Some examples of items that increase complexity include shifts in family situation, significant number of accounts and assets we are managing, and how much "worrying" we have to do with you and for you - it all takes time. If you've had any significant events in the past two years, or we anticipate complications in the near future, expect to hear from us.


Thank you all for being such great clients. We are so grateful for you and appreciate your support while we grow and change with the times. Please share your thoughts, suggestions and ways we can improve. We love what we do and look forward to growing old with all of you.


Warm regards,


Carolyn, Tim, Victoria, and Krissy