Retirement expenses that can blow your nestegg

It's been a "challenging" couple of weeks. My parents were finishing a tour of California and ending in San Diego where I live. They were to spend 3 days near me and then head home to Florida.

The day they arrived in San Diego my Mom missed a step and fell wrong on her hip. It was broken and she required immediate total hip replacement. Not only did the logistical nightmare begin, but now the expenses are multiplying quicker than the US debt.

My parents are the type of people that believe they would never need long term care insurance. They are typical of many aging baby boomers who think things only happen to other people. Now they know.

I am diverging today from my usual capital gains post in hope that even one person may benefit from my parent's story.

Since they live in Florida, my Dad had to cancel his trip back and pay the penalty to change his flight. He was able to stay with me and have me as a temporary chauffer, but not all are that lucky.

My mom went from the hospital to acute rehab (at $1500./day) and then will have to go to assisted living until the doctor feels she is ready to fly home. She will probably need to upgrade to business or first class to be able to stand the long flight. Who knows how much post therapy she will need in the coming months.

They have good health insurance. It doesn't cover custodial care or assisted living. My parents have a pension and a paid for house, but really can't easily afford 20-30K out of savings. Their budget is tight.

The moral of the story is, stuff happens. More than you might want to admit. This is probably the first of several medical crisis with a lasting consequence.

For all my clients that have chosen to just "pay their capital gains taxes", think of how having that extra money working for them would have helped in a similar unexpected event.

Statistics say that 60% of people over 65 will need long term care. PLEASE be sure you can afford to cover your expenses if you choose not to have coverage. One mis-step can cost you your retirement savings.

Paula Straub
SaveGainsTaxaskpaula@savegainstax.com
Free report at KeepYourCapitalGains

Good news on Capital Gains

Just back from a business trip where lots got done and set into motion. It's going to be an exciting second half of the year.

Our government just extended the lower capital gains tax rates for another 2 years. See link:

http://www.cnn.com/2006/POLITICS/05/10/house.tax/index.html?section=cnn_latest

They added a bit to the limits to avoid the dreaded Alternative Minimum Tax, but a lot of people will be still be caught in that trap. Let's hope they eliminate it all together one of these years!

I'll be back on track starting next week. Have a new website with free report available here.

Happy Mother's Day to all you moms. My mom will be visiting from Florida this year.

Paula Straub
SaveGainsTax
760-917-0858

Another scenario for 1031/TIC Exchanges

The trick is always in the planning. Sometimes you can have your cake and eat it too.

In helping a client determine what the best strategy was for them, a couple of things came into play. They had land that had really appreciated that they had owned for about 10 years and they wanted to sell. The sale price was about 800K (gains 700K).

They would like to exchange for two land parcels that were 150K each and eventually build on them. They didn't particularly want any other properties at this point. They were still left with 500K from their exchange that they would have owed taxes on.

When introduced to the concept of exchanging that 500K with a tenant in common property that would not only provide them income and appreciation potential without management hassles, this fit their needs perfectly.

They will be able to do a complete exchange, not pay any capital gains tax at this time, have their two lots for future use and have income from a good portion that is 100% more than they were getting from vacant land over the last 10 years.

They are well on their way to really building their wealth and retirement nest egg.

Paula Straub
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Interview with the Pros - Educational resource
askpaula@savegainstax.com

Selling your Business and Keeping your Gains

Real estate is known to be an asset that appreciates greatly over time. Most know there is a capital gains tax consequence when an investment property is sold.

But what about your business? Maybe you are a physician selling a practice, a dry cleaner, a hair stylist, a construction company... Whatever your business, if you get ready to sell, you should visit a competent tax professional and find out what tax consequences you will face. They could be a lot greater than you think!

If you'd like to spread out those taxes over the rest of your lifetime rather than paying in one lump sum, take the time and investigate whether a private annuity trust might suit your needs.

If possible, it could save you a great deal of money and keep your gains working for you well into your retirement years.

Be on my next teleconference and learn more about how they work.

Also, stay tuned for details on a special upcoming teleconference featuring a guest speaker!

Paula Straub
Teleconference Link
Resource Link
askpaula@savegainstax.com

Tip for choosing a Tenant in Common Property

How do you know if the tenant in common property that you would like to exchange into is a good investment?

First, start by looking at it as if you were buying the entire building, not just a fractional interest. If you are not a sophisticated real estate investor, employ the aid of a commercial realtor or financial advisor who can go over the propectus/ sales data with you. Look at the assumptions made and see if they will justify the proposed return over the long haul.

Make sure you deal with a TIC Sponsor company who has been in business for a while and has a successful track record. Make sure the management company is experienced, well funded and can produce a long record of profitable properties they have handled.

If you are not comfortable with a varying return, or don't want the possible risk of putting in more money should things not go well, look into getting a triple net lease, where the burden is transferred to the management company.

Call a local realtor in the area where the property is, and ask their opinion on the location and building condition. If you have the time and inclination, fly there yourself and see it in person.

Do your due dillegence just as you would if you were financing the entire purchase yourself. The right exchange will bring you years of steady income, good appreciation potential and hassle free real estate ownership. It's worth your time and effort to make the right choice.

Paula Straub
Interview with the Pros - educational resource for tax saving strategies
askpaula@savegainstax.com
SaveGainsTax - free teleconference this week, sign up now!

Tax Time - Again...

I dislike doing my taxes as much as anyone else. Mostly because each year I promise myself I will keep better records and not have to sort through piles of paper in order to prepare my return. It always is such a relief to have the process behind me.

I've been getting a ton of questions on my SaveGainsTax website regarding returns. I love to hear from everyone, but must remind you that I am not a licensed tax professional, and I am the last person you want to ask about which IRS form to use and for specific tax return questions. So what is a person to do?

I often refer people to my friend Eva's site taxmama.com She has an "ask" tab there and will try to answer as many questions as possible. Realize however, that during the last days of tax season, she doesn't have time to do anything but her client's returns. Most tax professionals are buried this time of year.

So, it's a good time to think about finding a good professional to give advice on next year's taxes. The time to visit one, or to contact me if you are selling your asset is BEFORE you sell. I'm afraid if the deal is done, you will pay taxes.

Another question I can't answer is exactly how much you will owe in capital gains tax. There are many factors involved and are tied directly to your unique situation and how the asset has been listed on previous returns. I can't stress enough that now is not the time to pinch pennies and attempt to do your return yourself. Contact a qualified tax professional with particular expertise in the type of sale/ asset transfer you had and let them earn their money by perhaps saving you a bunch that you might miss by just not knowing any better. I doubt you want to be audited on a return where you made a critical error.

Have a happy holiday and hopefully a good tax filing. In my book that is any time I can minimize my tax obligation legitimately!

Paula Straub
askpaula@savegainstax.com
Interview With the Pros

Q&A Can more than one property be placed in a PAT?

I get asked a lot if more than one type of investment can be placed in a Private Annuity Trust.

The answer is yes, if it is constructed properly. When the trust is built, a conversation should be had with the Trust Company and the Trust Advisor and the Legal Counsel, and financial counsel. A thorough analysis should be done as far as other assets, income needs, estate planning needs, timelines, etc.

At that time, the question should be raised as to whether to structure the trust to accept other properties in the future. These could be in the form of real estate, investments, collections, a business sale, etc.

This way, when other assets are sold in the future, another annuity contract can be established, and future income can be increased. Multiple trusts may be cumbersome and cost more over the long haul to set up, maintain and administer. If all can be done within the same trust, logistics are simplified greatly.

Careful planning is key as always. That and choosing knowledgeable professionals and an established Trust Company.

More information on choices is available in the "Interview with the Pros" resource.

Paula Straub
SaveGainsTax
askpaula@savegainstax.com