Posts filed under Personal Finance

Power of Attorney - Do I need this legal document? Yes.

Having a trusted person(s) with the legal ability to make decisions for you if you are incapable is a smart idea.

Financial power of attorney (POA) is not the same as POA for healthcare. Acting on behalf of another person in the areas of property and financial management is beneficial for signing documents when you are unable to be present, withdrawing or making money decisions, acting on behalf of the incapacitated or absent person.

Ordinary POA ceases once a person loses mental capacity. Enduring POA is required to continue representation after mental incapacitation. Having control and naming this person is the importance of this formality while you are healthy and able to make decisions. Naming a POA is not equivalent to losing your rights. Many people specify that this assignation of powers happen only when a doctor certifies incapacity or other qualifying occurrences have come to pass and the exact actions the POA is allowed to take. You can revoke your POA choices at any time.

Spouses should have a POA document for each other. All legal and financial transactions are not covered by the mere fact of marriage.

For more details on power of attorney.

Posted on December 5, 2013 and filed under Personal Finance.

What does the DOMA ruling mean for tax payers?

Last month in United States v. Windsor, the Supreme Court ruled that Section 3 of the Defense of Marriage Act (DOMA) was unconstitutional under the Due Process Clause of the Fifth Amendment. 

The 5–4 decision is regarded as a landmark case for marriage equality and civil rights under law. By deeming DOMA unconstitutional, the court has returned marriage rights to the states. If a same-sex couple legally marries in one of the thirteen states or five Native American jurisdictions where same-sex marriage is legal, the federal government recognizes the marriage and extends all the rights, privileges and benefits of marriage to the couple.

The tax implications of the DOMA ruling at the federal level are considerable. At the heart of the Windsor case was the estate tax exemption of surviving spouses, otherwise known as the inheritance tax. Because Edith Windsor’s marriage to Thea Spyer was recognized by the state of New York, Windsor applied for the surviving spouse federal exemptions that allow spouses to inherit assets and property from one another tax-free. The exemption can be applied throughout their lives and at the time of one spouse’s death. Because Section 3 of DOMA defined marriage as a union only between a man and woman, Windsor was denied the exemption and faced a $363,053 estate tax on the home she and Spyer shared. 

In addition to the rights of survivorship enjoyed by opposite-sex couples through the institution of marriage, same-sex couples may now be eligible for over 1,000 benefits at the federal level that were often denied to them under section 3 of DOMA. Same-sex married couples will now be allowed to file joint tax returns. Their status as lawfully married will also affect, immigration issues, social security tax rates, capital gains and losses, child care tax credits, elderly and disabled credits. Same-sex married couples may also be able to amend tax returns filed previously to reflect their new legal status. The statute for limitations on filing amendments to a tax return is usually three years.

The tax implications of the DOMA ruling are vast and in many instances will benefit same-sex couples that marry legally. However, same-sex couples that marry will find out what opposite-sex married couples have known for years. Namely, that the federal government penalizes married couples by creating tax thresholds that are significantly lower than that of two single earners. If the couple’s combined income exceeds the threshold they will be taxed at a higher rate than two single earners would on the same amount of income or dividends. This part of the tax code is known as the “Marriage Penalty”. 

Most same-sex couples, like their opposite-sex counterparts, probably won’t let a higher tax rate stop them from entering into marriage. In today’s society, romantic love has superseded the old ideas of marriage as a contract based on security or social status. While security and status in society still play a role, it is love that drives most people to the alter. However, once couples marry professional tax advice and financial family planning becomes even more vital to creating and maintaining a healthy financial future.

Tom Bulger, CPA specializes in estate tax law, and helping families achieve their financial goals. Give Tom a call today.

Are you engaged to be married, or a newlywed wondering about the tax implications of marriage? Post your questions below.

Check back for our next post on "Perceived Indifference" and the effect it has on retaining your business' customer base.

Posted on July 21, 2013 and filed under Estates & Trusts, Filing Taxes, Personal Finance.

Working Moms and Personal Finance

The American workforce has seen a dramatic increase of women joining its ranks over the last forty years. Today women make up 47% of the workforce and by 2020 women’s participation is expected to exceed that of their male counterparts. This is of course due in part to large swing in attitude about traditional household roles. But the need for two incomes in order to support a family is also sending plenty of parents into the workforce who might otherwise prefer to stay at home and raise their kids.

Does that second paycheck make sense?

For many middle class women with dual incomes, returning to the workforce after maternity leave is a real question as to whether it is economically astute in light of the high cost of childcare. In a New York Times op-ed Lilian Faulhaber, associate professor of law at Boston University, writes that the IRS hurts mothers because “the tax code starts with a bias in favor of couples in which one partner works and one stays home.” Faulhaber admits that “this bias, however, does not directly discourage one partner from working. What does is the tax code’s treatment of childcare.”'

Mom's are taking charge of finances

Working moms are breadwinners in 40% of US households, and most of them are single.

According to a Pew Research Study, women performing as the primary breadwinner has climbed from just 11% in 1960 to nearly half of U.S. households with children in 2012. As the major breadwinners, working moms are making more of the financial decisions, managing investments, and dealing with tax issues. 

Although there are more breadwinning moms, the gender gap in pay is still a real issue in today's businesses. According to the Bureau of labor statistics women earn on average between 77% and 80% of what men earn for the same work. A new PAYSCALE analysis has released more optimistic findings, contending that men and women at the beginning of the careers see more equitable pay with women earning about 98% of what men earn. However, as they move into executive positions women’s earnings still fall to around 91%. 

But despite the gap, several studies show women are better at managing their family's finances. They save more money, manage their credit, and take on less debt. 

Tom Bulger, CPA has been helping working parents and families of all types make informed financial choices for over 25 years. Contact Tom to see how he can help you grow your family's wealth today and tomorrow.

Are you a working mom? Are you the major breadwinner in your household? Share your experiences with us in our comment section below.

Check back for our next post in our series on women in the workforce where we will look at women in leadership roles across industries.

Posted on June 24, 2013 and filed under Personal Finance.