While we all envy the person on television like Jud Clampett that receives some great news on a royalty interest, (or misses a rabbit only to hit oil) …in real life frequently this can be more trouble than gift.
Living in Texas a state that produces oil and natural gas royalty rights are very popular and frequently handed down from one generation to the next.
Continued Disposition Problems
We are continuing to run into an ever increasing number of need to dispose of seemingly small mineral right properties that maybe had an offer at one time or another that actually cost more to dispose of them the offer.
Photo by Albert Hyseni on Unsplash
Please don’t run out and dump that long ago relative’s income producing oil or gas property that has been in the family for years producing a nice monthly check … but the hundred dollar or seemingly worthless offer for that very small parcel of land that has a very small mineral right may be a good offer not only from a small tax reporting over the years that you may have to do but also from an organization standpoint in your estate.
While there are exceptions and of course when oil prices were in the mid 100s there were extreme cases of payments, it is very likely if you are receiving a very nominal amount of money from your mineral interest over the past decade that that mineral interest likely has very little value and maybe more of a burden to you from a tax standpoint and especially to your heirs from an estate cleaning standpoint than it’s worth.
No Need to Be Reckless – Do some Research
This is once again not an endorsement to go recklessly sell the mass form of income property but rather a recommendation to maybe think twice and do a little research when receiving a seemingly low offer by a professional mineral person who wants to consolidate his portfolio and take that interest off of your hands!
Welcome to our Video and Audio Podcast Review of our Q1 2021 Newsletter. For those on the road or just unable to grab the time to read, our podcast type review gives you the behind the scenes insight to our thoughts, observations and deep views of the entire Newsletter.
In this start to a new year, we update the pictures on the Video and also the entry and exit music. Our editor actually greatly adjusted the colors and fonts of the Newsletter this year, which we really liked as well.
Click the Download button below, for a direct link to an electronic version (an early peek-good ole fashion paper versions are on their way to you shortly) and here for our Newsletter page
This Newsletter is chocked full of reminders from events and experiences we had with you in the field last year the would be helpful looking forward into 2021!
With a very large number of moves in 2020 …. much greater than we can ever recall, in this Article we remind of the Homestead.
In the year 2020 we have had more change of residences than we can ever recall over the past three decades. As a reminder, and using Texas as a template, if you live in your home on January 1 you can do what is called a homestead tax exemption. Once again through the lens of Texas, this is a particularly good tax savings exemption that everyone should do if you live in Texas.
Q 1 2021 J.K. Financial, Inc. Newsletter Lead Financial Planning Article
And just a bit more description from the same Article …
From TexasLawhelp.org – a fantastic non-profit resource we use frequently – again only for Texas residences, those living in other states may want to check for a similar organization.
What property qualifies as a “homestead?”
A “homestead” is a house or other residential structure that you own, together with up to 20 acres where the structure sits if the land is used for residential purposes. A manufactured home on a rented lot qualifies as long as you own the home. Manufactured homes must meet additional requirements for a “Statement of Ownership and Location,” but if you did not receive the paperwork from the prior owner and cannot locate the seller after making a good faith effort, you can submit the affidavit in Form 114-A.
Estate Planning Tops Our Minds
It was literally a race for the greatest increase over normal years, for folks moving to a new residence (per above) or reviewing and updating their Estate Plans.
Has Anything Changed Since My Documents Were Written?
Just because five, seven or even ten years have transpired does not mean that you automatically need to update your documents. If everything looks right, and things have not changed then those documents are likely just fine.
On the other side of the equation if things have changed in the past twelve months (or even less) that would make your documents incorrect, you likely need to do an update so your directives are appropriate.
Q 1 2021 J.K. Financial, Inc. Newsletter Second Lead Financial Planning Article
If we are not in possession of a copy, please send to us or upload to your Vault as we keep things safe and most importantly FOREVER!
Q 4 2020 ES Reminder – The Safe Harbor
Mid-month, January 15, 2022 to be exact is the final due date for Quarterly Tax Payments ( Q 4 2020 ES Tax Payments.) With a pushed out ordinary filing date due, it seems like to many we just filed last year’s taxes (2019), and here we are already rushed to complete 2020. Hence the reminder.
Lastly, if you are in a situation where you tax bill may be dramatically different from the prior year, in this case 2019, consider trueing up your 2020 taxes to at least 110% of year 2019 total Federal tax withholding. To help avert any penalties or interest.
Retirement Contribution Levels and Medicare IRMA Amounts
While we have posted these levels earlier here, and we know the formatting was a bit wonky, we wanted to review them again directly from the Newsletter.
Here are last years most common levels along with whats up for 2021 – mostly unchanged
IRMA – Income Related Monthly Adjustment Amount – Medicare Part B Surcharge
“ If your modified adjusted gross income is above a certain amount, you may pay an Income Related Monthly Adjustment Amount (IRMAA). Medicare uses the modified adjusted gross income reported on your IRS tax return from 2 years ago. This is the most recent tax return information provided to Social Security by the IRS. “
Here are the 2021 limits and adjustments:
We hope you enjoy … talk to you Next Quarter – Happy 2021 !!!
Over the next two weeks, with staggered schedules, our office, which our building manager is still continuing to ask us not to have guests, will be open sporadically. We will collectively be working remotely or out of the office on various family holiday getaways.
Donald “The Brain” is happily in a warmer climate near water, loosely connected to the office for some much needed and much earned R&R this week after a full spring, summer, and fall, of lock downs.
My time actually occurs next week after Christmas and through New Year’s.
Jen will be in and out remotely connected with a few official bookend days for holidays and long weekends throughout the next two weeks.
One big positive of the events of this year is the ease of pivot to remote for all of us!
A Gentleman‘s Agreement on Wall Street!
While in recent years we’ve seen this agreement violated, look no further than some of the sharp drop offs during this time just a year ago, generally there is an unwritten gentleman‘s agreement to “do no harm” during this time of the year. Meaning capital markets usually do not trade upward or downward in dramatic fashion throughout the remainder of the year.
Under normal circumstances the next two weeks, partial trading weeks …with closures on each Friday and half a day before the holiday trading would be BORING and very low volume….trying not to jinx ourselves here!
Newsletter Update
With a newsletter chocked full of great Financial Planning, Income Tax, and Personal reminders, and being non-market related, the Newsletter is complete and we hope to have it to you during the holidays for some possible fun reading that you may have during down time.
We think it came out fantastic, and tribute the great bulk of subject matter to you guys for the experiences, reminders, and techniques that we did this year.
Our posts here at Street-Cents will likely not be as regular and much lighter over the next two weeks as well!
Remember, as mentioned here in this urgent reminder post, Financial Institutions in every area of service are greatly overloaded for some reason this year, and as such MONEY IS MOVING SLOW…. do not wait until the last minute for a Financial Transaction, especially if it is personal!
Happy Holidays, Be Well, Be Safe, and Happy New Years!
Each year the IRS publishes their top dozen tax scams, here in our post we cover all dirty dozen tax scams to be aware.
Our top three are their first three-
Phishing
Phone Scams
Identity Theft
Which are the ones we see most frequently!
For the record, we have seen way less this year than in years past!
Choose Beneficiaries Carefully Part II
Here in our Part II beneficiary post, we discuss the two most common types of designations you will likely see on Beneficiary paperwork, Per Stirpes (flows to heirs, irregardless of survivors) and ProRata (funds only to survivors) and once again as a reminder that Beneficiary language will over ride Wills and other types of Estate Planning documents – choose carefully!
Capital Market Comments –
Inverted Yield Curve
Here we spoke of the three hour inverted yield curve in a Break In abbreviated post. As an update, the yield curve has been inverted most of this week, making is a TRUE inversion.
We will have a detailed review soon, but again the importance of this event is the recession signaling prowess.
All recessions are not equal, and we highly suspect the next one will be a shallow one, but our radars are up.
Have a Great Day – Talk to you at the end of March!
In a follow on post to our original Why Choose Your Bene’s Carefully post AND for our own reference – we frequently end up having to go search up this terminology just to make 100% sure we are correct when completing beneficiary information … Here are two hand crafted pictures that should get the job done when choosing Beneficiaries..
Oh… and a precursor to our in depth Newsletter Article coming soon…
Per Stirpes and Pro Rata
In a picture is worth 1000 words spirit…
Per Stirpes
And here is Pro Rata
It will be interesting to see just how many times we view this in the future for a refresher!
In our updated post here, we discuss a few handy items to grab and remember when you retire or change jobs.
Here are the bullets-
Last Pay Check
RSU-Options
Employee Stock Purchase
Deferred Comp
Pension
Health Coverage
Long Term Health Coverage
401k
New 401k
Severance
Social Security Withholding
Institutional Trustee
This post has turned into a full article in the coming Newsletter due to the great response and continued questions and ideas that were brought up-
Possible reasons for an IRON CLAD Institutional Trustee
No other comfortable option – Many times a friend/family member is preferred
Want an iron clad back up
Calming possible family feuds
Long lasting legacy desired
Desired attention to details such as monthly distributions, bill payments etc.
Choose Beneficiaries Carefully
In this post, just earlier in the week, born from an in field experience – multiple questions in the office after – and the subject making its way into the Newsletter as well… just a great additional article to the Trust!
The most important item to remember in choosing a designated beneficiary on and account is it will over-rule your Will – choose carefully and review occasionally for safety of desired outcomes.
The Brain Shines at West Coast Event
Capital Market Comments –
Good News – Recovery without a Re-test – So far
Nothing to change from the prior month!
What a different a month makes – WOW! We literally have gone from the sky is falling to sunshine!
In our summary post in December, we mentioned that fast moving slumps, such as the one we had, frequently do not last long….
Here, earlier in the month we also mentioned that we fully expected some type of retest of those lows before we gained our footing.
We still do expect some type of re-test, but as of this date we have had the following positives that have added to the markets better mood:
Federal Reserve (FOMC) have turned very cautious about raising rates further (We are happily surprised at their yielding, and even more surprised at market participants joy)
Tariff talks are making progress – Interestingly, China has seen a slow down in their economy making for slightly more urgent talks – with a little compromise and statesmanship a resolve looks more likely – again a positive for capital markets.
Earnings are still cranking along – For the prior 4-6 quarters, earnings were red hot and hitting on all cylinders, so hot, they were not sustainable. Companies are still reporting good earnings, just not the Red Hot, overheated earnings from prior quarters – this is good news as it avails the FOMC to not have to raise rates to slow the economy –
All in all a Win- Win!
Have a Great Day – Talk to you at the end of March!
Books get updated and reprinted on a regular basis. This post is originally from several years back, but worthy of a re-post/update regularly!
So Important
Maybe you are about to Retire… CONGRATULATIONS ! ……Or maybe you are about to change jobs… exciting new times, just around the corner…
Here are a few handy reminders before/as you leave!
Job/Retirement Change Checklist
Grab that Last paycheck– Once you are gone, the internal system may be harder to access, be sure to get your last paycheck downloaded for your tax and personal recordkeeping.
RSU -Options- Grants -Make sure you are not leaving anything on the table via a vesting sunset or time line that can be associated with your departure.
Employee Stock Purchase Plan-Confirm you have control of your stock and transfer it to an easily controlled account-most ESPP plans are only holding tanks and cumbersome to make transactions.
Deferred Comp– Check on when your plan will be paying you your funds- i.e. tax year, time frame, and if all at once or over several series of payments- confirm the payments method and where they will be sent if mailed.
Pension – Get a copy of your latest balance or estimated amount, time frame of payment, if the projection is inclusive of your departure, if your spouse is included as beneficiary and his/her date of birth is correct and MOST IMPORTANTLY your correct address.
Health Coverage– You do not want to go a day without coverage, make sure you have some type of overlap such as Cobra, New company coverage, Medicare or outside personal coverage.
UPDATED NEW REMINDER – Long Term Health Coverage– If you have been at your employer some time (10+ Years usually), check to see if some type of retirement health coverage options are available. Frequently these have a one time option of opting in and if you leave, you will NEVER get another chance. We have found these to be very good options in certain cases.
401k– In most instances you want to take control of your old 401k by rolling into a self directed IRA. Make sure your final paycheck withholding has hit your 401k before you roll it over or there will be residual amount later.
New 401k– In most cases you want to allocate your new 401k aggressively- be careful NOT to overfund your old and new plan in the same year- most maximums are $18k (+$6k catch up) – If your two employers do not know about each other they may accidentally allow you to overfund the total afore mentioned amount
Severance– Be sure to get your arms around the type, amount, timing and pay and benefits.
Social Security Withholding – Withholdings may likely be over withheld since your two employers did not know about each other – keep good tax records- if they did, you get a refund.
While mentioned several times, once more due to just how important, be sure to keep your address up to date with your former employer !
Last Monday we replayed Part 1, here in our post, one week later we wanted to re-roll out Part 2 of this all important Document review, checklist and explanation – Enjoy!
Trusts, in our opinion are most helpful for organization, directives for minors, and very useful in avoiding Estate Taxes, just to name a few.
Estate Tax Review
Estate taxes are the tax that is incurred upon the final death of an estate member. Unlike Federal taxes, Estate taxes are accessed on the TOTAL VALUE of all assets less liabilities. Currently these taxes begin just under $5.5 million for a single person and if done correctly can be double ($11 million total) for married couples. Above these total amounts, the tax rate quickly gets to 40%. For this reason, the popularity and needs of many of the following Trusts have grown and will continue.
Trusts – All Type Review
Over the last several years we have grown warmer to the use of Trusts. Residing in Texas, a low cost probate state, Trusts frequently have lessor place in the Estate plan. However, we are finding more and more uses for them, and as such wanted to have a detailed list of the various Trusts – This is the second, and more deep dive to our original Estate Planning Doc Summary.
Revocable Trust – By far the most common and most commonly misunderstood Trust of the bunch. Revocable means it can be changed at the grantors request. Due to this fact, there is very little tax or liability avoidance. The key positive for this trust is organization, especially over state borders. In high probate cost states may prevent substantial probate costs.
Testamentary Trust – Trust that is usually embedded in a Will and is created upon the grantors death. Testamentary trusts can take many forms, but are a key aspect of Estate planning for minors, estate tax, and generational transfers. It has virtually no existence until the grantor passes away.
Irrevocable Trust – The Hulk of Trusts. Being Irrevocable, once established and funded, this Trust is a beast. Estate tax, liability, inheritance are just a few items that can be addressed with an Irrevocable Trust. The biggest issue of this type of trust is it what makes it a beast, Irrevocable … once you put assets in it, there is no turning back. Careful use is advised.
QTIP Trust : Qualified Terminal Interest Trust – Most common set up by Grantor to give direction to assets beyond the spouse. Frequently used in second marriages to protect children from a prior marriage. Created and resides most frequently in a Will.
Credit Shelter/A:B Trust – Type of trust that is used to help minimize Estate taxes by maximizing the first person in a married couples Estate tax exemption upon death commonly resides in a Will. Can give directives to eventually end up to a non-spouse beneficiary, but living spouse maintains control during lifetime.
GST or Generation Skipping Trust – This handy estate planning trust gives relief to Grantors by jumping a generation and essentially skipping the Grantors children and passing to the grandchildren. Income may be distributed to the children, but the ultimate beneficiary will be the grandchildren. Under current law there is Estate tax relief from this trust.
ILIT : Irrevocable Life Insurance Trust – This trust is very useful in getting life insurance proceeds out of a Grantors estate. While life insurance is free from Federal taxes in most cases, proceeds are included in an Estate for Total Estate Tax purposes. Done correctly, the ILIT trust can limit most if not all of the proceeds from an estate and thereby estate taxes.
Pat yourself on the back (especially if you are still awake and made it this far.) With a reasonable understanding of these types of trusts, you now have deep knowledge of the types of Trusts available. Reach out if you have any questions.
This is another redo of an article/post of several years back. We reference this so much we thought it a good idea to present it again, especially to those who may not have seen it originally – As a reminder, we like all of your Estate Planning Documents to have a virtual home in your Vault for easy, safe continued access! Ok – Let’s get going – again!
The term “Estate Planning” gets thrown around frequently, sometimes by us. Recently we tossed the term out and upon finding we did not have an article with a total summary of “Estate Planning Docs” an article was born.
Break in – If you have not reviewed your documents in five + years, now is a good time… let us know, as we should have a soft copy of file … if not…send us one please!
Estate Planning Docs
Will – Document that directs non-beneficiary directed assets (Ex ..house, property, cash and regular investment assets) and may create trusts for minors, names a Custodian, Executor and may also create trusts and Trustees for estate tax minimization and other uses (see final statement in article below on Trusts.)
Power of Attorney– Financial document that appoints someone other than you to make most financial decisions in your absence. Generally this document immediately becomes effective upon authorization, as opposed to upon disability.
Healthcare Power of Attorney – Document that appoints someone to make important healthcare decisions if you are unable. Think un-conscience and need to approve some type of procedure.
HIPPA – Allows your appointed person to receive medical information on your behalf. This is the ant-privacy document to counter unintended consequences of many of the recently enacted privacy laws.
Living Will- Cease and Decease – DNR – These titles are one in the same and are frequently confusing. This document allows medical professionals to NOT mandate all possible care, should you become deceased mentally, but not in body function. DNR stands for do not resuscitate, and is probably the most explanative title.
We will dig more into Trusts in a specialized post (Part 2) just dealing specifically with that area of Estate Planning!
Now you have a great all-in-one spot for just what the heck all those “Estate Planning” docs are… and us too !
Books get updated and reprinted on a regular basis. This post is from several years back, but worthy of a re-post!
Maybe you are about to Retire… CONGRATULATIONS ! ……Or maybe you are about to change jobs… exciting new times, just around the corner…
Here are a few handy reminders before/as you leave!
Job/Retirement Change Checklist
Grab that Last paycheck– Once you are gone, the internal system may be harder to access, be sure to get your last paycheck downloaded for your tax and personal recordkeeping.
RSU -Options- Grants -Make sure you are not leaving anything on the table via a vesting sunset or time line that can be associated with your departure.
Employee Stock Purchase Plan-Confirm you have control of your stock and transfer it to an easily controlled account-most ESPP plans are only holding tanks and cumbersome to make transactions.
Deferred Comp– Check on when your plan will be paying you your funds- i.e. tax year, time frame, and if all at once or over several series of payments- confirm the payments method and where they will be sent if mailed.
Pension – Get a copy of your latest balance or estimated amount, time frame of payment, if the projection is inclusive of your departure, if your spouse is included as beneficiary and his/her date of birth is correct and MOST IMPORTANTLY your correct address.
Health Coverage– You do not want to go a day without coverage, make sure you have some type of overlap such as Cobra, New company coverage, Medicare or outside personal coverage.
401k– In most instances you want to take control of your old 401k by rolling into a self directed IRA. Make sure your final paycheck withholding has hit your 401k before you roll it over or there will be residual amount later.
New 401k-In most cases you want to allocate your new 401k aggressively- be careful NOT to overfund your old and new plan in the same year- most maximums are $18k (+$6k catch up) – If your two employers do not know about each other they may accidentally allow you to overfund the total afore mentioned amount
Severance– Be sure to get your arms around the type, amount, timing and pay and benefits.
Social Security Withholding – Withholdings may likely be over withheld since your two employers did not know about each other – keep good tax records- if they did, you get a refund.
While mentioned several times, once more due to just how important, be sure to keep your address up to date with your former employer !
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!
Background
The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.
And here is Pro Rata
It will be interesting to see just how many times we view this in the future for a refresher!
March 2019 Podcast Video, Financial Planning and Capital Market Update – By John Kvale
Break in Reminder for our Social Security Event
Saturday April 27th at 10 am and Dallas Athletic Club
Hello and Welcome to our March 2019 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast format as well as Video!
Newbies – We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!
March – 2019 Video
Financial Planning Tip (s) –
IRS Dirty Dozen
Each year the IRS publishes their top dozen tax scams, here in our post we cover all dirty dozen tax scams to be aware.
Our top three are their first three-
Which are the ones we see most frequently!
For the record, we have seen way less this year than in years past!
Choose Beneficiaries Carefully Part II
Here in our Part II beneficiary post, we discuss the two most common types of designations you will likely see on Beneficiary paperwork, Per Stirpes (flows to heirs, irregardless of survivors) and ProRata (funds only to survivors) and once again as a reminder that Beneficiary language will over ride Wills and other types of Estate Planning documents – choose carefully!
Capital Market Comments –
Inverted Yield Curve
Here we spoke of the three hour inverted yield curve in a Break In abbreviated post. As an update, the yield curve has been inverted most of this week, making is a TRUE inversion.
We will have a detailed review soon, but again the importance of this event is the recession signaling prowess.
All recessions are not equal, and we highly suspect the next one will be a shallow one, but our radars are up.
Have a Great Day – Talk to you at the end of March!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
street-cents
-96.808100
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Posted in Economy, Estate Planning, FOMC, General Financial Planning, Interest Rates, Investing/Financial Planning, Market Comments, Monthly Review, Podcast, Retirement Planning, Video
Tagged Benefeciary, China, FOMC, Institutional Trustee, Job Change, Rates, Tariff, Trustee