Paul R. Tierney Law

A New Year’s Nightmare: How Congress Could Ruin Your 2013

Call it the not-so-happy new year. Unless Congress wrangles a deal in
the next few days, Americans will ring in 2013 with champagne, funny hats --
and a knock-you-off-your-feet cocktail of tax hikes.

As you ring in 2013, it may be hard to welcome a new year without some amount of financial
stress if Congress fails to resolve the fiscal crisis. An article in Fox News recently explained “How Washington’s failure to reach a tax deal could spoil your 2013.”

A few of the topics identified in the article include:

Tax Hikes

By now, everyone knows the Bush-era tax rates are slated to roll-back to pre-2001
rates. This means families making between $50,000 and $75,000 could see taxes
jump roughly $2,400. Capital gains would be taxed at 20 percent rather than 15
percent. Dividends would be taxed like regular income. And the estate tax would
expand to include more and more families.

In addition, a short-term Social Security payroll tax cut is also likely to expire, with the
rate rising from 4.2 percent to 6.2 percent. And without an agreement to do
otherwise, the alternative minimum tax would expand to 28 million more
taxpayers.

So, without an agreement in the next few days, the New Year will bring with it the largest
tax increase in American history – a $536 billion tax increase.

Spending Cuts, Threatened Jobs

Along with the steep tax hikes, 2013 will bring the first installment of $110 billion in
government spending cuts. About half of the cuts will focus on defense
spending, thereby threatening the thriving defense industry. The other half
will affect other federal departments, possibly causing some federal workers to
be furloughed or laid off. The Congressional Budget Office predicts the country
could lose up to 3.4 million jobs.

IRS Filing Frustration

American taxpayers were not the only ones hopeful Congress would come to a fiscal
agreement before the end of 2012. The IRS was too. In fact, the IRS assumed
that Congress would avert the alternative minimum tax provision so it failed to
make necessary changes to its computer system. Now, if nothing is done, more
than 100 million taxpayers will have to wait until mid-March to file their 2012
tax returns.

Refer to the above mentioned article for more ways this Congressional dilemma could impact
you in the New Year.

Reference:  Fox News (December 25, 2012) “How Washington’s failure to reach a tax deal
could spoil your 2013”

Should You Mix Business with Friendship?

Have you considered co-founding a new business with a family member or
friend? If so, you’re in good company –Fox Business reporter Susan Shreter
reports that about half of today’s startups are co-founded among friends,
family members or spouses.

Going into business with a friend or family member? It certainly makes sense that one
would want to pursue their most ambitious goals with people they trust. But is
doing so good or bad for the relationship you have with your co-founder?

When working with friends, expectations of loyalty and understanding are higher than is
common among everyday work colleagues. And when friends let us down,
resentments can linger and cause a deep divide in both work relationship and
personal relationships.

Here are five ways startup misunderstandings can spiral out of control and potentially
end friendships, according to Fox Business.

#1: Unmet Expectations. The typical startup business will take a lot more time and money to become profitable than anyone ever expects.

#2: Work Style Conflicts. Even though friends get along great when hanging out at the bar, this compatibility may not resonate in the office environment.

#3: Business Strategy Disagreements. New startup partners tend to be well aligned to the grander
goals of an organization, but rarely have worked through the nitty gritty details of how to achieve these goals.

#4: Spending Conflicts. One of the most common areas of disagreement is spending authority and budget priorities.

#5: No Way Out. What happens when one partner wants to sell out, quit or reduce involvement in the business?

Have you considered co-founding a new business with a family member or
friend? If so, you’re in good company –Fox Business reporter Susan Shreter
reports that about half of today’s startups are co-founded among friends,
family members or spouses.

 

Going into
business with a friend or family member? It certainly makes sense that one
would want to pursue their most ambitious goals with people they trust. But is
doing so good or bad for the relationship you have with your co-founder?

When working
with friends, expectations of loyalty and understanding are higher than is
common among everyday work colleagues. And when friends let us down,
resentments can linger and cause a deep divide in both work relationship and
personal relationships.

Here are five
ways startup misunderstandings can spiral out of control and potentially
end friendships, according to Fox
Business.

#1: Unmet Expectations. The
typical startup business will take a lot more time and money to become
profitable than anyone ever expects.

#2: Work Style Conflicts. Even
though friends get along great when hanging out at the bar, this compatibility
may not resonate in the office
environment.

#3: Business Strategy
Disagreements. New startup partners tend to be well aligned to the grander
goals of an organization, but rarely have worked through the nitty gritty
details of how to achieve these goals.

#4: Spending Conflicts. One of
the most common areas of disagreement is spending authority and budget
priorities.

#5: No Way Out. What happens when one
partner wants to sell out, quit or reduce involvement in the business?

A recent Forbes article, titled “Co-Founding
With a Friend - - Without Decimating a Friendship,” shares a few words of
wisdom from successful businesses founded by friends. One startup says “when
making decisions, we make the conscious decision to not be disrespectful
because at the end of the day, we want to stay friends.” Another startup
recognizes the importance of keeping work and personal lives separate.

In order to avoid any
misunderstandings that could potentially end the business or the friendship, it
is important to discuss all issues that might interfere with productive
business building.

 

References: Fox Business
(June 13, 2011) “Why Co-Founding a Business Can Decimate
Friendships”

 

Forbes (December 12, 2012) “Co-Founding With a Friend – Without
Decimating a Friendship”

A recent Forbes article, titled “Co-Founding With a Friend - - Without Decimating a Friendship,” shares a few words of wisdom from successful businesses founded by friends. One startup says “when
making decisions, we make the conscious decision to not be disrespectful
because at the end of the day, we want to stay friends.” Another startup
recognizes the importance of keeping work and personal lives separate.

In order to avoid any misunderstandings that could potentially end the business or the friendship, it
is important to discuss all issues that might interfere with productive business building.

References: Fox Business (June 13, 2011) “Why Co-Founding a Business Can Decimate
Friendships”

Forbes (December 12, 2012) “Co-Founding With a Friend – Without Decimating a Friendship" 

Tax Uncertainty: Refrain From Hasty Decisions

With all the ominous talk of tax increases and a “fiscal cliff” if
President Barack Obama and Congressional leaders cannot agree on a plan to
avert automatic tax increases Dec. 31, some investors may be tempted to act
soon to take advantage of current tax rates. But financial advisers say that in their rush to do something this year, investors might end up with regrets.

With the looming “fiscal cliff” on the horizon, there is no doubt that investors are sitting
on the edge of their seats. And if the President and Congress cannot agree on a
plan to stop automatic tax increases set for December 31, some of those
investors may be tempted to make hasty decisions in order to take advantage of
current tax rates.

But financial advisers warn that “any time you make a decision purely for tax reasons, it has
a way of coming back and biting you.”

A recent article in the New York Times, “With Shifts Possible in U.S. Tax Policy,
Beware of Sudden Moves,” discusses some of the top areas where
short-term trading decisions based solely on taxes could end up hindering
long-term investment goals. The article focuses on how to deal with appreciated
stock, municipal bonds, real estate and insurance annuities.

The best advice offered by the article, however, is to wait and see. Restraint now could prevent a lot of regret in the future.

References: The New York Times (December 2, 2012) “With Shifts Possible in U.S. Tax Policy,
Beware of Sudden Moves”

Avoid These Five Retirement Planning Mistakes

Unfortunately, planning for retirement isn’t an exact science. There’s no one-size-fits-all when it comes to saving the right amount for your golden years--which is part of what makes retirement
planning so nerve-wracking for a lot of us.

Although there is no exact equation for retirement planning, there are some common blunders
to avoid in the process. A recent NBC News article breaks down these mistakes:

1.     Don’t be overly optimistic

While optimism is usually a welcomed attribute, when it comes to retirement, a more
pessimistic view may be more appropriate. According to Tami Simpson, CFP and
president of Wealth Financial Group West, a retirement management services and
financial consulting firm in Southern California, “too much positive thinking
isn’t the best recipe for saving…a healthy dose of pessimism is actually a good
thing for your retirement planning.” Simpson says that some people put off
saving money because they “hope” things will simply fall into place down the
road. People imagine the best case scenarios and don’t account for unexpected
events that could occur. 

2.     Don’t underestimate your spending

Many people underestimate how much they’ll be spending once they hit retirement. Wells
Fargo financial adviser Fay Sheppard reminds her clients that “retirees often
take more vacations, make more home improvements, and dine out more frequently
than they did before they left the workforce.”

When planning for retirement, people need to be realistic and look at income, inflation,
long-term care needs and emergencies.

3.     Don’t focus only on investments

According toJeff Yeager, author of How To Retire The Cheapskate Way: The Ultimate
Cheapskate’s Guide to a Better, Earlier, Happier Retirement, “paying off
all of your debt before you retire is as central to a good long-term plan as
the size of your retirement fund.” He believes that the greatest retirement
asset is something you don’t have:  debt.

4.     Don’t worry about being “selfish”

When it comes to preparing for retirement, experts says we must concentrate on our own
financial well-being. This means that we stop paying for our children or
helping friends or relatives. “It’s important to leave your retirement funds
intact for yourself, no matter how hard it may seem to turn somebody down if
they ask for money.”

5.     Don’tput off your financial physical

Similar to our yearly health physical, Jack Keeter, CFS, and president of Jack Keeter and Associates,
advises that a periodic “financial physical” is the key to a healthy retirement.
He insists that everyone meet with a financial professional before there’s a
problem and review your financial health.

References: NBC News (December 6, 2012) “5 retirement-planning mistakes to avoid”

 

In a Rush to Make a Charitable Donation? New Tools to Help Your Decision

The holiday to-do list is already long. There are last-minute tax moves to make. And somewhere along the way, people find a few minutes to make a series of hasty decisions and dash off a bunch of
checks.

In the midst of the holiday festivities, you may find yourself rushing to make a charitable
donation before the year is over. And although your heart is in the right
place, sometimes a hasty decision can lead to poor charitable decisions. Are
you making sure your donation represents your ideals and morals?

This “scrambled” method of donating, however, is not the only way to make a contribution at
year-end. As mentioned in a New York Times article, a new game called “Talk
About Giving” helps families discuss values and philanthropy throughout the
entire year. This in turn leads to families making more meaningful charitable
donations at the end of the year.

The game includes a deck of cards with questions like:

-         What is our family’s history of helping?

-         If you could have changed anything that happened in the world this year, what would you change?

-         Should we volunteer even if we don’t want to?

-         What do you appreciate most about our town?

-         How much did tonight’s dinner cost?

 

For additional insight on making your end-of-year donations, refer to the New
York Times article “Asthe Year Draws to a Close, Deciding How to Slice Your Charitable Pie.”

 

References: The New York Times (December 7, 2012) “As the Year Draws to a Close, Deciding How
to Slice Your Charitable Pie”

 

The New York Times (December 10, 2012) “Playing the ‘Talk About Giving’ Game With
Your Family”

“Facing Retirement” Gets a Whole New Perspective

Executives of Bank of America’s Merrill Edge program have taken a page
from The Christmas Carol to prompt investors to change their financial
behavior: They’re offering them a glimpse of their future selves.  Through a new online tool that ages a consumer’s photo, investors can see what they’ll look like many years down the road.

 

It can be hard for us to really believe we are facing retirement.  Sometimes, we just don’t want to admit that the time is fast approaching. We’ve all been told that we need to save for
retirement long before the time arrives, but it’s hard to think ahead of how
things will change for us.  If only we could ‘picture” it …

As reported in a recent Financial Planning article, executives of Bank of America’s Merrill Edge program have altered the face of retirement planning, literally. A new online tool, Face Retirement, ages a consumer’s photo so investors can see what they’ll look like several years down
the road.

The new tool is supposed to motivate Americans to save more for their retirement and to
engage in conversations about their financial future. The tool was prompted, in
part, by a Stanford University experiment finding that those who exposed “themselves” to their
“older selves” were more likely to begin thinking about retirement and planning
for it than those who were not exposed to the images.

The tool performs other functions as well. It can show a potential investor what prices
will look like with inflation in the future. And most importantly, the tool can
predict the amount of savings a person will need at the age of retirement.

If you need some extra motivation to start saving more for retirement, check out the new tool mentioned above – hopefully, you’ll have a better “picture” of your future.

References: Financial Planning (December 6, 2012) “New Tool Helps Investors Face Retirement,
Literally”

 

Stanford University (2011) “Increasing Saving Behavior Through Age-Progressed Renderings of the Future Self”

 

Merrill Edge (2012) “Face Retirement”

Maximize Your Hiring Potential – Resume Enhancement

Older
workers come to the table with experience, maturity and dedication… But older
workers who do wind up unemployed often struggle to recover.

 

As the dawn of a new year approaches, many companies will begin to
re-evaluate their staffing needs. This might mean companies will increase their
hiring initiatives, or they could decide to shed jobs. Either possibility means
having an updated resume ready at the New Year may pay dividends. Even if
nothing changes for you around the turn of the year, it wouldn’t hurt to have a
spruced up resume.

 

For older individuals, reaching retirement means managing a budget
with savings, social security, and part-time income. Having a polished resume
is extremely important, as an analysis of the
most recent job data by the AARP Public Policy Institute shows. Consider
this: unemployment for older job seekers is now
56 weeks on average, compared with 37 weeks for younger workers. In light of
this trend, it is crucial for older workers to revise their resumes to catch
the eye of potential employers.

 

As reported recently in The Wall Street Journal, a
new program known as the American Association of Community Colleges’ Plus 50
Initiative is helping seniors do just that. The Plus 50
Initiative recognizes the experiences, skills, and
leadership that the baby boomer generation possesses. Given the possibility of
unemployment facing many older workers, the Plus 50 Initiative seeks to harness
the experience of an older generation and use it to teach new skills to an
already successful generation.

 

Many times, the only thing standing between a
senior and a job is a lack of technical knowledge and computer experience.
Taking a short class on computer software is one of the best ways for older job
seekers to brush up on these skills, enhance their resumes, and show employers
that they are up to date with technology.

 

As the New Year approaches, consider taking some
time to reevaluate how you can best market yourself in an ever-changing economy
and job market.

 

References: The Wall Street Journal (October 5, 2012) “Can classes give older
workers an edge?”

 

American Association
of Community Colleges “The Plus 50
Initiative”

The Fiscal Cliff & Your Health

If President Barack Obama and Congress cannot reach an agreement on the fiscal
cliff…it would likely send the country back into recession…and ultimately, it
could hurt your physical and emotional health.

Financial health and physical health can go hand-in-hand. In these
trying economic times it is important to make sure your finances are secure,
not only for the health of your bank account, but for your physical health as
well.

This issue was recently taken up in a CNN article titled, “10 ways falling off
the fiscal cliff could hurt your health.”

According to the Congressional Budget Office, if the fiscal cliff
is not avoided, the scheduled reduction in Medicare’s payment rates for
physicians will lower Medicare spending by $11 billion. This overall spending
reduction results in a 2% cut in existing Medicare budgets. Consequently, these
reductions will mean a decrease of available Medicare funds to help pay for
essential healthcare needs.

In many instances, Medicare funds are used to pay for vital
services like nursing home and hospice care, which are crucial to the wellbeing
of our elderly population. Reduced Medicare funds mean reduced payments to
health care providers which, in turn, may cause hospitals and care providers to
stop accepting Medicare patients.

As we prepare for the possible approach of the fiscal cliff, a
consultation with an experienced elder law attorney can ensure that your access
to healthcare is protected. An experienced elder law attorney also may help
file an appeal in the event your health care provider denies your Medicare
payments.

Reference: CNN (November 30, 2012) “10 ways falling off the fiscal cliff could hurt your health”

Congressional Budget Office (May 30, 2012) “Economic Effects of
Reducing the Fiscal Restraint That Is Scheduled to Occur in 2013”

Planning for Retirement Starts at Home

An AARP survey found that more than 80 percent of us want to stay in our homes as we grow old. And as boomers go, so goes the remodeling industry.

These days, preparing for retirement doesn’t just mean stabilizing
your finances, preparing your estate, or securing affordable health insurance.
For many, planning for retirement means making in-home renovations for a more
accommodating lifestyle.

As a recent article in Bloomberg highlights, assisted living costs are on the rise. Consequently, many individuals nearing retirement are opting to renovate their homes to avoid increased assisted-care costs. If you are heading towards retirement, it is vital to your financial health and
the stability of your estate that you consider “Remodeling as Retirement Planning.” Substantially remodeling your home to further accommodate an aging body may cost a pretty-penny up front, but it may pale in comparison to the yearly cost of a nursing home.

According to a MetLife Mature Market Institute study, the US
National Average for yearly nursing home costs is just over $75,000.
Accordingly, a relatively simple $10,000 renovation to your home might provide
you with extra years of independent living, and save you thousands in assisted
living costs along the way.

Even though many renovations come with a lofty price tag, some can
be as simple as removing area rugs to reduce the risk of tripping. If you’re
interested in renovating your home, consider consulting this recent Bloomberg article for a few
retirement-friendly renovation tips and tricks.

Reference: Bloomberg (November 29, 2012) “Remodeling as Retirement Planning”

Post-traumatic Stress Disorder & Veteran’s Benefits

[Vietnam veterans are] part of a class-action lawsuit against the armed forces arguing
that [Vietnam veterans] had post-traumatic stress disorder when they were
issued other-than-honorable discharges.

 

Post-traumatic Stress Disorder (PTSD) is a growing issue for many
Iraq and Afghanistan veterans, but it has existed and affected veterans since
long before it became recognized in 1980. During the Vietnam War, PTSD was not
recognized as a psychological symptom of warfare. As such, any symptoms of the
disorder that led to dishonorable discharge from the military pre-1980 left
many Vietnam veterans unable to collect veteran’s benefits.

 

Recently, as presented by the New York Times article “Vietnam Veterans,
Discharged Under Cloud, File Suit Saying Trauma Was Cause,” Vietnam veterans that suffered from PTSD have filed a lawsuit against the armed forces to recover medical benefits that were denied due to discharges related to PTSD. Chiefly, “can they be given a diagnosis of PTSD retroactively, to their time in service, though the disorder was not identified until 1980? And if they can, should
recently instituted policies intended to protect troops with PTSD be applied
retroactively to their cases?”

 

The outcome of this case could have a serious effect for Vietnam
veterans dishonorably discharged due to PTSD symptoms. If the suit is
successful, then thousands of Vietnam veterans dishonorably discharged due to
PTSD will have the ability to reapply for lost veteran’s benefits.

 

As anyone who has experienced this trauma knows, PTSD can be a
crippling lifelong condition. Many families and relationships struggle daily
because a veteran in their family is silently suffering from PTSD. Signs of
PTSD are recurring and distressing recollections or nightmares of a traumatic
event, emotional detachment or estrangement, poor concentration, and
irritability. Visit www.military.com, an online military
community, to learn more.

 

If you think you or a loved one may be suffering from PTSD,
consider visiting an attorney specializing in veteran’s benefits to ensure your
right to medical benefits is not lost due to a dishonorable discharge that may
have been caused by PTSD. 

 

References: The New York Times (December 2, 2012) “Vietnam Veterans,
Discharged Under Cloud, File Suit Saying Trauma Was Cause”

 

Military.com “PTSD: What You Need to Know”