July 2013 Newsletter

15 Ways to Save on Your Next Vacation:

Whether your vacation budget is big or small, no one likes to spend more than necessary when traveling. Here are some tips that can help you save on your next trip.

Air travel

• Pick your travel times wisely. Popular wisdom holds that Tuesday and Wednesday are the least expensive days to travel, but this isn’t necessarily the case in all markets or at all times of the year. If possible, search for airfares within two or three days of your ideal departure date, and consider off-peak flight times.

• Search for flights at more than one airport. If you’re willing to depart from any airport near you or arrive at any airport relatively close to your destination, you’ll have a better chance of snagging a lower-cost flight.

• Sign up for fare alerts. Online travel agencies, travel websites, or the airlines themselves

can notify you when airfare hits a low price point or drops by a certain percentage.

• Compare baggage charges. Don’t settle on a fare before seeing how much extra you’ll pay to check your luggage.

• Save on parking. At many airports you have the option of parking in an economy lot. At larger airports, you may be able to save even more by parking offsite at private lots. Some hotels offer packages that allow you to spend the night before your flight and leave your vehicle there until you return.


• Check hotel websites. Many list their rate calendars on their reservations page so you can see for yourself when rooms are available (and at what price).

• Look for freebies. For example, does the hotel offer complimentary transportation to the airport, restaurants, or local attractions? Does the rate include breakfast (having a meal included can save you a bundle, especially on longer trips or family vacations).

• Share amenities. Love the amenities at a luxury resort but not the price tag? Book a room at a lower-priced hotel that allows you to use the facilities of a higher-priced sister property.

• Watch out for taxes. Though you can’t avoid them, lodging taxes vary by location and are based on the room rate, so you can save money on taxes by booking a lower rate or, in some cases, by choosing a different location (a property outside the city, for example).

• Compare extra person charges. Will your kids stay for free? Hotel chains often allow up to two adults and two children age 17 and younger to stay in one room for the same rate, but policies vary, and smaller properties may require you to pay more or book extra rooms.

Rental cars

• Look for coupon codes or discounts. These are available through many sources, such as your road and travel plan, your insurance company, and your credit card issuer.

• Choose the vehicle class that offers the best value. Smaller cars are often less expensive, but not always. Rates vary widely, so check out all rental companies before settling on one. And although you can’t count on getting one, it never hurts to ask for a free upgrade at the rental counter.

• Pay attention to fuel costs. If you’re going to be driving long distances, make sure the rental vehicle has good fuel economy. And decide whether you want to pay for a full tank of gas up front, with the option of returning the vehicle on empty. The per-gallon price is usually posted at the rental counter and may be more or less than what you’ll pay if you fill it up yourself off-property.

• Consider insurance before you get to the rental counter. Avoid buying duplicate coverage by checking with your insurer to see how your auto policy covers you in a rental vehicle. Some credit card companies also offer some insurance protection for rentals.

• Compare extra driver fees. You may pay a surcharge if you add an extra driver, and fees and terms vary by company and location.


Financial Planning When You Have a Chronic Illness

When you live with a chronic illness, you need to confront both the day-to-day and long-term financial implications of that illness. Talking openly about your health can be hard, but sharing your questions and challenges with those who can help you is extremely important, because recommendations can be better tailored to your needs. Every person with a chronic illness has unique issues, but here’s a look at some topics you might need help with as you’re putting together your financial plan.

Money management

A budget is a useful tool for anyone, but it’s especially valuable when you have a chronic illness, because it will serve as a foundation when planning for the future. Both your income and expenses may change if you’re unable to work or if your medical costs rise, and you may have unique expenses related to your condition that you’ll need to account for. Clearly seeing your overall financial picture can also help you feel more in control.

Keeping good records is also important. For example, you may want to set up a system to help you track medical expenses and insurance claims. You may also want to prepare a list of instructions for others that includes where to find important household and financial information that a trusted friend or relative can access in an emergency.

Another step you might want to take is simplifying your finances. For example, if you have numerous financial accounts, you might want to consolidate them to make it easier and quicker for you or a trusted advisor to manage. Setting up automatic bill payments or online banking can also help you keep your budget on track and ensure that you pay all bills on time.


Reviewing your insurance coverage is essential. Read your health insurance policy, and make sure you understand your co-payments, deductibles, and the nuts and bolts of your coverage. In addition, find out if you have any disability coverage, and what terms and conditions apply.

You may assume that you can’t purchase additional life insurance, but this isn’t necessarily the case. It may depend on your condition, or the type of life insurance you’re seeking–some policies will not require a medical exam or will offer guaranteed coverage. If you already have life insurance, find out if your policy includes accelerated (living) benefits. You’ll also want to review your beneficiary designations. If you’re married, you’ll want to make sure that your spouse has adequate insurance coverage, too.


Having a chronic illness can affect your investment strategy. Your income, cash flow requirements, and tolerance for risk may change, and your investment plan may need to be adjusted to account for both your short-term and long-term needs. You may need to keep more funds in a liquid account now (for example, to help you meet day-to-day living expenses or to use for home modifications, if necessary) but you’ll want to thoroughly evaluate your long-term needs before making investment decisions. The course of your illness may be unpredictable, so your investment plan should remain flexible and be reviewed periodically.

Estate planning

You might think of estate planning as something you do to get your affairs in order in the event of your death, but estate planning tools can also help you manage your finances right now.

For example, you may want to have a durable power of attorney to help protect your property in the event you become unable to handle financial matters. A durable power of attorney allows you to authorize someone else to act on your behalf, so he or she can do things like pay everyday expenses, collect benefits, watch over your investments, and file taxes.

A living trust (also known as a revocable or inter vivos trust) is a separate legal entity you create to own property, such as your home or investments. The trust is called a living trust because it’s meant to function while you’re alive. You control the property in the trust, and, whenever you wish, you can change the trust terms, transfer property in and out of the trust, or end the trust altogether. You name a co-trustee such as a financial institution or a loved one who can manage the assets if you’re unable to do so.

You may also want to have advanced medical directives in place to let others know what medical treatment you would want, or that allow someone to make medical decisions for you, in the event you can’t express your wishes yourself. Depending on what’s allowed by your state, these may include a living will, a durable power of attorney for health care, and a Do Not Resuscitate order.

Review your plan regularly

As your health changes, your needs will change too. Make sure to regularly review and update your financial plan.


Portability of Applicable Exclusion Amount between Spouses

Transfers of property during life or at death are generally subject to federal gift or estate taxes. However, each taxpayer has an amount of property that can be sheltered from federal gift and estate taxes by the unified credit, called the “applicable exclusion amount.”

Prior to 2011, each spouse was entitled to his or her own applicable exclusion amount, and any amount that a spouse did not use would be lost; so special planning was often used to insure neither spouse’s exclusion was wasted.

In 2011 and later, the estate of the first spouse to die can elect to transfer any applicable exclusion amount that is not used to the surviving spouse. This is known as “portability.” The applicable exclusion amount is redefined as equal to the sum of the basic exclusion amount of the surviving spouse and the unused applicable exclusion amount of the predeceased spouse, and the basic exclusion amount is equal to $5 million as indexed for inflation each year ($5,250,000 in 2013).

Now that portability and the increased exclusion, which had been scheduled to expire in 2013, have been made permanent, it is probably a good time to review your estate plan and documents. Portability of the exclusion between spouses and an increase in the basic exclusion amount should make estate planning easier for many estates.

Simple planning with portability

If you’re planning today, you could transfer everything to your spouse at your death, and your estate can elect to transfer your unused applicable exclusion amount to your surviving spouse. Your spouse will then have an applicable exclusion amount equal to the sum of his or her own basic exclusion amount and your unused applicable exclusion amount, which your spouse can use for gift or estate tax purposes. For example, if you transfer your $5,250,000 unused applicable exclusion to your surviving spouse, who also has a $5,250,000 basic exclusion amount, your spouse then has a $10,500,000 applicable exclusion amount in 2013 to shelter property from gift and estate tax. Such simple planning might be very practical for some married couples, especially where the spouses’ combined estates are expected to be less than their combined applicable exclusion amounts.

Potential need for more complex planning

There are a number of reasons why such simple planning with portability may not always produce the desired or best results. These might include (among others):

• You have family members or individuals other than your spouse who you would like to benefit prior to the death of your spouse.

• You have grandchildren or later generations who you would like to benefit. The $5,250,000 (in 2013) generation-skipping transfer (GST) tax exemption is not portable between spouses.

• State exclusion amounts may be different than the federal applicable exclusion amount and may not be portable between spouses.

• The unused exclusion is not adjusted for inflation after the first spouse’s death, and may not fully protect appreciating property from estate tax in the surviving spouse’s estate.

Use of A/B trust arrangement

Prior to 2011, many married couples with estates that were greater than the applicable exclusion amount would set up an A/B (or A/B/C) trust arrangement. In general, the first spouse to die would transfer an amount equal to the applicable exclusion amount to the “B” or credit shelter bypass trust. The B trust could benefit the surviving spouse and their children, but the B trust would be designed to bypass the surviving spouse’s estate. The balance of the estate would be transferred to the surviving spouse, either outright or using an “A” marital trust, and qualify for the marital deduction. In some cases, a “C”, “Q”, or QTIP marital trust was also used if the first spouse to die wanted to control who received the marital trust property at the second spouse’s death. The A/B trust arrangement typically assured that there would be no estate tax at the first spouse’s death and that neither spouse’s applicable exclusion amount was wasted.

An A/B trust arrangement may still be useful, even with the availability of portability. For example, the B trust can be used to provide for family members or individuals other than your spouse (and even your spouse) prior to the death of your spouse. You could also allocate your GST tax exemption or state exclusion to the B trust. Also, appreciation of property after the transfer to the B trust should not be subject to estate tax at your spouse’s death. The A trust could use your spouse’s applicable exclusion amount, GST tax exemption, and state exclusion.

The use of trusts can also provide other benefits, such as control over who receives your property and when, investment management of trust property for trust beneficiaries, avoidance of probate, and asset protection.


What are the new Section 179 expensing and bonus depreciation rules for 2013?

As a business owner, you may have faced the prospect of losing two important tax-saving provisions as part of the fiscal cliff: the temporarily expanded Section 179 expensing limits and the 50 percent first-year bonus depreciation rule. The increased deduction limits were originally enacted several years ago–and subsequently extended and modified a few times since–to help businesses weather the prolonged economic slump. The premise was that the tax perks would encourage businesses to make purchases, giving a boost to the overall economy.

As part of the American Taxpayer Relief Act of 2012, these provisions were once again extended, and the Section 179 deduction was enhanced for both 2012 (retroactively) and 2013.

Section 179 rules now state that for both 2012 and 2013, businesses can expense purchases of up to $500,000 for new and used equipment, up to a maximum investment of $2 million for the year. Any purchases over that $2 million limit reduce the allowable deduction amount on a dollar-for-dollar basis. The idea here is that the provision is designed primarily to benefit small and medium-sized businesses.

But businesses that make purchases over the $2 million limit have a reason to invest, too. The bonus depreciation deduction means business owners can speed up their depreciation tax benefits by taking a first-year deduction of 50% of the cost of new equipment only (i.e., purchases of used equipment are ineligible). To take advantage of both the Section 179 deduction and the bonus depreciation, a business would typically max out its Section 179 expense first and then apply the 50% bonus depreciation to remaining purchases. Companies that experience net operating losses may also take the 50% bonus depreciation deduction, carrying the loss forward if needed.


I just bought a vacation home. Do I need to purchase a specific type of insurance?

Insuring a vacation home is different from insuring a primary residence. As a result, you’ll want to purchase insurance that is specifically geared to provide coverage for this type of property.

When insuring a vacation home, the type and cost of coverage will vary, depending upon the insurance company and the state in which your vacation home is located.

Most insurers offer at least some type of insurance that is specifically designed for second/vacation homes. Coverage under these types of policies can range from standard coverage that protects against certain named perils, to more comprehensive coverage that protects against all perils unless specifically excluded in a policy.

Keep in mind that, depending on what is covered under the policy, you may need to obtain additional protection (e.g., property or liability coverage) through either an endorsement or separate policy. In addition, if your vacation home is located in an area that is susceptible to flood damage–which is not covered under a standard vacation home policy–you’ll want to look into obtaining separate coverage for that peril as well.

Due to some of the unique circumstances surrounding vacation homes (e.g., high-risk location, not being occupied for long periods of time), vacation home insurance premiums are usually much higher than those for a primary residence. However, you may be able to save money by insuring your vacation home with the same company that provides coverage for your primary residence (some insurers may require this). In addition, you may be eligible for other discounts, such as those offered for newly built homes, nonsmokers, and homes that have a security system installed. Policy discounts will vary by state and insurer.

Because of the vast array of vacation home insurance products on the market, you’ll want to be sure to shop around for the best coverage and rates. You may also want to contact the state department of insurance where your vacation home is located for additional information on the coverage and rate options that may be available.


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