President Trump and his administration have proposed several changes to tax law, including reductions to income tax, capital gains tax (for some tax brackets), and business taxes. Amidst these impending tax law changes, it is important to adapt your investment strategy accordingly.

What changes are in store?

President Trump’s tax plan proposes the following changes:

• A lower marginal income tax rate

• Removal of the 3.8% investment income tax

• Lowering the effective tax for long-term capital gains from 23.8% to 20% for taxpayers in the top tax brackets

Despite taxes lowering for most Americans, tax efficient strategies will continue to play an important role in investors’ portfolios. Historically, even over periods when tax rates were lower, tax-managed equity strategies remained an important tool in one’s investment portfolio.

Take advantage of market volatility and lower tax rates to refine your portfolio

Capitalize on market dips: Tax-managed accounts typically benefit in markets with lower returns and higher volatility. With change being a fundamental talking point in Trump’s campaign, uncertainty and market volatility may be in store. A short-lived market dip may be advantageous if a tax loss-harvesting strategy is used.

Restructure your portfolio: Also, with lower capital gains tax rates for higher tax brackets, there may be opportunities to recalibrate your portfolio in order to benefit your long-term investment strategy.  For example, investors with high concentrations of a single stock or asset class can take advantage of lower tax rates to diversify their portfolio at a lower cost. Similarly, investors holding appreciated securities that no longer support their overall plan can take advantage of the lower tax cost to transition to more appropriate investments. There are several financial calculations your financial advisor can help you with to determine the cost-benefit of such a transition.

Customize your picks: Lower tax rates on stock market gains may also provide you with the opportunity to align your portfolio with your values. The rapid advancements in Environmental, Social & Governance (ESG) investing has delivered a number of new investment vehicles for folks who are so inclined.

Impending changes in tax law and the market environment as a whole provides investors with a perfect window to reevaluate and reassess their long-term investment plan by taking advantage of short-term shifts. If you are unsure about how these new tax law and market changes will affect you, work with your financial advisor to reset your goals, recalibrate your portfolio, if needed, and align your investments to meet your values or interests.

Divorcees should keep an eye on newly revised rules that now apply to Social Security benefit claims. In November 2015, Congress passed the Bipartisan Budget Act, which added a new set of rules for divorced individuals who meet certain criteria.

Key Claiming Strategy that Most People Miss:

A divorcee who is currently single, but was previously married for at least 10 years is qualified to collect on an ex-spouse’s Social Security benefits – even if the ex-spouse has since remarried. If both individuals are at least 62 years old and have been divorced for at least two years, the ex-spouse is independently entitled to claim Social Security benefits on a former spouse’s earnings record, even if his or her ex has not yet started to claim benefits. Furthermore, ex-spouses born ON or BEFORE Jan 1, 1954, are permitted to collect on their ex’s benefits, while leaving their own benefits untapped and left to grow until they reach the age of 70.

In order to claim an ex-spouse’s benefits, while leaving your own intact, you must file a restricted claim for spousal benefits. Filing a restricted application tells the Social Security Administration that you are not applying for all of the social security benefits you are eligible for at the same time.  

New Rules Limit Restricted Claims to Those Born Before 1954

The new Social Security benefits rules, which were signed into law on Nov. 2, 2015, limit restricted claim applications to only those who were born on or before Jan. 1, 1954. In addition to being of full retirement age and born before 1954, the applicant must also not have begun claiming their own Social Security benefits to comply.

Anyone born on Jan. 2, 1954 or later is not permitted to file restricted claims for spousal benefits, meaning that when they file for a spouse or ex-spouse’s benefits, they are filing for all of the benefits they are entitled to, including their own.

Exceptions to the New Rules

There are generally two exceptions to these new rules.

One exception to this age limitation is for widows and widowers, who are permitted to file restricted applications at any claiming age. Widows and widowers may file a restricted application regardless of when they were born and even if they have not yet reached full retirement age.

Another limited exception to this new rule is for claimants caring for a child under the age of 16 or a for a disabled child of any age. In some cases, those who are eligible for a dependent child’s benefits may also be able to file a restricted claim on a spouse’s or ex-spouse’s benefits at any age.

Additional Resources

Full details about restricting your scope of benefits can be found at the Social Security Administration’s website in its Program Operations Manual System. The Social Security Administration also has a useful Social Security calculator that may also help shed some light on the best claiming strategy for you; however, it is best to also consult with a financial advisor to ensure you are factoring in all earnings and liabilities in the equation.
Social Security benefits claims and the rules surrounding them can be complex and may impact your financial planning strategy, particularly as it relates to retirement. Whether you are divorced, widowed, caring for a dependent child, or simply aren’t sure about which Social Security claims benefit strategy is best for you, contact your financial advisor to determine the best Social Security approach for you and your family.

Many people draft an estate plan when they start a family, then do little to make updates to it as other key life events happen. This is a major mistake that can put your hard-earned money built over a lifetime in the wrong hands or tied up for years. To make sure that this doesn’t happen to you, here are ten triggers that should get you thinking about updating your estate plan pronto.

Marriage

Marriage is an important life event that brings another loved one under your care. Estate planning after a marriage doesn’t have to be complex and can simply include updating your beneficiary information, buying a life insurance policy, and updating your emergency contact information. As your marriage progresses, you may also want to consider setting up a will and living will. Your spouse should also play an important role in discussions about how you wish your estate to be managed depending on different scenarios.

Divorce

No one ever plans for divorce to happen to them, yet many people unfortunately go through this process. For some partners, the complexities and emotional toll can be overwhelming. In the midst of just trying to get the whole thing behind them, mistakes can be made. This has resulted in ex’s receiving houses, money, life insurance proceeds and more just because of some estate planning oversight where a will wasn’t updated. Make sure that you make changes to your estate as soon as divorce proceedings have been finalized.

Death

The death of someone who is contained in your will is another often-overlooked event that you need to consider in your estate plan. These important people may be ones who are named as guardians to your children, have inheritance allocated for them, be named as an executor of your estate, or listed as beneficiaries or emergency contacts. While the passing of someone close to you is devastating, it’s important to start transitioning new people to fill the role of the loved one who recently passed as soon as you can. This will help to prevent any lapse should something occur to you during this short window of time. Worse, you may just eventually forget to do it at all!

Changes to Laws

If you move to another state, you should have your will and living will examined. It is possible that some of the language might not be applicable to the laws in the state where you now reside. One of the biggest changes in laws that can dramatically affect estate plans are changes to the tax laws. When the IRS or your state change the amount of the estate tax and the thresholds surrounding who will be taxed, it’s time to look at your estate plan again. It may require you to change how money is distributed to minimize tax burdens for your heirs. It also may change your strategy completely, for better or for worse. Make sure to seek advice from your financial advisor, attorney and accountant for help in making these decisions.

Hitting the Jackpot

As a result of hard work or simple luck such as being a lottery winner, you may find yourself in a very secure financial position.   This may lead to becoming the owner of pricey new items, such as cars, yachts, homes and businesses. If you find yourself in this situation, examine your estate plan in more detail. Estates with more assets carry a higher tax burden and can lead to more infighting about who gets what assets among the family members. To avoid these situations, it may be wise to set up a Trust with ironclad language so that it will be harder for people to manipulate other family members into doing something they’ll regret. Then, make sure to share your will and discuss it with those people who will inherit your assets or play an important role in managing your estate after you’re gone. This single tip has proven to be the most productive part of the estate planning process and helps ensure everyone understands your wishes while minimizing surprises.

Purchasing or Refinancing a Home

Anytime you purchase or acquire a new asset, such as a home or other real estate, make sure that the legal owner of that asset is your trust. Sometimes people forget to do this or lenders will take the property out of your trust during a refinance, which makes these assets go through the public probate courts. If your properties are not in your trust, work with your estate-planning attorney to help transfer the properties to the trust.

Opening New Accounts

To avoid probate and make sure the transfer of your title to beneficiaries goes smoothly, make sure all savings accounts, mutual fund accounts, brokerage accounts, life insurance policies and checking accounts are also in the trust. While it is not often intuitive, consider opening large bank accounts, such as those opened after acquiring an inheritance, in the name of the Trust right from the beginning to avoid any unnecessary complexities for your heirs.

In addition to new accounts, here are some other commonly overlooked items that you may want to title to your trust:

• Bank accounts
• Brokerage accounts
• Life insurance policies
• Businesses
• Cars, boats and planes
• Collectibles and antiques

Family Additions

Adding another member to the family is one of the most exciting times in life, but it’s not an excuse to forget to update your estate plan. Having a child requires major revisions to your estate plan, not only in who will inherit your estate but also who will fill the role of executor in the future. Of course, over the course of time, these elements will also change as your children grow up and mature.

Major Health Changes

Unfortunately, some people will face a major health crisis and have no estate plan in order. Whether it’s a cancer diagnosis or another chronic illness, there’s no point in stalling any longer. Make sure that your estate is in order and especially make sure that you have an Advanced Directive form on file. You may also want to talk to your doctors and attorneys about completing DNR and POLST forms if they are available in your state. That way you can make sure that you get the exact medical treatment you want and not what someone else thinks is best for you.

Changes to Your Business

If your ownership interest changes in a business, if partnership interests change, or if a business is purchased or sold, you need to see what impact it has on your estate plan. You may want to consider creating a business succession plan or asset distribution plan in the event you decide to sell your business. There may also be tax implications that can impact your heirs without proper planning in advance.

The passage of time is reason enough to take a periodic look at your estate plan to make sure everything is up to date. At a minimum, you should set a reminder to review your estate plan every 3-5 years, even if there have been no changes. Sometimes you’ll notice something that needs to be changed or remember that you forgot something once you look it over again.