Whether your assessed value is up, down or flat, you may be able to save money by protesting your property valuation.  Over the life of a typical mortgage, even a modest savings of just $200 per year on your property tax bill could grow to almost $10,000.

Here are some guidelines to follow when contesting your property value:

• Gather comparable information. Gather your property information, including square footage, lot size and number of bedrooms. Take note of the appraised value of your property and review neighboring properties for comparison.
  • Compare Market Value. Start by consulting a real estate website such as Zillow.com.  Also, contact a local real estate agent and request a free Comparative Market Analysis (CMA).  Be sure that you are comparing properties of similar size and amenities.
  • Compare Tax Values. Find similar homes in your neighborhood and look up the assessed values for the homes on your appraisal district’s website.  This will let you know if your home’s value is unequal compared with other similar properties.
  • Check your exemptions. Ensure that your appraisal notice reflects all exemptions available to you, such as homestead or over age 65.
  • Complete the form – and don’t miss the deadline! Complete the protest form that accompanied your appraisal notice.  Be sure to select the appropriate reasons for your protest, as this will affect the type of evidence you can submit at the hearing. Submit the form to your appraisal district prior to the filing deadline (May 31^st for most counties in Texas). The appraisal district will send times and information for informal and formal hearings.
  • Make your case. Go to the informal hearing with your data prepared in a simple, organized manner. Present your information to the board. If the appraisal district agrees they will adjust your tax appraisal value.

Some appraisal districts offer homeowners the opportunity to file a protest electronically.  Review the appraisal notice and related information mailed to you by your appraisal district to see if this convenient option is available.

A property tax representation firm can let you know whether it is worth your time and effort to protest.  Some are paid strictly by a contingency fee.  If you would like advice or representation, contact your Wealth Planning team and they can provide referrals.

What is tax-loss harvesting? First, this strategy entails selling the underwater security to realize a capital loss for tax purposes.  The second step is to purchase a similar but not substantially identical security to replace the one that was sold at a loss to maintain your target asset allocation.

So, what have you gained? Tax-loss harvesting can reduce your current and future tax bill. The loss can offset any capital gains recognized this year or reduce ordinary income by up to $3,000. For taxpayers in the 25 percent federal tax bracket, this can mean $750 or more in tax savings. Unused losses can be carried forward to future years.

Even if other investments have not gone up in value this year, you may receive capital gain distributions from mutual funds.  Not every fund distributes gains each year, and a fund may even make a capital gain distribution in a year where it has posted a loss.  We receive information regarding estimates of capital gain distributions ahead of time and use this information to plan for tax-loss harvesting activities.

When the replacement security is sold in the future, it will have a lower cost basis and thus a higher gain.  However, tax-loss harvesting has enabled you to realize a current tax benefit today by offsetting capital gains and ordinary income in the near term.  The savings that you realize may be compounded over many years until the security is eventually sold.

If you have questions about this topic, or have realized gains or losses in a taxable account that is not under our management, please contact a member of your planning team.

We do not provide tax advice, please consult a tax professional if you have any questions.

There are many steps that you can take both before and after the occurrence of a natural disaster.  In this blog posting we would like to address just a few measures to consider that may help protect and preserve your personal belongings and financial security.

Here are a few precautionary measures to take now:

• Safeguard your home. Consult your insurance agent for specific actions to take that can protect your home.  This may include storing combustibles, such as propane and gasoline, away from the house and keeping your home clear of tree branches and leaves.
• Protect important files and records. Store valuable documents in a fire-resistant safe or at an off-premise location such as a safe deposit box.  These may include wills, birth certificates, passports, insurance cards and other legal documents. Regularly back up important computer files, including digital picture and video files, using an online backup service such as SOS or Mozy. Features and pricing vary so it is recommended to review several backup services to choose the one that is right for you.
• Take inventory of your belongings. In the event of a claim you may need to prove you owned certain items and also verify their worth. The best way to do this is to go through your house with a video camera. Walk through each room in your home, opening closets and jewelry boxes, making sure you capture an image of everything of value to you. Remember to include the attic, basement and any storage units. You can also take photos of items, including serial numbers for electronics, and make a list on paper. Be sure to keep these videos, photos and lists in a safe location away from your home or backed up online with your other computer files. Iphone and iPad apps to track home inventory are also available.
• Insure for replacement cost. There are two basic kinds of coverage for your home’s contents– replacement cost and actual cash value. Contact your insurance agent to verify that your homeowner’s policy provides replacement cost coverage for both dwelling and personal property. Replacement cost will pay for the damaged item to be replaced with a new item of similar quality. Actual cash value coverage, which is less expensive to buy, pays an amount equal to the replacement cost less depreciation.
• Consider inflation. The cost required to build a home increases each year. It is worth consulting with your agent to verify that your dwelling coverage is adequate and to request an inflation guard, which automatically increases the coverage each year.  Also, be sure to factor in any improvements or remodeling you’ve done that may have added to the value of your home.

In the event a natural disaster threatens your area, here are some actions to take:

• Prepare a “Go Bag”.  If a natural disaster threatens to strike in your area, it is a good idea to gather important or irreplaceable items ahead of time. This may include important documents including health insurance cards, property and casualty insurance cards, birth certificates, passports, photo identification, proof of address, as well as photo albums.  Keep these documents by the door in a waterproof and portable container.  Also include medication for at least one week, a list of current medications and dosages as well as doctors’ names and numbers.
• Be proactive. As soon as possible, make a thorough list of damaged items. This may help process your claim more efficiently. Document the damage with photos or videos. Provide the insurance company with a copy of your home inventory. In the meantime, don’t throw out damaged items, especially expensive ones, until an insurance company representative has had a chance to assess the damage and file a claim report.  
• Know your coverage. If you have comprehensive auto insurance, your vehicle will be covered for damage, destruction, theft or vandalism. Also, vehicle contents are typically covered under the personal possessions portion of a homeowner’s policy. Homeowner’s insurance policies often cover theft and vandalism, so losses due to looting in the wake of a disaster should be paid. In the event that your home is badly damaged and requires repairs or rebuilding, loss of use coverage will reimburse the policyholder for living expenses that exceed those that a homeowner would normally incur while living in their home. Covered expenses may include temporary housing, the cost of temporary storage and moving, laundry costs, and the cost of some meals. Most policies place limits on benefits by enforcing time constraints or by restricting the maximum reimbursement to a percentage of the coverage amount on the home.

Experiencing a loss due to a natural disaster can be overwhelming. Ultimately, your personal safety and that of your loved ones is of primary importance. However, taking these steps now may make you better equipped if you find yourself faced with a natural disaster in the future.

Sources: http://www.insurancejournal.com/news/west/2007/10/23/84486.htm; http://www.insure-net.com/home.htm

We are often asked what books we read that may be of interest to our clients and professional colleagues. Here are some titles to consider that we hope you will find interesting and insightful.

Investments

The Investment Answer by Daniel Goldie & Gordon Murray

Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

The Four Pillars of Investing by William Bernstein

Financial Planning

Wellbeing: The Five Essential Elements by Tom Rath and Jim Harter

Family: The Compact Among Generations by James E. Hughes, Jr.

Family Wealth—Keeping It In the Family by James E. Hughes, Jr.

Raising Financially Fit Kids by Joline Godfrey and Kit Hinrichs

• The Federal Reserve oversees open market operations as their primary tool to implement monetary policy. By increasing or decreasing the amount of money in the banking system, the Fed attempts to steer short-term interest rates.
• Interest rates and bond prices are inversely related. An increase in rates leads to a decrease in bond prices and vice versa.
• Interest rates and bond yields are directly related. An increase in rates leads to higher bond yields, while the inverse is true as well.
• Duration is a measure of the sensitivity of a bond’s price to changes in interest rates. Bonds with low durations (1-2 years) are less sensitive to interest rate changes than bonds with longer durations (15-20 years). A rule of thumb is that if interest rates increase by 1%, a bond fund’s value will drop by approximately the fund’s duration.  Therefore, if rates where to increase by 1%, a bond with a short duration of 2 years (value would drop by approximately 2%) is less sensitive to this change when compared to a bond with a long duration of 10 years (value would drop by approximately 10%).
• Portfolio turnover is important in the bond fund structure. A fund which invests in primarily short-term bonds will be able to reinvest at a much quicker pace than a fund with longer term bonds. This turnover allows for reinvestment in higher yielding bonds whereas the longer maturity portfolio must do so over a longer period of time.
• Bond funds allow for dividends paid at the end of each month to be reinvested automatically. This benefits investors in periods of increasing interest rates with a long term investment horizon. As rates increase, the value of underlying bonds falls and reinvested dividends benefit from a lower cost.

There is a great deal of uncertainty as to when interest rates will increase again. However, investors with a long term investment approach who hold short-term, high quality bonds benefit as these positions with low interest rate sensitivity can react quicker to rate changes than their longer term counterparts.

Please contact your financial planner if you have any questions regarding this blog entry.

Most thieves still obtain personal information through traditional rather than electronic channels. In the cases where the method was known, 68.2% of information was obtained off-line versus only 11.6% obtained online.

Conventional methods such as through lost or stolen wallets, misappropriation by family and friends, and theft of paper mail are among the most common ways thieves gain access to information.

You may never be able to completely prevent your identity from being stolen, but here are some steps you can take to help protect yourself from becoming a victim.

• Review your credit report periodically. Check to make sure that all the information contained in it is correct, and be on the lookout for any fraudulent activity.  www.creditkarma.com is a great resource that allows you to securely monitor your credit and actual credit score over time for free without negatively impacting your credit.
• You may get your credit report for free once a year. To do so, contact the Annual Credit Report Request Service online at www.annualcreditreport.com or call (877) 322-8228.
• If you need to correct any information or dispute any entries, contact the three national credit reporting agencies:

• Equifax: www.equifax.com (800) 685-1111
• Experian: www.experian.com (888) 397-3742
• TransUnion: www.transunion.com (800) 916-8800

• To stop telephone calls from national telemarketers, list your telephone number with the Federal Trade Commission’s National Do Not Call Registry by calling (888) 382-1222 or registering online at www.donotcall.gov
• To remove your name from most national mailing and e-mailing lists, as well as most telemarketing lists, write the Direct Marketing Association at 1120 Avenue of the Americas,    New York, NY 10036-6700, or register online at www.dmachoice.org
• To remove your name from marketing lists prepared by the three national consumer reporting agencies, call (888) 567-8688 or register online at www.optoutprescreen.com

Please contact your financial planner if you would like more information about proactive ways to mitigate potential identity theft.

The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 was signed into law on December 17, 2010.  It extended existing federal income tax rates as well as tax rates on long-term capital gains and qualifying dividends for two additional years.  It also includes a patch for alternative minimum tax that is good for 2010 and 2011.  We’ve already seen with some clients how this will translate into thousands of dollars of savings on their tax liability.

There is more clarity with estate tax, albeit temporarily. For 2011, the estate tax exemption amount will be $5 million per person (and will be indexed for inflation in 2012), and the top estate and gift tax rate for these years will be 35%. The gift tax (reunified with the estate tax) now has a $5 million dollar exemption amount and the generation-skipping transfer tax, now with a $5 million exemption effective January 1, 2010, has a 35% tax rate for 2011 and 2012. In addition, for 2011 and 2012, when one spouse dies, any unused portion of that spouse’s estate tax exemption amount may be transferred to the surviving spouse.

For this year only, the employee portion of the Social Security retirement component of FICA tax is reduced by 2%. Instead of paying 6.2% of covered wages up to the taxable wage base ($106,800 in 2011), this rate will be reduced to 4.2%. Self-employed individuals will also see this reduction—instead of normally paying 12.4% for the Social Security portion of their self-employment taxes, they will pay at the rate of 10.4% for 2011.

For higher-income individuals itemized deductions and personal and dependency exemptions will not be reduced; for individuals in the 10% or 15% marginal income tax bracket, a special 0% rate on long term capital gains will generally continue to apply.

Please contact your financial planner and see how these changes and other provisions of the Act impact you.