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Life, Liberty, and Tax-Advantaged Opportunities #munis #529s #RothIRA #IRA #HSA

By Taxes

Americans are passionate about taxes. In recent years, Americans have spent more on taxes than on food, clothing, and housing combined.1 The Tax Foundation estimates Americans will pay $3.4 trillion to the federal government and $1.8 trillion to state and local governments in 2019.2

Selecting investment vehicles that emphasize tax-advantaged opportunities could help reduce the amount of taxes you owe. There are tax-free and tax-advantaged options available. Here are a few to consider:

Municipal bonds, also known as munis, help provide funding for schools, hospitals, utilities, and other projects. The interest is free of federal income tax. Some bonds may pay interest that also is exempt from state income tax. Generally, this is true if you reside in the state issuing the bond.3

At first glance, munis may seem less attractive than corporate bonds or Treasuries because municipal bonds generally offer lower yields than taxable bonds of similar maturity and quality. For instance, a muni yielding 3.3 percent may not be as enticing as a taxable bond yielding 4.8 percent, until you take taxes into account.4

Imagine: an investor in the 35 percent tax bracket has a choice between investing in a federally tax-free municipal bond yielding 3.3 percent or a taxable bond yielding 4.8 percent. Which will provide more income after taxes?4

In this example, the tax-free bond provides more income. Because the investor is in a higher tax bracket, he is able to benefit from owing no federal taxes on the muni bond. As a result, the lower yielding bond delivers more income to the investor than the taxable bond.5

In this case, the investor would need to find a taxable bond of the same maturity and quality yielding 5.08 percent to earn as much income as a muni bond would deliver.*5

Roth Individual Retirement Accounts (IRAs) are tax-advantaged accounts. Owners pay taxes on contributions made to Roth IRAs but the account earnings grow tax-free, and every penny earned can be withdrawn tax-free, as long as certain conditions are met.**6

When investors start saving early, Roth IRAs have the potential to offer substantial tax-free income later in life. If a 27-year-old saved $100 a month until full retirement age (67), and earned 6 percent a year on average, the account would be worth more than $198,000 ($48,000 saved and $150,000 in earnings). All of it could be withdrawn tax-free.6

Another Roth IRA advantage is investors don’t have to take required minimum distributions (RMDs) from a Roth IRA at age 70½. As long as an owner has held an account for five or more years, the beneficiary who inherits the Roth can take tax-free distributions, too. (Beneficiaries are subject to RMDs.)6

Roth retirement plan contributions are an option in some workplace retirement plans. Talk with your company’s human resources group to find out whether Roth contributions are allowed. Contributions to Roth plan accounts are made with after-tax dollars, but any earnings grow tax-free and distributions are tax-free, just as they are for Roth IRAs. An important difference is RMDs must be taken from Roth plan accounts at age 70½.7

Health Savings Accounts, or HSAs, offer Americans a way to save for current and future healthcare expenses in tax-advantaged accounts. You can open an HSA as long as you participate in a high-deductible health plan (HDHP). It’s a choice worth considering because HSAs have a triple tax advantage:8

HSA contributions are tax-deductible, interest and earnings in the account grow tax-free, and distributions are tax-free when taken for qualifying medical costs.

HSAs are different than Flexible Spending Accounts (FSAs). You own the HSA and, if you don’t spend the money in the account, you keep it until you need it. The account is yours, even when you change employers. Employers own FSAs and unspent funds are often forfeited at year-end.8

Fidelity estimated the average 65-year-old couple, retiring in 2019, would need about $285,000 for medical expenses during retirement, excluding long-term care. The estimate assumes the couple does not have employer-provided retiree healthcare coverage and does qualify for Medicare.9

529 College Savings Plans are a tax-advantage way to save for education. States and educational institutions sponsor 529 plans. Some offer prepaid tuition plans and others offer education savings plans. Contributions are considered to be gifts for tax purposes, so a couple could contribute up to $30,000 for each child each year.10, 11

Anyone can open and contribute to a 529 College Savings Plan, including parents, grandparents, or friends. Contributions are not federally tax deductible, but earnings grow tax-free and withdrawals used to pay qualified school expenses are tax-free.12

Account holders can withdraw up to $10,000 in tuition expenses for private, public, or religious elementary and secondary schools per year, per beneficiary.12

In addition to the options described here, there are many investment strategies and opportunities that deliver tax advantages to investors. If one of your goals is to pay as little as possible in taxes, there are a variety of ways to do it. Give us a call to see how we can help.

* Tax equivalent yields are found by dividing the tax-free yield by 1 minus tax bracket. In this case 3.3 percent / 1-35 percent = 5.08 percent.5

** As long as you have owned the Roth account for five years and you’re age 59½ or older, you can take distributions anytime you want without owing federal taxes.6














Where There’s a Will, There’s a Plan

By Estate Planning, Food for thought, Wills

Throughout history people have made inheritance choices that are inexplicable to others. In 1926, Harry Houdini left his magical equipment to his brother, his pulled-from-the-hat rabbits to the children of friends, and a series of random words to his wife. The words were a code that would let her know when he was in touch from the afterlife.1

In 1968, Quaker State Refining Corporation heir Eleanor Ritchey left $4.5 million to her dogs. She had 150 of them. The will was contested and, by the time it settled, the value of the estate had increased to $14 million. The 73 surviving dogs received $9 million.2

Radio and television funnyman Jack Benny set aside a significant sum of money so that his wife would receive one long-stemmed red rose every day for the rest of her life.3

In a similar vein, in 1970, Janis Joplin bequeathed $2,500 “so my friends can get blasted after I’m gone.” Today, the amount would be equal to more than $16,000.4

Don’t follow Prince’s example

End-of-life planning can be complicated and a little scary. That may be why so many people don’t do it. After musician Prince Rogers Nelson died without a will in 2016, Gallup conducted a poll and found the majority of Americans don’t have wills. Gallup reported:5

• 32 percent of Americans age 65 and older don’t have a will
• 86 percent of Americans age 30 or younger don’t have a will
• 45 percent of Americans with income of $75,000 or more don’t have a will
• 39 percent of Americans with post-graduate education don’t have a will

Not everyone has an estate like Prince, but we can all learn from the unenviable state of his estate. In 2018, The Washington Post reported:6

“This month, the six heirs filed a heavily redacted motion challenging a potential ‘entertainment transaction’ they claim would be ‘an embarrassment to Prince’s legacy.’ And three half siblings have filed a petition questioning the estate administrator’s high legal fees, noting concern that ‘at the end…there will be little, if anything left to pass on to the Heirs.’ Draining the estate is also a fear for former colleagues who yearn to see Prince’s quiet dedication to philanthropy continued.”

Have a will and a plan

Clearly, procrastinating about writing a will or securing an estate plan is not unusual. There is a downside to procrastination, though. The momentary relief it provides often is overwhelmed by negative feelings, as well as heightened anxiety and stress.7

If you ever wake in the middle of the night troubled about what will happen to your children if something happens to you, or concerned your ex may be the beneficiary named on your 401(k) plan, or worried your spouse will be able to keep the house when you’re gone, it’s time to put a plan in place.

There are a number of reasons why people avoid estate planning, writes elder law attorney Stuart Furman in the Senior Living Blog. They include:8

• Estate planning isn’t easy. It requires thoughtful decisions about who should receive what and why.
• People don’t want to pay a financial planner or an attorney to draft and execute an estate plan, even if the plan will save money in taxes and legal costs over time.
• People fear giving too much authority to others, such as adult children who could make poor decisions about a parent’s care.
• People avoid discussions about death. No one likes to look potential mental incapacity or mortality in the face.

One way to get past some of these obstacles is to work with a trusted financial advisor who can coach you through the process. An advisor can help with many aspects of planning to make sure the plan you want is the one put into place. A good advisor can:

• Ask questions that will help clarify your thinking about how to divide your estate
• Recommend options that help meet the goals you set for your estate
• Facilitate meetings to communicate the plan to your family and other heirs
• Coordinate with your attorney, accountant, or any other advisors to put your plan in place
• Review the plan and make recommendations required over time

Even if you don’t wake up in the middle of the night, it’s a good idea to have a will so any assets left behind go to the people or organizations you choose – and not to legal fees, taxes, and heirs chosen by a probate judge.9

If you would like to learn more about the estate planning process or have a will and estate plan that have not been updated recently, get in touch. We’re happy to help.


Do you Have a Plan for your Digital Assets? You should.

By Estate Planning, Food for thought

Digital Assets

Digital assets – are they covered in your current Will?

According to various surveys more than half of all American adults don’t even have a Will. So by default, most people haven’t planned for their digital assets.

If you have a Will, you need it to specify that your executor can control your digital assets. It means accessing, managing, storing and retrieving them.

We usually think of digital assets in terms of email and social media accounts. Those are important, but it also pertains to cryptocurrency.

If you have any Cryptocurrency, (think Bitcoin or Ethereum, or any of the many others), you need someone to be able to access those accounts when you die. You need your Executor to be able to do that, or you could just lose those investments, and that would be terrible. Also, your Executor needs to be able to access your other digital assets and those might include other types of currencies.

Again, make sure that you have a Will in the first place, and that when you have a Will, you give your Executor power over your digital assets so they can do what they need to. Everything is digital these days, you can’t die without it.

My name is Mike Garry, and my company is Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. (That’s in Bucks County). Our law firm is Yardley Estate Planning, LLC and is in the same place. We only do Estate Planning work and I am licensed in Pennsylvania and New Jersey.

If you’d like to talk about this or anything else, please reach out: 267-573-1019, or @michaeljgarry

Click on the hyperlinks for the: Yardley Wealth Management and Yardley Estate Planning YouTube channels.

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2019 Estate and Gift Tax Update

By Estate Planning, Food for thought

2019 Estate and Gift Tax Update

For 2019, the Federal Estate and Gift Tax exemption amount has been raised to $11,400,000, from $11,200,000 due to an inflation adjustment.

This is the amount each person can pass before owing any federal estate taxes. If you are married, you and your spouse can each claim the exemption for a total of $22,800,000. It means that very few people need fear the estate tax.

In 2018, of the many millions of people who died, there were about 1,890 taxable estates according to the Tax Policy Center.

By comparison, in 2013 the exemption amount was $5,000,000 per person and there were about 4,687 taxable estates.

In the year 2000 the estate exemption was only $675,000 and there were about 52,000 taxable estates that year.


Do You Know What a QCD is? Should You?

By Estate Planning

Do you know what a QCD is? It’s a Qualified Charitable Distribution.

It is taking your Required Minimum Distribution from your IRA if you’re over 70 1/2 and having the money sent directly to a charity or charities of your choice.

When you do that, you don’t get taxed on that money coming out because it’s a charitable distribution. It does not increase your adjusted gross income like a regular IRA distribution would.

You have to be 70 1/2 and the money has to go directly from your IRA to the charity, so the custodian of your account has to send it via the instructions you make to the custodian on its form.

It’s a little complicated. You can’t go above your RMD for it. You need to use it for your RMD. The limit is $100,000 per person per year and it’s not per IRA. So, if you have multiple IRAs you could do some from different IRAs. Finally, it can only come from an IRA or an inherited IRA, not a 401K or a 403B.

Again, QCD, Qualified Charitable Distribution may come in handy this year now that there are higher amounts of standard deductions on taxes and it’s a little bit harder to itemize or less likely that people would itemize. If you make a QCD it will reduce your taxes even if you don’t itemize because it never counts as income in the first place.

Mike Garry, Yardley Wealth Management. We are a fiduciary, fee-only financial planning, and wealth management firm in Newtown, Pennsylvania. That’s in Bucks County. If you’d like to talk about this or anything else, please reach out: 267-573-1019, or @michaeljgarry

Should I use Software for my Estate Planning Needs?

By Estate Planning, Food for thought, Wills

Something that we’ve seen in the last couple of months that I’d like to point out, is that we’ve had three different set of married clients come in, having had done their prior Wills using software. They all used different packages, but they used software.

While it’s tempting to do that because the price tag is pretty cheap (I think they paid like fifty or seventy-five dollars each) and it’s tempting to do it in a pinch, I would be cautious. The software doesn’t know your entire situation within the context of the estate planning landscape and it doesn’t know the practical realities of the decisions you are making.

A lot of the decisions that clients need to make, it’s hard for clients to know what the repercussions are when they are going through the workflow of the software program.

I’m not bashing software, because we actually use software to create and draft our documents. We also have over 20 years of practical experience, so we know what will happen with the different choices clients make. We can talk to clients and guide them as they make some difficult decisions and let them know things that they’re not thinking about, the practical realities of administering their Wills or dealing with their advanced directives or any of the other documents. I’m not bashing software, but I’d be wary about using it for documents like these.

Don’t Die Without a Will

By Estate Planning, Wills

The other night I was out, and I heard people talking about the fact that, the Queen of Soul, Aretha Franklin died without a Will; and they thought that that meant that her money went to the state. It does not.

I think that the problem is that the term for it is really an unusual term. What happens if you die without a Will is that your stuff goes by intestate succession. So each state lays out its own rules for how your stuff would be divided if you died without a Will, and it typically goes to family members like spouses and children and parents.

It’s a little bit different in the different states, but it doesn’t go to the state. Even though it doesn’t, you should still have a Will, because what if you don’t want your spouse, your kids, or your parents or whoever to get your stuff?

You need to take the time to figure out and settle your affairs. You need to figure out what you want to happen and make it happen. Don’t be like the Queen of Soul and countless other celebrities, that didn’t plan; it’s really a shame.

Fully Fund or Even Over Fund a #529 Plan Account?

By Estate Planning, Food for thought, Wills

If you have the means, and want to support your kids’ or grandkids’ educational efforts, I would consider funding or even overfunding 529s for them.

If you use a 529 plan, and you use the Pennsylvania plan, it escapes inheritance taxes and grows tax free if the money is used for education for as long as the money is in the plan. Now that means, you might want to consider funding it more fully than it might have been in the past or fully funding it if you can keep it in the plan for a long time.

It’s tricky with education because you don’t know how much they’re going to need because few pay the sticker price for private schools, and you don’t want to overfund it because it is stuck with education; but if you think about it, if you do have the means, and you have enough for your own retirement and are otherwise secure, if there’s more in the child’s plan then they need and there’s money left over, that money can stay in that plan and then you can change it to another beneficiary, like say their children, and grow tax free and compounding for a generation.

That can really have a nice snowball effect, it might even be able to keep up with the cost of college inflation! Anyway, it’s not something that a lot of people can think about or do, but it’s something that I’ve been thinking a lot about the past couple months and I think for some, it’s something to consider. Think about full funding your 529 fully or even putting in more than you necessarily need. Again, if your retirement is secure and you don’t otherwise need the money. You could get some great tax and investment gains out of that.

You do Estate Planning for Your Loved Ones

By Estate Planning, Food for thought

Recently I was talking to a friend of mine who lost his dad and we talked for a while, as I had known his dad and we shared some stories.

He then started talking about all the stuff he must go through to settle his dad’s estate and finish up his affairs. It really struck me then, more so than any other time, that you do your Estate Planning because it’s something you’re supposed to do sure, but you really do it for your loved ones, your heirs, the people who are going to be left behind putting your affairs in order and transferring them to your beneficiaries.

Keep that in mind when you update your Wills and other documents and when you update everything that you have for them, like the organization of all your stuff.

Make sure your heirs know where they can find your things, make sure they know where to find passwords or they know where everything is.

You don’t necessarily have to tell them everything, although that might be really helpful, but make a nice list and make it easy for them to find and tell them where to find it. It’ll make things much much easier, and they’ll be going through something that is very hard when you pass, and if you can make it a little bit easier and do this, then it’s a great service you can do for them.

Ask an Elder Law Attorney – What can I do if my elderly parent is losing the ability to make decisions and manage his or her affairs?

By Elder Law, Estate Planning

Ask an Elder Law Attorney – What can I do if my elderly parent is losing the ability to make decisions and manage his or her affairs?

By Joellen Meckley, Esq.

Here are three things you should keep in mind:

  1. The best time to plan is now. Oftentimes, mental decline in old age does not happen suddenly, it happens gradually. The signs can begin to show in subtle ways, such a noticing your mother isn’t paying her bills or has bounced a check or noticing that your father’s personal hygiene has begun to decline. Don’t ignore those signs, because the best time to plan is when your parent is still relatively healthy and competent. Planning can always be done, but the longer you wait, options become more limited.


  1. These conversations are often difficult. Older adults are no different from the rest of us – some are more resistant to change than others and it can be difficult to raise this subject. If you as a child are worried that your relationship with your parent may be damaged by raising these issues, a subtle approach may work best. Consider relating what a friend is going through with her own elderly parents and use that as a spring board to raise the issue of how you’re worried about what to do if it ever happens to them. Many elderly parents don’t want their children to feel burdened and will be more motivated to address certain issues if they see the potential negative impact their problems could have on their adult child. If there are siblings involved, try to reach a consensus beforehand. A united front can be more effective.


  1. A range of options are available based on existing mental capacity.   Depending on how receptive the parent is, the first step is generally to meet with an elder law attorney who can lay out the options. Hopefully the parent still has some capacity in decision-making and can dictate what he or she wants. They can then be walked through the process of appointing financial and health care powers of attorney, which saves the process of going through court to have a legal guardian appointed. An elder law attorney also can lay out common techniques that can be employed or pitfalls to be avoided when managing the affairs of an aging parent, as well as putting you in contact with a wide range of support resources in the community who are available to help in such a situation such as geriatric care managers, home health agencies, and daily money managers.


Throughout the process, don’t forget that remaining as independent and autonomous as possible may be critical to your elderly parent’s long term well-being and happiness. Obviously, safety and independence must be balanced and decline often continues. However, taking the time to recognize their dignity and promoting independence whenever possible can go a long way in sustaining their quality of life into the future.