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Financial Planning

A Use for Intra-Family Loans

 February 15 2017     Anna Pfaehler
As mentioned in my previous post, borrowing from The Bank of Mom and Dad can be very attractive for a child mostly because of the low interest rates. However, the strategy does benefit the parents too, especially when trying to achieve the nearly universal goal of those with a taxable estate – reduce Uncle Sam’s inheritance as much as possible.  The IDGT The income tax c...

Intra-family Loans

 February 8 2017     Anna Pfaehler
Borrowing from Mom and Dad after a certain age can make you bristle if you’re otherwise independent and accustomed to supporting yourself. However, it can make solid financial sense for both parties in certain cases. Interest Rates An intra-family loan should have an interest rate of at least the Applicable Federal Rate (AFR), which is published monthly by the IRS here (https://app...

Millennials, Coffee and Compound Interest

 January 30 2017     Anna Pfaehler
I have a confession – I am a millennial. I like participation awards. I value experiences more than things. And I have a deep love for coffee. Anyone who has ever heard me talk about budgeting knows my “fun money” goes to Starbucks and my husband’s goes to craft beer (he’s also a millennial). A recent survey from Acorns, a microinvesting app that saves spare chan...

Why the Second Law of Thermodynamics Matters in Financial Planning

 January 19 2017     Anna Pfaehler
The second law of thermodynamics states that the state of entropy of the entire universe, as an isolated system, will always increase over time – or things fall apart. Harvard Professor Stephen Pinker recently wrote for Edge.org: “Not only does the universe not care about our desires, but in the natural course of events it will appear to thwart them, because there are so many more ...

2017 Income Tax Proposals

 December 13 2016     Anna Pfaehler
Income tax reform is perpetually a political football. With Republicans in control of both the legislative and executive branches of the government, we are likely to see substantial income tax reform in 2017 instead of the usual “punt.” At HORAN we are watching the plays develop and considering how our clients may be affected. The following is an overview of what we may see in the next...

Why 65?

 November 21 2016     Anna Pfaehler
Young clients with decades until retirement often do not know when they want to retire. That far out, pinpointing an age is not terribly important because their situation is likely to change and what they want now might not be what they want then. In these cases, we will often begin by projecting what retirement could look like at 65 and adjusting from there. A client recently asked me to expla...

Entitlement Math

 October 20 2016     Anna Pfaehler
Client A: “I’ve worked my whole life, earning far more than Client B. Why is my benefit not larger than his?” Two reasons:  Wages subject to Social Security are capped. In 2016, only the first $118,500 of earned income is subject to Social Security taxes (FICA). The income used to calculate your Social Security benefit is likewise caped. Someone who earns $350,000 ...

Rollover Relief

 October 4 2016     Anna Pfaehler
“To err is human; to forgive, divine.”  - Alexander Pope The IRS has acknowledged that taxpayers are human and sometimes we humans make mistakes. Especially, if it is something we are unaccustomed to doing like executing a rollover of a retirement account.  There are two methods to rollover a retirement account:  A direct rollover or trustee-to-trustee transfer....

Changes to Valuation Discounts for Family Businesses

 August 30 2016     Anna Pfaehler
At the beginning of the month the Internal Revenue Service (IRS) issued proposed regulations for Section 2704, which pertains to valuation discounts. The new changes are broad reaching and will affect those intending to transfer ownership of a family business to the next generation.  Valuation discounts have long been a staple in planning for the transfer of closely held businesses eithe...

The Gift of Education

 August 4 2016     Anna Pfaehler
The National Center for Education Statistics lists the average tuition, fees, room and board costs of in-state public, 4-year colleges at $18,632 and private, 4-year colleges at $37,990 for the 2014-2015 school year.  Because this is an average, half of schools in the U.S. are more expensive. For example, my alma mater estimates total cost of attendance at $65,490. A quality college education...
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