 
Joe's practice focuses around Tax Returns,
Financial Service, 401K roll overs, Estate planning and Income Distribution
Planning.
Joe holds the AICPA certification of "Personal Financial Specialist" and is a
member of the PFP "Personal Financial Planning section of the AICPA.
The
AICPAs Personal Financial Planning Section is the premier provider of information,
tools, advocacy and guidance for CPAs who specialize in providing estate, tax, retirement,
risk management .
CPA e-mail should be sent to hicks.j@tx.rr.com
.
Important Tax & Financial Calculators
What
is my potential estate tax liability-
2011 federal income
tax estimator
Capital gains (and losses) tax
estimator
How
much of my social security benefit may be taxable-
Should I itemize or take the
standard deduction-
Tax freedom
day
Do I have too
much debt-
Advantages
of a 529 College Savings Plan
How much
home can I afford-
Should
I convert to a bi-weekly payment schedule-
How much life
insurance do I need-
What is my life expectancy-
What are my needs for burial
and final expenses-
What may my 401(k) be worth-
What may my 457
Plan be worth-
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Fall 2012
Office hours Monday through Thursday 10:00am
to 5:00pm by appointment
Friday - in and out of office, call before coming. Drop box by the door
Business phone answered most any time.
Other Pages: Social
Security 2012 Mileage Rates
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us on Face Book for more current information
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Joint Tenants With Rights of Survivorship or Tenancy In Common
It's
common practice for couples and business partners to take title to each other's bank
accounts, brokerage accounts, real estate and/or personal property as joint
tenants with rights of survivorship
(JTWROS).
JTWROS is a type of account that is owned by at least two people, in which all tenants
have an equal right to the account's assets and are afforded survivorship rights in the
event of the death of another account holder. In simple terms, it means that when one
partner or spouse dies, the other receives all of the money or property. This is why many
married couples and business partners choose this option. However, there are some things
you should consider before entering joint tenancy. Here we'll take a look at the
advantages and disadvantages of this arrangement.
Joint
Tenancy Can Help Avoid Probate
When
an individual dies, his or her will is reviewed by a probate
court. The court's purpose is to decide whether the will is valid and legally binding, as
well as to determine what liabilities and assets the deceased may have. After a thorough
review, any remaining assets after all debts are settled are then distributed to heirs.
If an individual dies without a will, a complicated process takes place within the probate
court because the court does not have any written evidence of how the deceased would like
the assets distributed.
The downside to the probate process is that it can take weeks, months - or years when
dealing with complicated estates - to sort through the deceased's assets and liabilities.
This means it will take even longer for heirs to receive their inheritance.
However, because JTWROS automatically transfers ownership to the other spouse or business
partner upon the death of the first partner, it avoids probate. This is an enormous
advantage for those who need the funds immediately.
Both
Parties Have Equal Responsibility
When
a married couple or two business partners own an asset that is titled JTRWOS it means that
both individuals are responsible for that asset. In other words, they both enjoy its
positive attributes and share in the liabilities
equally. This also means that neither party can incur a debt on the asset without
indebting themselves.
For example, a husband, knowing that he is about to divorce his wife, cannot obtain a loan
against the value of the couple's home with the intention of leaving the debt with his
wife. The moment the husband takes out the loan, he is equally responsible for its
repayment. Similarly, the husband may not lease a portion of the property without sharing
the proceeds with is wife.
There
Is Continuity
When
someone dies, their assets are often frozen until the probate court determines whether the
assets are encumbered,
or until a determination is made about how to distribute them to heirs. This can be a
problem for a surviving spouse who has outstanding debt or expenses.
However, by owning an asset as a joint tenant, the surviving spouse or business partner
may use the property in any fashion he or she sees fit, whether that means holding it,
selling it or mortgaging it. In fact, the law states that immediately upon the death of
one tenant, ownership is transferred to the survivor.
Dangerous
In an Unstable Relationship
Having
both owners own the entire asset is a disadvantage in an unstable relationship, regardless
of whether the relationship is personal or professional. For example, if a couple is going
through marital problems or two business partners are on the outs, neither party can sell
or encumber the asset without the other party's consent. Or, suppose the asset is owned
with an estranged child. Before the asset can be sold, the parent(s) would have to get
permission from the child and, in some states, from the child's spouse as well.
Bank
Accounts May Be Frozen
If
the deceased is heavily in debt and the probate court is afraid that the surviving spouse
or business partner may liquidate
the funds in order to avoid paying that debt, the account could be frozen by a court. In
addition, an account may be frozen if there is a dispute over whether the surviving spouse
or business partner actually contributed to the account, or if the ownership was merely
for convenience. In some cases, the asset may still be frozen upon death of either partner
or spouse.
Partner
Controls the Asset
When
the surviving spouse or business partner assumes control over the joint asset upon the
death of the first spouse or partner, he or she may then sell it, or bequeath it to
someone else. In other words, the deceased loses control over the ultimate disposition
of the asset entirely.
Alternative
To Joint Tenancy
The
alternative to joint tenancy is tenancy
in common.
Some of the benefits to this account are:
- Each
owner owns the asset. Each
owner may own one half of the asset or a percentage or fractional ownership can be
established. Also, each party can legally sell his or her share without the other party's
approval or consent.
- The
asset will pass to heirs. Unlike
with JTWROS ownership, of the asset will not automatically transfer to the surviving
account owner upon the first owner's death. In fact, the asset will pass according to
provisions made in the deceased's will. Typically, most tenants leave the asset to their
heirs. However, it could still pass to the other account owner if the deceased makes such
a provision in his or her will.
- Assets
can be accessed. If
one owner becomes disabled or dies, the other owner should still be able to access his or
her portion of the assets. This means that he or she can sell a portion of the asset or
dispose of it in any manner without having to wait on a judgment from a probate court.
Bottom
Line
Both
JTWROS and tenancy in common have attractive features. However, prior to taking title to a
certain asset, all individuals must first assess their situations to determine whether one
option is more favorable than the other.
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What
is a CPA Personal Financial Specialist?
A
Personal Financial Specialist (PFS) is a Certified Public Accountant (CPA) who meets the
financial planning requirements established by the American Institute of Certified Public
Accountants (AICPA). The credential is awarded only to CPAs who demonstrate the requisite
experience, education, examination, and ethical standards established by the AICPA.
What
are the requirements?
In
order to obtain the PFS credential, an applicant must:
- Be a CPA in good standing
- Be a member in good standing with the AICPA
- Earn a minimum of 80 hours of personal financial planning
education
- Pass a comprehensive Personal Financial Planning exam
- Have at least two years (or 3,000 hours equivalent) of
full-time financial planning business experience
- Agree to be bound by the AICPA Code of Professional Conduct
- Meet continuing education requirements
In addition Joe is insurance licensed in the State of Texas
| Lets Talk about Dividends
The
tax treatment on dividends is currently quite low by historical standards. Through the end
of 2012, those in the 25% tax bracket and above will pay a 15% tax rate on qualified
dividends, while those in the 10% and 15% tax brackets will owe no taxes at all on their
qualified dividend payouts. (Note that dividend tax treatment is scheduled to return to
pre-2003 levels in 2013.
But
what makes a dividend qualified? And more to the point, what types of dividends don't
count as qualified?
According
to the IRS,
a dividend qualifies for the favorable, long-term capital gains treatment if it meets
certain criteria. Specifically, the dividend must have been paid by a U.S. corporation, by
a foreign corporation that is eligible for benefits under a U.S. tax treaty, or by a
corporation whose shares trade on a U.S. exchange. Finally, for dividends to be taxed as
capital gains, the stockholder must have held the stock for more than 60 days during the
121-day period that begins 60 days before the ex-dividend date.
Dividends
in certain categories won't qualify for the low tax treatment. They include the following.
REITs
Certain
Foreign Stocks
Some
Equity-Income Funds
Securities
Held for a Short Time |
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Link
to our Location
Additional
information can always be found at the IRS Web site, http://www.irs.gov.
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