MFG Advisors Receive Five Star Awards

Please join us in congratulating Rosalind Frazier and Christopher Musuneggi on winning the 2014 Five Star Award! The Five Star Awards recognize providing quality services to clients, and we are honored to once again be selected. These mark the third and fourth Five Star Awards for our firm: Mary Grace Musuneggi, President & CEO, won in 2012 and Christopher won in 2013.

Additionally, Rosalind and Christopher will be featured in the July issue of Pittsburgh Magazine as 2014 Five Star Wealth Managers! Thank you to everyone who took part in the survey process that contributed to Rosalind and Christopher receiving this award.

We also thank you all for the loyalty and confidence you’ve given us throughout the years. If you feel one of our partners or advisors has provided you with excellent service, please pass our information along to someone you know. We promise to treat your friends and relatives with the same care and dedication.

Have you considered Charitable Gifting?

Have you considered Charitable Gifting?

Could it make the world a better place? Could it make sense financially?

Provided by Mary Grace Musuneggi, of The Musuneggi Financial Group

A gift to charity may prove to be a great financial favor to you. Some charitable gifting methods offer you notable tax advantages. Here’s a brief look at some popular options.

Charitable remainder trusts (CRTs). These trusts can be useful estate planning tools. People with highly appreciated assets – such as stocks or real estate – are often hesitant to sell those assets and reinvest the proceeds because of the capital gains taxes that could result from the sale. Could the CRT offer a solution to this problem?

CRTs are tax-exempt trusts. In transferring highly appreciated assets into a CRT, you may get: a) a tax deduction for the present value of your future charitable gift, b) income payments from the CRT for up to 20 years, and c) tax-free compounding of the assets within the CRT. Generally, you avoid paying capital gains taxes on the amount of your gift, and you may exclude an otherwise taxable asset from your estate.¹

After you die, some or all of the assets in the CRT will go to the charity (or charities) of your choice. (What about your heirs? You can structure a CRT in conjunction with an irrevocable life insurance trust so that they are not disinherited as a result.)¹

A charitable remainder annuity trust (CRAT) pays out a fixed income based on a percentage of the initial fair market value of the asset(s) placed in the trust. In a charitable remainder unitrust (CRUT), income from the trust can increase as the trust assets grow with time.²

Charitable lead trusts (CLTs). This is the inverse of a CRT. You transfer assets to the CLT, and it periodically pays a percentage of the value of the trust assets to the charity. At the end of the trust term, your heirs receive the assets within the trust. You don’t get an income tax deduction by creating a CLT, but your gift or estate tax could be markedly reduced.³

Charitable gift annuities. Universities commonly suggest these investment vehicles to alumni and donors. (The concept has been around since the mid-1800s.) Basically, you donate money to a university or charity in exchange for a flow of income. You (and optionally, your spouse) receive lifelong annuity payments. After you pass away, the balance of the money you have donated goes to the charity. You may also claim a charitable deduction on your income tax return in the year you make the gift.⁴

Pooled income funds. In this variation on the charitable gift annuity, the assets you donate are unitized and “pooled” with the assets of other donors. So essentially, you are buying “units” in an investment pool, like an investor in a mutual fund. The rate of return on your investment varies from year to year.

Pooled income funds often appeal to wealthier donors who don’t have a pressing need for fixed annuity payments. As just interest and dividends are paid out of a pooled income fund, it is possible to shield the whole gain from, say, a highly appreciated stock through such a fund. You get an immediate income tax deduction for a portion of the gift, which may be spread over a few consecutive tax years. Also, the balance of the assets left to the charity at your death may be greater than if a charitable gift annuity is used. Another nice option: you can put more assets in the fund over time, whereas a charitable gift annuity is based on one lump sum gift.⁵

Donor advised funds. A DAF is a variation on the “family foundation” concept. Unlike a private foundation, it is not subject to excise taxes, and it does not require employees and lawyers to implement and administer. You establish a DAF with a lump sum gift to a public charity. The gift becomes property of the charity, which manages the assets. (You can continue to contribute to the fund.) Each year, the charity determines the percentage of the value of the fund which will become available for grants or other programs. You advise the charity how to spend the money. DAF contributions are tax-deductible in the year that they are made. You may avoid capital gains taxes and estate taxes on the gift, and the assets may grow tax-free.⁶

Scholarships. These can be created at a school in your own name or in memory of a loved one, and you can set the criteria. Commonly, you and your advisor can work directly with a school to create one.

Life insurance and life estate gifts. Some people have unwanted or inadequate life insurance policies that may end up increasing the size of their taxable estates. In such cases, a policyholder may elect to donate their policy to charity. By doing this, the donor reduces the size of his or her taxable estate and enjoys a current tax deduction for the amount of the cash value in the policy. The charity can receive a large gift at the donor’s death, or they can tap into the cash value of the policy to meet current needs.⁷

Life estate gifts are an interesting option allowing you to gift real estate to a charity, university, or other non-profit – even while you live there. You may take a tax deduction based on the value of property, avoid capital gains tax, and live on the property for the rest of your life.⁸ (If somehow you can’t remain at that residence, the charity may opt to lease or sell it. You can gift all of a property or just some of a property as appropriate.)⁹

Give carefully.  Charitable gifting is a complicated estate planning tool and is not suitable for all clients. If you are thinking about making a charitable gift, remember that the amount of your tax deduction will ultimately depend on the kind of assets you contribute, and the variables of your individual tax situation. Remember also that some charitable gifts are irrevocable. Trusts are drafted by licensed attorneys who will charge a fee for the service. Be sure to consult qualified financial, legal and tax professionals for more information before you decide if, when and how to give.

Mary Grace Musuneggi may be reached at 412-341-2888 or info@mfgplanners.com.

www.mfgplanners.com

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

¹ library.findlaw.com/1997/Dec/1/128372.html

² giving.mit.edu/ways/planning/trusts/index.html

³ 360financialliteracy.org/Life+Stages/Retirement/Articles/Charitable+giving/Charitable+giving.htm

⁴ plan.gs/CategoryDetailList.do?orgId=327&categoryId=228

⁵ cmu.edu/giving/planned/pooled.shtml

⁶ worldlawdirect.com/article/570/What_are_donor_advised_funds.html

⁷ younglife.org/Giving/LifeIns.htm

⁸ purdue.edu/udo/planned_giving/life_estate_gift.shtml

⁹ ucsf.edu/support/trustsandbequests/realEstate.html

Exciting Announcement!

We are pleased to announce The Musuneggi Financial Group is expanding through the addition of Tweardy & Associates.

Like The Musuneggi Financial Group, Tweardy & Associates is a Pittsburgh-based independent and family-owned financial firm. This expansion will allow Tweardy & Associates to enhance the service they currently provide to clients, and it is the most recent development in The Musuneggi Financial Group’s consistent pattern of growth over the last decade.

Visit John Tweardy, Jr.’s bio page to learn more about him, and in the coming months stop by the office and say hello!

How long would $43,797 last you?

Did you know…

The average length of retirement is 18 years, and the average 50-year-old has just $43,797 saved, according to statisticbrain.com.

How long would $43,797 last you?

If you don’t love your answer to that question, join us for Girls Just Want to Have Funds (for Retirement!) workshop on Tuesday, April 29. See the attached flyer for all the details!

Why Not to Hold Physical Stock Shares

Remember how your grandmother bought you a share of Disney stock as a birthday gift; or when you bought a few shares of Duquesne light stock in the 70’s as “everyone was” because it was paying a great dividend? Did you buy those shares of XYZ Company because your bartender gave you a stock tip, or did you work for one of those numerous companies that issued stock awards or stock options? In many cases these gifts or purchases of stocks came with the actual physical shares for you to hold.

Today most stocks exist as “book entry,” meaning you don’t get the shares in your hands.

But years ago you could…and if you did, then you probably still have those shares in a safety deposit box, shoe box, jewelry box, or in the back of a closet somewhere. Maybe the Disney stock is in a frame hanging on the wall. Or perhaps you have no clue where the shares are, but you keep getting dividend checks on a quarterly basis.

Holding physical shares of stock brings a myriad of potential problems. If they are in fact lost, it can be very costly to replace them. If you want to sell them quickly, that is not possible as they need to be placed in an investment account and/or returned to the Transfer Agent of the stock company before this can be done.

If you need to transfer ownership due to divorce or death, this can be another time consuming issue. These shares could also end up in your Estate. They may need to be valued for inheritance tax purposes. They may need to be made available and valued if you go into a Long Term Care facility.

Tracy Zihmer, Estate Planning Attorney with Feldstein Grinberg Lang & McKee, P.C., reminded us that “having physical shares is a huge pain when settling an estate.” Tracy says, “The biggest advantage of having shares in your investment account with your financial advisors–like The Musuneggi Financial Group–is the ease of transfer after death. It is such a pain to transfer stock that is in paper form. Usually the stock must be transferred into the estate and then from the estate into the heirs’ individual accounts, and then they can sell it or not. In addition, each stock may have a different transfer agent and you have to go through each transfer agent separately–it’s a very time consuming and costly process; and then you may run the risk of when you get all of the paperwork filed, the stock company switches transfer agents and you have to start over again.”

If you receive dividends from physical shares and you like using them for income, you can continue to do that after switching those shares to an investment account. You may also be able to have them reinvested in additional shares or accumulated in another investment.

Remember, even though you may have initially bought the shares for “fun” or you laughingly thought your one share could be worth thousands if the stock split someday, and even if they are just hanging in a frame on the wall…these shares are an asset, like any other financial asset.

If you are holding physical shares, or if you are getting dividends from shares you cannot locate, give us a call and we will be glad to discuss the ramifications of keeping the physical shares or offer recommendations for what you can or should do with the shares.

Organizing Your Paperwork for Tax Season

If you haven’t done it, now’s the time.

How prepared are you to prepare your 1040? The earlier you compile and organize the relevant paperwork, the easier things may be for you (or the tax preparer working for you) this winter. Here are some tips to help you get ready:

As a first step, look at your 2012 return. Unless your job, living situation or financial situation has changed notably since you last filed your taxes, chances are you will need the same set of forms, schedules and receipts this year as you did last year. So open that manila folder (or online vault) and make or print a list of the items that accompanied your 2012 return. You should receive the TY 2013 versions of everything you need by early February at the latest.

How much documentation is needed? If you don’t freelance or own a business, your list may be short: W-2(s), 1099-INT(s), perhaps 1099-DIVs or 1099-Bs, a Form 1098 if you pay a mortgage, and maybe not much more. Independent contractors need their 1099-MISCs, and the self-employed need to compile every bit of documentation related to business expenses they can find: store and restaurant receipts, mileage records, utility bills, and so on.¹

In totaling receipts, don’t forget charitable donations. The IRS wants all of them to be documented. A taxpayer who donates $250 or more to a qualified charity needs a written acknowledgment of such a donation. If your own documentation is sufficiently detailed, you may deduct $0.14 for each mile driven on behalf of a volunteer effort for a qualified charity.¹

Or medical expenses & out-of-pocket expenses. Collect receipts for any expense for which your employer doesn’t reimburse you, and any medical bills that came your way last year.

If you’re turning to a tax preparer, stand out by being considerate. If you present clean, neat and well-organized documentation to a preparer, that diligence and orderliness will matter. You might get better and speedier service as a result: you are telegraphing that you are a step removed from the clients with missing or inadequate paperwork.

Make sure you give your preparer your federal tax I.D. number (TIN), and remember that joint filers must supply TINs for each spouse. If you claim anyone as a dependent, you will need to supply your preparer with that person’s federal tax I.D. number. Any dependent you claim has to have a TIN, and that goes for newborns, infants and children as well. So if your kids don’t have Social Security numbers yet, apply for them now using Form SS-5 (available online or at your Social Security office). If you claim the Child & Dependent Care Tax Credit, you will need to show the TIN for the person or business that takes care of your kids while you work.^1,3

While we’re on the subject of taxes, some other questions are worth examining…

How long should you keep tax returns? The IRS statute of limitations for refunds is 3 years, but if you underreport taxable income, fail to file a return or file a claim for a loss from worthless securities or bad debt deduction, it wants you to keep them longer. You may have heard that keeping your returns for 7 years is wise; some CPAs and tax advisors will tell you to keep them for life. If the tax records are linked to assets, you will want to retain them for when you figure out the depreciation, amortization, or depletion deduction and the gain or loss. Insurers and creditors may want you to keep federal tax returns indefinitely.²

Can you use electronic files as records in audits? Yes. In fact, early in the audit process, the IRS may request accounting software backup files via Form 4564 (the Information Document Request). Form 4564 asks the taxpayer/preparer to supply the file to the IRS on a flash drive, CD or DVD, plus the necessary administrator username and password. Nothing is emailed. The IRS has the ability to read most tax prep software files. For more, search online for “Electronic Accounting Software Records FAQs.” The IRS page should be the top result.⁴

How do you calculate cost basis for an investment? A whole article could be written about this, and there are many potential variables in the calculation. At the most basic level with regards to stock, the cost basis is original purchase price + any commission on the purchase.

So in simple terms, if you buy 200 shares of the Little Emerging Company @ $20 a share with a $100 commission, your cost basis = $4,100, or $20.50 per share. If you sell all 200 shares for $4,000 and incur another $100 commission linked to the sale, you lose $200 – the $3,900 you wind up with falls $200 short of your $4,100 cost basis.⁵

Numerous factors affect cost basis: stock splits, dividend reinvestment, how shares of a security are bought or gifted. Cost basis may also be “stepped up” when an asset is inherited. Since 2011, brokerages have been required to keep track of cost basis for stocks and mutual fund shares, and to report cost basis to investors (and the IRS) when such securities are sold.⁵

P.S.: this tax season is off to a late start. Business filers were able to send in federal tax returns starting January 13, but the start date for processing 1040 and 1041 forms was pushed back to January 31. Per federal law, the April 15 deadline for federal tax returns remains in place, as does the 6-month extension available for those who file IRS Form 4868.^6,7

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Citations.

1 – bankrate.com/finance/taxes/7-ways-to-get-organized-for-the-tax-year-1.aspx [1/6/14]

2 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/How-long-should-I-keep-records [8/8/13]

3 – irs.gov/Individuals/International-Taxpayers/Taxpayer-Identification-Numbers-%28TIN%29 [1/17/14]

4 – irs.gov/Businesses/Small-Businesses-&-Self-Employed/Use-of-Electronic-Accounting-Software-Records;-Frequently-Asked-Questions-and-Answers [5/22/13]

5 – turbotax.intuit.com/tax-tools/tax-tips/Rental-Property/Cost-Basis–Tracking-Your-Tax-Basis/INF12037.html [1/23/14]

6 – irs.gov/uac/Newsroom/Starting-Jan.-13-2014-Business-Tax-Filers-Can-File-2013-Returns [1/9/14]

7 – irs.gov/taxtopics/tc301.html [1/22/14]

Introducing The Family Legacy Initiative

This year we’re excited to launch a new program, The Family Legacy Initiative. Through this initiative, we will be able to provide our clients and their families with programs and information to help them have “The Talk”; make preparations for later life issues and lifestyle changes; explore medical, financial, and living arrangements; and prepare for happiness and security as they–or their parents–age.

Please join us for our Kickoff event, Having “The Talk,” on January 30 from 6 – 8 PM at the Carnegie Municipal Building. Mary Grace Musuneggi, President & CEO of The Musuneggi Financial Group, will discuss how to use the Family Meeting and the Family Letter to communicate your plans and wishes for financial matters, living arrangements, and final arrangements to your family. Parents, bring your adult children; adult children, bring your parents!

This event is free for clients and their guests.

For more information about this event click here.

This is a no cost, no obligation event. This information should not be considered as tax/legal advice. You should consult your tax/legal advisor regarding your own tax/legal situation.

Christopher S. Musuneggi Selected for 2013 NAIFA Quality Award

Please join us in congratulating Christopher S. Musuneggi, our Vice President of Business Development, for receiving the 2013 National Association of Insurance and Financial Advisors (NAIFA) Quality Award. This award is considered a mark of distinction for financial advisors, and it recognizes Christopher’s professionalism, quality service provided to clients, adherence to the NAIFA code of ethics, and service to the industry association.

The Pittsburgh Foundation Scholarship Search

Are you planning for a college education or trying to pay for one right now? Whether you are a student or a parent of a student, we recommend using The Pittsburgh Foundation’s Scholarship Search to browse scholarships established by Pittsburgh Foundation donors.

This site provides information on scholarships for a variety of students, including:

• High school students who are about to graduate,
• Undergraduate students,
• Graduate students or someone who is about to enter graduate school, and
• Elementary school students.