About Letort Trust

LeTort Trust is an Independent Trust Company with a single focus of providing personalized financial solutions to individuals, businesses and institutions. As an Independent Trust Company, we are held to the highest standards of fiduciary accountability in the industry. Our clients depend on the prudence and expert guidance we provide through our customized wealth management and retirement plan services.

 

Partial Clarity Beyond the Fiscal Cliff

Despite the brinksmanship and reality deferment we now have a better understanding of the various tax increases and changes that will impact all economic levels as result of the Fiscal Cliff results.  The major changes impacting most Americans include:

1.  Payroll tax holiday expires reverting the tax back to 6.2% from 4.2%

2.  The Federal Estate tax exemption remains at $5.125 million with a tax increase from 35% to 40% for estates exceeding that level

3.  An additional 0.9% on top of the 6.2% payroll/Medicare tax increase for taxpayers earning $200,00 or above (Single) or $250,000 or   above(Married). In addition, an investment surtax of 3.8% on interest, dividends, and capital gains on sources above limits for this taxpayer group.

4.  Taxpayers making $400,000 or above (Single) or $450,000 (Married) will see a top marginal income tax rate increase from 35% to 39.6%. In addition, they will see a long term capital gains tax increase from 15% to 20%.

5.  Taxpayers making $ 250,000(Single) or $ 300,000(Married) will face a phase out of exemptions and deductions.

6.  Employees can convert any traditional (pre-tax) amounts within a qualified employee deferral plan into a Roth account, even if the employee cannot elect a distribution of such amount. The amount converted is subject to regular income tax in the conversion year, but then will grow tax-free going forward.  Formerly, the employee could only covert the amount that qualified for an elected distribution.  Existing plan amendments would be required and the employee must be fully vested for the amounts converted. Additional details on Roth IRA

The attached article provides more specifics on how the deal might impact your financial planning going forward.

Regardless of our view regarding the approach, these changes have provided much needed yet only partial clarity to resolving our nations’ unfunded commitments and establishing a growth friendly landscape. Our leaders have again deferred the more painful and tumultuous spending reductions for what we can imagine will only generate further volatility and consternation. That said, the process is moving, albeit slowly, but it is moving and we should take some solace in that fact.   Pessimism is still at elevated levels and many have fallen victim to the comforts of expensive “safe haven” asset classes. We will continue to look beyond the short-termism so prevalent today and focus on efficiently compounding dollars over the long term

Fortunately for most of us, we don’t have to depend on knowing all of the details that Congress will unfold in order to make good financial decisions. A few basic principles still apply, even during these uncertain economic times:

–  Increase your participation in qualified retirement plans. This will lower your taxable income and allow you to prepare for your future.

– Stay invested and keep a long term perspective. If you are invested appropriately, try not to react to short-term market noise or sensational news headlines.

We have been through many economic challenges in the past and we will continue to face and overcome those presented in the future.