NEWS a life well planned is a life well lived
The Captain’s Log Summer 2019
My family absolutely loves the summer and we are extremely fortunate to live and conduct our business in an area that offers an abundance of outdoor summer fun. Both kids, Kathryn and Drake, have the great opportunity to spend the hot summer days working as full-time sailing instructors at our local yacht club, and when not at work, Ginger and I spend as much time as possible boating, fishing, beaching, and generally enjoying and exploring our remarkable southern Chesapeake Bay area. My father was an avid boating enthusiast and as a young person and a young professional he spent as much time as possible sailing for both pleasure and competition. His father was a professional waterman and spent his entire life in some way or another working on the water and messing around with boats. I believe not truer words have ever been spoken than the words of Kenneth Grahame, "There is nothing -- absolutely nothing -- half so much worth doing as
simply messing about in boats.” Having grown up surrounded by such an accomplished boating family, as a young person it would have been unthinkable to not spend time hearing the boating tales and gleaning the knowledge frequently and enthusiastically shared by the older generations. As I think back now with a more-clear sense of reality, I have learned that some of these tales blurred the lines between reality and fantasy, but as a young impressionable boy it simply did not matter – these tales were gospel. Although I am not certain of the full truthfulness behind some of the family’s maritime exploits, I am certain that spending time in boats and working on boats creates a clarity of purpose and a practical vision that carries over to many aspects of life away from the shore’s edge. (continued on page 3)
JAMESTOWNE INVESTMENTS NEWS What’s Inside: The Captain’s Log 6 Reasons Why You Should Have an Estate Plan at any stage of life Summer Pet Care Tips From Pearl How to Avoid and Correct Tax Issues Ways to Ease the Cost of College The Finances of Remarrying Recipe Corner
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A MESSAGE FROM CLAYTON Your Trusted Advisor continued from 1st page
For example, boats are built and rigged to operate smoothly and flawlessly during pristine sailing conditions; however, they must also be able to survive immediate and harsh unexpected extreme conditions. By design, boats are built for the best days and prepared for the worst. The stoic metaphor between building boats and building investment portfolios is too rich to ignore. Like boats, we want portfolios that operate smoothly and comfortably during the good weather days; we want our accounts to participate in the enjoyable bright and sunny, summer-time doldrums of the stock market. At the same time, we know there is always the threat of an unexpected storm and we cannot ignore the danger caused by an unanticipated weather event. From a boating analogy, we want an 18’ sloop for the calm and easy pleasure days but we want an aircraft carrier for the heavy weather hurricane-like conditions.
CLAYTON JAMES FINANCIAL ADVISOR
In building portfolios, how do we balance the need to address the desire for comfort and pleasure against the need for strength and stability? This is an age-old question and perhaps the best answer comes fortuitously and metaphorically from inside the boat building community.
“Water in the boat is the ruin of a boat, but water under the boat is the support of the vessel”. Now in investment terms, volatility in the market can be the ruin of the market, but volatility of the market can be the support of the market. I am the first to recognize the Zen-like philosophy here, but the underlying lesson resides in our individual perceptions of and reactions to market volatility. Market volatility and Bear market cycles can be the ruin of some investors; however, if you are confident in your boat and you are confident in your boating skills, volatility can be the support of your entire investment experience. Many times, during difficult market conditions, I have watched the “Weak Longs” become prematurely flushed from the system ultimately opening great opportunities for the resilient and confident long-term market participants. We only need to glance back to the second half of 2018 and the first half of 2019 to truly gain an appreciation for the need to remain confident while others panic. Now enough market volatility rambling, let’s all get outside and enjoy the beautiful weather and enjoy wonderful & safe boating opportunities. I hope everyone has a fantastic summer and I look forward to hearing about your personal summer fun tales. My Very Best to You and Your Family. Clayton W. James, CFM, AAMS Managing Director
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6 Reasons Why You Should Have an Estate Plan At any stage of life
While you may think that only the ultra-wealthy need an estate plan, anyone—regardless of age, marital status or net worth—can benefit from having a plan in place if the unexpected happens. Still, more than half of American adults—and 78% of millennials—lack basic estate planning documents like a will or living trust, according to the American Association of Retired Persons (AARP). It’s not surprising that younger adults tend to put estate planning on the back burner. However, even if you don’t have children or many assets yet, you can benefit from going through the process now. Here are six reasons why you should have an estate plan at any stage of life: 1. To Plan for Your Own Needs An important step in the estate planning process is determining who will make decisions on your behalf if you’re unable to do so yourself. If you become incapacitated—or unreachable due to travel or other circumstances—a living or revocable trust will hold assets for your benefit while you’re alive and name the people you wish to receive your property when you die. Additionally, naming a durable power of attorney to act on your behalf on financial and legal matters if you become physically or mentally disabled can help ensure that these decisions are made in your best interest. If you’re unable to make medical decisions for yourself, having a healthcare proxy, agent or power of attorney, HIPAA release and living will can help make sure that you receive the care you need and desire. 2. To Choose How You Dispose of Your Wealth The most basic document of most estate plans is a will, which names an executor or personal representative who is responsible for the administration of your estate after you die and distributes property as you direct. If you have minor children, you can name guardians to oversee their care in your will. A revocable trust or personal property memorandum may also be helpful to supplement your will. 4 /
Certain assets such as life insurance, retirement accounts and annuities require you to name beneficiaries and therefore don’t need to be included in a will. However, these assets are often overlooked, so it’s important to coordinate their distribution with your other property. 3. To Minimize Transfer Taxes Maximizing the wealth you transfer to your beneficiaries (and minimizing transfer taxes) can be an important component of the estate planning process. The Tax Cuts and Jobs Act of 2017 expanded the amount that individuals may give away at death—or during life—without triggering transfer taxes. The new law offers several advantages, including an increased exemption amount until 2026 and portability, which means spouses can share one another’s exemption. You can make annual tax-free gifts up to $15,000 in 2019 (and double this amount for married couples). Additionally, you can pay medical and educational expenses for someone else without incurring the gift tax. 4. To Incorporate Philanthropic Planning If you have philanthropic goals—whether from a legacy, personal fulfillment, generational connection or tax-planning perspective—an estate plan can help make sure your objectives are met. Going through the planning process allows you to choose a charitable cause that’s important to you, select the assets you wish to give and determine the best way to make your gift. 5. To Protect Family Wealth Many wealth transfer strategies also have wealth protection benefits, which can be an important consideration for affluent families. Asset ownership, insurance, limited liability entities, irrevocable trusts and asset protection trusts are all methods designed to protect your assets from creditors in the event of frivolous law suits and claims. A wealth advisor or estate planning attorney can help you determine which of these options is appropriate for your circumstances. 6. To Prepare Future Generations to Receive Wealth Finally, preparing the rising generation to receive wealth can be very helpful in preserving family wealth in the long term. Developing an estate plan is often a good opportunity to establish wealth planning goals, facilitate conversations about what
wealth means to your family, and educate adult children about financial concepts and ways they can become involved in creating and sustaining the family legacy. Estate planning can be a daunting task, especially if you’re starting from scratch. If you’re unsure where to begin, working with a trusted advisor or estate planning attorney can help you develop the documents you need to give you peace of mind about your financial affairs.
Jamestowne Investments is honored to be named to the 2019 Prospera Director's Circle. This recognition is given to the top 25 advisors for their work in the previous year.
Summer Pet Care Tips From Pearl Pets are an irreplaceable and wonderful extension of our lives. We all love our pets and we all want the very best for our 4-legged family members. Our dog Pearl is like family to us and yes most of the time she gets more love and attention than the kids. This time of year, with the seasonal blooms, upcropping of weeds and grasses, and the onset of mosquito and tick season, it is imperative that we pay extra special attention to the furry critters in our lives. Here are a couple of "Pointers from Pearl" that can make this summer season easier and more pleasant on all of your animals: Allergies can plague a dog like humans Seasonal allergy Symptoms in pets include: • • • • • • • • •
Excessive itching Red, irritated skin Obsessive licking Hair loss Hot spots Skin rash or hives Red, irritated ears Excessive ear rubbing or flapping General observational uncomfortableness and unsettledness
Most of the time dogs, unlike humans, will not display allergy related respiratory symptoms; however, animals will present similar nonrespiratory conditions like a runny nose, watery eyes, coughing or sneezing. Do not discount these subtle symptoms in your pets as these conditions my be warning you of a much more severe allergy condition. Seasonal allergies for dogs tend to be caused primarily by pollens, dust mites, fleas, ticks, and molds. Ear Care is Critical: Dogs (and cats) with allergies will typically have symptomatic problems with their ears. The feline and canine ear canals can become itchy, red, and inflamed as part of the general allergic response. Ears canals can also develop infections which only worsen with the symptomatic response to allergies. Signs that your pet’s ears need attention: • Scratching of the ears • Head shaking • Hair loss around the ears 6 /
• Inside the ear rash or inflammation • Sensitivity to rubbing and petting • Build-up of foreign material or general dirty condition • Unfavorable odor or discharge If they are suspicious of an ear infection, it is highly recommended that you seek help and treatment options from your trusted veterinarian. Pets can have food allergies: To some people this is surprising, but a hypersensitivity to food is a real problem and can develop spontaneously and asymptomatically. It often takes some detective work to find out what your pet is allergic to, but common culprits today are beef, chicken, dairy and wheat. If you are suspicious of an undetected food allergy, try a scheduled elimination diet to determine the root cause of your pet’s discomfort. Treating Allergy Issues: The best treatment for most pet allergies is to remove the offending allergens from your environment. Easier said than done, however, your pet is depending on a safe and allergy free world. If you are not able to self-determine and self-rectify these issues, consult your vet. We wish each of your pets a safe, allergy free and fun outdoor summer.
How to Avoid and Correct Tax Issues Nobody likes unexpected tax bills or IRS penalties. So how can you minimize the possibility of errors on your return? And if an error does still slip through, what then? In both cases, it’s often a matter of paying close attention to documentation. Avoiding tax errors. Audrey Young, a tax attorney and senior manager at accounting, tax, and consulting firm RSM US, says one of the basic things that everyone should do is pay attention to what their tax preparer sends them. “Most clients who work with professionals get a tax organizer,” Young says. The organizer is a document outlining a series of questions for people to answer. It helps taxpayers think through all the big and small items from the past year that could impact their taxes. Big life changes in particular should be called out in the organizer, as they’re a common cause of tax filing errors: • • • •
Selling a business Selling interest in a building or shares in a closely held business Inheriting money or an IRA Turning 70½ and triggering mandatory IRA distribution requirements
“Most people do a very good job except when an extraordinary transaction comes along,” Young says. In these cases, good record keeping is crucial — as is sharing that information with your advisor. For example, a problem that can attract unwanted IRS interest is when someone fails to note an extraordinary gift, such as land, to a university or charitable organization. The value of that property has to be properly documented. When gifts of stock or other property (like a vacation home) are made during one’s life, good records are essential to avoiding tax problems down the road — especially for the recipient. That’s because the gift’s “cost basis” — the purchase price — also transfers to the gift recipient. Say mom and dad give their vacation home to their adult child. If, later on, that child sells that house, the cost basis used to determine how much profit was made on the sale is the purchase price of the home when the child’s parents originally bought it. Correcting tax errors. If you do make a mistake, don’t panic. With some common mistakes, such as math errors, IRS computers will often detect the error and send you a bill. You'll be required to pay interest on the unpaid tax, but unless the IRS thinks it’s a deliberate or particularly large omission, you probably won’t owe a penalty. If you or your preparer discover an error after filing, Young recommends filing an amended return as soon as possible. “I think it’s always better to report your error before the IRS finds it,” Young says. Remember, your preparer will need to correct all the errors in the return — not the just the ones that are favorable for you. It’s important to note that your preparer must file amended returns on paper (rather than e-filing) and they can take longer for the IRS to process. So, the sooner you correct any mistakes, the sooner you can resolve any potential conflicts. / 7
Ways to Ease the Cost of College A look at grants, scholarships, 529 plans, and other methods.
How much could a college education cost in the 2030s? You may want to take a deep breath and sit down before reading the next paragraph. A MassMutual analysis projects that four years of tuition, room, and board at a private college will cost nearly $369,000 in 2031. An article at CNBC offers a slightly cheaper estimate, putting the total expense at $303,000 for a freshman setting foot on campus in 2036. (Today, the cost of four years at a private university is less than half that.) How about the price tag for four years of tuition, room, and board at a public university in that year? The same CNBC article says that it may reach $184,000.1,2 Even today, finding enough money to pay for college can be an enormous challenge. There are obvious ways to counter the cost: a student can work full time and apply much of the income toward school, or assume student loans. Fortunately, there are other ways – ways that you may want to explore if you do not want your child to take a hard-scrabble path through school or get soaked with debt. Ideally, you use money you never have to repay. Grants and scholarships are more plentiful than many students (and parents) realize, and some go begging for applicants. Grants are based on need; scholarships, on merit. Grants can be issued incrementally or in lump sums to a student; most are awarded on a first-come, first-serve basis, which is why it is so crucial to fill out the Free Application for Federal Student Aid (FAFSA) early. A school accepting your student will evaluate your student’s FAFSA, then send an award letter detailing his or her eligibility for federal and state grants. As for scholarships, there are literally millions of them. Sallie Mae provides a convenient online search tool to explore more than 5 million such awards, and you can use it to drill down to opportunities that are strong possibilities for your student.3 Through a 529 plan, you can invest to meet future college costs. 529 plans come in two varieties, and both varieties have common tax advantages. 529 plan earnings are exempt from federal income tax, and 529 plan assets may be withdrawn, tax free, so long as the money pays for qualified education expenses. While there are no federal tax breaks linked to 529 plan contributions, more than 30 states offer state income tax deductions or credits for them.4 Some 529 plans are prepaid tuition plans, giving you the potential to prepay up to 100% of your student’s future tuition at a public university within your state (most of these plans do not pay for housing costs). You may be able to convert a prepaid tuition plan so that the assets can be used to pay tuition at an out-of-state university or private college. (There is also the Private College 529 Plan, which 250+ private colleges and universities collectively support.)4 The great majority of 529 plans are college savings plans, analogous to Roth IRAs. In a college savings plan, you can direct your contributions into equity investments, which offer you the possibility of tax-advantaged growth and compounding. (If the investments perform badly, your college fund may shrink.)4 8 /
You may choose to fund a 529 plan account incrementally or with a lump sum. States put different limits on the amount of money that a 529 account can hold, but six-figure balances are often permissible. You can invest in any state’s 529 plan and pay for higher education expenses with 529 plan assets at any qualified U.S. college or university.4,5 Whole life insurance could help. If you have a permanent life insurance policy with some cash value, you could take a loan from (or even cash out) the policy and apply the amount toward college costs. The value of a life insurance policy does not factor into a student’s financial aid calculation (which many parents do not realize). If you take a loan from a life insurance policy, you will reduce the death benefit; repay the loan in full, and you will restore its full value.6 Some families use Roth IRA assets to pay for college. A Roth IRA gives you a degree of flexibility that a 529 plan does not. Suppose your child does not go to college. (While this may seem highly improbable, some young adults do start successful careers without a college education.) In that event, you still have a Roth IRA: a tax-favored retirement savings account with the potential for tax-free withdrawals.7
A Roth IRA is not a perfect college savings vehicle, however. First, the annual contribution limit is low compared to a 529 plan. Second, while you may withdraw an amount equal to your contributions without penalty at any time of life, a Roth IRA’s earnings represent taxable income when withdrawn. Third, while Roth IRA assets are not countable assets on the FAFSA, tax-free Roth IRA contributions, once withdrawn, still amount to untaxed income for your student (i.e., the Roth IRA beneficiary), and they lower a student’s eligibility for need-based aid.7 Going to college should not mean going into debt. Would you like to plan, save, and invest to reduce or avoid that consequence? Then talk with a financial professional who is well versed in college planning. The variety of options available may pleasantly surprise you. Citations. 1 - forbes.com/sites/megangorman/2018/08/23/balancing-the-high-cost-ofchild-care-and-college-savings [8/23/18] 2 - tinyurl.com/y9on33n6 [6/23/18] 3 - salliemae.com/college-planning/financial-aid/understand-college-grants/ [11/15/18] 4 - savingforcollege.com/intro-to-529s/what-is-a-529-plan [8/29/18] 5 - thebalance.com/529-limits-contributions-balances-taxes-4138359 [9/19/18] 6 - nextavenue.org/life-insurance-pay-childs-college/ [9/18/18] 7 - savingforcollege.com/article/can-a-roth-ira-be-used-to-pay-for-college [8/1/18]
The Finances of Remarrying If you're about to walk down the aisle a second time and thinking about the finances of remarrying, you may want to consider the following steps to get your new life off on the right financial footing: Put all of your financial cards on the table. While the process may seem a little awkward, it's important to share a full accounting of your assets and liabilities. Partners should share with each other documents such as tax returns, pay stubs, and bank and investment account statements. Discuss any financial obligations you have to your ex-spouse, children, or to your extended family. You each may want to run a credit report and share it with the other so you both know what you are getting into financially before you walk down the aisle.
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Consider a prenup. It may seem unromantic, but remarrying couples should consider whether a prenuptial agreement would be appropriate. Prenups don't just spell out how assets should be split if the marriage fails; they also come into play if one of you dies. A prenup is especially advisable if you are bringing a lot of wealth or assets into the marriage or if you have children from a previous marriage you want to protect. Discuss your financial goals and philosophies. Are you a spender or a saver? Do you want to be able to support your aging parents as they get older? At what age do you hope to retire? Do you want to have children together? These are among the critical questions that play into the finances of remarrying. Before you tie the knot a second time, it's important to examine what money issues caused stress in your first marriage and what steps can you take to avoid them in the future. Decide who will pay for what. Discuss whether you are going to pool your assets and have a joint account, keep your assets totally separate, or have separate accounts as well as a joint account to which you both contribute. There's no right or wrong method, as long as you both are comfortable with it. Keep in mind that dividends are technically being accrued by both of you and should be segregated in a separate account. if you decide to keep your premarital property separate, it's important not to co-mingle it with property that you acquire during your marriage. Be careful, for example, about how you handle dividends on equities that you owned before the marriage. In some states, earnings on separate property earned during the marriage are considered marital property. While the stock itself can stay in your original account, the dividends are technically being accrued by both of you and should be segregated in a separate account. Change your account beneficiaries. Many people forget to change their beneficiary designations after they divorce. In most states, that means your divorced spouse will inherit your IRA if he or she is still named as your beneficiary. Now that you're remarrying, take the time to update the beneficiaries of your retirement plans, annuities contracts, investment accounts, and insurance policies. If you want specific benefits to go to your children rather than your new spouse, you may need to get a spousal waiver. For guidance, please contact Clayton at 757.941.5150.
Newsletter Disclosures Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA, SIPC. 5429 LBJ Freeway, Suite 400 - Dallas, TX 75240 This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. 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 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. Our firm does not provide legal or tax advice. You should consult with legal and tax advisors before making any investment decisions that would have legal/ tax consequences. Investments in securities and insurance products are: NOT FDIC-INSURED/NOT BANK-GUARANTEED/ MAY LOSE VALUE
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Recipe corner Hot German Potato Salad with Bacon Submitted by June Mitchell James Serves 4-6
Ingredients 1 lb bacon, cut into small pieces 1 onion, diced ¼ c. apple cider vinegar 2 T. water 3 T. sugar 1 tsp. salt ¼ tsp. pepper 4 c. peeled, diced and cooked potatoes 1 T. minced parsley
Preparation Fry bacon until crispy. Remove bacon and most of the remaining grease. Brown onion in the greasy pan. Add vinegar, water, sugar, salt and pepper. Heat this to boiling. Add parsley, bacon, and then potatoes to the mixture. Heat this thoroughly and serve warm. *Can be made ahead of time and kept warm in a crock pot
Watermelon Cooler Ingredients 3 lbs watermelon, rind and seeds dicarded and the flesh cut into pieces, plus thin slices of watermelon for garnish 1/2 cup vodka 1/4 cup Triple Sec 3 tablespoons fresh lime juice
Preparation In a blender, puree the watermelon pices and strain the puree through a very fine sieve set over a pitcher, discarding the solids. (There should be a bout 2-1/3 cups juice). Stir in the vodka, the Triple Sec, and the lime juice, pour the cooler into long-stemmed glasses filled with ice cubes, and garnish each drink with a watermelon slice.
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Checks Payable Reminder If you are wanting to deposit a check to your Jamestowne Investments account, please note that we are only able to accept checks made payable to you (the client). You may send them to our mailing address unless otherwise instructed. Pearl James IRA Account # 1234-3456 263 McLaws Circle, Ste 101 Williamsburg, VA 23185
JAMESTOWNEINVESTMENTS.COM 757.941.5150
Ensure your financial plan addresses all of your life’s events. A life well planned is a life well lived. Securities and advisory services offered through Prospera Financial Services, Inc. Member FINRA, SIPC. 5429 LBJ Freeway, Suite 400 - Dallas, TX 75240