Wealth Planning


College Planning

It takes planning to fund the cost of an education considering that college costs are growing more than twice the rate of inflation. While tuition will be the largest expense, don’t forget about these additional costs that may be incurred.

Pre-College Costs

  • Standardized test fees 
  • Test prep courses and materials 
  • Campus visits 
  • Moving costs 

Additional College Costs

  • Room & Board
  • Books & Supplies
  • Transportation

There are couple of ways you can save for college.

529 Plans

Section 529 Plans Sections 529 Plans are named after the tax code that governs them. Almost all 50 states offer these plans, and rules vary by state. In many cases, you don't have to be a state resident to take advantage of them; in fact, you can invest in multiple 529 plans in multiple states, if desired.

There are two types of 529 plans:

College Savings Plans
Generally, college savings plans offer tax-deferred earnings; distributions from qualified state tuition plans are tax free if they are used to pay for qualified higher education expenses (some states offer tax exemptions and deductions, so check around). Maximum contribution amounts range from state to state. Please keep in mind that the underlying investment options are subject to market risk and will fluctuate in value. Check the IRS Website and contact your tax professional for the current contribution amounts, and more details regarding income limitations.

  • Other 529 plan details include:
  • You can name yourself the account owner and beneficiary in planning for your own educational expenses. (You can also withdraw funds for non-educational expenses, but the earnings may be subject to ordinary income taxes, and a 10% federal tax penalty.)
  • You can also rename beneficiaries. Also, some states let the account owner be a friend as well as a relative.

Pre-Paid Tuition Plans

Some state universities have set up innovative programs where college expenses may be paid in installments over many years, or in a lump sum prior to attending the school. The advantage is that you can lock in the current price. Again, any earnings are tax-deferred, and distributions are excludable from gross income if used to pay for qualified higher education expenses. This may be a convenient way to meet expenses, but it takes the choice of school away from your child. If your child chooses not to attend the state university, it may pose a problem.

Coverdell Education Savings Accounts

With a Coverdell Education Savings Account (formerly known as Educational IRAs), you can make contributions for each child, until he or she is 18. There are contribution limitations. Money contributed to a Coverdell Education Savings Account may grow, tax-deferred, and may be withdrawn federal tax-free for any qualified higher educational expense incurred by the child before age 30. After that time, the account owner will incur a 10% tax penalty with the required withdrawal, and any earnings are taxed as ordinary income. There are still state taxes. The account owner can retain control of the money in the account, if desired. The beneficiary can even be renamed in some cases. Check the IRS website for current contribution limits.

Fund College with Permanent Life Insurance

Permanent life Insurance is an excellent tool that can be used to help pay for a college education.

If you live, will you accumulate enough money to be able to afford it?

  • Permanent life insurance accumulates cash value tax deferred. 
  • The cash value can be accessed tax-free(via Loans) to help pay for college, or any other important need.
  • Additional premiums paid into your policy provide additional guaranteed cash value. 

If you die before you accumulate the money, how will your family be able to save enough without you?

  • Life insurance provides a guaranteed death benefit that can help provide the funds for your child to go to or continue college.
  • This can give your family peace of mind knowing your child’s future doesn’t have to change if something happens to you.
  • You can make additional premiums into your life insurance policy, giving you guaranteed additional death benefit protection.

If you become disabled, how will you maintain your insurance policy and continue to accumulate cash value?

  • A popular, optional rider waives the premiums on your policy if you become disabled, thus keeping your policy in force  and allowing your cash value to continue to accumulate.
  • If you are making scheduled additional payments5 into your policy, these additional payments will also continue to be made by any mutual life insurance co., allowing your death benefit and cash value to grow even more

Don’t Forget!

Cash value in the policy is exempt from federal financial aid calculations.

Cash value can be accessed tax-free for education expenses, or any other important need.

Call us today at 732-317-8978 to discuss your tax, financial and accounting needs. 

You can also email us cpa@northeastsolution.com.

Solo 401k

Setting up a Solo 401k makes a lot of sense for sole proprietors, owners of an S Corporation, C Corporation or partnership.

The individual 401(k) comes in both a traditional and Roth version, just like IRAs. With the traditional individual 401K, you put away money on a pretax basis and it grows tax-deferred. Your money is taxed when you withdraw it, in a future that may well include higher tax rates.

If you opt for the Roth version, you put in after-tax dollars and your money grows tax-free - which means it is not taxed upon withdrawal. You can split your contributions between the two types of accounts. One other point: Unlike SEP IRAs, solo 401Ks allow you to borrow against your savings.

Unlike traditional 401K’s, there are no complicated discrimination tests or Form 5500 filing.  5500 is  a form that larger 401k plans have to file with IRS to be compliant. A Solo 401k doesn’t have to worry until the plan reaches in excess of $250,000 to have to file a Form 5500.

Who should think of it?

These plans are ideal if you intend to sock away large sums. An individual 401(k) allows you to save for retirement both as an employer and an employee, often enabling you to contribute more than would be possible with other retirement plans.
Here's how: As an employee, you can stash away as much as $19,000 for year 2019. As the boss, you can contribute an additional 25% of compensation, up to a maximum of $56,000, including your employee contribution.
These contributions are discretionary, so you can save the maximum in flush years and nothing in tougher times. If you and your spouse are both in the plan and enjoy a banner year, you could save a total of $112,000. And if you are both 50 or older and eligible for catch-up contributions of $6000 each, the total climbs to $124,000.

Who can contribute to one?

An individual 401(k) is strictly for sole proprietors who have no employees (although your spouse may contribute if he or she earns income from your business).

When Does a Solo 401k Plan Have To Be Established?

The plan has to be established by the end of the business tax year in order to make a contribution for that year (unlike the SEP IRA which can be setup until your tax filing).

Life Insurance

Role of Life Insurance in Financial Planning

There are three key pillars in a secure financial planning foundation: 

  • Growth 
  • Preservation 
  • Protection 

Without protection, all your visions of a secure future for you and the generations to come can be easily toppled.

Choosing the right insurance solutions – in the right amounts and for the right reasons – is both a wise financial strategy as well as a responsible and caring act that provides loved ones with a genuine feeling of security.

Life Insurance: Save On Taxes And Preserve Your Estate 

While the basic premise of life insurance is protection, many wealthy families are also using it as a long-term savings and wealth creation resource. Let’s take at the reasons why life insurance makes sense as part of your financial planning.

Family Protection

Even after death, life goes on. The mortgage needs to be paid, and so do auto, school and home equity loans, college costs, as well as final expenses: hospital bills, funeral and burial or cremation costs.

Used in its most traditional sense, life insurance provides critical money at a time when a family is emotionally overwhelmed. It can easily be tapped into to pay off housing expenses, outstanding debt, and provide replacement income.

Estate cash and income needs

If you’ve amassed significant wealth, a little planning can go a long way in helping you save in estate taxes. Many families find they are temporarily “cash poor” after a death; it takes time to liquidate many assets. As a result, an Irrevocable Life Insurance Trust (ILIT) can be used to create nearly instant liquidity and save frustration and headaches.

Just as importantly, depending on the size of the estate, federal estate and income taxes, state taxes and other levies can dramatically shrink assets. Add on estate taxes – which are typically payable at the time of death or shortly thereafter. Life insurance, when structured correctly, could at the very least help your family pay estate taxes from the proceeds of the policy.

Estate Distribution

Keeping family harmony is another goal of life insurance. Assume that the business – or perhaps the family home – is going to one of four children. That’s a large asset, and siblings may feel angry or shortchanged. Life insurance can help by making the division of assets more equitable.

In addition, the estate owner can earmark estate assets for charitable giving, ensuring the support of a favorite charity lives on…and quite possibly, saving on taxes as well.

Special needs

Providing for children with special needs presents its own unique difficulties. Life insurance may be a cost-effective way to help provide for future financial needs.

Promote current deals

Running a holiday sale or weekly special? Definitely promote it here to get customers excited about getting a sweet deal.

We have Just Moved to our New beautiful Location