If you have a teen in high school or a new born, saving for their education is probably on your mind.  There has been some buzz about 529 savings plans lately, but what are they exactly and how can they help you?

A 529 plan is a tax-advantaged college savings vehicle that is changing the way parent’s save for their children’s educations.  It is doing for education savings what 401(k) plans did for retirement savings: making things easier, more helpful and more beneficial to those putting money away.  Here are some basics about 529 plans.

How it works

Starting a 529 savings account is relatively easy.  You will first choose a plan.  Plans are different from state to state, so be sure to do your research.  Visit Morning Star’s interactive map to see the 529 plans offered in your state.

You’ll fill out an application, where you will select a beneficiary (the individual for whom you are saving) and how you want your contributions to the plan managed.  This is a little like a retirement account.  You will be able to select how aggressively you want your contributions invested based on the age of the beneficiary.  It would be wise to consult a professional for this step.

Typically, you will be asked to make a contribution to open the account.  After your initial contribution, most plans will allow you to contribute any amount at any time.

Why it’s Special

As previously mentioned, 529 savings plans are revolutionizing college education savings.  The 529 designation offers benefits that many other college savings plans do not.  Here’s why a 529 plan is different.

Tax Advantages: Contributions to a 529 savings plan are able to grow tax deferred, and the earnings are tax-free when they are used for the beneficiary’s education.

Contributions: Many plans will allow you to contribute up to $300,000 over the life of the plan.  High limits like this could help you child go to their dream school or attend graduate/medical school after their undergraduate education.

Open Participation: Anyone can open a 529 plan regardless of your income level or how much you can contribute.  You could help pay for your child’s education by saving a small amount over a long period of time, even if you have an extremely limited income.

Professional Management: 529 Plans are offered by the state, but contributions are managed by financial professionals.

529 Prepaid Tuition Plan             

There are two main types of 529 plans – the college savings plan, and the prepaid tuition plan.  The college savings plan allows you to save up for any college your child wants to attend, while the prepaid tuition plan allows you to pay for tuition NOW at participating colleges (at today’s rates) for the beneficiary to use in the future.  Here are some other differences:

Consider the risks and advantages before deciding to invest in a 529 college savings or prepaid tuition plan.  Glass Jacobson’s team of investment advisors work with their client’s best interests in mind, providing details so that they can make informed decisions.  Meet our team of advisors, or Contact Us with questions.

Last week, a small group of Glass Jacobson’s professionals spent a few days in Seattle, WA at the annual Integra International AAA Conference.  Integra is an international group of local, independent Accounting and Consulting firms that actively work together to help business flourish and best serve clients.  The conference in Seattle offered Glass Jacobson the opportunity to spend some time with other national and international members of Integra and see some speakers that will help us in moving forward and growing as a firm

Our team is thrilled to have been able to participate in such a special event.  It was great to be able to connect with Integra members from around the world,  and we look forward to being the hosts for the 2013 Integra International AAA Conference, right here in Baltimore!

I can hear some of you right now “2012 tax planning ALREADY? But I just filed my 2011 taxes last month!”  That may be the case, but while some of the paperwork is still lying around and the pain of scrambling around to file those 2011 taxes is still fresh in your mind, here are some tips to make sure next year is easier.

1. Review your withholding/paycheck.  Don’t wait until next year for another big refund.  You can adjust your tax withholding now if you’d prefer to receive a little extra money in each paycheck this year.  Use the IRS Withholding Calculator, or take a look at Publication 919 to help you decide what to do.  At the same time, you should review your paycheck.  Mistakes involving withholding, retirement account contributions, insurance and charitable donation deductions could have a huge effect on your bottom line.  Fixing the problem now will save you hassle in the long run.

2. Store your return in a safe place.  You know all that messy paperwork you have trouble finding every year when tax time comes around? Put it in a secure location while it’s still lying around so that nothing gets lost.  To be safe, make sure you have copies of your state, federal and local returns, as well as your W-2’s in one centralized location.

3. Establish a “tax-center.” Choose a centralized location for members of your household to store their tax related records throughout the year.  It can be anywhere that works best for you, just be sure that everyone in the house knows where it is and what it’s for.  This way, you won’t lose mileage receipts or charitable payroll deductions, and you’ll have somewhere to store your W-2’s when they come 3 months before you’re ready to file taxes.

4. Shop for a tax professional NOW.  If you typically use a tax professional, or if you are considering a financial partnership to keep you on track with your goals, now is the perfect time to begin looking.  Finding a professional in the next few months gives them time to advise your financial decisions for 2012, which could help you out greatly when it comes to filing taxes next April.  But choose carefully! Financial professionals are supposed to HELP you reach your goals.  Make sure to choose someone you can trust.

5. Keep up with changes.  Make sure you know about tax law changes, helpful planning tips and announcements from the IRS throughout the year by checking Glass Jacobson’s Wealth Wisdom Blog regularly.  Our professionals keep abreast of any tax law changes and announcements because they are dedicated to the financial success of our clients.  Contact us or sign up for email updates to help keep track of the ever-changing financial world.

Last week, Maryland Governor Martin O’Malley (D) announced that the General Assembly will enter into a special session starting today (May 14, 2012).  The special session is being held to address and make a decision regarding a tax increase package and miscellaneous other budget-related issues that failed to be decided on before the end of the regular 90-day legislative session that ended in April.

The proposed deal would lead to income tax increases for individuals who make more than $100,000 annually, and couples earning more than $150,000 annually.  Proposed legislature could also decrease allowable exemptions for those in the highest income tax brackets.  If these tax increases do not pass in the special session, the 2013 fiscal year budget will take effect July 1, calling for more than $500 million in cuts that could affect education and other service areas funded by the state.

As always, Glass Jacobson’s professionals will keep you up to date with any information on the special session.  If you are concerned about how these potential changes might impact your taxes, contact our team.

Continuing with our identity theft series this week, now it’s time to cover the other side of this problem.  What happens if you don’t protect yourself, or even if you do and someone steals your identity?

Some of the steps in our last post can help you discover the theft, but here are some places you should contact immediately to help you recover financially.  These institutions should be contacted in the order in which they are listed here.

1. Your credit card companies

If you notify your company of your missing card within 30 days of knowing it is missing, you won’t be responsible for more than $50 per card in fraudulent charges. Ask that the accounts be closed at your request, and open new accounts with password protection.

If an identity thief opens new accounts in your name, you’ll need to prove it wasn’t you who opened them. Ask the creditors for copies of application forms or other transaction records to verify that the signature on them isn’t yours.

Follow up your initial creditor contacts with letters indicating the date you reported the loss or theft. Watch your subsequent monthly statements from the creditor; if any fraudulent charges appear, contest them in writing.

2. Your bank
If your debit (ATM) card is lost or stolen, you won’t be held responsible for any unauthorized withdrawals if you report the loss before it’s used. Otherwise, the extent of your liability depends on how quickly you report the loss.

• Within two business days after you notice the card is missing: you’re liable for up to $50 of unauthorized withdrawals. (If the card doubles as a credit card, you may not be
  protected by this limit.)
• If you fail to report the loss within two days after you notice the card is missing, you can be held responsible for up to $500 in unauthorized withdrawals.
• If you fail to report an unauthorized transfer or withdrawal that’s posted on your bank statement within 60 days after the statement is mailed to you,you risk unlimited loss.

If your checkbook is lost or stolen, stop payment on any outstanding checks, then close the account and open a new one. Dispute any fraudulent checks accepted by merchants in order to prevent collection activity against you. And notify the check-guarantee bureaus: Certegy, Check Rite, ChexSystems, NPC, SCAN, and TeleCheck.

3. The three major credit bureaus
If your credit cards have been lost or stolen, call the fraud number of any one of the three national credit reporting agencies:

• Equifax (888) 766-0008
• Experian (888) 397-3742
• TransUnion (800) 680-7289

You need to contact only one of the three; the one you call is required to contact the other two.

Next, place a fraud alert on your credit report. If your credit cards have been lost or stolen, and you think you may be victimized by identity theft, you may place an initial fraud alert on your report. If you become a victim of identity theft (an existing account is used fraudulently or the thief opens new credit in your name), you may place an extended fraud alert on your credit report once you file a report with a law enforcement agency.

4. Law enforcement agencies

While the police may not catch the person who stole your identity, you should file a report about the theft with a federal, state, or local law enforcement agency. Once you’ve filed the report, get a copy of it; you’ll need it in order to file an extended fraud alert with the credit bureaus. You may also need to provide it to banks or creditors before they’ll forgive any unauthorized transactions.

If your driver’s license has been used to pass bad checks or perpetrate other forms of fraud, contact your state’s Department of Motor Vehicles. If you lose your passport, contact the U.S. Department of State. Finally, if your Social Security card is lost or stolen, notify the Social Security Administration.

If you have experienced identity theft, Glass Jacobson’s forensic accounting team can search your financials and help you tie up any loose ends to make sure you recover as fast as possible. Contact us for more information.

Larry Goldberg

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For all you Maryland residents who also happen to own your home you should check to make sure you applied for the Homestead Property Tax Credit.  You have until the end of 2012 to apply or you will lose this valuable property tax break.

The deadline was set back in 2007 so you might not remember if you applied.  According to the State Department of Assessments and Taxation (SDAT) about 150,000 homeowners have not sent in their applications. The homestead program only applies to your primary residence.

The Homestead Credit is a credit calculated on any assessment increase exceeding 10% (or the lower cap enacted by the county where the principal residence is located) in one year.  So, homeowners pay property tax on the value of their property as declared in their previous tax assessment plus any increase up to 10% but nothing more.

You can check the status of an application by visiting the SDAT website, and type in your address on the Real Property Data Search page.  If the state received and processed a homestead application, that will be noted at the bottom of the property’s page.

Check out the website it will only take a few minutes to make sure you are not missing out on this valuable tax break.

This week on the Wealth Wisdom blog, we’re going to cover identity theft in detail to keep you protected and help you recover should you ever fall victim to theft.

Identity thieves can empty your bank account, max out your credit cards, open new accounts in your name, and purchase furniture, cars and even homes on the basis of your credit history.  And what will you get in return? You’ll be left to clean the mess they made and restore your credit history through a painstaking process.

Here are some tips to take to help prevent becoming a victim of identity theft:

1. Check yourself out

It’s important to review your credit report from time to time.  Once a year, you can check your credit report for free by contacting the Annual Credit Report Request Service. Check to make sure that all the information contained in it is correct, and be on the lookout for fraudulent activity.

If you need to correct any information or dispute any entries, contact the three national credit reporting agencies: Equifax, Experian and TransUnion.

2. Don’t be careless

Make sure to keep your Social Security card in a safe place like a safe deposit box or a safe.  By leaving your card lying around your home or carrying it in your car or wallet, you become extremely vulnerable to identity theft.  Armed with your Social Security number, identity thieves have an easy road ahead of them.

Be careful to keep your receipts.  This should be a no-brainer, but many people ignore this simple step.  Keeping receipts can help you catch any discrepancies on your credit card bill or bank statement, and some receipts may even contain your credit or debit card number.

3. Shred it

Before you throw out any financial records such as credit or debit card receipts and statements, cancelled checks, or even offers for credit your receive in the mail, be sure to shred the documents.  If you don’t, and an identity thief targets your trash, you’ve just left a wealth of personal information lying around.

4. Cyber safety

Try to avoid storing personal and financial information on a laptop; if it’s stolen the thief may obtain more than your computer. If you must store such information on your laptop, protect these files with a strong password—one that’s six to eight characters long, and that contains upper and lowercase letters, as well as numbers. When you get a new computer, remove all of your personal information by overwriting the hard drive with a “wipe” utility program. Deleting your files will not be enough to protect your information should your old computer fall into the wrong hands.

Be conscious not to open emails from people you don’t know.  Opening the emails or clicking on attachments from the email may expose you to viruses, infect your computer with “spyware” that captures information by recording your keystrokes, or lead you to “spoofs” or fake websites that replicate legitimate sites.

If you use online banking or pay your credit card bill online, be sure that you are directly typing the URL address into the browser to ensure that you reach the correct site and not a spoof.  Be sure to only provide personal or financial information at secure websites.  To determine whether or not a site is secure, look for a URL that begins with “https” (instead of “http”) or a lock icon on the browser’s status bar.

Glass Jacobson’s financial professionals take identity theft very seriously, providing a secure portal for document transfer between themselves and their clients.  With personal and financial information being transferred electronically, you can never be too careful!

Keep an eye on the Wealth Wisdom Blog this week for more information on identity theft.

There are five estate planning documents you may need, regardless of your age, health or wealth:

1. Durable power of attorney

A durable power of attorney (DPOA) can help protect your property in the event you become physically unable to mentally incompetent to handle financial matters.  If no one is ready to look after your financial affairs when you can’t, your property may be wasted, abused or lost.

A DPOA allows you to authorize someone else to act on your behalf, so he or she can do things like pay everyday expenses, collect benefits, watch over your investments and file taxes.

2. Advanced medical directives

Advance medical directives let others know what medical treatment you would want, or allows someone to make medical decisions for you, in the event you can’t express your wishes yourself.  If you don’t have an advanced medical directive, medical care providers must prolong your life using artificial means, if necessary.

3. Will

A will is often said to be the cornerstone of any estate plan.  The main purpose of a will is to disburse property to heirs after your death.  If you don’t leave a will, disbursements will be made according to state law, which might not be what you would want.

4. Letter of instruction

A letter of instruction (also called a testamentary letter or side letter) is an informal, nonlegal document that generally accompanies your will and is used to express your personal thoughts and directions regarding what is in the will (or about other things, such as your burial wishes or where to locate other documents).  This can be the most helpful document you leave for your family members and your executor.

A letter of instruction IS NOT a substitute for a will.  Any directions you include in the letter are only suggestions and are not binding.

5. Living trust

A living trust (also known as a revocable or inter vivos trust) is a separate legal entity you create to own property, such as your home or investments.  The trust is called a living trust because it’s meant to function while you’re alive.  You control the property in the trust, and, whenever you wish, you can change the trust terms, transfer property in and out of the trust, or end the trust altogether.

Glass Jacobson’s financial services experts can help advise you on your estate planning, and which of these documents are most helpful for your specific situation.  For any questions regarding these documents, or other estate planning concerns please contact us.

Business valuation is a critical component to your estate or business succession planning.  Your business maybe your largest asset, and if you plan to engage in either one of these types of planning, at some point you will need to determine the taxable value of your business interest.  An incorrect value (i.e. one that is underestimated) could cause you to miss out of tax-saving strategies, while a value that is inflated could result in an investment of time and money in unnecessary planning.

Why might a valuation be needed?

Business may need valuation for any of the following reasons:

• May be no active market to set price
• Determine capital gain
• Sale of business to family member or outsider
• Transfer of business under buy-sell agreement
• Transfer of business interest by gift
• Estate tax purposes

What determines the value of my business?

There are multiple ways to determine the value of your business:

How do you determine the taxable value of your business?

The best way to determine the value of your business is to find a qualified appraiser.  Determining the value of your business is not something you should attempt on your own, especially in light of the fact that the IRS could challenge your valuation.  Glass Jacobson has a team of 5 Certified Valuation Analysts (CVAs) who specialize in determining the value of businesses.

A word to the wise: DO NOT use an old appraisal

You may have had your business appraised in the past for another purpose.  As tempting as it might be, don’t use an old appraisal now.  The purpose of the appraisal can affect the valuation assigned, and time can change the factors that go into the appraisal calculation.

The best time to start thinking about your business’s succession plan is a couple years BEFORE you are ready to exit.  If you are starting to think about next steps for you and your business, contact us to ensure your business is valued properly and you have a plan in place to mitigate taxes.

Our CVAs are Ed Jacobson, Bart Scheffel, Doug White, Jennifer Verch and Larry Goldberg.