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What kind of freedom do you desire?
 Putting a Second Home to Work
A client mentioned they were thinking of renting out their vacation home, but their accountant told them they would lose the income tax deduction for the home mortgage interest. We found out that they were paying 5.5% interest on their home in Kansas and 6.5% interest on their vacation home, which was owned jointly.
The result...We lined them up with resources to get them a loan on the Kansas home for a fixed rate of 4.625%. They paid off the vacation home mortgage, changed ownership of their vacation home to an LLC, and put it on the rental market to create a stream of income to handle expenses and create extra cash. This simple strategy lowered their overall interest cost, they were able to keep the interest fully tax deductible and they created a protected asset. The vacation home went from being an expense to becoming an income producing asset that was still available for recreational use.
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Inheriting an Education
As part of a client’s plan to fund their children’s education, we set up a 529 plan that the client funded on a monthly basis. The client called and mentioned that he had received an inheritance and wondered where the best place to allocate funds would be. Since the 529 plan can grow on a tax deferred basis, we suggested revisiting his funding strategy.
The result...We suggested that he fund the 529 plan immediately with a lump sum rather than continuing to fund it on a monthly basis. This would allow for a significant tax savings, and he would benefit from the value of compounding over a longer period of time. Additionally, when he takes the money out for college related purposes in the future, it could be distributed tax free. He was able to completely fund his children’s college tuition with fewer dollars than it would have otherwise taken and the college funding project was completed several years ahead of schedule.
Preparing a Doctor for Success and Succession
While meeting with a doctor and his wife, we discussed the goals for their medical practice: a succession plan and protection of the medical building from any potential medical malpractice claims. Despite their best intentions to bring their daughter into ownership, the goal had never been realized. Additionally, the practice’s building was susceptible to potential exposure for loss because it was owned personally by the doctor.
The result...We first set our clients up with our resources in accounting and law who quickly helped them establish their daughter as a partner in the practice. Then, we helped transfer the ownership of the building into an LLC owned by the wife’s trust, because she was less susceptible to a liability law suit. This strategy protected the building and the practice. We also worked with a real estate appraiser and an attorney to help them set up a market value lease agreement for the building in anticipation of bringing in a new partner in the future.
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