MAKING CENTS: Keeping the vacation home in the family

As you close up the vacation home for the season, reflect back on all the great memories and the stories that your grandchildren are carrying with them to their neighborhoods. 

The beach, hikes and bonfires will last with them forever. These memories are enough to make you want to preserve this home through the generations, and let the memories turn into legacy.

Your children, however, are probably having a discussion with a little different flavor. They are wondering how their older brother, who hasn’t held a steady job in 10 years is going to pay for his share of the maintenance. Your daughter in Scottsdale is wondering why she has to pay for the maintenance of the home all year round when she only plans to be there for two weeks in July. And your middle daughter, who lives nearby both you and the vacation home, is concerned that all of the maintenance and seasonal responsibilities will fall upon her.

If you are determined to turn the memories into legacies, try these simple steps to accomplish your vision for a family vacation home that endures the generations, economies and tax law changes.

Consider placing the title of the home in a trust. Work with a good estate planning attorney to draft the provisions giving you the greatest chance of accomplishing your objectives. If you simply leave the home to your children directly in equal shares, you are inviting a host of potential problems.

The trust needs a trustee, who can be one of the beneficiaries. Be very specific about the duties and powers of the trustees and give careful thought to how t successor trustees would be chosen.

Consider spelling out rules regarding usage of the home. A fair and equitable method that doesn’t give all the “prime time” to any one child. Spell out the financial obligations of the beneficiaries and the consequences for any one beneficiary’s inability to meet their fair share.

This all sounds simple when you consider your three children who all get along so well. But add a spouse, a few grandchildren each and all of a sudden you have a dozen or more stakeholders with an interest in the terms of the trust.

Consider endowing, or funding the trust with enough cash to maintain the home in perpetuity. For some, this may not be possible. You may look into a life insurance policy to fund this trust. If you can’t afford the insurance or the endowment, understand that your vision may be beautiful, but not practical.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200.

Making Cents: Save some money with storm preparation

This first week of autumn is a good time to get yourself prepared for any weather-related calamities to your home or yard that rain, snow, wind or hail might bring.

Start by checking your insurance coverage. Make sure that your limits are adequate to protect against major losses and that it will pay for the replacement cost of any losses, including a total loss. Pay special attention to limits for floods or damage from trees.

Also, be sure that you are comfortable with the amount of coverage that you have on your contents especially any valuable art or other collectable items.

Consider taking an inventory of your contents both in list and photo format including photographing any special features such as rare wood or other unique hard-to-replace features.

Next, take a walk around the yard. Look at the house for loose shingles, gutters, roofs or anything else attached to the home that may be damaged by high winds or snow and ice. Also take a look at the trees to be sure that you are not one big gust away from a hole in the roof or a loss of power from fallen limbs.

After the leaves have fallen, make sure your gutters are cleaned to prevent ice dams. For any north-facing roofs with clogged gutters, ice dams may ruin a lot more than your interior paint job.

If you are prone to power outages, look at the cost of installing a small generator to keep the essentials working or have a power outage plan regarding what you will do in the event of an extended outage. Consider an alternate form of heat such as a wood stove that may keep your home warm enough to prevent frozen pipes.

With shorter days also on the horizon, check your outdoor lighting. Whether you are leaving for work before sunrise or getting home after dark, it sure makes it easier when you have some lighting to avoid bumping around in the dark.

Get a jump on buying supplies that cause lines at the store. This may include the traditional water and other food staples but also items like flashlights and batteries. And get that snow blower tuned up and out of the shed before you need it.

Have all of your mechanical systems in the home checked or tuned up. If you need any repairs such as hot water heaters, windows or home furnaces, make sure that you inquire about energy saving products that may give you some tax relief. You would need to have these items installed before the end of the year to enjoy any tax relief.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial. Member FINRA/SIPC. He can be reached at 781-849-9200

MAKING CENTS: Many opportunities missed, especially in estate planning

More costly than a mistake in your tax filing may be missing out on opportunities for savings you didn’t know existed. One may be with the holding period of your investments. Investments held for one year or longer qualify for a lower capital gains rate than short term gains held less than a year. Before you sell any investment, check the date of acquisition.

Consider harvesting any gains or losses in your portfolio to offset each other. The code allows you to deduct losses dollar for dollar against gains. When your losses exceed your gains, you’ll only be allowed a $3,000 deduction.

An exception to offsetting gains with losses may be appropriate for low income taxpayers. Perhaps this is the year that you’ve retired, and you find yourself in a lower tax bracket. Joint taxpayers with taxable incomes less than $72,500 will pay no capital gains on their sales of appreciated investments.

Before you sell an investment to donate to your favorite charity, consider gifting the investment to the charity. In the case of gifting appreciated securities, you will get a

deduction for the full fair market value of the investment even though your cost may be far less than the fair market value. In this case, you’ll avoid claiming any capital gains and get a full deduction for the amount that you want to gift to the charity.

Improperly calculating the basis of inherited investments also causes problems. The inheritor of investments can step up their tax basis to the fair market value at the date of death. For an elderly decedent who held their investment for a long time, this difference may be very significant.

Similarly, if an elder person is considering a gift of real estate or appreciated property of any kind, it may make sense for this asset to pass through the estate rather than via gift simply for the step up in basis.

The last thought is about Roth IRAs. Many people are conditioned to take nothing from the IRA until the last possible moment at age 70½. A conversion to a Roth IRA now will help to reduce required minimum distributions later. Of course, you’ll pay tax now on the amount converted but this may a good thing. If you find yourself in a lower tax bracket this year, consider making a partial Roth conversion to use up whatever may be remaining in that lower tax bracket.

MAKING CENTS: MAKING CENTS: Insurance you don’t need

You can insure just about anything. From “hole in one” insurance to losses of body parts while on the job, there’s a policy for just about everything. The questions are whether you need that coverage and if it is cost effective.

A simple rule to go by for coverage that is a bit out of the ordinary is to size up the risk.

If you were going to give a vehicle for a hole in one, that risk is relatively large. In these situations, you will likely conclude that the premium for the coverage is a good idea even though the occurrence of a hole in one is not likely.

But in the case of getting extra money because you broke your leg or lost an eye while on the job, that is not often a wise choice. Let’s say that you are injured away from work. Is your trauma and financial loss any less because you were riding a bike through the woods when it happened rather than at work? Not likely. In either case you are going to miss work, incur medical bills and either recover or not. But the financial loss is identical in either situation.

The conclusion is that for those with adequate insurance, these extras are typically not needed. This leads one to question: are you properly covered? The answer to that is different for everyone, but basic insurance to me means health, life, disability, long term care, homeowners, liability and auto. Everyone needs to budget the cost for these basic policies into their cost of living. It is not safe to assume that you are adequately covered for all of these risks through your job. Sometimes group coverage offered at work does not have as strong a benefit as you can buy on your own.

Also remember that most insurance acquired through the workplace is only in place while you are an employee. Your life, disability and health insurance frequently do not come with you upon retirement, changing jobs or getting laid off.

For some, extended warranties make a lot of sense, and for others, not so much. If you are a buy-and-hold person who is hard on cars, then perhaps it makes sense to purchase this for your auto. Similarly, if you do a lot of city driving, and spend time dodging pot holes, then the tire warranty is probably a pretty good deal.

Many consumer scholars think extended warranties are i a waste of money. But as a professional consumer, I think the correct answer for you lies in your particular facts and circumstances.