Fleming Financial Services Blog

At Fleming Financial Services, Inc., our role is to assist our clients in defining and realizing their financial objectives and goals. We work with our clients to implement personalized plans designed for their unique situations. Our areas of concentration are: Retirement planning, Estate and Wealth Transfer strategies, and Business Continuation planning. We emphasize the importance of conducting our business with integrity and professionalism. As a member of PartnersFinancial, an independent national financial services company, we are able to provide access to sophisticated resources for the benefit of our clients. Some of the professionals with our firm are currently registered to conduct business through NFP Securities, Inc. With those additional resources in place, we help facilitate the complex corporate and personal financial decisions our clients must make.

All about IRAs-Part 2

What happens when you start taking money from your traditional IRA? Any portion of a distribution that represents deductible contributions is subject to income tax because those contributions were not taxed when you made them. Any portion that represents investment earnings is also subject to income tax because those earnings were not previously taxed either. Only the portion that represents nondeductible, after-tax contributions (if any) is not subject to income tax. In addition to income tax, you may have to pay a 10% early withdrawal penalty if you're under age 59½, unless you meet one of the exceptions. Traditional IRAs--Tax Year 2014 Fleming Financial Services, PA, IRA                         If you wish to defer taxes, you can leave your funds in the traditional IRA, but only until April 1 of the year following the year you reach age 70½. That's when you have to take your first required minimum distribution from the IRA. After that, you must take a distribution by the end of every calendar year until your funds are exhausted or you die. The annual distribution amounts are based on a standard life expectancy table. You can always withdraw more than you're required to in any year. However, if you withdraw less, you'll be hit with a 50% penalty on the difference between the required minimum and the amount you actually withdrew. Roth IRAs Not everyone can set up a Roth IRA. Even if you can, you may not qualify to take full advantage of it. The first requirement is that you must have taxable compensation. If your taxable compensation is at least $5,500 in 2014 (unchanged from 2013), you may be able to contribute the full amount. But it gets more complicated. Your ability to contribute to a Roth IRA in any year depends on your MAGI and your income tax filing status. Your allowable contribution may be less than the maximum possible, or nothing at all. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.

All about IRAs-Part 1

Fleming Financial Services, PA, IRAAn individual retirement arrangement (IRA) is a personal retirement savings plan that offers specific tax benefits. In fact, IRAs are one of the most powerful retirement savings tools available to you.  Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA. What types of IRAs are available? There are two major types of IRAs: traditional IRAs and Roth IRAs. Both allow you to make annual contributions of up to $5,500 in 2014 (unchanged from 2013). Generally, you must have at least as much taxable compensation as the amount of your IRA contribution. But if you are married filing jointly, your spouse can also contribute to an IRA, even if he or she does not have taxable compensation. The law also allows taxpayers age 50 and older to make additional "catch-up" contributions. These folks can put up to $6,500 in their IRAs in 2014 (unchanged from 2013). Both traditional and Roth IRAs feature tax-sheltered growth of earnings. And both give you a wide range of investment choices. However, there are important differences between these two types of IRAs. You must understand these differences before you can choose the type of IRA that's best for you. Traditional IRAs Practically anyone can open and contribute to a traditional IRA. The only requirements are that you must have taxable compensation and be under age 70½. You can contribute the maximum allowed each year as long as your taxable compensation for the year is at least that amount. If your taxable compensation for the year is below the maximum contribution allowed, you can contribute only up to the amount you earned. Your contributions to a traditional IRA may be tax deductible on your federal income tax return. This is important because tax-deductible (pretax) contributions lower your taxable income for the year, saving you money in taxes. If neither you nor your spouse is covered by a 401(k) or other employer-sponsored plan, you can generally deduct the full amount of your annual contribution. If one of you is covered by such a plan, your ability to deduct your contributions depends on your annual income (modified adjusted gross income, or MAGI) and your income tax filing status. You may qualify for a full deduction, a partial deduction, or no deduction at all. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.

The Most Financially Literate States in America

Author thomas-joseph-fleming-financial , 6/26/2014
Fleming Financial, PA, United States MapNew Hampshire must be on to something. The state is No. 1 for financial literacy and it had one of the top five average credit scores in the country at the end of last year. That success likely stems from a variety of things: New Hampshire requires personal finance education in schools, has one of the highest high school graduation rates, has some of the most educated residents in the country and has the lowest portion of unbanked households in the country. In short: New Hampshire residents seem to have the resources to make smart financial decisions. A recent report from WalletHub took several financial and educational metrics and analyzed them to come up with the country’s most (and least) financially literate states. The rankings are based on savings habits and spending patterns, in addition to states’ educational requirements. New Hampshire came out on top, followed closely by several states with similarly high credit scores (based on 2013 credit score data from Experian-Oliver Wyman Market Intelligence reports).
  1. New Hampshire
  2. Utah
  3. Virginia
  4. New Jersey
  5. Minnesota
  6. South Dakota
  7. North Dakota
  8. Maryland
  9. Idaho
  10. Massachusetts
Five of those states are also among those with the top 10 average credit scores. Financial literacy matters because everyone has to deal with money — and it’s crucial to manage money well by spending within your means, saving for large purchases and unexpected expenses, paying your bills on time and understanding the terms of any financial products (usually credit cards or loans) you use. Even if you didn’t start out with the best financial foundation, you can learn from and correct past mistakes. One of the most helpful things you can do is learn how your past actions influence your credit standing and access to financial products in the future. Reviewing your credit scores and credit reports is a great habit to form, because you can connect how things like on-time payments and how much credit you use impact your credit scores. If you want to see where you stand, you can get two free credit scores with a account, along with advice on how to improve or maintain them. Content provided by:

Business Succession Planning-Part 2

Author thomas-joseph-fleming-financial , 6/24/2014
Fleming Financial Services, PA, Business Succession PlanningPrivate annuity With a private annuity, you transfer your ownership interest in the business to family members or another party (the buyer). The buyer in turn makes a promise to make periodic payments to you for the rest of your life (a single life annuity) or for your life and the life of a second person (a joint and survivor annuity). Again, because a private annuity is a sale and not a gift, it allows you to remove assets from your estate without incurring gift or estate taxes. Until 2006, exchanging property for an unsecured private annuity allowed you to spread out any gain realized, deferring capital gains tax. IRS regulations proposed that year have effectively eliminated this benefit for most exchanges, however. If you're considering a private annuity, be sure to talk to a tax professional. Self-canceling installment note A self-canceling installment note (SCIN) allows you to transfer your interest in the business to a buyer in exchange for a promissory note. The buyer must make a series of payments to you under that note, and a provision in the note states that at your death, the remaining payments will be canceled. Like private annuities, SCINs provide for a lifetime income stream and they avoid gift and estate taxes. But unlike private annuities, SCINs give you a security interest in the transferred business. Fleming Financial Services, PA, Business Succession Planning Gifting your business If you're like many business owners, you'd prefer to have your children inherit the result of all your years of hard work and success. Of course, you can bequeath your business in your will, but transferring your business during your lifetime has many additional personal and tax benefits. By gifting the business over time, you can hand over the reins gradually as your offspring become better able to control and manage the business on their own, and you can minimize gift and estate taxes. Gifting your business interests can minimize gift and estate taxes because:
  • It transfers the value of any future appreciation in the business out of your estate to your heirs. This can be especially valuable if business growth is expected.
  • Gifts of $14,000 per recipient are tax free under the annual gift tax exclusion.
  • Aggregate gifts up to $5,340,000 (2014 figure) are tax free under your lifetime exemption.
  • Partial interest gifts, as with GRATs, GRUTs, and FLPs, may be valued at a discount for lack of marketability or restrictions on transferability.
Gifting your business using trusts You can make gifts outright or use a trust. You can even structure a trust so that you keep control of the business for as long as you want. You can establish a revocable trust, which will bypass probate and allow you to change your mind and end the trust, or an irrevocable trust, such as a grantor retained annuity trust (GRAT) or a grantor retained unitrust (GRUT) that can provide you with income for a specified period of time and move your business out of your estate at a discount. Gifting your business using a family limited partnership You can transfer your business interest using another entity, such as a family limited partnership (FLP). An FLP is a limited partnership formed to manage and control a family business. You (and your spouse) can be the general partners, retaining control of the business itself and receiving income from the business, while your children can be limited partners.  By transferring the business to an FLP, you may be able to use valuation discounts and substantially reduce the value of the business for tax purposes by making annual gifts to the limited partners. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.

The hidden costs of Medicare

Author thomas-joseph-fleming-financial , 6/19/2014

 Fleming Financial, PA, Hidden cost of MedicareWatch out for these unexpected Medicare costs.

Some of the out-of-pocket costs Medicare beneficiaries face are fairly predictable, such as their monthly premiums, annual deductible and the copays and coinsurance associated with various Medicare services. However, there are other Medicare costs that are far more difficult to discern that could lead to medical bills in retirement. Here are some Medicare costs you might unexpectedly incur in retirement:

Your free annual checkup might not be free

During the first 12 months you have Medicare Part B, you can get a free “Welcome to Medicare” preventive care doctor’s visit, and after that retirees are eligible for a free annual wellness checkup. However, depending on what tests or services your doctor orders during this visit, you may still end up with a bill. While Medicare covers a variety of preventive care services with no cost-sharing requirements, if your doctor recommends a test or procedure that isn’t considered preventive or you get a test more often than Medicare covers it, you may have to pay coinsurance and the Part B deductible may apply. “If the doctor orders a test and it falls under Part B, you could very well have to pay 20 percent of those test costs,” says Allison Hoffman, an assistant professor of law at the UCLA School of Law. However, supplemental plans such as Medigap and Medicare Advantage plans may fill in some of these cost-sharing requirements.

Preventive services may trigger other costs

Medicare covers many, but not all, preventive care screenings with no out-of-pocket costs for retirees. However, if a screening test finds something concerning that requires additional tests or services, you will likely face a variety of out-of-pocket costs. “The copay is reduced to zero for the preventive service, but once that part of the service is no longer preventive, now we are treating something and you are going to hit the 20 percent copay,” says Jack Hoadley, a health policy analyst at Georgetown University. For example, a colonoscopy is covered once every 120 months for most Medicare beneficiaries and typically costs nothing for the recipient. However, if a polyp or other suspicious tissue is discovered and removed during the colonoscopy, you may have to pay 20 percent of the Medicare-approved amount for the doctor’s services and a copayment to the medical establishment where the procedure was performed.

No annual limit on out-of-pocket costs

With original Medicare, retirees can expect to pay a Part B deductible, copays and coinsurance amounting to 20 percent of the Medicare‑approved amount for most services. There’s no annual limit on what retirees could be expected to pay out-of-pocket. “There are types of situations where out-of-pocket costs can go extremely high,” Hoadley says. “If you have major cardiac surgery, your 20 percent coinsurance could be thousands of dollars or possibly tens of thousands of dollars.” Supplemental insurance policies can protect retirees from these sometimes catastrophically high costs.

Penalties for late enrollment

You can sign up for Medicare Part B at any time during the seven-month period that begins three months before the month you turn 65. But if you don’t sign up during this initial enrollment period, you might have to pay a late enrollment penalty for the rest of your life. Your monthly Part B premium will increase by 10 percent for each 12-month period you were eligible for benefits but didn’t sign up for them. For example, a retiree whose initial enrollment period ended Sept. 30, 2010, but who didn’t sign up for Medicare Part B until March 2013 will pay 20 percent higher premiums due to the two full years he delayed signing up. People who are still working after age 65 and are covered by an employer’s group health plan can avoid this late enrollment penalty by signing up for Medicare Part B within eight months of the employment or coverage ending. COBRA coverage and retiree health plans are not considered coverage based on current employment for the purpose of avoiding the late enrollment penalty.

You could lose your right to purchase Medigap coverage

Medigap policies, which are sold by private insurance companies, generally pay for some of the health care services Medicare doesn’t cover. However, you only have a small window in which you are guaranteed the right to buy a Medigap policy. There is a one-time Medigap open enrollment period that begins the first month you’re 65 and enrolled in Part B. It lasts for six months, during which you have the right to buy any Medigap policy sold in your state regardless of your current health. After this enrollment period ends, you may no longer have the option to buy a Medigap policy, or it could cost significantly more. “If you sign up in that initial period, they can’t look at your whole health history and decide to charge you more because you have had cancer in the past or had heart disease,” Hoffman says. “If you don’t sign up in the initial enrollment period, then they can underwrite you. They can charge you more because of your particular health characteristics.” If you delay enrolling in Part B due to group health coverage provided by an employer, your Medigap open enrollment period begins when you sign up for Medicare Part B.

Part D late enrollment penalty

Medicare Part D also has a late enrollment penalty if you don’t sign up when you are first eligible to do so or you go 63 or more days in a row without prescription drug coverage, and the penalty increases the longer you go without coverage. “If you become entitled to Medicare and you decide you don’t want to sign up for a Part D plan – for example, if you are not taking very many medications, if down the road you get sick and you start needing some medications, you will face a late enrollment penalty unless you have had drug coverage that was at least as good,” says Juliette Cubanski, a Medicare policy analyst at the Kaiser Family Foundation. “It makes sense to sign up for Part D when you are first eligible or when you first lose coverage so as to avoid those late enrollment penalties.” The late enrollment penalty is calculated by multiplying 1 percent of the national base beneficiary premium ($31.17 in 2013) by the number of months you went without Medicare Part D or other prescription drug coverage after becoming eligible for Medicare, and is then added to your monthly premiums for as long as you have Medicare Part D. For example, a retiree who was first eligible for coverage on May 1, 2009, but elected to delay signing up for a Part D plan until Jan. 1, 2013, and didn’t have other coverage during those 43 months will be charged a monthly penalty of $13.40 in 2013 in addition to her plan’s monthly premium.

Drug restrictions

Medicare Part D plans have formularies that list which drugs are covered and the cost-sharing requirements. Some Part D plans also require prior authorization before you can fill certain prescriptions or might require you to try similar lower-cost drugs before a plan will cover a more expensive prescribed drug. There may also be quantity limits on how much medication you can get at a time.

Medicare Part D has a coverage gap

Most Medicare drug plans have a coverage gap that begins after a retiree incurs $2,850 in prescription drug costs and ends when drug costs reach $6,691 in 2014 and catastrophic coverage kicks in. In the coverage gap, retirees are responsible for 47.5 percent of the cost for brand-name drugs and 72 percent of the cost for generic medications in 2014. “Part D has the famous 'doughnut hole' that is going to be closed, but there’s a sizable liability there for people who have substantial prescription drug costs,” Palmer says. Some Part D plans offer additional gap coverage in exchange for higher premiums. The coverage gap is scheduled to be eliminated by 2020.

Little long-term care coverage

Don’t expect Medicare to pick up the tab for a nursing home or many other types of long-term care. Only short-term nursing home stays of up to 100 days after a three-day hospital stay are covered. If you need nursing home care for longer than that, you will be responsible for all costs. “Many people who have a need for long-term care services end up spending down whatever resources are available to them and may, at that point, end up qualifying for Medicaid,” Cubanski says. “While Medicare does not cover long-term care expenses, if someone is permanently living in a nursing home or some other type of assisted living facility, Medicaid does cover some of those long-term care expenses. And people can purchase private long-term care insurance that can help cover long-term care.” Content provided by

Business Succession Planning-Part 1

Author thomas-joseph-fleming-financial , 6/17/2014
Fleming Financial Services, PA, Business Succession PlanningWhen developing a succession plan for your business, you must make many decisions. Should you sell your business or give it away? Should you structure your plan to go into effect during your lifetime or at your death? Should you transfer your ownership interest to family members, co-owners, employees, or an outside party? The key is to pick the best plan for your circumstances and objectives, and to seek help from financial and legal advisors to carry out this plan.

Selling your business

Selling your business outright You can sell your business outright, choosing the right time to sell--now, at your retirement, at your death, or anytime in between. The sale proceeds can be used to maintain your lifestyle, or to pay estate taxes and other final expenses. As long as the price is at least equal to the full fair market value of the business, the sale will not be subject to gift taxes. But, if the sale occurs before your death, it may result in capital gains tax. Transferring your business with a buy-sell agreement A buy-sell is a legally binding contract that establishes when, to whom, and at what price you can sell your interest in a business. A typical buy-sell allows the business itself or any co-owners the opportunity to purchase your interest in the business at a predetermined price. This can help avoid future adverse consequences, such as disruption of operations, entity dissolution, or business liquidation that might result in the event of your sudden incapacity or death. A buy-sell can also minimize the possibility that the business will fall into the hands of outsiders. The ability to fix the purchase price as the taxable value of your business interest makes a buy-sell agreement especially useful in estate planning. Agreeing to a purchase price can minimize the possibility of unfair treatment to your heirs. And, if your death is the triggering event, the IRS' acceptance of this price as the taxable value can help minimize estate taxes. Additionally, because funding for a buy-sell is typically arranged when the buy-sell is executed, you're able to ensure that funds will be available when needed, providing your estate with liquidity that may be needed for expenses and taxes. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.

Happy Father’s Day!

Author thomas-joseph-fleming-financial , 6/12/2014

Father’s Day is this weekend, are you ready?  No?   That’s okay, we have a couple of suggestions for you.

Father’s Day Brunch at Mitchells Fish Market

Fleming Financial Services, PA, Happy Father's Day

                “We invite you to discover our fresh seafood obsession at Mitchell's Fish Market where the fish is off the boat fresh, the drinks are made with fresh-squeezed juice & the atmosphere is as warm and inviting as a day on the water. At Mitchell's Fish Market we are obsessed with fresh seafood. Our mantra is a commitment & passion for freshness as a way of life - a pledge that our fish is 100% fresh or it isn't good enough. With more than 80 items, the chef inspired menu includes items such as Cedar Roasted Atlantic Salmon & Shang Hai Sea Bass. Come experience what an obsession with freshness tastes like at Mitchell's Fish any fresher would still be in the ocean! View of menus online at!” Not a seafood lover?  What about breakfast and a movie?

Breakfast and Father of the Bride

Fleming Financial Services, PA, Father of the Bride

It's Father's Day! Bring dear old dad to a breakfast catered by Kelly James (formerly of Sugar Cafe) and the charming comedy Father of the Bride, starring Spencer Tracy and Elizabeth Taylor. YOU MUST GET YOUR BREAKFAST TICKETS BY THURSDAY, JUNE 12. If you want to see the movie only, it's $7 at the door. Great food, great movies (and cartoons before each screening!), plus door prizes!! In the movie, proud father Stanley Banks remembers the day his daughter, Kay, got married. Starting when she announces her engagement through to the wedding itself, we learn of all the surprises and disasters along the way. Directed by Vincente Minnelli. Starring Spencer Tracy and Elizabeth Taylor. Comedy/1950/G/92 minutes. From all of us here at Fleming Financial Services, we want to wish all the Fathers out there a Happy Father’s Day! Sources:   and

How Grandparents Can Help Grandchildren with College Costs-Part 3

Author thomas-joseph-fleming-financial , 6/10/2014
Fleming Financial Services, PA, Grandparents and CollegeIf grandparents want to open a 529 account for their grandchild, there are a few things to keep in mind. If you need to withdraw the money in the 529 account for something other than your grandchild's college expenses--for example, for medical expenses or emergency purposes--there is a double consequence:  the earnings portion of the withdrawal is subject to a 10% penalty and will be taxed at your ordinary income tax rate. Also, funds in a grandparent-owned 529 account may still be factored in when determining Medicaid eligibility, unless these funds are specifically exempted by state law. Regarding financial aid, grandparent-owned 529 accounts do not need to be listed as an asset on the federal government's financial aid application, the FAFSA. However, distributions (withdrawals) from a grandparent-owned 529 plan are reported as untaxed income to the beneficiary (grandchild), and this income is assessed at 50% by the FAFSA. By contrast, parent-owned 529 accounts are reported as a parent asset on the FAFSA (and assessed at 5.6%) and distributions from parent-owned plans aren't counted as student income. To avoid having the distribution from a grandparent-owned 529 account count as student income, one option is for the grandparent to delay taking a distribution from the 529 plan until any time after January 1 of the grandchild's junior year of college (because there will be no more FAFSAs to fill out). Another option is for the grandparent to change the owner of the 529 account to the parent. Colleges treat 529 plans differently for purposes of distributing their own financial aid. Generally, parent-owned and grandparent-owned 529 accounts are treated equally because colleges simply require a student to list all 529 plans for which he or she is the named beneficiary. Note:  Investors should consider the investment objectives, risks, charges, and expenses associated with 529 plans before investing. More information about specific 529 plans is available in each issuer's official statement, which should be read carefully before investing. Also, before investing, consider whether your state offers a 529 plan that provides residents with favorable state tax benefits. Private elementary/secondary school If you're interested in contributing to your grandchild's private elementary or secondary school education, a Coverdell education savings account (ESA) is worth a look. You can contribute up to $2,000 per beneficiary each year to a Coverdell ESA. Like funds in a 529 plan, money in a Coverdell ESA grows tax deferred and is tax free at the federal and state level if used to pay the beneficiary's qualified education expenses, which includes college along with private elementary and secondary school. However, there are income limits on who can contribute to a Coverdell ESA--married couples with a modified adjusted gross income over $220,000 ($110,000 for individuals) can't contribute. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.

How Grandparents Can Help Grandchildren with College Costs-Part 2

A 529 plan can be an excellent way for grandparents to contribute to a grandchild's college education, while simultaneously paring down their own estate.  Contributions to a 529 Did you knowplan grow tax deferred, and withdrawals used for the beneficiary's qualified education expenses are completely tax free at the federal level (and generally at the state level too). There are two types of 529 plans: college savings plans and prepaid tuition plans. College savings plans are individual investment-type accounts offered by nearly all states and managed by financial institutions.  Funds can be used at any accredited college in the United States or abroad. Prepaid tuition plans allow prepayment of tuition at today's prices for the limited group of colleges--typically in-state public colleges--that participate in the plan. Grandparents can open a 529 account and name a grandchild as beneficiary (only one person can be listed as account owner, though) or they can contribute to an already existing 529 account.  Grandparents can contribute a lump sum to a grandchild's 529 account, or they can contribute smaller, regular amounts. Regarding lump-sum gifts, a big advantage of 529 plans is that under special rules unique to 529 plans, individuals can make a single lump-sum gift to a 529 plan of up to $70,000 ($140,000 for joint gifts by married couples) and avoid federal gift tax. To do so, a special election must be made to treat the gift as if it were made in equal installments over a five-year period, and no additional gifts can be made to the beneficiary during this time. Example:  Mr. and Mrs. Brady make a lump-sum contribution of $140,000 to their grandchild's 529 plan in Year 1, electing to treat the gift as if it were made over 5 years. The result is they are considered to have made annual gifts of $28,000 ($14,000 each) in Years 1 through 5 ($140,000 / 5 years). Because the amount gifted by each grandparent is within the annual gift tax exclusion, the Bradys won't owe any gift tax (assuming they don't make any other gifts to this grandchild during the 5-year period). In Year 6, they can make another lump-sum contribution and repeat the process. In Year 11, they can do so again. Significantly, this money is considered removed from the grandparents' estate, even though in the case of a grandparent-owned 529 account the grandparent would still retain control over the funds. There is a caveat, however. If a grandparent were to die during the five-year period, then a prorated portion of the contribution would be "recaptured" into the estate for estate tax purposes. Example:  In the previous example, if Mr. Brady were to die in Year 2, his total Year 1 and 2 contributions ($28,000) would be excluded from his estate. But the remaining portion attributed to him in Years 3, 4, and 5 ($42,000) would be included in his estate. The contributions attributed to Mrs. Brady ($14,000 per year) would not be recaptured into the estate. ©2013 Broadridge Investor Communication Solutions, Inc. All rights reserved.