Karin Price Mueller/The Star-Ledger
Posted: 02/26/2012 6:40 AM

Q. My wife and I are both 65. We own our home and have an existing mortgage plus a home equity loan outstanding. We’ve been hearing a lot about reverse mortgages lately. We have approximately $300,000 equity in the home and are examining our options regarding the next phase of our lives. Are reverse mortgages truly beneficial to homeowners? What are the disadvantages? Does everyone 62 years of age qualify regardless of their situation? Are there tax consequences?
— Curious

A. Anyone 62 and older qualifies for a reverse mortgage.

These allow homeowners to tap the equity in their home. Depending on the agreement you have with the lender, you might receive a lump sum, a monthly income stream or a line of credit based on the value of the home, said Michael Gibney, a certified financial planner with Highland Financial Advisors in Riverdale.

You can’t borrow the entire value of the home.

“The amount that can be borrowed is based on a formula that factors in the age of the youngest homeowner, the interest rate, appraised value and the county where the property is located,” Gibney said.

Also, the house must be fully paid off, or have a small remaining balance on the mortgage, for you to qualify. You also must continue to live in the home, and you’d also retain title and ownership of the home.

Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield, said he likes reverse mortgages in some circumstances.

“Often, retirees have a lot of money locked up in their homes and they would like to have more cash in retirement,” he said. “Recent changes in these programs have cut down the upfront costs substantially, which was one of the criticisms of these programs.”

Lynch said if a reverse mortgage can unlock funds in retirement that normally would not have been spent, and if those funds can improve the quality of your retirement, it could make sense.

And the income you’d receive is tax free, he said.

Lynch said the mortgage company will eventually get back the money it pays you, with interest, if you sell the home or die. But it’s also possible for a lender to give you too much, so if your home is worth less after you die, the lender can lose funds. The lender cannot go after the family for additional assets to repay the excess portion of the loan, Lynch said.

Lynch said many clients tell him they want their homes to ultimately be inherited by their kids.

“Unless it is a beach or ski house, the day after you pass, that home is on the market,” he said. “If there is equity in their home at the end of the day, the kids get that.”

There are some disadvantages to consider.

Lenders generally charge fees for a reverse mortgage, and the interest is not deductible for you.

“A reverse mortgage may affect a person’s eligibility for some other programs,” Gibney said. “Consult your local program offices to determine how, or if, monthly reverse mortgage payments might affect your specific situation.”

— Karin Price Mueller

E-mail your questions to askbiz@starledger.com or jerry.lynch@jflconsultinginc.com

Jerry Lynch is president of JFL Consulting and has more than 24 years in insurance and financial planning. He has been a regular guest on CNBC, WABC and does regular articles for the Star Ledger. He can be reached at jerry.lynch@jflconsultinginc.com

Jerry Lynch is a representative of Comprehensive Capital Management, Inc., an SEC registered investment adviser through which such representative provides investment advisory services, with principal offices at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211). Jerry Lynch may also provide commission based securities sales through Comprehensive Asset Management and Servicing, Inc., an SEC registered and FINRA member broker-dealer, with principal offices also located at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211). JFL Consulting is a trade name, it is not a registered investment adviser. All questions should be directed to Ron Rollins, Chief Compliance Officer.

Published: Wednesday, 8 Feb 2012 | 2:16 PM ET

By: Cindy Perman
CNBC.com Staff Writer

This just in — money isn’t always No. 1!

After enduring the financial impact of the recession, a whopping number of Baby Boomers say money isn’t the most important thing they hope to leave to their kids.

They don’t just want to leave an inheritance; they want to leave a legacy.

“It is more important to us to leave the legacy of what we value than to leave a large amount of money for our children,” said Kathleen Moynihan, a 53-year-old mother of three from Concord, Mass.

“Your values become the new valuables,” said Derrick Kinney, a financial adviser and owner of Derrick Kinney & Associates in Dallas. “Giving your kids the gift of knowing what is important to you gives them a reason to help protect and manage lasting wealth,” he said.

Indeed, 75 percent of Boomers said passing down family values and life lessons was more important than the actual monetary amount they’re leaving in the inheritance, according to a recent survey by Allianz Insurance.

Keith Ogorek, senior vice president of marketing at Legacy Keepers, a firm that helps people preserve their family memories in audio, video and book form, said he thinks it’s a combination of the fact that many Boomers grew up during the 60s and tend to be of a more activist mindset that they want to leave the world a better place, coupled with the fact that they’ve lived through the financial devastation of the recession.

“They lived through a time of reshaping the culture. Making their mark. Everything from ending segregation to protesting the war, the sexual revolution and women’s rights,” Ogorek. Said. “It’s not surprising that that they want to leave something behind besides their finances.”

Now, you might think that they’re downplaying the importance of money because they don’t have any — or a lot less, anyway — since the recession. You know, the ‘ol — You want a tip? I’ve got a tip for you. Stay in school!

In fact, it’s more that the financial impact of the recession is still fresh for many, so they want to make sure that instill in their kids how to be smart with their money.

“Family fortunes potentially are not as great as they were six, seven years ago … Putting money in market and watching it go up is not the rule any longer,” said Stacy Francis, a personal-financial adviser in New York and founder of Savvy Ladies, an organization aimed at teaching women about money.

“It’s about being smart about where you put your money in the market,” she said.

“You can give a child a fish but you can also give a child a fish and teach them how to fish in the future,” Francis said. “We see it over and over again, the same story — individuals coming into a lot of wealth and not knowing how to manage it. That wealth being potentially squandered,” Francis said. “That’s what people don’t want to have happen in their family.”

Moynihan said their priorities are to teach their children the importance of charitable giving and that education is very important to be successful. So, she and her husband have set it up where one-third of their wealth goes to their children, one-third goes to charities and one-third to the grandchildren. They have a donor-advised fund at Fidelity that they hope their children will continue to donate to after they are gone and have created an educational trust for their grandchildren to help them pay for college.

A lot of people set up a trust for their kids with specific rules about how and when the inheritance money is doled out.

“The goal is to have a document that would act like the parents would — when they would give the kids financial support and when they would not,” said Jerry Lynch, a financial adviser and owner of JFL Consulting in Fairfield, N.J.

For example, Lynch said, a parent might offer incentives such as:

• Matching investment dollars — if the kid invests $5,000 per year, the trust matches it
• Matching funds to charity
• Matching a down payment on a home
• Matching funds to start a business

Or, he said, DIS-incentives such as:

• No job, no funds
• Withholding funds in response to drug, alcohol or gambling abuse
• Making the kids wait longer for funds if they choose to not go to college or a trade school

And, while no parent likes to think about their kid getting divorced, it’s important to consider it in estate planning. Assets in general are protected from spouses in the event of divorce, Lynch said, though if funds are co-mingled — say, inherited funds are mixed with the spouse’s funds to buy a house — then that protection is lost. One way to get around that, Lynch said, is to give the child a loan for their down payment (instead of giving them the money outright) and then forgive that loan (or not!) over time.

One way to start passing down smart money lessons is to include your kids in discussions about money — either with your spouse or a financial adviser.

“Children should be in those meetings to understand what type of assets they’re going to come into and what skills they’re going to have to develop before they receive that money,” Francis said.

And if you have young children, it’s important to start them early talking and learning about money.

“The scary thing is we’re seeing young kids graduate from college not only with thousands upon thousands of dollars in college loans but thousands upon thousands of credit-card debt,” Francis said. “They’re starting their life several steps behind where they should be.”

It’s important, she said, to have that conversation sooner rather than later.

“It’s like the sex conversation,” Francis said. “You don’t have the sex conversation on their wedding night!”

And, she said, it’s important to know that there is no right way to deal with a child and money because every child is different. Some do better when given more freedom and others require a little more parental guidance.

“Every child has a different DNA — and they have a different money DNA, too,” Francis said.

She said three of the best money lessons to start them with are:

• Money doesn’t grow on trees. That means you don’t just hand them an allowance and let them go crazy. In order to get money, they have certain responsibilities. Maybe it’s clearing the table or cutting the grass. “Make it very clear that ‘This is your allowance but you are a contributor to this family and this is how you are to contribute to this family,’” Francis said. “Then they understand the value of a dollar.”
• Credit cards can be the devil. Francis said it’s important for kids to understand that they should not put something on their credit card unless they have the money in their bank account to back it up.
• How to live large on less. “That means understand where you’re spending your money,” Francis said. “Understand how to budget and look at ways that you can live large on less and make the most of your money.”

Inheriting a large sum of money doesn’t change a person’s financial habits — “it simply enables you to do everything on a large scale financially,” Kinney said.

“Teaching your children to be smart with their money is more important than leaving behind an inheritance. It is the difference between leaving a legacy or lip service to your kids,” Kinney said. “Diligently coaching your kids on how to fish instead of just giving them fish can take one generation’s wealth and extend it to multi-generational wealth,” he said.

Here’s hoping they learn how to fish!

© 2012 CNBC.com

For the link to the article, please visit the CNBC website http://www.cnbc.com/id/46313097

Jerry Lynch is president of JFL Consulting and has more than 24 years in insurance and financial planning. He has been a regular guest on CNBC, WABC and does regular articles for the Star Ledger. He can be reached at jerry.lynch@jflconsultinginc.com.

Jerry Lynch is a representative of Comprehensive Capital Management, Inc., an SEC registered investment adviser through which such representative provides investment advisory services, with principal offices at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  Jerry Lynch may also provide commission based securities sales through Comprehensive Asset Management and Servicing, Inc., an SEC registered and FINRA member broker-dealer, with principal offices also located at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  JFL Consulting is a trade name, it is not a registered investment adviser. All questions should be directed to Ron Rollins, Chief Compliance Officer

Karin Price Mueller/The Star-Ledger

Posted:  01/31/2012 6:01 AM

Q. I opened a 529 plan for my 3-year-old grandson. What happens to my contributions if my grandson does not attend a college or technical school? I have no other grandchildren. Will I be able to re-coup these funds with or without penalty or transfer them to his parents? Are there other options to save for his future just in case he does not attend a college or technical school?
– Grandma T

A. Good thinking, Grandma.
The beauty of a 529 is that you can give a gift and still keep control, said Jerry Lynch, a certified financial planner with JFL Consulting in Fairfield.

“In a 529 plan, if Junior says he is not going to college, that is fine, but they are not getting the money as it belongs to the grandparents,” Lynch said. “They have an option to change the beneficiary of the account to another grandchild or just taking the  money out and they get it back.”

You said you don’t have other grandchildren, so taking the money out is an option.
From a tax standpoint, you’d be subject to a 10 percent penalty on the earnings only — not the original investment. You’d also have to pay taxes on the gains as ordinary income.

“That is a pretty good deal considering that the money grew tax deferred for all those years,” he said.

Another option is a Uniform Transfers to Minor (UTMA) account, which can be used for education or other financial purposes, said Eric Carlson of Ameriprise Financial in Florham Park.

“In New Jersey the age of majority is 18 and when your grandson reaches this age, he has complete control of how to use the funds in the account,” Carlson said.
That could be bad news because it allows him to use the money for whatever he wants.

“Even if the intention of the account was for college, Junior can say, ‘I am not going to college, I am taking the money, buying a Porsche, and going to California,’” Lynch said.

Another possibility, Lynch said, is that grandparents can give five years worth of gifts to any beneficiary without incurring a gift tax. If you’re married, you can give $65,000 each, or $130,000 total, to your grandchild.

This is a complete gift from an IRS standpoint , Lynch said, as long as you live five years after the gift is made.

E-mail your questions to askbiz@starledger.com.

For a direct link to the article, please follow the link below: http://mobile.nj.com/advnj/db_/contentdetail.htm?contentguid=xOvKgNYS&full=true#display

Jerry Lynch is president of JFL Consulting and has more than 24 years in insurance and financial planning. He has been a regular guest on CNBC, WABC and does regular articles for the Star Ledger. He can be reached at jerry.lynch@jflconsultinginc.com

Jerry Lynch is a representative of Comprehensive Capital Management, Inc., an SEC registered investment adviser through which such representative provides investment advisory services, with principal offices at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  Jerry Lynch may also provide commission based securities sales through Comprehensive Asset Management and Servicing, Inc., an SEC registered and FINRA member broker-dealer, with principal offices also located at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  JFL Consulting is a trade name, it is not a registered investment adviser. All questions should be directed to Ron Rollins, Chief Compliance Officer

Published: Friday, 27 Jan 2012 | 12:29 PM ET

By: Cindy Perman
CNBC.com Staff Writer

Are you overwhelmed?

Take a number.

That’s one of five “financial personality” types determined in a study from Allianz Insurance and — everyone try to act surprised — it was the category most people fell into.

The other four are: iconic, resilient, savvy and distracted.

We checked in with a couple of financial advisers for their take on the personalities — and what the biggest risks are if you have that personality type.

Accounting for one-third of the survey respondents, the “overwhelmed” tend to be in in their 40s and 50s and have the lowest income and net worth. Most feel that retirement is important and want a “serious plan” but aren’t necessarily sure what that is — or how to get it.

The big risk for this group is that “you are so busy managing life on a day-to-day basis that your retirement sneaks up on you and you are not ready!” said Stacy Francis, a New York-based financial adviser and the founder of Savvy Ladies, a group aimed at educating women about finance.

The next type is “iconic” people who fall into this group are typically over 60 and, according to the study, exemplify “The American Dream.” They’ve worked hard all their lives, didn’t overspend and are now enjoying a comfortable retirement. About 20 percent fell into that group.

This group sounds like they have it all together, but even they aren’t safe, Francis said.

“Iconics generally live within their means but they may not have planned for unexpected expenses like medical,” Francis said. “Medical expenses are the number one reason for bankruptcy,” she said.

The “resilient” are generally in their early to mid-50s with a “take charge” attitude and want to make sure they don’t outlive their income. This group, which accounts for 27 percent of the survey group, has an independent streak but even they took a hard hit from the recession. They’ve learned from their mistakes and recognize “the need for better financial planning.”

“Resilients are more involved in their planning but may not have put enough away for retirement,” Francis said.

“A lot of our clients are in this area. They may not have worked with a financial planner and generally after coming through 2008 are saying we really need to get some help here,” said Jerry Lynch, a financial adviser and owner of JFL Consulting in Fairfield, N.J.

“With a smaller nest egg, they must continue to work,” Francis said. “What happens if they are laid off in their 50s and cannot work until their 60s like they had planned? Catastrophe!”

The next group, the “savvy,” tend to be over 60, made smart investments and have few financial concerns. This group, which accounts for just 14 percent of the survey group, were still impacted by the market’s slide and now want a more conservative approach to investing.

“We all want to be the savvy person. This person is very involved in their finances and very educated,” Francis said. The pitfall for this group, she said, is that they may be TOO involved.

“They may feel that they can invest better than their advisor and be sucked into the false belief that they know what they are doing,” she said.

The other risk for this group is focusing too much on retirement.

“They may never really enjoy their retirement because they are too busy worrying about their money!” she said.

Finally, the “distracted.”

Sorry, what did you say?

The distracted tend to be in their 40s and 50s, well-educated and struggling with the balance of family and career. They have the highest income “by far” and the second-highest level of investable assets. That being said, they aren’t focused on financial planning and spend freely. They know they need to be smarter about investing but have not yet committed to doing so. This group accounts for just 7 percent of those surveyed. (Though, being distracted and all, that 7 percent doesn’t include those who didn’t finish the survey or didn’t want to be surveyed at all.)

Here’s a case where (get ready for an eye roll) having too much income could actually be a downside. It lulls some members of this group into a false sense of security — they may think they’re saving more than they really are.

“These folks often save what is left over at the end of the month instead of paying themselves first,” Francis said. “What is left over is usually nothing.”

The biggest lesson, no matter what “financial personality” type you have, is “Don’t write checks that your pocket book cannot afford,” Francis said. “Too much borrowed money in the form of HELOCs (home equity lines of credit), mortgages, credit cards and pay day loans will never get you to your financial goals.”

And, if you take away nothing else from the recession, remember this:

“You don’t get rich in the stock market,” Lynch said. “You will get reasonable rates of return over time but you do not get rich. People get rich by being born into a wealthy family, investments in real estate and by owning a business,” he said.

Which personality type are you? Take the test and see!

Jerry Lynch is president of JFL Consulting and has more than 24 years in insurance and financial planning. He has been a regular guest on CNBC, WABC and does regular articles for the Star Ledger. He can be reached at jerry.lynch@jflconsultinginc.com.

Jerry Lynch is a representative of Comprehensive Capital Management, Inc., an SEC registered investment adviser through which such representative provides investment advisory services, with principal offices at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  Jerry Lynch may also provide commission based securities sales through Comprehensive Asset Management and Servicing, Inc., an SEC registered and FINRA member broker-dealer, with principal offices also located at 2001 Route 46, Suite 506, Parsippany, NJ 07054 (Phone 800-637-3211).  JFL Consulting is a trade name, it is not a registered investment adviser. All questions should be directed to Ron Rollins, Chief Compliance Officer