Fairhaven Journal: Summer 2018 : simplebooklet.com

I NO TE FR O M M A R C H O RN E R Thank you for the wonderful feedback on our inaugural issue of the Fairhaven Journal We are so pleased to hear how many people enjoyed the content and actually made the recipe I TA BL E OF CON TENT S Note from Marc Horner 3 Talking About Money with Parents 4 Team Member Spotlight Meet David Edstrom 8 Meet the Fairhaven Team We re Growing 11 Tasting Summer Academe Brasserie Celebrates the Watermelon 12 Playing for Power Girls in the Game 16 Demise of the Donut Hole Plus Other Tales from Medicare 18 The Axeman Strumming His Way to Success 22 A few highlights of Issue 2 include continuing the topic Talking About Money but this time approaching it from the perspective of later in life conversations between adult children and parents You will also get to know better the latest addition to Team Fairhaven David Edstrom including his thoughts on some of the best drummers of all time these are his opinions and any letters of disagreement should be directed to David and not me College starts back up in just a few weeks so we thought it helpful to share a few ideas about both saving and spending Of course we also continue with our foundational topics around food healthcare and philanthropy Lastly following up on our promise to build out the Journal we highlight a travel destination in upper Michigan to which Friends of Fairhaven can gain unique access We also turn the limelight on an Entrepreneur In Action making things happen in the music industry out of his home base in Arizona Sincerely Golf North Young Man Golf North Michigan s True North Golf Club 24 College Saving and Spending Strategies 28 Fairhaven in the Media 32 This material has been prepared for informational and educational purposes for our clients and friends Please consult your Fairhaven Wealth Management professional to discuss how this may impact your own financial plan and or investment portfolio This material is not intended to provide and should not be relied upon for accounting legal or tax advice or any other purposes Neither Fairhaven Wealth Management nor its subsidiaries or affiliates provide accounting legal or tax advice Please consult your tax advisor and or attorney for such guidance Advisory services offered through Fairhaven Wealth Management an SEC registered investment advisor Securities offered through Triad Advisors member FINRA SIPC Fairhaven Wealth Management and Triad Advisors are not affiliated For a copy of Fairhaven Wealth Management s ADV Part 2 disclosure document please direct your inquiry to admin fairhavenw com Marc Horner Wealth Advisor President Fairhaven Journal Volume 1 Issue 2 Summer 2018 Fairhaven Journal is published quarterly for the enjoyment and education of Fairhaven Wealth Management clients 2018 Fairhaven Wealth Management All rights reserved The information contained in this issue of the Fairhaven Journal is correct as of press time 3

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I TA LK ING A B O U T M O NEY W ITH PA RE N T S I n our inaugural issue of The Journal we discussed strategies to start talking with kids early about money and finances The earlier a person gets started and that is the key to start working towards a financial goal the better Time is a huge ally As life moves along roles tend to change In our own unique experiences we progress from babies completely dependent on adults to teenagers who frequently question the wisdom of just about any adult to becoming adults ourselves with our own set of real world responsibilities Frequently this latter stage includes role reversals with parents Instead of them making sure you get to school on time you now give them directions to their grandkids softball games Maybe as your career has progressed you start to periodically pick up a restaurant check even if it means inconspicuously sliding the credit card to the server to avoid the 20 minute There s no way I m letting you pay discussion And sometimes there comes a time when parents need some help managing their finances And you thought talking with your kids was awkward Just like talking about money with your kids the earlier you start talking about finances with parents the better That is important for both healthy family financial dynamics as well as their own protection Unfortunately as we age financial elder abuse can become a reality Being aware of and staying current with aging parents finances is an important step to protecting them One way to get financial conversations started is to share your own financial update For example it is a good practice to periodically review core components of your own financial plan including asking certain questions ARE MY INVESTMENTS ALIGNED WITH MY GOALS Have conditions changed whether in my personal or professional life or within my investments Is rebalancing appropriate Should I raise cash for a new short term goal 5

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AM I BEING TAX EFFICIENT Have changes in my personal tax situation or tax laws opened or closed strategies to help me more efficiently keep more of what I make AM I APPROPRIATELY PROTECTED A growing family might have different insurance needs than a family whose children have moved into adulthood Are my estate planning documents up to date these documents might include wills trusts and healthcare and financial powers of attorney Do key individuals have copies of or know where these these relationship evolving conversations progress there are a few concepts of which to remain aware both for adult children and Mom and Dad IT S THE RELATIONSHIP Family financial decisions have the power to create closeness or distance in family relationships Close relationships are typically characterized by open conversations where participants are allowed to talk views are heard everyone feels respected and while there may not be 100 agreement there is a sense of fairness Distant relationships on the other hand often involve a Just like talking about money with your kids the earlier you start talking about finances with parents the better documents are located Are beneficiary designations on insurance and retirement accounts correct A regular review can help prioritize financial decisions and strategies This is also a wonderful opportunity to tee up money conversations with Mom and Dad But consider making that first conversation about you Share what you and your family are doing with your own financial planning Ask questions and advice What strategies were they happy with and what would they have done differently Leading in this way will help lay the foundation for continued candid money conversations The goal should be to break the money silence and see your relationship graduate from the traditional parent child hierarchy to becoming peers in discussing important and sometimes difficult financial topics Of course this takes time and the more the better As 6 lack of communication some family members feel they have no voice they may feel judged or unheard leading to feelings of unfair treatment Be careful in your family financial conversations and any decisions that come from them Periodically ask yourself Am I creating closeness or distance in my family relationships DICTATORSHIP TO DEMOCRACY Imagine the chaos in your childhood home if all members of your family were given a vote from the day they were born It is a practical impossibility Mom and Dad were the collective boss You the child had to earn a voice and eventually a vote over time When discussing family financial matters it is important to allow all family members to have a voice Early in the process of eliminating money silence parents may understandably avoid or fear giving children a voice or relinquishing the vote because it means slowly giving up control But as children mature and change their roles in the family the voice vote engagement should also evolve As these decisions are increasingly made together they contribute to building closer family relationships FAIR EQUAL NECESSARILY Equal might be easy but it does not necessarily make things fair Fairness is open to a wide range of personal interpretation All family members rarely have the same talents lifestyle career choices health maturity marriages number of children or life spans Is fairness based on need merit equalizing family member circumstances or simply trying to treat everyone equally Silence on varying financial treatment of family members can severely impact family relationships Instead parents and adult children should engage with one another Parents should share their rationale for decisions made or that they are considering Likewise children should inquire with their parents about perceived unfair financial treatment Open dialogue provides the opportunity to talk through family circumstances allowing mutual sharing of rationale and feelings WALK BEFORE YOU RUN Late in life disclosures about financial decisions that have already been made whether prompted by health issues or angst will likely negatively impact your family relationships On the other hand your grandchildren won t visit much if you insist on regularly reviewing the details of your generation skipping trust and the importance of stepped up cost basis on inherited assets Family financial discussions should be characterized by balance and age appropriate transparency Important topics to address include both the location of estate planning documents and the roles and responsibilities outlined therein successor trustees executors of wills agents in both healthcare and financial powers of attorney named beneficiaries on life insurance and retirement accounts Secrecy on these topics can create jealousy among family members Also some family members may be uncomfortable with the responsibility that accompanies these roles For younger families one way to get started breaking money silence is to discuss financial decisions around the dinner table Life events such as graduations college choices vacations buying a car changing jobs getting a raise all present an opportunity to get money on the table Over time appropriate levels of transparency create a sense of shared knowledge and decision making At the same time it provides parents a money silence glidepath allowing the hold back of certain information until they are comfortable sharing it Talking about money is rarely easy and discussions between adult children and parents can be even more challenging Next to health financial decisions may have the most comprehensive influence on each of our lives In most things financial time is a huge ally So break through the awkwardness and take the common first step to achieve any goal Start 7

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I TEA M M EM B ER SPO TLIG HT Senior Relationship Manager David Edstrom A mong the passions of Senior Relationship Manager David Edstrom is helping clients articulate their unique goals and developing a path to achieving those goals I believe my broad based professional experience working within both large and small firms equips me with the knowledge to really help clients get to the core of their needs wants and fears Technology has so dramatically changed the landscape of just about every industry but especially the wealth management industry Smaller firms now have access to just about any of the resources previously available to only the biggest of the big firms So the industry has evolved away from particular investments or products and towards a professional s ability to listen and understand what is truly important to a client And that is what really energizes me This professional know how closely mirrors another of David s passions drumming David regularly mans the drumkit in a worship band at his church providing the tempo for a variety of musicians with diverse musical backgrounds It might sound a stretch to equate the hard pounding rhythms of a drummer with the skills required in the wealth management industry but David is quick to point out the similarities Part of the role of both a drummer and a relationship manager is to provide a stable cadence to their band or the team David notes A drummer s duties include keeping the band on track and providing a firm confident and predictable beat to follow Those responsibilities are very similar to what any client should expect of a wealth management team says David David started as a drummer at age 8 but went on an informal drumming sabbatical when he was 16 He climbed back behind the kit when his son took up the skins My son Alec started taking lessons and I would dabble a bit with him Eventually I dusted off my old 9

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I M EET THE FA IR HAV EN TEA M Without a doubt the professionalism and commitment to taking care of their clients by the entire Fairhaven team is second to none The best people carefully chosen for service and results Marc Horner Wealth Advisor and Founder Gerald King Wealth Advisor Gina Hornbogen Executive Assistant DAV I D S C H O I C E S F OR A LL TI ME B E S T D R U MMERS 1 BUDDY RICH Best jazz drummer maybe best ever Led the big bands jazz bands knowing when to stay in the background and when to exert his incredible talent in a fill or solo Was one of the few drummers with an eponymous band First drummer I admired saw him in concert and met him when I was 12 2 JOHN BONHAM LED ZEPPELIN Although he had a hard charging style and looked maniacal when he played he may be the best rock drummer ever With his aggressive style he was the glue and driving force behind the band with his strong dependable and sometimes very complicated beat 3 STEWART COPELAND THE POLICE I think he would agree that a drummer s job is to provide the backbeat and keep the music on track But that does not mean the backbeat need be boring He expressed his individuality by adding flare with extra beats fills and speed His unique flare made his drumming a thing of beauty 10 drumset to help Alec continue to learn and got up the nerve to approach the leader of the worship band at church He slowly brought me back into the fold of performing After all it had been 30 years since I played as part of a group and even more nerve racking in front of a crowd A relatively recent addition to the Fairhaven team one of the factors that stood out to him in the recruiting process was the culture Part of my professional experience includes mentoring and coaching so I have seen a lot of financial advisors in action Without a doubt the professionalism and commitment to taking care of their clients by the entire Fairhaven team is second to none It s part of their DNA A resident of Hinsdale Illinois David s daughter Ainsley lives in New York City and works in the advertising industry and his son Alec is studying business at DePaul University in Chicago Kurt Anderson Wealth Advisor Heidi Orth Administrative Assistant Trent Warren Wealth Advisor Denise Jahns Administrative Assistant David Edstrom Senior Relationship Manager Michael Kronk Emeritus Susan Kostecki Administrative Assistant Barb Schrage Administrative Assistant Joseph Guest Head of Operations Amy Christenson Media Consultant Blair Fuchs Wealth Advisor Dave Wilson Social Media Manager Paul Mardoian Wealth Advisor 11

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I DEM ISE O F THE DO NU T HO LE Plus other tales from the upcoming annual Medicare enrollment period CPA and Financial Planner James Sullivan MS CPA PFS I n 2019 the donut hole a temporary limit on what Medicare covers for brand prescription drugs will be no more As part of recent legislation Congress ended the donut hole a year earlier than scheduled It won t be missed For those readers whose prescription drug costs were relatively low you did not have to struggle with this complex provision of Medicare Part D For those of you faced with the donut hole due to the high cost of your prescription meds you will be happy to say good riddance For professionals like me who had to explain how it worked it will save time and save my clients the aggravation of having to listen and plan around it On a personal note my 96 year old mother in law was frequently in the donut hole She held me personally responsible for its existence and reminded me of that twice each year The first was during the annual enrollment period the second was during the year when the cost of her medications put her into the donut hole and she had to spend more out of pocket In the spirit of looking forward I will not spend time on how the donut hole worked Instead after providing some basic information on the Annual Enrollment Period AEP I will discuss how Part D will operate in 2019 AEP BASICS The AEP which runs from October 15 through December 7 provides Medicare beneficiaries the opportunity to make coverage changes This can be especially helpful if your health care needs have changed during the year This is also helpful because your current Part D plan may announce changes for the next year that may require taking a close look to determine whether a change to another plan is warranted The AEP should be looked on as an opportunity to be proactive in your Medicare planning Many beneficiaries don t realize that Medicare is not a one and done decision Coverage should be reviewed every year during the AEP 19

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Beneficiaries often misunderstand the purpose of the AEP and what they can and cannot do regarding their Medicare coverage Because of the media attention the AEP receives before and during the window beneficiaries recognize the term but do not always have a clear idea of its purpose WHAT THE AEP IS NOT The AEP has nothing to do with enrolling or disenrolling in Medicare Part A or Part B It has nothing to do with making changes to Medicare Supplement Medigap plan coverage WHAT THE AEP IS The AEP provides the beneficiary with an opportunity to make changes to his or her Medicare Advantage and Part D coverage Changes made are effective on January 1 of the following year Of the changes allowed during the AEP the opportunity to change Part D prescription drug plan coverage is probably the one that impacts most Medicare beneficiaries It provides beneficiaries with an opportunity to change coverage necessitated by changes to their own prescription drug regimen or by changes to their current drug plan s formulary If beneficiaries do nothing else during the AEP they should WHAT CAN BE DONE DURING THE AEP During the AEP the beneficiary may make the following changes to his or her Medicare coverage CHANGE COMMENT Switch from Traditional also referred to as Original Medicare coverage to a Medicare Advantage plan Change may be made without answering health related questions Note The beneficiary must be enrolled in Medicare Part A and Part B to enroll in an MA plan Switch from a Medicare Advantage plan to Traditional Medicare Most beneficiaries enrolled in Traditional Medicare purchase a Medicare Supplement Medigap plan Depending on the state in which the beneficiary lives and other factors it may not be possible to purchase a Medigap plan if the beneficiary has a preexisting health condition Do not change from a MA plan to Traditional Medicare until it is clear whether a Medigap plan can be purchased Change from one Medicare Advantage plan to another Change may be made without answering health related questions Change from a MA only plan to a MA plan with a prescription drug plan a MAPD plan Change may be made without answering health related questions Note that if a MA participant elects to participate in a standalone prescription drug plan he or she will be dropped from the MA plan and go back into Traditional Medicare Be very cautious work with a planner who is familiar with these rules Change from a MAPD plan to a MA only plan Change may be made without answering health related questions Some beneficiaries may do this because they have a creditable prescription drug plan available from another source such as the Veterans Administration Again be careful before making such changes Change from his or her current Part D prescription drug coverage to another Part D plan Change may be made without answering health related questions This change can be driven by changes to the beneficiary s prescription drug needs by changes to his or her current plan s formulary or a combination of both Go to www medicare gov Drop Part D coverage Beneficiary may have alternative creditable coverage available Creditable coverage means the alternative prescription drug plan is at least as good as or better then Medicare Part D This is determined by an actuarial study The plan sponsor should be able to provide that information to you 20 check to determine whether their current Part D plan makes sense going into the new year Many beneficiaries end up paying hundreds and even thousands of dollars more for their coverage by ignoring this annual exercise You can do this analysis at www medicare gov Click on the Medicare Plan Finder and follow the instructions If you are not computer literate ask a grandchild to help A better idea might be to call 1 800 Medicare or contact the State Health Insurance Assistance Program SHIP at https www shiptacenter org for assistance with evaluating selecting and enrolling in a Part D plan Some financial planners also have the knowledge and experience to help Be careful however of using a sales professional In most areas there are 25 to 30 different plans available Most sales professionals offer only one or two plans and may be biased toward offering you only the plans they represent WHAT CAN BE DONE DURING THE AEP See chart on facing page The 21st Century Cures Act signed into law by President Obama on December 13 2016 eliminates the existing MA disenrollment period MADP that had taken place from January 1 through February 14 Effective for 2019 the act replaces it with a new annual MA open enrollment period OEP that will take place from January 1 through March 31 The new OEP allows individuals enrolled in an MA plan to make a one time election to go to another MA plan or Original Medicare Individuals using the OEP to make a change may make a coordinating change to add or drop Part D coverage This provision gives MA beneficiaries additional time and flexibility to make decisions regarding coverage GOING FORWARD WITHOUT THE DOUGHNUT HOLE In 2019 there will be 4 coverage levels Here is what I mean 1 The first level of coverage is the annual deductible In 2019 this will be 415 You pay this before plan coverage kicks in Some plans offer a 0 annual deductible or a deductible less the 415 This seems appealing but when analyzing a plan look at the total plan cost the annual deductible the monthly premium the co payments and co insurance 2 The second level otherwise known as the initial coverage limit begins after the annual deductible You pay 25 of the cost of the brand or generic drug 3 The third level or the coverage gap level begins when you hit 3 820 of gross drug cost This is the remaining remnant of the old donut hole but it is much easier to understand The cost sharing for brand drugs at this level does not change it remains at 25 You pay 37 of the cost of generic drugs In 2020 the generic coinsurance will be reduced from 37 to 25 meaning the third level of coverage will disappear 4 The fourth level is catastrophic coverage that begins when your total drug costs for the year hit 5 100 You pay the greater of 5 of the cost of the drug or 3 40 for generic drugs and 8 50 for brand drugs Catastrophic coverage can still result in high drug costs for the beneficiary For example Xtandi is the brand name for the drug enzalutamide a treatment for prostate cancer In 2018 the cost of the drug to a Part D plan was 10 525 per month The beneficiary paid the greater of the brand drug co payment of 8 35 or 5 of the drug cost or 526 The AEP offers you an excellent opportunity to be proactive when it comes to your Medicare coverage You can make changes that better fit your current health care needs and your household finances Jim is a CPA and financial planner Jim s practice focuses on helping his clients think about and plan for the costs of health care in retirement He has written over 100 articles on health care costs in retirement and a book on Medicare for the American Institute of Certified Public Accountants the AICPA He is currently writing a book for the AICPA on the impact of chronic and terminal illness on retirement plans He lives in Glen Ellyn with his wife 3 children and 2 Beagles The 3 820 and 5 100 levels of drug costs are best described as terms of art While you and I would think this should be a straightforward concept after all cost is cost right it is not The term includes your co payments and co insurance for drug costs and the cost of the drug to the plan including discounts The bottom line you may get to both levels of cost sooner than you think 21

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I THE A X EM A N by Dave Wilson B ased out of Phoenix Arizona professional musician and producer CJ Teffner has logged countless hours of studio production time rubbing shoulders with some of the heavyweights in the music industry In addition to working behind the scenes at the mixing console CJ is equally accomplished in the studio and out on the road wielding the ax that s a guitar for those of us less familiar with music slang as a hired gun guitarist Over the years I ve worked with a variety of different artists playing many different styles Being comfortable with and accomplished in a wide range of styles continues to open up some really interesting opportunities CJ says Appreciation for and exposure to such a broad range of music helped shape the sounds of his latest album Stars In a recent interview CJ described Stars as a bit dark and dreamy driven by acoustic guitars piano and cello There s a lot of emotion in the songs they re pretty personal wrestling with some of my inner demons and making friends with them they re much better as friends laughs CJ A fan of collaboration CJ s latest album features the vocal stylings of Robyn Cage Robyn and I have worked together on some other projects She has a very clear and honest voice with impressive conviction and delivery When I wrote the song Meant to Fit her voice popped into my head and I knew she d be perfect for it Raised in a musical family his grandfather mom dad aunt and uncle were all musicians CJ got his start as a 9 year old amateur percussionist banging on the family coffee table with wooden spoons Next came piano and guitar lessons and by high school he was performing in all three school bands concert jazz and marching My high school music teacher Mr Solt had a huge impact on me and my music He encouraged me and supported me so much he even wrote me notes to get out of study hall so I could jam in the band room He was one of those teachers you hear about who make a real difference in a kid s life When not in the studio or performing CJ and his wife enjoy having their adult daughter back at home after years studying abroad And all three love to watch their Doberman Xena run the neighborhood golf course doing battle with the evening sprinklers Check out CJ and his work at OFFICIAL WEBSITE cjteffner com FACEBOOK facebook com cjteffnermusic INSTAGRAM instagram com cjteffner TWITTER twitter com cjteffner 23

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I G O LF NO RTH Y O U NG M A N G O LF N O RT H by Stephen Wozniak S ix time British Open golf champion Harry Vardon was onto something when he stated simply For this game you need above all things to be in a tranquil frame of mind There are of course a few more parts to the equation for a good game of golf Long experience good form and the sustained energy to play a worthwhile game helps too But for that tranquil frame of mind location and setting play a huge role Highly rated courses and golf vacation destinations dot the U S map from the view seducing beachside resorts in Florida to the secret links of suburban upstate New York But those in the know will tell you that Northern Michigan offers some of the very best settings for a day on the course The privately owned True North Golf Club a relative newcomer to the scene is a case in point Located on Lake Michigan in beautiful and picturesque Harbor Springs known as the Nantucket of the Midwest it is a short 4 to 6 hour drive from major cities like Chicago Milwaukee and Detroit The nationally recognized tournament condition course was created by award winning designer Jim Engh in 2004 Ranked among the best in the state by Golf Digest the 18 hole course features several elevated teeing grounds that make every game enjoyable for vacay novices seasoned pros and even intermediate players like me True North was carefully planned and carved directly out of the dense sugar maple oak and pine fir forests that weave their way throughout the region These woods surround the rolling fairway and putting greens providing a serene and protected space for that tranquil state of mind With an amazing temperate yearly high of 78 F degrees in July it only gets better the rest of the year from 54 F in April to 57 F in October when the changing leaves fill the region with color True North stays cool enough for many golfers to extend their typical play time from 1 to 3 full 18 hole games even on its 7 000 yard course The 25

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course s limited membership makes it easy to manage your pace of play and prevent backed up games So what other amenities are on tap The Compass Room restaurant provides grab and go fare for readyto play golfers as well as delicious multi course meals for all guests While the golf club is private the Compass Room is open to the public so friends and family can enjoy a bite and the incredible 180 hardwood forest view overlooking the 18th hole If you re looking for more than a short golf getaway True North offers a limited number of estate lots houses and cabins for those looking to rent or purchase a home for year round living These units are elegantly appointed with queen beds full kitchens and stone fireplaces and each is built on a wooded lot with panoramic views of the greens forest and open meadows Some are available to be built to order The club s friendly accessible culture provides members and guests a place to truly live where you play according to PGA General Manager Michael Kernicki Camp True North created in 2018 by award winning architect John Sather expands on the traditional golf grounds to provide stocked trout ponds hiking and a community building pool and amphitheater Recalling the great tradition of family camps established in the early 19th century Camp True North was envisioned as a place that brings families together in nature for recreation rest and group activities The club s professional staff offers expert instruction for players of all levels And the modest but complete True North Golf Shop is stocked with some of the best brands gear and accessories If for some reason they don t carry what you re looking for believe me they can secure it for you And when members guests do find the golf equipment they want it s professionally fitted to each individual Finally the practice facilities at True North are second to none and the short game area near the club cottages gives members the opportunity to practice for many hours before the long days fade away in summer As we all know practice makes perfect and this area is available for use throughout the day While I have enjoyed some of the best North Michigan fairways in recent years I have to count this tucked away forest clad course as one of the finest pure golf destinations on the continent I ll be following my compass back to True North as often as I can While True North is private the club gladly welcomes Friends of Fairhaven If you would like to play and or stay at True North mention your relationship with Marc Horner and Fairhaven Wealth Management and watch the red carpet roll FOR MEMBERSHIP INFO CONTACT Michael Kernicki PGA General Manager at 231 526 3300 x2 mkernicki truenorthgolf com True North s spectacular fairways are lined with towering strands of hardwoods and pines FACING PAGE Beautifully designed cottages that complement the serene setting of the northern woods are available for those who choose to play and stay 24

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I SAV ING A ND SPENDING FO R C O L L E GE Strategies to maximize benefits and avoid mistakes T here is a great quote that goes something like It s not what you don t know that hurts you it s what you know for sure that just ain t so Now we would love to give appropriate and accurate credit but a quick Google search reveals too many opinions to count regarding the quote s origination Citations include Mark Twain Will Rogers and Leo Tolstoy Suffice to say the quote did not originate with us one can contribute to anyone else s 529 Plan Contributions in excess of 15 000 per person would need to be reported to the IRS as a gift However a 529 Plan can be superfunded with contributions of up to 75 000 per person that strategy would use up your federal gift tax exclusion for the following 5 years and would need to be reported on a gift tax return It is probably best to coordinate with both your financial and tax advisors if you are considering this option Just like with pop culture quotes there can also be confusion around financial topics Saving and eventually spending for college is no different A few commonly held misconceptions about 529 College Savings Plans include Unlike custodial accounts the money in a 529 Plan remains controlled by the owner and there are no required minimum distributions such as those associated with retirement accounts You can let the money remain invested in the account in anticipation of the beneficiary continuing on to graduate school or other post secondary institutions Should you consider one of these options remember to realign your investment strategy with a potentially longer time horizon TRUE FALSE ONLY PARENTS CAN START 529 PLANS False Anyone can open a 529 Plan and name anyone as the beneficiary The owner of the Plan is permitted to change the beneficiary to another qualified family member such as siblings nieces nephews grandchildren or even themselves More importantly anyone can contribute to your 529 Plan Currently contribution limits are 15 000 per person to any 529 Plan in any calendar year That includes parents grandparents aunts uncles neighbors any TRUE FALSE 529 PLAN FUNDS CAN ONLY BE USED FOR COLLEGE TUITION False 529 Plan assets can be withdrawn for a variety of education related expenses including room and board textbooks and computers As of 2018 qualified expenses were expanded to include elementary middle and high schools whether private public or religious 29

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529 plan tax bene ts by state as of January 2018 You may choose to make payments directly from your 529 Plan or you may choose to pay bills first and then reimburse yourself from the 529 Plan Either way it is important that withdrawals match the payment of qualifying expenses in the same tax year not academic year There are of course ineligible expenses such as off campus housing in excess of the school s estimates for on campus room and board Other expenses that do not qualify may include insurance athletic or club expenses travel and that bigee student loan repayments Withdrawals for non qualified expenses are permitted but they may be subject to taxes and penalties Exceptions to penalties include receipt of a scholarship In that case you are permitted to withdraw an amount equivalent to the scholarship Income taxes however would still be owed on the earnings portion of the withdrawal TRUE FALSE MY STATE 529 PLAN IS MY ONLY OPTION False There are a wide variety of state sponsored 529 Plans and you are not required to use the state plan in which you live Plans vary greatly so there are many factors to consider including range of investment options fees and potential state level tax benefits The facing chart is a summary of state bystate plans If you live in a state with 529 tax benefits but have a 529 Plan through another state plan or no 529 plan at all there may still be an opportunity to realize tax benefits Most plans do not have a waiting period on withdrawals Therefore a strategy to consider is 30 rolling over an out of state plan to the in state plan to recognize any tax benefits Or you could establish an in state plan make a contribution and then withdraw the funds a day later to pay the bursar s bill Provided the withdrawal is made to pay for qualified higher education expenses you may qualify for your state s income tax deduction As with any tax strategy it is important to carefully discuss this with your tax advisor we also recommend avoiding the term loophole TRUE FALSE 529 PLAN SAVINGS SEVERELY LIMIT FINANCIAL AID False In general parent owned 529 Plan assets have a relatively small effect on federal financial aid eligibility Assets in custodial accounts such as UGMA or UTMA accounts tend to have a greater impact on financial aid packages as they are considered assets of the child versus assets of the parents 529 Plans owned by grandparents for the benefit of grandchildren present some unique tax hurdles to consider To allow for proper tax planning it is best to speak with your tax advisor well in advance of taking distributions for grandchildren With the cost of college skyrocketing borrowing to pay for some of college is a financial necessity for more and more of us In this case you may want to prioritize spending down 529 Plan balances in order to put off as long as possible the accumulation of interest charges on student loans KEY TAKEAWAYS Anyone can open and contribute to a 529 Plan 529 Plans aren t just for college anymore State income tax credits may be available The IRS is watching keep good records State Maximum annual state income tax bene t Who quali es Alabama Arizona Arkansas Colorado Connecticut D C Georgia Idaho Illinois 5 0004 10 0005 2 0004 4 0005 5 0004 10 0005 Full contribution amount up to contributor s taxable income 5 0004 10 0005 4 0004 8 0005 2 0004 4 0005 6 0004 12 0005 10 0004 20 0005 20 tax credit on contributions up to 5 000 maximum credit is 1 000 3 2394 6 6 4785 6 3 000 4 6 0005 2 4004 4 8005 7 2 500 1 0004 2 0005 through 2021 5 0004 10 0005 1 5004 3 0005 10 0004 20 0005 8 000 4 16 0005 3 0004 6 0005 10 0004 5 5 000 if married ling separately Full contribution amount 5 0004 10 0005 5 0004 10 0005 4 0004 5 10 0004 20 0005 2 3304 6 4 6605 6 14 0004 28 0005 5004 1 0005 Full contribution amount 5 tax credit on contributions up to 1 920 4 6 3 8405 6 maximium credit is 96 4 5 6 1925 6 10 tax credit on contributions up to 2 500 4 5 0005 maximum credit is 250 4 5005 4 0004 5 fully deductible if age 70 or older Full contribution amount 3 1001 4 5 6 Any contributor Any contributor Any contributor Any contributor Any contributor Acct owner only Any contributor per bene ciary Any contributor Any contributor Indiana Iowa Kansas Louisiana Maryland Massachusetts Michigan8 Minnesota11 Mississippi Missouri Montana Nebraska New Mexico New York North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina Utah Vermont Virginia West Virginia Wisconsin8 Any contributor Carry forward 1 4 years 6 years 5 years Credit Acct owner only per bene ciary Any contributor per bene ciary Any contributor per bene ciary Any contributor per bene ciary Any contributor Any contributor Any contributor Any contributor Acct owner spouse only Acct owner spouse or custodian parent Acct owner or parents guardians of ugma utma accounts Any contributor Acct owner only Any contributor Any contributor per bene ciary Any contributor Any contributor Any contributor per bene ciary Acct owner only Any contributor Unlimited 10 years Unlimited 5 years 4 years Unlimited State tax rate 2 State tax savings 3 5 00 4 54 6 90 4 63 6 99 8 95 6 00 7 40 4 95 500 182 690 463 699 895 120 592 495 3 30 1 000 8 98 4 60 6 00 5 75 5 10 4 25 9 85 5 00 6 00 6 90 6 84 4 90 8 82 2 90 5 00 5 00 9 90 3 07 5 99 7 00 582 276 288 575 102 425 296 500 600 414 684 490 882 290 500 500 990 307 599 700 Acct owner only per bene ciary10 Credit 5 00 190 Acct owner only per bene ciary Credit 8 95 500 Acct owner only Any contributor Any contributor per bene ciary 9 Unlimited 5 75 6 50 7 65 575 650 765 9 Unlimited Source BlackRock leveraging data from savingforcollege com 1 Some states allow taxpayers who contribute above the maximum annual tax deduction to carry forward excess contributions to future state income tax returns State tax savings re ect full deduction of 10 000 over the carry forward period 2 Assumes joint tax lers in the maximum state tax bracket for 2017 and 10 000 in 529 plan contributions 3 If you itemize state tax savings must be claimed as income on the following year s federal tax return 4 Filing individually 5 Filing Jointly 6 Adjusted annually for in ation 7 Certain deductions may be claimed each year for an account opened for needy non related bene ciaries meeting eligibility requirements 8 Contributions are reduced by quali ed withdrawals during the year for purposes of determining the amount that may be deducted 9 Contributions from non account owners are deductible by the account owner 10 Bene ciary must be younger than age 19 when designated on account to claim tax credit or deduction 11 Minnesota also offers a tax credit that can be used instead of a state tax deduction Want to know more blackrock com collegeadvantage 866 529 8582 The BlackRock CollegeAdvantage 529 Plan is offered to residents of all states However you should note that i depending on the laws of the state where you or your bene ciary live or pay ACTION state income taxes STEPS favorable state tax treatment or other bene ts offered by the applicable state for investing in quali ed tuition programs may be available only for investments in such state s quali ed tuition any state based bene t offered with respect to a particular quali ed tuition program should be one of many appropriately weighted factors to consider savings spending strategy can help you maximize Whether you program are just ii starting a family and considin making an investment decision and iii you should consult with your nancial tax or other advisers to learn more about how state tax and state based bene ts such as nancial aid potential tax advantages and equally important ering getting started saving for school you ve fully scholarship funds and protection from creditors that are only available for investments in such state s quali ed tuition program would apply to your speci c circumstances and you may wish to contact your home state and your bene ciary s home state or any other quali ed tuition program to learn more along about thethe features bene ts and limitations of the applicable state s avoid mistakes way funded your kids or grandkids education or you quali ed tuition program plan to pay forInvestment school Manager through a mix of savings andpossible loss of principal Account owners assume all investment risks as well as responsibility for any BlackRock serves as the Investing involves risk including federal and state tax consequences For more information about the BlackRock 529 Plan www savingforcollege com contact your nancial advisor who www fidelity com can call 1 866 529 8582 or visit Sources student loans now is the time to coordinate your CollegeAdvantage blackrock com collegeadvantage to obtain a Program Description and Participant Agreement which includes investment objectives risks charges expenses and other important www blackrock com college savings spending strategy A well thought out information read and consider it carefully before investing or sending money 2018 BlackRock Inc All Rights Reserved BLACKROCK is a registered trademark of BlackRock Inc or its subsidiaries in the United States and elsewhere All other trademarks are those of their respective owners Prepared by BlackRock Investments LLC member FINRA Not FDIC Insured Lit No 529 MAP 0118 May Lose Value 74366 0118 No Bank Guarantee 31

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