Mark Your Calendars!

Vintage Grand Prix

July 23rd and 24th!

To celebrate this event the firm will have a tent at the start/finish line both days from 9:30am - 4:00pm.  We invite you to stop by the tent, watch the races, have a bite to eat and enjoy a cool beverage.  Shuttles will be available from Flagstaff Hill, where parking will be provided.  Shuttles will also be available to take you to the Grand Prix Village where various displays will be located. 

Fragasso Financial Advisors participates in Race for the Cure!

On Sunday May 8, 2011 members of the Fragasso team joined together with their pups to support the Susan G. Koman Foundation's Race for the Cure (South Park Style).  Team members included: Jennae Backo, Liliann Moser, Brian Robinette, Bob Fragasso, and Joy Holden.  Fragasso is proud to support such a wonderful cause!

8th Annual Animal Law Conference

Now in its eighth year, and growing in attendance and popularity, the Pennsylvania Bar Institute again will present its annual seminar on Animal Law. If you’ve attended this seminar in the past, then you know how educational and entertaining the day is! If you have not attended before – this is your chance to get in on the fun and earn six CLE credits!

The PBI faculty will address the following topics:

Watch a mock trial of a dog bite case
 

Learn where animal welfare groups can get grants and donations and how to stay legal in the process
 

Examine the link between animal cruelty and violence toward humans
 

Get updates on how to be sure your pets are cared for in the event of your death or incapacity
 

Find out more about farm animals and the food supply
 

Learn about the unique challenges of helping and rescuing wild animals
 

See bomb detection, cadaver, narcotics search and other working dogs demonstrate their skills

 

Pittsburgh
Thurs., July 21 Pittsburgh Marriott City Center 112 Washington Place 9:00 am to 4:45 pm;

Mechanicsburg
Wed., Aug. 10 PBI Conference Center 5080 Ritter Rd., Rossmoyne Exit, Rt.15 9:00 am to 4:45 pm;

Philadelphia
Thurs., Aug. 25 The CLE Conference Center, Wanamaker Building 10th Floor, Ste. 1010, Juniper St. entrance (between 13th & Broad Sts., opposite City Hall)

To register or for more information on this informative seminar call the PBI at 1-800-932-4637 or visit their website www.pbi.org

FEATURED

Education and Your Children and Grandchildren

by Bob Fragasso

The world has taken the importance of education beyond the motivation that many of us had growing up.  We were indoctrinated to believe that education would give us a better way of life, better than that of our parents.  Today that has changed to a realization that we need education to preserve our way of life in competition with growing economic powers throughout the world.  We are no longer guaranteed the prosperity that the Greatest Generation of World War II earned for us by their sacrifice and initiative.  So we must educate ourselves in a competitive world or we will suffer diminished opportunity and circumstance.

Please consider another dimension of the word education.  Look at the title of this article.  Did you automatically read college education?  Consider that, while we greatly value a generalized education, does it advance us as a nation?  Instead, should we broaden our respect for education to include specific and technical skills?  We think so and, thus, education embraces university and technically oriented course work.  Consider the old story of the attorney who had a plumber do some work at his home.  When presented with a large bill for a short period of work, the attorney exploded with the comment that he was an attorney and he didn’t command that kind of money for the time that was spent.  The plumber calmly replied that he didn’t either when he was an attorney.  How about a nuclear plant technician, medical research lab worker, welder, mechanical designer and many other occupations?   We need them all and that presents opportunity for prosperity.  Consider the example of a local, old-line manufacturing company, interestingly begun during the 1930s Depression, that had to morph from old-fashioned line manufacturing to designing and then creating solutions to client engineering problems.  They are thriving as a result and now employ thousands of people all over the world.  Yes, they still have manufacturing workers, but their primary employment is of problem solvers who possess people skills and engineering expertise, and everyone benefits as a result.

When we guide our children and grandchildren, we must open their vistas and, very importantly, provide the financial resources for them to gain the education that seizes tomorrow’s opportunities.  That becomes even more important in an era of decreased education subsidies.  Yet, the guiding principles of education funding have not changed.  They include time, rate of return and tax burden shifting.  We practice those time-tested, textbook principles for funding education costs in guiding our clients.  So we suggest that you spend your time where you uniquely can impact and guide your family members.  And talk to us now to take advantage of our expertise in guiding you in funding your children’s and grandchildren’s future.  

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Coverdells vs. 529 Plans

There is more than one way to save for college.

Today, some parents are wondering if they should convert Coverdell Education Savings Accounts to 529 college savings plans.  With that in mind, here is a brief look at how both of these accounts work.

Why were Coverdell ESAs so popular in the past decade?
Imagine a Roth IRA used only for college savings. That's basically the concept behind a Coverdell. In fact, the Coverdell ESA (created in 2002) evolved from the Education IRA (created in 1998).

Contributions to a Coverdell ESA aren’t deductible, but you get tax-deferred growth. Withdrawals from Coverdells are (currently) tax-free if used for qualified educational expenses such as tuition, fees and books. The funds can also pay for certain K-12 education costs.¹

You can allocate Coverdell account assets among many different kinds of investment vehicles, and many banks, credit unions and mutual fund providers offer these accounts. However, Coverdells have some drawbacks. The (current) annual contribution limit to a Coverdell is $2,000, and phase-outs kick in at $95,000 for single filers and $190,000 for married filers.²

Aside from a limit on annual contributions, there are also some age requirements. The Coverdell ESA beneficiary must be younger than 18 when the account is set up, and the money in the account must be spent or transferred before the beneficiary turns 30. At that point, the funds will have to be withdrawn and taxes and a 10% penalty may be assessed on the withdrawal. (If a beneficiary has special needs, contributions after age 18 and retention of the account assets after age 30 may be allowed – see IRS Publication 970 for details.)^1,2

Big changes are coming for Coverdells in 2012.
Unless Congress intervenes, these accounts will be a lot less attractive next year. 

Beginning in 2012:

• The annual contribution limit drops from $2,000 to $500.
   
• Distributions will be tax-free only  if you don’t claim a Hope          or  Lifetime Learning Credit in the same tax year.
   
• No withdrawals may be used to pay K-12 education                      expenses.^3,4

All this has many parents thinking about shifting their Coverdell funds to a 529 plan.

Thinking of moving Coverdell assets into a 529?
You can do a rollover from a Coverdell ESA to a 529 plan without incurring any tax penalties as long as the 529 plan will have the same beneficiary as the present Coverdell account.⁴

Under federal tax law, withdrawals from a 529 plan are tax-free - assuming they are used for qualified education expenses - but contributions are taxed. (Some states do give you a break and let you deduct part of your 529 contribution from state tax returns.)^4,5

You can go one of two ways with a 529:

• You can prepay tuition at today’s rates (at a qualifying college or university) through a 529 prepaid tuition program.
   
• You can save to pay tomorrow’s college tuition through a 529 savings plan which gives you tax-deferred growth. Most people prefer this option for its flexibility and asset accumulation potential.6

You can put much more money into a 529 annually.
You can put up to $13,000 in a 529 plan this year without having to file a gift tax report. Your spouse can, too. So can your relatives. So can anyone: any individual taxpayer can contribute up to $13,000 to a 529 plan in 2011. In fact, a taxpayer can pour in up to five years worth of contributions in one year ($65,000) without incurring gift taxes or eating into the unified credit, as long as that taxpayer refrains from making further contributions for the next five years. (For married couples filing jointly, this limit is $65,000 x 2 = $130,000)  Such contributions would only be included in the donor’s taxable estate if the donor died within the five-year period that the $65,000 represents.⁹  

Most 529 plans allow annual contributions of more than $200,000. Some have “lifetime” limits on the total contribution. All 529 contributions must be in cash.^6,7

A 529 plan has no phase-outs.
You are never too rich to contribute to a 529 plan. 529s do not have any form of income restrictions.⁷

Other nice features.
The owner of a 529 plan retains control of the assets and has the power to change the beneficiary. You can even start multiple 529 plans.⁸

In many respects, 529 plans have left Coverdell ESAs in the dust.


Withdrawals for expenses other than qualified education expenses are subject to income tax and an additional 10% penalty on earnings. You should consider a 529 Plan’s fees and expenses such as administrative fees, enrollment fees, annual maintenance fees, sales charges, and underlying fund expenses, which will fluctuate depending on the 529 Plan invested in and the investments chosen within the plan. You should also consider the inherent risks associated with investing in 529 Plans such as investment return and principal fluctuation, which will also vary based on the investments made within the plan. More information is available in each plan’s official statement. The official statement should be read carefully before investing.


Citations
1 – irs.gov/newsroom/article/0,,id=107636,00.html [3/24/08]
2 – irs.gov/pub/irs-pdf/p970.pdf [6/25/11]
3 – online.wsj.com/article/SB10001424052748704300004575095942228680772.html [4/5/10]
4 – usatoday.com/money/perfi/columnist/block/2010-09-14-yourmoney14_ST_N.htm [9/14/10]
5 –news.cincinnati.com/article/20100908/BIZ01/9090330/1076/BIZ/BusinessWise-briefs-Pros-and-cons-of-529-plans [9/8/10]
6 –smartmoney.com/spending/deals/the-529-basics-10676/ [2/3/10]
7 – investopedia.com/university/retirementplans/529plan/529plan1.asp [9/28/10]
                investopedia.com/university/retirementplans/529plan/529plan2.asp [9/28/10]
8 – schwab.com/public/schwab/planning/college_planning/529_plan/faqs [9/7/10]
9 - learn.bankofamerica.com/articles/money-management/529-college-savings-plans-explained.html[6/28/11]

Copyright 2011 Peter Montoya, Inc.  All Rights Reserved
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Client Profile: Susan White and Robert Kubacki

This quarter’s client profile was written by Melissa Richey,CFP®  Vice President.

Susan White and Robert Kubacki define their life as a series of choices and they have no regrets.  They feel that in some ways their life has come full circle, taking them back to their roots.  

Susan grew up south of Boston and has four brothers and one sister – all about a year apart.  Her father inherited a small family business at the age of 23 after his father suddenly passed away.   Susan credits her father for her incredible work ethic. Her father believed that you had to set goals and work diligently toward them – there is no quick fix.  He had a good attitude about learning; he was humble, worked hard, and taught his kids to do the same.

Susan’s parents could not afford to send six kids to private school so they put Susan and her sister through Milton Academy Prep school.   She knows that her parents made an incredible choice and thanks them to this day for that sacrifice. Susan went on to study at Colorado College in Colorado Springs, Colorado.  She spent a year abroad studying in Greece – the only problem was, she didn’t speak Greek.  But in typical Susan fashion, she learned how to adapt quickly.

Susan eventually met Robert, through mutual friends, and they soon became inseparable.  They quickly found out how much they had in common.  Robert was also from Massachusetts – Springfield to be exact.  He has two brothers and two sisters and also came from an incredibly hard working family who emphasized education.  Robert’s Mom was a homemaker and his Dad put all of the kids through school.  Education was a priority in the Kubacki household.  He was a toolmaker and held down two jobs, often working on Saturdays, to provide for his family.  Robert recalls that his Father never took a vacation and has an incredible love for his family.  He is fully aware of all the sacrifices that his parents made for him and his siblings, including putting Robert through law school.  

For 10 years, Robert handled children’s legal issues for an adolescent adoption agency.  This was unheard of in 1978.  At that time, if a child was 3 years or older, they were considered unadoptable.  During this time, Robert continued his schooling and got a masters degree in public administration and did adjunct teaching.  He is also trained as a mediator in Boston.  He moved to Pittsburgh looking to get out of the public sector.  Susan was accepted at the University of Pittsburgh for a master’s degree in public administration and international affairs.

In Pittsburgh, Robert worked as a director of dispute resolution services.  He taught at Duquesne and CMU in the philosophy department dealing with conflict resolution.  Susan’s career path took more of an international turn.   She had professional and personal relationships in Mozambique for over 25 years.  The birth of a little girl 14 years ago, changed Susan and Robert’s life forever.  Susan knew the day after she was born that this baby would be special in her life.  

Susan knew the baby’s birth mother for years and became the baby’s godmother.  Another great honor was bestowed on Susan – the baby was named after her – Susan Cossa.  Being a godmother holds a special cultural status in the family in Mozambique culture and the opportunity for Susan to take on more responsibility.  Susan was surprised and honored and knew that this was done with the blessing of the family.   Susan and Robert traveled to Mozambique many times over the years and their bond with young Susan got stronger each time.  They made the choice to have Susan come and live with them here in the U.S.  This was not only their choice but also the choice of Susan’s family to let her go.  

Along with the emotional, personal choice to bring young Susan home with them, they also made a financial choice.  They knew that they were taking on a financial commitment.  Susan states that “there is no price tag for love.  Choices along the way support that original emotional choice.”  

Like their parents, Susan and Robert also placed a high priority on education.  Susan Cossa was a star pupil and well liked in school.  She speaks 4 languages – English, Portugese, French, and Zulu.   Susan lived with them for 5 years and now attends a private boarding school in Johannesburg, South Africa.  I had the pleasure of meeting Susan Cossa a year ago and could easily see the intense love and family bond that they all share.

When they are not spending time with Susan, they enjoy hiking and reading.  Robert is an accordion player and volunteers by playing music for hospice patients.  A few years ago, he produced his first CD “Jumping Gawumpki”.  It was named after their cat who liked to jump. Robert’s CD currently sells in 7 countries, including the U.S.   He finds that children love his music and that gratifies him the most.    Robert is also developing a conflict coaching practice.  He enjoys helping people think through issues as it relates to conflict in the workplace and loves to see people grow as individuals.

Susan is currently one of 3 Program Directors at Pathfinder International.  The company works to improve the sexual and reproductive health of adolescents, women, and men throughout the developing world.  Susan has a portfolio of 7 countries.

Susan and Robert coordinate visits with Susan Cossa either in South Africa or when she comes to the U.S., those are the moments that they treasure most.  

Last year, they relocated to Boston and reconnected with family and friends.  They feel that they truly have come full circle. Susan and Robert also want everyone to know that even though they left Pittsburgh and live in Boston, Pittsburgh is in their hearts and that they will always be Steelers fans, no matter their location.

Susan and Robert thank Fragasso Financial Advisors for helping them to see the long view on days where it was difficult, especially as they dealt with complex transition issues with their daughter.   “There was a focus on learning what our interests are and how to support them financially and emotionally.” said Susan.  One might think that their story is unusual but it’s really not – it is about love, choice, and being realistic about the financial needs to support their situation.  

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Shredding Party Wrap-Up!

On Saturday, April 30th, Fragasso Financial Advisors invited clients and their guests to it's first annual "Shredding Party."

This event invited guests to bring their no longer needed documents to be securely destroyed at the Fragasso offices.

Representatives from Shred It parked in front of our offices on 610 Smithfield Street to shred the documents. Guests were free to mingle and enjoy the complimentary breakfast, or "shred and run" if they preferred!  In just 2 hours, we saved 13 trees!

The event was a huge hit, and our clients are already looking forward to "cleaning house" again at next year's event!  

And remember, you can always help eliminate some of those paper statements by signing up for LPL’s paperless statement service.  Click on the “Go Paperless” icon after you’ve logged in to AccountView.

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