Archives for May 2018

Frequent Flier Miles: Which Airlines Are Easiest To Redeem Economy Awards?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Cashing in your frequent flier miles for a free flight can be hit or miss, especially around a holiday. Which airlines are the most generous with making seats available? Each year, IdeaWorks tries to run a fair comparison of all the major airlines to keep them honest. This WSJ article discusses the results:

During March, IdeaWorks made more than 7,000 trip searches among 25 airlines, looking for two seats at the basic “saver” award level—25,000 miles for a domestic U.S. round-trip, for example—on 14 specific travel dates June through October. Each airline’s 10 busiest long routes and 10 busiest medium-length routes, both domestic and international, are queried to get the fullest picture of award availability.

frequentwsj2018

Most improved goes to American, which admitted that they significantly increased their overall seat availability, especially to Hawaii and Europe. Worst decline goes to Alaska, which says it didn’t change the amount of seats released, so perhaps there is simply more competition and usage of the program. Note that the survey focuses on economy tickets (not business or first class).

Southwest and JetBlue remain on top at close to 100% availability, but that is a bit misleading since both of their points are revenue-linked with no blackout dates. For example, 25,000 Southwest points will buy you basically any “Wanna Get Away” ticket that costs up to about $340. So the results are really just saying that Southwest’s busiest routes almost always have a flight that costs under ~$340. Southwest doesn’t fly to Europe at all, but they do have plans for Hawaii soon (which I look forward to, but will probably hurt their numbers).

iPhone 6S Plus + New Apple Battery = Best Used/Frugal Phone?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

iphone6srose

Update 3/17: DailySteals just added new stock in iPhone 6 and iPhone 6S at under $200 (Verizon + Fully GSM unlocked). Compare with Swappa.

More and more people are being scared away from paying $1,000+ for a new smartphone as they realize that every September there will be another one that is a bit newer and shinier. I think the absolute amount that the iPhone improves each year is getting smaller and smaller. If you’re not committed to staying on the bleeding edge, why not save some bucks?

I recently took advantage of the special pricing on iPhone battery replacements on my iPhone 6, and it definitely made a difference in speed (and of course battery life). They performed the battery swap in the Apple Store in about an hour while I shopped elsewhere. This made me think about what the current best value would be for an iPhone (functionality/price).

My choice as of mid-2018 is the iPhone 6S Plus. They currently start in the $220 range, compare prices at sites like Swappa (person-to-person) and DailySteals.com (refurb deals). You have Touch ID. You get the bigger 5.5-inch high-resolution “Retina” screen for easier reading. From a superficial perspective, it’s really hard to tell it apart from an iPhone 7 or 8 (especially with case). The speed is adequate, even if you update to the current iOS. Of course, this assumes that you add a new battery ($29) direct from Apple. (You even get a physical headphone jack!)

Why Pursue Financial Freedom: Fulfilling Retirement Activity vs. Ideal Job

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

retirehappy

How to Retire Happy, Wild, and Free by Ernie Zelinski continues to offer smart observations on retirement. For example, when people are working, their idea of leisure is often passive: watching TV, listening to music, shopping, or eating at restaurants. However, in retirement, they need to replace all the intangibles besides money that working provided.

The Academy of Leisure Sciences has 8 criteria for finding a good leisure activity in retirement:

  1. You have a genuine interest in it.
  2. It is challenging.
  3. There is some sense of accomplishment associated with completing only a portion of it.
  4. It has many aspects to it so that it doesn’t become boring.
  5. It helps you develop some skill.
  6. You can get so immersed in it that you lose the sense of time.
  7. It provides you with a sense of self-development.
  8. It doesn’t cost too much.

Did you know even know the Academy of Leisure Sciences existed? Another new tidbit from this book.

My observation is that these are also same characteristics of a good job. Think of your own job and read it again:

  1. You have a genuine interest in it.
  2. It is challenging.
  3. There is some sense of accomplishment associated with completing only a portion of it.
  4. It has many aspects to it so that it doesn’t become boring.
  5. It helps you develop some skill.
  6. You can get so immersed in it that you lose the sense of time.
  7. It provides you with a sense of self-development.
  8. It pays enough to support your lifestyle.

Of course, this brings you to why saving up money to reach financial freedom is a worthy pursuit. The list of things that satisfies the top 8 leisure criteria should be pretty long. It might take a few tries to find something that fits, but you could play any sport, learn to cook, speak a new language, and so on.

However, adding the criteria that it has to pay you makes the list much shorter, perhaps non-existent. Compare picking up cycling for personal enjoyment vs. getting paid as a professional cyclist. Learning how to smoke some decent backyard BBQ vs. getting paid as a professional caterer. Start to speak a new language vs. becoming an (adequately-paid) French teacher. I’m sure some lucky people out there really do have a perfect job where they are getting paid for something that they would “do for free”. However, most of us don’t, so that’s where financial freedom comes in to remove that money requirement.

eBay: Spend $150+, Get Free Google Home Mini ($49 Value)

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

ebaymini

Google is offering eBay customers who spend $150+ in eligible items a free Google Home Mini ($49 retail). Eligible items exclude items from the Coins & Paper Money, Gift Cards & Coupons, and Real Estate categories. Expires 5/20/18 or while supplies last.

How to redeem your Coupon:

Include a Google Home Mini worth $49.00 direct from Google in your cart.
Shop for $150+ in Eligible Items. (See below for exclusions).
Enter the Coupon code in the redemption code field: PFREEMINI
Check out by 11:59 PM PST on May 20, 2018
Free Google Home Mini to arrive within 10 (ten) business days.

Not a bad deal if you were already considering such a purchase, or if something $150+ you wanted was a similar price on eBay. An alternative idea is to buy $150 worth of US Postal Service Forever Stamps.

Remember, you can also stack with cashback shopping portals like eBates ($5 new customer bonus), Mr. Rebates ($5 bonus), and TopCashBack ($5 right now, but varies).

Here Are 11 Reasons We Have An Umbrella Liability Insurance Policy

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Personal Umbrella Insurance is additional liability insurance, designed to pay out when your existing auto and homeowner’s/renter’s insurance policies are exhausted. For example, you may only have $300,000 in liability coverage on your car insurance. If you are in a car accident and found liable for $1,000,000, you would be on the hook for $700,000 yourself unless you had an adequate umbrella insurance policy. Here is a diagram explaining this from MSN Money:

umbrellahow

In addition, an umbrella policy can also fill in the gaps by providing coverage for other incidents like liability for rental properties or being sued for slander or libel. Imagine working and saving for decades, only to have all of it taken away with one incident.

Real-world examples of $300,000+ liability claims. Every time I read about one of these scenarios, I think of them as a reason to keep paying for my umbrella insurance policy.

Do you drive a car? In a sever car accident, medical costs alone can exceed $100,000 per person easily. Now imagine if there were 2, 4, or even 6 people in the car. Here is one example from a NY Times article on umbrella policies:

One of Mr. Cox’s clients crashed into the rear of a car on a slick highway. A woman and a child were critically injured. After two years of litigation, his client settled the lawsuit for more than $5 million. The client had $15 million in umbrella coverage. The policy paid for the settlement and all legal costs. “Without the umbrella,” Mr. Cox said, “they would have been completely wiped out.”

Are you ever a parent chaperone? A high school field trip led to a $700,000 verdict for negligence:

Lauren Crossan, of Randolph, N.J., had traveled to Hawaii in 2004 with Susanne Sadler, Sadler’s daughter, and another New Jersey cheerleader to perform in the halftime show of the Hula Bowl. Within hours of her arrival at the Hyatt Regency Maui Resort, Crossan was seen drinking alcohol. Her body was found the next day on the hotel grounds.

An arbitrator determined last month that Sadler was partially responsible for Crossan’s death and ordered her to pay $690,000 to Crossan’s parents and her estate.

Do you have a dog? This Reuters article discusses the increasing number of dog-related claims. Here are two examples that didn’t even involve a bite:

State Farm public affairs specialist Heather Paul’s dog ran out through her open gate and scared an elderly neighbor, who fell off the curb and broke her ankle. The lady filed an insurance claim with Paul’s carrier, but the standard liability coverage of $100,000 was not enough for her bone reconstruction. Luckily, Paul had an additional umbrella policy, which kicked in and covered the rest.

A California woman went through a two-year lawsuit after her dog got loose and knocked over a postal worker. The dog did not bite anyone, but the worker claimed damages greater than the homeowner’s policy covered. […] This owner said she had no umbrella policy, and now she cannot get one. Her homeowner’s premium has skyrocketed.

More scenarios:

  • You leave a negative Yelp review about a company and the business sues you for defamation. Look what can happen with a mediocre 3-star Yelp review.
  • A man was asked to cut down a tree from his own yard. He refused, and later a hurricane blew the tree down and injured someone in the neighboring house.
  • Your child gets in a fight at school, and injures another student.
  • You have a pool, and a visitor hurts themselves.
  • A handyman or contractor hurts themselves on your property.

Have the insurance company lawyers be on your side. Forget even getting a large jury verdict against you. If someone simply sues you for a frivolous reason, you’ll have to pay for a lawyer to defend yourself. With an adequate umbrella policy, the money at risk will be the insurance companies instead of your own. That means the big corporate lawyers will be on your side, and your defense costs will be covered as part of the umbrella policy.

The premiums are relatively affordable. It cost us about $250 a year for $1 million in coverage for the both of us, including 2 cars and a house. That’s basically $10 per month per person. However, we did have to raise the liability limits of our auto and homeowner’s policies slightly to $500,000 each. So if you are only carrying the bare minimum required by law, your actual additional costs may be higher. If your net worth is higher, then you’d want to buy higher limits, but it should still be affordable on a relative basis.

It’s often easy to add to your existing policy. It was really simple to get as well; we had an umbrella policy added to our existing policies with just one phone call. We already had our homeowner’s and auto insurance at the same company. We didn’t have to fill out a long application or go through a credit check. If the cost is a shock, consider contacting an independent insurance broker and shopping around. You may find a better deal and get a multi-line discount.

But the low cost also means you may have to look out for your own interests. Something that involves a big commission like universal life insurance is more likely to generate interest from your insurance agent. On the other hand, selling you an umbrella policy results in a tiny commission. When I asked about it initially, all I got was a “yeah, I suppose that might be a good idea…” and they never followed-up. You need to take action on your own behalf.

One less thing to worry about. Peace of mind. Some people believe that you may be a bigger target for lawsuits if someone finds out you have a $1 million umbrella policy. Here’s how I look at it. If I really wanted to premeditate a lawsuit against someone, I’d pick someone who is worth a lot more than $1M. More like $10 million and up. In a big metro area like mine, multi-millionaires are a dime a dozen. Even if I was frivolously sued, again the whole point is that I’m still covered. To me, this argument is like saying you shouldn’t earn more money because someone will sue you for it.

Now, if you have a low or negative net worth, then perhaps there would be less incentive in getting such coverage. I certainly had no idea what umbrella insurance was in college. I would imagine lawyers are less likely to go after a big amount if you are “judgment-proof”. However, consider that your net worth may change quickly in the future, and if you did have an incident it may affect your future insurability.

Bottom line. Umbrella insurance gets to the core of the purpose of insurance. You pay money to share the risk with others and protect you and your family from a catastrophic event that could ruin your lives. In other words, you pay the premiums with the hope that you will never have to make a claim on it.

The Business Platinum Card from American Express: 75,000 Point Limited-Time Offer

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

amexbusplatLMThe Business Platinum Card® from American Express OPEN is the premium AmEx business card with a variety of perks, including the best airline lounge access program (American Express now has their own Centurion lounges too). Right now, they are running a limited-time offer of up to 75,000 Membership Rewards points. Here are the details:

  • Earn up to 75,000 Membership Rewards points. Earn 50,000 Membership Rewards points after you spend $10,000 and an extra 25,000 points after you spend an additional $10,000 all on qualifying purchases within your first 3 months of Card Membership.
  • 5X points on flights and prepaid hotels on amextravel.com.
  • 1.5X points per dollar on each eligible purchase of $5,000 or more. Up to 1 million additional points per year.
  • 1 point per dollar on all other purchases.
  • $200 Airline Fee Credit. Up to $200 a calendar year in baggage fees and more at one airline.
  • $100 Fee Credit for Global Entry or TSA PreCheck.
  • Free Unlimited Boingo WiFi access + 10 Free Gogo inflight internet passes annually.
  • $450 annual fee.

American Express Global Lounge Collection. Some other travel cards give you Priority Pass Select, which is nice but not as inclusive as this card’s list of partners. Domestically, you get Delta Skyclub access (Individual Skyclub membership costs $495 from Delta) as well as the new Centurion Lounge network built specifically for American Express cardholders.

  • The Centurion® Lounge
  • The International American Express Lounges
  • Delta SkyClub®
  • Priority Pass Select
  • Airspace Lounge
  • Escape Lounges

Other benefits:

  • 35% Airline Bonus: Use Membership Rewards® Pay with Points for all or part of a flight with your selected qualifying airline, and you can get 35% of the points back, up to 500,000 bonus points per calendar year.
  • 35% points back on all First and Business class flights, with all airlines available through American Express Travel.
  • Automatic Starwood Preferred Guest (Marriott) Gold status.
  • Automatic Hilton Honors Gold status.
  • No Foreign Transaction Fees.

Note the following language: “Welcome bonus offer not available to applicants who have or have had this product.”

35% Airline Bonus details. Let’s say your selected airline is Delta, and you want to buy a couple economy Delta tickets for $1,000 using their Pay with Points features. This means that $1,000 ticket booked through AmEx Travel will only cost you 65,000 Membership Rewards points net (100,000 points and then 35,000 point rebated back). This improves the 1 cent per point value to 1.54 cents per point value. This means that 100,000 Membership Rewards points can be worth $1,540 in airfare on your selected airline.

Transfer partners. You can transfer Membership Rewards points to 16 airline and 3 hotel partners including Delta, British Airways, Hawaiian, JetBlue, Air Canada, Hilton, Starwood Preferred Guest, and Choice Hotels. If you’re good at snagging award tickets, you can get even better value this way.

Overall, this small business card is meant for big spenders that travel regularly and value convenience and comfort. Spending $25,000 within 3 months is a relatively high spending hurdle. (Given the 5X bonus category, it would be perfect if you needed to book some business flights/hotels soon.) If you can swing that, then this card can offer a lot of value in a year. In addition to the Membership Rewards points (see above for value), the $450 annual fee can be offset by the $200 annual credit towards airline fees and the $100 Global Entry credit. I think the biggest value factor is the wide lounge access which includes more domestic lounges than Priority Pass Select alone.

Bottom line. The Business Platinum Card from American Express card tries to make your air travel more pleasant by addressing things like baggage fees, economy plus upgrade fees, TSA PreCheck security lines, Global Entry customs lines, inflight WiFi, free snacks and drinks at airline lounges, etc. Right now, they have a 75,000 point welcome offer if you meet the qualifying spending requirements for new cardholders.

Urbanr: Pay Rent With Credit Card – 1.5% Transaction Fee

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

urbanr0Urbanr is an apartment rental website that allows renters to pay rent to landlords using a credit card. Urbanr accepts all Visa, MasterCard, and Discover credit and debit cards. The 1.5% transaction fee can be paid by renter, paid by the owner, or split evenly between them (owner pays 0.75% and the renter pays 0.75%). The owner/landlord must sign up on the service first to accept payments (direct deposited to their bank account).

Urbanr wants to make it so that everyone pays rent with a credit card, and they claim that they are not losing money on the transaction fees. If so, they must be very good negotiators. You’ll need both parties interested for this to work. That means renters perhaps with a 2% cash back credit card or similar miles/points card, and an agreeable landlord (easier rent collection?).

Principles by Ray Dalio – YouTube Summary For Short Attention Spans

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

dalioPrinciples: Life and Work by Ray Dalio is a bestselling book by the billionaire investor and founder of Bridgewater Associates. The book outlines both his personal development and investment philosophies and has been on my reading list for a while. If you’re like me and haven’t quite gotten around to reading it, you might be in luck.

Mr. Dalio just released a series of animated YouTube videos where he breaks down his “Principles for Success” into 8 videos at about 4 minutes each. Instead of reading a review or even paying for an “executive summary”, you can get a 30-minute version straight from the source. Here’s the trailer (embedded below) and first episode:

The YouTube channel also contains a few other longer videos dealing with the book content.

Auto Insurance: How Much Will An Accident Claim Increase Your Premium?

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

Here’s an infographic from HowMuch.net that charts how much your annual auto insurance premium will go up after just one claim:

Auto insurance companies portray themselves as friendly and forgiving in television commercials, but they are less friendly than you might think. After filing just one claim, car insurance premiums increase by an average of 41.81%, according to an annual study by insuranceQuotes and Quadrant Information Services.

autoinsaccident

I was somewhat surprised at how much the initial premiums and subsequent hikes varied state-by-state. On average, the annual premium is $842, but after a single $2,000+ accident claim, it goes up by $352. The source article also states that you should expect rates to remain high for three to five years, depending on the severity of the claim. Ouch.

I didn’t see similar data about smaller claims like a dented bumper. I keep my collision deductible at $1,000 because I’d rather self-insure below that amount, pocket the premium savings, and avoid any rate hikes if I did make a claim. In general, I always try to only pay for insurance when an incident would cause significant financial difficulty (your number may vary).

Non-Financial Retirement Planning: List 10 Retired Activities

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

retirehappyEver notice that every book on “How to Retire” is really just about how to accumulate a big pile of money? I’m currently in the middle of How to Retire Happy, Wild, and Free by Ernie Zelinski, which contains absolutely nothing about mutual funds, real estate, or safe withdrawal rates. Instead, it deals with the non-financial aspects of retirement. What does that mean? Well, many retirees spend at least some time being quite unhappy. They haven’t solved the other retirement problems:

  • How will you create meaning for yourself?
  • What activities will you keep your mind and body in top shape?
  • Who will you spend your time with?
  • Where is the best environment to live?

A recommended exercise is to write down the 10 favorite interests and activities that you would like to pursue in retirement. At the same time, write down how much time you are presently spending on these activities. If you are not spending any time pursuing these activities before retirement, the experts say that you are unlikely that you will spend much time on these activities after you quit work. Many people are surprised when their retirement is completely different from they imagined. They may become bored, aimless, lonely, and/or depressed. A surprisingly large number go back to work!

You need to develop activities as part of your retirement planning, BEFORE you retire. Here’s my list of favorite activities, along with time currently spent.

  1. Time with kids. Chasing bugs and jumping in muddy puddles. Learning new things with them. (Almost enough)
  2. Cooking at home. Becoming a better cook. Know what I’m eating. (4-6 hours a week)
  3. Time with spouse. Enjoying their company. (Not nearly enough)
  4. Play tennis. Social interaction and physical exercise. (3-6 hours a week)
  5. Keep learning about investing and finance. (Enough)
  6. Entertain friends at house. Cook for them. Socialize. (Very little)
  7. Read books. (2-3 hours a week? A little each day)
  8. Build an off-grid shed. Power from solar PV. Tinker with batteries and wind turbines for fun. Water catchment. Composting toilets? (None)
  9. Raise fish and/or chickens. I like to read about chicken tractors and backyard fish farms. (None)
  10. Travel. So much left to see out there. (Few weeks a year)

Right now, most of our non-work time is spent on toddler childcare, so many of these activities are being neglected. This list is a good reminder that I need to work harder on maintaining good relationships my wife, family, and friends. Once all the kids are in pre/school, we’ll see if I actually get around to the rest. Maybe the experts are right and I’ll never build that self-sustaining tilapia farm…

Berkshire Hathaway Shareholder Meeting Full Videos, Transcripts, and Podcasts

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

brkpodcastFully updated for 2018 with new sources. Berkshire Hathaway’s Annual Shareholder Meetings are held in Omaha, Nebraska every May. Although most of my portfolio is in a diversified mix of index funds, I also own individual shares of Berkshire Hathaway and respect the rational and clear advice given out by Warren Buffett and Charlie Munger. I’ve been reading through transcripts from past meetings, but in 2018 Buffett gave CNBC a bunch of complete tapes from old meetings.

I’ve wanted to physically attend a meeting for several years now, but things haven’t worked out. (Time is running out, I know…) In the meantime, here is a big list of ways you can watch, read, or listen to past shareholder meetings. Please let me know if you have something to add.

Full Videos

  • Yahoo Finance Livestream. Yahoo Finance is the exclusive online host of the Berkshire Hathaway 2018 Annual Shareholders Meeting that occurred May 5th, 2018. View the entire Q&A session in its entirety on demand.
  • CNBC Warren Buffett Archive. Footage of shareholder meetings from 1994-2017 (VHS tapes!) were converted to digital videos, which you can view in their entirety for free. Additional material from CNBC including interviews, highlights, and short-form videos is also available.

Transcripts

Liveblogs

Podcasts

  • Yahoo Finance also makes the BRK meeting available as a podcast, so you can listen in parts during your commute or chores. Right now, the 2017 meeting podcast is still available. 2018 should be up shortly. iTunes. Player.fm.

Books

Reminder: This post is about the live shareholder meeting, and is separate from the annual shareholder letters (which are also great).

Completed Sample IRS Form 709 Gift Tax Return for 529 Superfunding / Front-Loading

“The editorial content on this page is not provided by any of the companies mentioned, and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author's alone.”

529Updated for 2018. Let’s say you are fortunate enough to be able to make a large contribution to a 529 college savings plan, perhaps for your children or grandchildren. You read from multiple sources that you are able to contribute up to $75,000 at once for a single person or up to $150,000 as a married couple (2018), all without triggering any gift taxes or affecting your lifetime gift tax exemptions. (From 2013-2017, these numbers were $70k/$140k). What you are doing is “superfunding” or “front-loading” with 5 years of contributions, with no further contributions the next four years.

Those are pretty big numbers, but any contribution above $15,000 will require you to file a gift tax return because that is the annual gift tax exclusion limit for 2018. ($14,000 for 2013-2017.) You’ll need to fill out IRS Form 709 [pdf], “United States Gift (and Generation-Skipping Transfer) Tax Return”. The instructions are quite long and confusing. You ask your accountant and they suggest talking to your estate lawyer. You may wish to avoid paying the $400 an hour or whatever it will cost as the form should be pretty straightforward.

So how do you fill out form 709 for a large but simple 529 contribution? Here are the resources that I found most helpful:

(Note that I have found what I consider minor errors and/or inconsistencies in some of the sample 709 forms above.)

Here’s a redacted version of my completed Form 709. Let me be clear that I am not a tax professional or tax expert. I am some random dude on the internet that did his own research to the best of his abilities and filled out the form accordingly. This is what my form looks like. It could be wrong. You’ll need to make changes to conform to your specific situation. Feel free to offer a correction, but please support your statement.

For my version, I am assuming that you and your spouse contributed the maximum $140,000 together. (I didn’t actually contribute that much.) The 2014 form is shown below, but I just did this for another kid using the 2017 form and I couldn’t find any differences. Note that you’ll need to file two separate gift tax returns, one for you and one for your spouse. Mail them to the IRS in the same envelope, and I like to send them certified mail.

f709_generic1_ediated

f709_generic2

f709_generic3

Here is my Form 709, Schedule A, Line B Attachment

Form 709, Schedule A, Line B Attachment

– Donor made a gift to a Qualified State Tuition Program (a 529 plan).

– Total amount contributed $140,000 in 2014.

– Donor elects pursuant to Section 529(c)(2)(b) of the IRS Code of 1982, as amended to treat the gift as having been made equally over a 5-year period.

– The gift was made jointly by the taxpayer and the taxpayer’s spouse on January 1st, 2014 and will be split equally in half.

– Election made for $140,000 over 5 years is equal to $28,000 total per year, or $14,000 per person per year.

– The contribution is for

Juniper Doe
Daughter
1234 Main St
New York, NY 10001

When to file Form 709. When taking the 5-year election, you must fill out the gift tax return (Form 709) by April 15th of the year following the year in which in the contribution was made. So if you make the contribution in 2018, you must file Form 709 by April 15th, 2019. If you make the upfront contribution in the first year and then make no future contribution in the next four years, you do not have to file a gift tax return after the one you did for the first year.

What if you’re late? Well, you should file the Form 709 as soon as possible. If you did not exceed the limits then technically there is no gift tax due, and there is no penalty that I could find for late filing when there is no taxes due. Still, I would file ASAP.

The tax information set forth in this article is general in nature and does not constitute tax advice. The information cannot be used for the purposes of avoiding penalties and taxes. Consult with your tax advisor regarding how aspects of a 529 plan relate to your own specific circumstances.