Review Your Property Tax Assessments…Now

Most Michigan residents have recently received their property tax assessment notices for 2010, which should reflect the significant decrease in property values of their real estate.

Property owners should carefully review the assessments they received, as the change in valuation will directly impact the amount of their current and future property taxes. While the decreases are very discouraging, if you are not planning to sell your property in the near future, a careful review may be beneficial for years to come.

Under Michigan law, when property values rise, the increase is capped at 5% or less, per year. This is called the taxable value. Taxpayers should review their assessments, as this year may be the low point in valuations and future increases would thus be based on this figure.

Time is of the essence, as to appeal your assessment, you must go before your local community’s Board of Review, which is generally in March. To go before the Board of Review, you should be prepared with recent comparable property sales, and possibly even consider retaining a qualified real estate appraisal, if the amount of the disputed tax is large enough.

The process for commercial real estate may be different and may result in appearing before the Michigan Tax Tribunal, which sometimes reviews these cases for multiple years at one time, due to the heavy caseloads.

While our firm does not specialize in this area, we can review your situation with you and provide you additional guidance, and referrals to specialists, if it is considered necessary.

We highly recommend that you review your assessment promptly, as this may save you money. Immediate action is necessary to receive any benefit.

Thoughts from a Quick Trip

Some random thoughts from a quick trip with my two boys and my parents to Florida, primarily to visit the Tigers for the opening of Spring Training.

I flew Southwest Airlines. Amazing how efficient, friendly and terrific they operate. Absolute evidence of a happy staff translating into a more successful business. How they can land and take off so quickly (and safely), is unbelievable.

Southwest has created a great marketing strategy: 2 free bags included with their ticket price. Delta (formerly Northwest) charges approximately $25 per bag, each way. That’s $50 roundtrip per person for one bag! So, make sure to factor in bag charges when you make plan reservations. And for those that know that I overpack, I only took one suitcase, not 2.

My boys flew Airtran (long story as to why). My younger son is very into technology. Airtran now offers wi-fi on all their flights. My son was able to use the internet, post Twitter updates, etc. for most of the flight, for approximately $10. That seems reasonable and a future trend many of us will be using in the near future. I’m now following him, and a few others on Twitter, to learn about Twitter.

The opening of spring training was fun and a positive sign of spring to come. Observing the great variance in how the Tigers’ players interacted with fans to sign autographs was interesting. Some were overly gracious and signed for everyone in sight. Others would not give the fans, even little kids, the time of day. For what they are paid, no excuse. I really wanted to get Brandon Inge’s autograph for my daughter, as he does so much charitable work, which we followed last summer. He never signed, although we waited and waited, as he stayed for hours after most other players had left for the day. A sign of his incredible work ethic and desire to rehab from last years’ injuries. Can’t fault him for that and a great lesson for my kids!

We went to the Kennedy Space Center, which I strongly recommend to anyone who goes to Orlando or departs from a cruise near there. Can easily spend an entire day, which is moving (particularly the Memorial for astronauts who have died in various space program efforts and the Shuttle explosions), awe inspiring and educational. You have to see the 1970s Saturn V rocket, which they built a building around to display, to truly appreciate how large the rocket is…and how small the ship carrying the astronauts in the Appolo missions were at the very top. A must see experience!!

The road outside the Tigers spring training facility is evidence of our health care system and Lakeland’s population. For probably two miles, over 90% of the buildings appeared to be every type of health care related facility possible. My kids noticed before I did. Other than 1 sub shop and a car dealership, just health care and more health care.

The Next Big Mistake: Don’t reach for it!

As we meet with clients, a common theme is investor frustration with the low yields that are available for high quality fixed income investments, such as CDs or short term government bonds.

We often say that we don’t have a crystal ball and we cannot predict the future. However, the implication for the eventual rise in interest rates and their impact on many investors is best stated as: “Not if, but when.”

Interest rates are at historically low levels, due to the economic crisis that we have endured since 2008. Eventually interest rates will rise. No one knows specifically when this rise will begin, how quickly it will happen or to what extent. But we know that eventually interest rates will rise from their current levels.

What will happen when rates rise? Who will be affected and will that affect be good or bad? Many people we meet with who are not currently clients, or clients who still hold some of their investments elsewhere, hold some of their fixed income investments in bond funds. When interest rates rise, bond values will fall. The longer the maturity of the bond, the larger the loss will be. This is an economic reality.

Investors in bond funds, who think they own a “safe investment,” are going to be facing losses, some of which will be very significant, when interest rates rise. We recommend that investors hold high quality individual fixed income investments, not bond funds. By holding these investments to maturity, our clients will avoid the losses that investors in bond funds may incur, when interest rates rise.

So investors may want to “reach” for the higher yield that tempt them by owning a bond fund (or lower quality or longer term bonds), but they will be better off in the long run to stick to short term, high quality individual bonds or CDs.

We can work with you to structure a fixed income portfolio that will maximize the interest rate return that is available today…and properly structure your fixed income portfolio for the eventual rise in interest rates. This will help you avoid what we predict will be one of the major financial stories of the next 5 years…the massive losses that will be incurred by investors in bond funds when interest rates rise. Don’t make that mistake!

Teaching and Learning

On Thursday February 4th, Brad spoke about Roth IRA conversions for the Institute of Continuing Legal Education (ICLE), before approximately 200 attorneys and another 100 who watched via a live webcast. ICLE, an affiliate of law schools in Michigan, primarily the University of Michigan Law School, provides continuing legal education to attorneys throughout Michigan. The seminar will be rebroadcast throughout the State during February and March.

Based on our background as investment advisors and CPAs, we are uniquely qualified to provide guidance and creative planning opportunities for Roth IRA conversions. See our separate blog post regarding Roth IRA conversions or contact us for more information.

Keith recently attended a 2 day seminar in Arizona with advisors that we are affiliated with on a national basis, as part of our affiliation with BAM Advisor Services, our “back office” firm which supports approximately 120 wealth management firms, which together manage approximately $10 billion.

Keith’s seminar focused on estate planning with a nationally recognized estate planning attorney, as well as sessions with top executives from Dimensional Fund Advisors (DFA) and economists.

Both Brad and Keith participate in these peer groups throughout the year, which focus on exchanging best practices and advice with advisors who share our investment and wealth management philosophy. These peer groups also talk bi-weekly or monthly throughout the year, to discuss various topics and ideas, and meet in person at least twice a year.