CMR Financial Advisors
Cliff’s Notes
Volume 12 Issue 3
July 2013
Does Freedom
Hurt Us?
pg. 3
Gift Tax
Exclusion pg. 4
LTC Insurance
&
Your Assets pg. 8
Wailea Sunset
CC Image courtesy of Apogee Photography on Flickr
Maui No Ka Oi
Contents
I’m writing this on Maui in
between meeting with clients.
I always have a sense of
peace and comfort when I am
here. I suspect it’s because
of being born and raised on
Maui and all the fond childhood memories. But as I
reflect, I believe it’s much
deeper. There is a sense of
belonging or connection with
this island. I really don’t understand it and can’t analyze
it but it’s real.
This same feeling is what
we at CMR strive to have
clients feel each day in all that we do. If I had to pick one word
to describe it, it would be trust. Trust is very difficult to earn and
very easily broken. You have to handle it with care and it has to
be earned every day. Our hope is that we are or become your
trusted advisors. It’s a complex world and trust is a major ingredient in transforming the complexity into simplicity for you. Our
philosophy is simple, “The best interest of the client is the only
interest that matters”.
3
What’s Happening at CMR
3
Does Freedom Hurt Us?
4
Understanding Gift Tax
Exclusion
5
Do it Yourself:
Organizational Tips
8
How LTC Insurance Can
Help Protect Your Assets
10
American Cancer Society
Relay for Life
11
Our Team
14
Contact Us
Disclosure / Credits
Cliff M. Robello
CFP®,ChFC
“The best interest of the client is the only interest that matters”
2
We’re Growing...
Kalalea Montgomery joined CMR on August 25, 2011.
He’s a graduate of Kamehameha Schools and has a BA
After almost two years with CMR and outstanding
in Finance from Loyola Marymount. Check out his
performance, I have decided to expand his role to
biography on page 12.
serve all of CMR clients. Our growth and desire to
I know that you will
serve you with excellence makes his new role a tre-
come to like and trust
mendous addition. In future appointments he may be
him as you do the rest
sitting in with me, following up with you on financial
of the CMR Team.
issues and all that it takes to serve you.
Kalalea
has been in the industry for over 12 years. He has
demonstrated exemplary knowledge and abilities.
Does Freedom Hurt Us?
For many of us, the 4th of July is a day of celebration with friends and family and also a day to recognize our
country’s independence. We all enjoy the freedoms our great country affords us, but as Eleanor Roosevelt said,
“with freedom, comes responsibility.”
Continued on page 6
3
Understanding the Gift Tax Exclusion
Most of us will never face taxes related to money or assets we give away.
“How can I avoid the federal gift tax?”
that won’t likely occur.
If this question is on your mind, you aren’t alone. The
The IRS has set the annual gift tax exclusion at $14,000
good news is that few taxpayers or estates will ever
this year. What this means is that you can gift up to
have to pay it.
$14,000 each to as many individuals as you like in 2013
without having to pay any gift taxes. A married couple
Misconceptions surround this tax. The IRS sets an-
may gift up to $28,000 each to an unlimited number of
nual and lifetime gift tax exclusion amounts, and this
individuals tax-free this year. The gifts may be made in
is where the confusion
cash, or they can be made
develops. 
in stock, contributions to
Here’s what you have to re-
529 plans, collectibles, real
member: practically speak-
estate – just about any form
ing, the federal gift tax is a
of property with value, as
tax on estates. If it wasn’t
long as you cede ownership
in place, the rich could
and control of it.1,2,3
simply give away the bulk
So how are amounts over
of their money or property
the $14,000 annual exclusion handled? The excess
while living to spare their heirs from inheritance taxes.
amounts count against the $5.25 million lifetime gift
Now that you know the reason the federal government
tax exclusion. While you have to file a gift tax return if
established the gift tax, you can see that the lifetime
you make a gift larger than $14,000 in 2013, you owe
gift tax exclusion matters more than the annual one.
no gift tax until your total gifts exceed the lifetime
exclusion.2,3
“What percentage of my gifts will be taxed this
year?”
“What happens if I go over the lifetime exclusion?”
Many people wrongly assume that if they give a gift
If that occurs, then you will pay a 40% gift tax on gifts
exceeding the annual gift tax exclusion, their tax bill
above the $5.25 million lifetime exclusion amount.
will go up next year as a result. Unless the gift is huge,
4
One exception, though: all gifts that you make to your
of us is portable. That means that if you don’t use all of
spouse are tax-free provided he or she is a U.S. citizen.
it up during your lifetime, the unused portion of the
This is known as the marital deduction.1,2,3
credit can pass to your spouse at your death. So if you
only use up $1.25 million of your unified credit during
“But aren’t the gift tax and the estate tax unified?”
your lifetime and your spouse has the
They are. The gift tax exclusion and
full $5.25 million credit remaining,
the estate tax exclusion are sometimes
your spouse would have the chance to
called the unified credit. So if you have
transfer as much as $9.25 million tax-
already made taxable lifetime gifts that
free, either through gifts made during
have used up $3 million of the current
your life or after your death.3
$5.25 million unified credit, then only
In sum, most estates can make larger
$2.25 million of your estate will be ex-
gifts during life without any estate, gift
empt from inheritance taxes if you die in 2013.3
or income tax consequences.
However, the $5.25 million unified credit given to each
Do It Yourself: Organizational Tips
Use a magazine rack as pot lid holder .
Use tension rod to hang spray bottles under your sink.
5
Does Freedom Hurt Us?
continued from page 3
I can’t help but think of how such freedoms can often times get us into trouble, especially when it comes to making decisions about investing and retirement planning.
As I write this article, the market has just experienced the worst trading day of the year. The S&P closed -40.74
or down -2.50% and the Dow closed -353.87 or down-2.35%. These market swings are all too familiar, and if we
aren’t careful, may influence us to make unnecessary changes in our retirement planning portfolios. The chart
below illustrates what market movement “feels” like. Fear and greed continue to be the two emotions that control investor behavior.
How Investor Emotions affect Investor Returns
The volatility in market movement has influenced many investors to make poorly timed decisions that have negatively affected their portfolio returns. These decisions are based more on emotion than discipline. As a result,
research has shown that investors often underperform the very asset classes in which they are invested.
6

At CMR, we understand how these emotions can get the best of clients and we work tirelessly to reduce emotional decisions by using a disciplined approach to retirement planning and investment selection.
If market movement affects our emotions and our emotions affect our decision making, how can we protect ourselves? First we need to understand that Market Movement is the primary driver of an investor’s experience and
“behavior “ to this Market Movement will determine your return over time. Therefore, the single most important decision an investor will make is how much Market Movement to include in their portfolio.. Eleanor Roosevelt was correct in her statement, “with freedom, comes responsibility.” Use this freedom to act responsibly to
“behave” appropriately. Part of our job or value to you is to help you in this effort.
And in the end it’s not the years in your life that count. It’s the life in your years.
- Abraham Lincoln
7
How LTC Insurance Can Help Protect Your Assets
Create a pool of healthcare dollars that will grow in any market.
How will you pay for long term care?
*A private one-bedroom unit in an assisted living fa-
The sad fact is that most people don’t know the answer
cility has a median cost of $3,450 a month, or $41,400
to that question. But a solution is available.
annually. It was 4.5% cheaper last year.
*The median payment to a non-Medicare certified,
As baby boomers leave their careers
state-licensed home health aide is $19
behind, long term care insurance
an hour in 2013, up 2.3% from 2012.1
will become very important in their
financial strategies. The reasons to get
Can you imagine spending an extra
an LTC policy after age 50 are very
$40-85K out of your retirement sav-
compelling.
ings in a year? What if you had to do
it for more than one year?
Your premium payments buy you
access to a large pool of money which can be used to
The U.S. Department of Health & Human Services
pay for long term care costs. By paying for LTC out of
estimates that about 70% of Americans will need some
that pool of money, you can preserve your retirement
kind of long term care during their lifetimes. Addition-
savings and income.
ally, 69% of Americans older than 90 have some form
of disability – often a direct cause for long term care.2
The cost of assisted living or nursing home care alone
could motivate you to pay the premiums. Genworth
Why procrastinate?
Financial conducts a respected annual Cost of Care
The earlier you opt for LTC coverage, the cheaper the
Survey to gauge the price of long term care in the U.S.
premiums. This is why many people purchase it before
Here is a summary of the 2013 survey’s key findings:
they retire. Those in poor health or over the age of 80
are frequently ineligible for coverage.
*In 2013, the median annual cost of a private room in
What does it pay for?
a nursing home was $83,950 or $230 per day – up 3.6%
Some people think LTC
from 2012. In the past five years, the cost has risen
about 4.5% annually.
coverage just pays for nursing home care. That’s inac-
8
curate. It can pay for a wide variety of nursing, social,
only pay for the first 100 days of nursing home care,
and rehabilitative services at home and away from
and only if 1) you are getting skilled care and 2) you
home, for people with a chronic illness or disability
go into the nursing home right after a hospital stay
or people who just need assistance bathing, eating or
of at least 3 days. Medicare also covers limited home
dressing.3
visits for skilled care, and some hospice services for the
terminally ill. That’s all.4
How much will your DBA be?
DBA stands for Daily Benefit Amount - the maximum
Now, Medicaid can actually pay for long term care – if
amount that your LTC plan will pay per day for care in
you are destitute. Are you willing to wait until you are
a nursing home facility. You can choose a Daily Benefit
broke for a way to fund long term care? Of course not.
Amount when you pay for your LTC coverage, and you
LTC insurance provides a way to do it.4
can also choose the length of time that you may receive
the full DBA on a daily basis. The DBA typically ranges
Why not look into this?
from a few dozen dollars to hundreds of dollars. A
You may have heard that LTC insurance is expensive
small number of these plans offer you “inflation pro-
compared with some other forms of coverage. But the
tection” at enrollment, meaning that every few years,
annual premiums – in the vicinity of $2,000-2,500 for
you will have the chance to buy additional coverage
the typical policy right now – are cheap compared to
and get compounding - so your pool of money can
real-world LTC costs.3
grow.
Ask us about some of the LTC choices you can explore.
Medicare is not long term care insurance.
While many Americans have life, health and disability
Some people think Medicare will pick up the cost of
insurance, that’s not the same thing as long term care
long term care. That is a misconception. Medicare will
coverage.
The best and most beautiful things in this world cannot be seen or even heard,
but must be felt with the heart.
- Helen Keller
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CMR is one of the proud sponsors of this year’s American Cancer Society’s Relay for Life.
Everyone has been touched by cancer personally or someone you know. The goal finding
a cure is a worthy cause but in all things money is needed to fund the effort. I lost my
mother-in-law and sister to cancer along with several close friends and clients. You can
donate by going to http://www.relayforlife.org/magicislandhi or come by and donate.
Celebrate. Remember. Fight Back. ®
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C
Our Team
liff is President and founder of CMR Financial Advisors, Inc., a
Honolulu-based wealth advisory firm that provides investment
management and retirement income planning for a select group of families
primarily in Hawaii. Cliff began CMR with a simple but powerful philosophy:
“The best interest of the client is the only interest that matters.”
Cliff currently manages over $65 million in advisory and brokerage assets.
When it comes to retirement planning, he believes it is crucial to focus more
on controlling risk than maximizing returns, since the primary goal of most
retirees is to ensure that they receive a steady income stream from their assets
throughout their retirement. Although each client only retires once, Cliff has
been through the process many times and has a profound understanding of the
challenges and opportunities.
Born and raised in Kahului, Maui, Cliff graduated from Baldwin High School and earned a BA in
Economics from the University of Hawaii at Manoa. He began working in financial services in 1987 and is a
Certified Financial Planner™ professional and Charter Financial Consultant (ChFC). His articles appear regularly on Oceanic Road Runner’s “Around Hawaii” website, www.aroundhawaii.com, and he has been quoted in the
Honolulu Star Advertiser and Pacific Business News.
Cliff is a member of the Financial Planning Association and the Hawaii Estate Planning Council. He is the chair
of the Board of Trustees for the Friends of Library Hawaii.
Cliff and his wife Michelle have two children, Stephen and Sheri. Stephen resides in Seattle, WA with his wife
Brittany and their identical twin boys, Kainoa and Kekoa. Sheri graduated from Hawaii Pacific University with
Bachelor degrees in Finance and Entrepreneurial Studies. She is currently working at a financial planning and
advisory firm and part-time with CMR Financial Advisors.
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Our Team
K
alalea Montgomery joined the CMR team in 2011 as a Financial Advisor.
He began his career in 1998 as a financial advisor at PaineWebber in
Beverly Hills. He has earned the distinct certification as a Registered Financial
Consultant (RFC®) through the International Institute of Registered Financial Consultants. Kalalea focuses on retirement planning, wealth management
analysis and helping State and City and County Employees with ERS Option
Planning™.
Kalalea grew up on Oahu and graduated from Kamehameha Schools, Kapalama.
He attended Loyola Marymount University in Los Angeles, California and
earned a Bachelor of Arts degree in Finance. He currently holds securities
licenses Series 7 and 66, as well as Hawaii Life & Variable Annuity Insurance
licenses.
Kalalea has found that after a decade of working in the industry, the only way to truly put client interest above all
is working with an independent firm.
Kalalea is a member at the Waikiki Surf Club, Moanalua Golf Club and volunteers his time with the Muscular
Dystrophy Association and several fraternal organizations in Honolulu. In his free time, Kalalea enjoys golfing,
spending time with family, reading, supporting local sports teams and any activity involving the ocean.
Kalalea and wife, Elizabeth are proud parents of four girls; Paoakalani, Kalei, Kulia and Wailohia. Paoakalani
lives in Boston and is attending Harvard University. Kalei, Kulia and Wailohia are all attending school and are
active in paddling, soccer and volleyball.
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Our Team
M
argaret joined CMR Financial Advisors in 2003. She has been in the
financial services industry since 2000, beginning her career with ING.
Her responsibilities include managing the office and client service. She has
won many accolades for her commitment and dedication. She believes each
and every client deserves nothing less than outstanding service. She truly is
“Miss Aloha” of CMR. Originally from Honolulu, she now resides in Pearl
City. Margaret and her husband Al have three children, Alana, Makana and
Alohi.
T
ara joined CMR Financial Advisors in 2008. She has more than 15 years
of experience in the financial services industry, customer services, sales
and marketing. Tara has won many awards and accolades for her superior
customer service and productivity. Her passion is to lead clients through the
financial planning process, helping them to financial freedom and achieving
their retirement goals. Tara holds the Series 6, as well as well as the State of
Hawaii Life Insurance License. She assist Cliff with financial plans, portfolio
management and client servicing. Tara and her husband Scott have a daughter, Tayler.
S
heri started with CMR Financial Advisors in 2003 while still in high
school. She is a graduate of Mid Pacific Institute and earned a BA in
Finance and Entrepreneurial Studies from Hawaii Pacific University. She is
currently working at a financial plannining & advisory firm & part time at
CMR Financial Advisors
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Contact Us
Phone: (808) 537-2912
Fax: (866) 543-1845
Website: cmrfa.com
E-mail: [email protected]
700 Bishop St. Suite 1902
Honolulu, Hawaii 96813
Disclosures
Understanding Gift Tax Exclusion
1 - www.chron.com/news/article/New-act-clears-up-estate-gift-tax- confusion-4301217.php [2/22/13]
2 - www.nolo.com/legal-encyclopedia/changes-gift-tax-laws-coming.html [1/13] 3 - www.forbes.com/sites/deborahljacobs/2013/01/02/
after-the-fiscal-cliff-deal- estate-and-gift-tax-explained/ [1/11/13]
How LTC Insurance can help protect your asests
1 - www.genworth.com/dam/Americas/US/PDFs/Consumer/ corporate/131168_031813_Executive%20Summary.pdf [3/18/13]
2 - longtermcare.gov/the-basics/who-needs-care/ [3/18/13]
3 - www.marketwatch.com/story/long-term-care-coverage-worth-the- price-2012-12-04 [12/4/12]
4 - www.medicare.gov/longtermcare/static/home.asp [8/3/12]
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor
their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or
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or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any
particular investment.
Photo Credits
- Cover - CC Image courtesy of Apogee Photography on Flickr, Wailea Sunset
- Tara Bellucci, Apartment Therapy 28 June 2011, http://www.apartmenttherapy.com/under-sink-solu-150146
- Aimee Wimbush-Bourque, HGTV, http://www.hgtv.com/decorating-basics/clever-uses-for-everyday-items-in-the-kitchen/pictures/
page-3.html
- 2013, http://blog.newchurchlive.tv/wp-content/uploads/2013/05/Freedom-jumping-tanks2.jpg
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC.
Advisory Services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. CMR Financial
Advisors, Inc. and Cambridge are not affiliated.
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