Umbrellas and Taxes

Gray Easterling
Gray Easterling

I recently had an insurance review and it came to my attention that I did not have umbrella liability insurance. This was a surprise to me because I was sure that I had added this coverage years ago. This could have been a very costly oversight. If you are in a car accident and get sued, your auto insurance covers up to your personal liability limit which, in many cases, is between $100,000 and $300,000. The same action would occur with your homeowner’s coverage if someone was injured in or around your home. An umbrella policy pays for settlements and legal fees above the limits on your auto or homeowners policies. Without this coverage, your wages and assets could be at stake if the judgment came in higher than your standard coverages.


Examples of possible risks include the obvious auto accident, which is the most common loss that umbrella coverage pays. Other areas of exposure include remodeling of your home where the general contractor has not adequately provided for workmen’s comp; hosting a party where a guest leaves and is involved in a drunk driving accident; swimming pool or hot tub accidents, etc. You get the idea. That is the bad news. The good news is that umbrella coverage is normally very affordable. According to an article in the February Money Magazine, a typical homeowner can get $1,000,000 of coverage for between $250 and $400 per year. You should also know that acquisition of a personal umbrella liability plan usually requires specific liability limits on the policies that it is “piggybacking”. You may have to boost coverage on your auto or homeowner’s plan.  Also, some companies will only issue coverage over policies that they have written. Do some homework and make sure you are protected.


The Wall Street Journal had some tax planning ideas in their January 11-12, 2014 edition. For married couples filing jointly with incomes above $450,000, the top tax rate moves to 39.6% from 35%. Also, for couples in the above income level, capital gain rates are bumped up to 20% from 15%. Taxpayers in the bottom two tax brackets pay no tax on capital gains or dividends. If you are married filing jointly and your adjusted gross income exceeds $250,000, a 3.8% additional Medicare tax on investment income comes into play. IRS Form 8960 is the applicable document. Your salary and/or self-employment income may be subject to a Medicare surtax at the $250,000 limits. For married couples filing jointly with adjusted gross incomes over $300,000, exemptions and itemized deductions may be reduced. The final good news is that there are higher thresholds for itemizing medical deductions. As always, with the tax code being as complicated as it is, consult with your tax advisor to help determine whether these new rules affect you.


From the January 3, 1014 Forward: “What is the difference between trusting and turning something over to God, and just being lazy and not doing the thing for ourselves? Turning a thing over to God does not mean you do nothing; it means you do what you can do and trust God for the outcome. Sometimes this means wrestling with a problem until your strength is sapped, then releasing it to God. It does not mean giving up, but rather giving over to a greater power. Trust is what we do when we cease to fight against the elements, when we invite Jesus in to the boat with us and ride the wave safely and confidently to shore.” Psalm 46: “God is our refuge and strength, a very present help in danger. Therefore, we will not fear, though the earth be moved, and though the mountains be toppled into the depths of the sea. The Lord of hosts is with us.”


Securities, insurance and investment advisory services offered through FSC Securities Corporation, member FINRA/SIPC and a registered investment advisor 3416 North Blvd, Alexandria, LA 71301, (318) 448-3201.  The views expressed are not necessarily the opinion of FSC Securities Corporation.