Summarize the type of income Brooke has and the taxation of her income.

Summarize Brooke's assets and the taxation of her assets.

Using the financial statements and facts provided, make five recommendations that could help Brooke meet her goals. Please discuss your "why" for each recommendation.

Brooke Ence, age 42, has entered into a financial planning engagement with you. She is married, but has been separated from her spouse for three years. She files MFS. Brooke has four children (ages 9, 15, 22 and 23) and is able to claim the youngest two as dependents. Through the years, Brooke has made some investments and has accumulated a relatively sizable portfolio. (Note: all assets reflect current fair market value unless indicated otherwise.)

Brooke's self-described risk tolerance level is aggressive. Although Brooke considers herself a novice investor, she has been investing independently without professional assistance. She has an expected rate of return of 13%.

Brooke has no separate savings for the children's college education, but is willing to use current assets to help with their college expenses.

Brooke is a health care professional. She is fully vested in the hospital's 401(k) plan. Her employer matches 100% up to 10%. Brooke is contributing 10%. All contributions are pre-tax.

Brooke has a second source of income. She does contract work for a health care agency. Brooke is not considered an employee of the agency; therefore, she is not eligible for benefits nor participation in the retirement plan.

Income tax planning goals are as follows:

·        Main goal is to NOT have any tax due when filing each year. She does not want to pay anything at tax time, even if that means taking a less than optimal lifetime tax position.

·        Minimize tax liability to get a larger refund each year. Brooke regularly gets a very small tax refund each year, she would like to get a larger refund if possible.

·        Retire from health care at age 55 and get a part-time job earning $4,000/monthly in today's dollars. Brooke wants to start setting herself up now to address tax issues that may arise later.

·        Group term life is $300,000.

·        Has a 30 year term insurance policy of $500,000 outside of employer (term began at age 40).

·        Would like to leave $1,500,000 as an inheritance for her four children to divide.

·        The rental real estate and land are investments that Brooke is willing to sell to fund retirement.

Income

Hospital (Take home W-2 income) $     6,415.00

Agency (Take home 1099 income) $     4,170.00

Net Real Estate Rental Income $        682.00

Total Income $   11,267.00

Expenses:

Mortgage on land $        650.00

Electric $        210.00

Gas $          45.00

Water $          47.32

Internet $        104.00

Sam's Club $        294.07

Walmart $          62.25

Housing: Miscellaneous $          25.75

Fresh Market $          24.09

Bells $          39.89

Publix $        205.27

Aldi $          74.56

Auto Gas $        164.69

Auto maintenance $        127.39

Dining out $        327.44

Travel $               -  

Miscellaneous: Medical $          50.83

Miscellaneous: Store $          77.41

Miscellaneous: Gifts $        128.60

Car insurance $        229.60

Cell phone $        246.49

Gym memberships $        165.00

Sanitation service $          26.67

Total expenses $     3,326.32

Net Cash Flow $     7,940.68