Judy Dang
Alex DeLeon
Phil Tran
Logan Parker
Case Study 1- Robert and Mary Trenticosta
The following summary and recommendations are based on the information that you provided
during our meetings and through supporting documents. While coming up with these
recommendations, we took into account their goals and objectives. However, please know that
the Trenticosta still retain full control of any decisions they make regarding these strategies.
Objectives (in order of Importance)
1. Mary to retire at age 65, Robert at age 44- with a retirement income of $150,0000 (in
today’s dollars)
2. Transfer ownership of Crescent City Publications to Dominic, starting with a 40%
ownership gift today.
3. Adequately answer any estate tax questions and figure out the best way to avoid
probate expenses.
4. Evaluate stock value in Big Company, Oil Company and Auto company to protect gains.
5. Explain the tax consequences of liquidating the bond mutual fund and decide if
liquidating this fund is the appropriate decision to make, based on their financial goals.
Fundamentals:
After analyzing Mary and Robert’s cash flow statement and balance statement, they have a net
worth to be $2,941,334. At their age, this is a very appropriate net worth.
Helpful tips that would implement in your financial plan consist of:
• Taking full advantage of Robert’s 401(k) to get the dollar-for-dollar match up to 3%.
• Selling certain Treasury bonds and Oil Company stock.
• Mary may buy another Whole life insurance policy worth 2 million dollars and she can
sell her term life insurance policy worth $300,000.00.
Savings: By looking at the financial position statement, the family’s total cash and equivalents is
$76,950 and net cash flow has a surplus of $13,284. Because Mary and Robert are married with
two sources of income, they should have an emergency fund of approximately $17,520 to cover
3 months of living expenses. Based on their current financial position statement, their family has
enough liquid assets to prepare for unexpected life situations.
Debt: The Trenticosta’s current liabilities include their credit card debt and one car payment.
Their long-term debt consists of a mortgage for the primary home as well as the ski condo. The
current and long-term liabilities are $45,000 and $493,554 respectively and combined equals to
$538,554 for total liabilities. The most effective way to handle their debt would be to follow the
snowball method. By following this method, the family would start by paying off $7,000 debit
first to build momentum and psychological encouragement, followed by the automobile notes
payable of $38,000 and leaving the mortgage payments last to complete.
Mortgage: Mary and Robert have two mortgages; one for the primary home and another for the
ski resort. Both are $278,300 and $215,254 respectively.
Auto Loans: Mary and Robert only have one automobile note payable of $38,000
Cash Flow Statement: Looking at the statement of cash flow shows that both Mary and Robert
have a positive cash flow with a surplus of $13,284. It is a good that they have a surplus after
expenses, but there are efficient ways to cut costs to have a higher surplus. Looking at their
expenses, the best place to start would be to manage the food expenses ($800/mth),
telephone($600/mth) and travel expenses ($583.33/mth) since those are the highest expenses on
a per month basis that can be easily adjusted.
Taxation
Income Tax: Based on their adjusted gross income, The Trenticosts are in the 28% marginal
federal income tax bracket. Capitals gains are taxed at 15% and there is no state income tax.
Currently, neither Mary nor Robert have made any previous taxable gifts.
Capital Gain/Loss: Since Mary is not selling the business, there are no capital gains/losses to be
calculated.
Individual Retirement Account (IRA): Mary makes contributions into IRAs for both Mary and
Robert. This is a great way to delay taxes on retirement money today until they need to take
money out for retirement.
