Sherina Jackson

• 53 years old.
• For the past 27 years, Sherina has been a staff physician and employee of Nopaine Hospital where she currently earns $200,000 per year.
• Sherina also operates a private practice clinic with Schedule C net income of $100,000. The practice has three employees.

Jamal Jackson

• 55 years old.
• Recently took his company’s early retirement option.

Jamal and Sherina Jackson

• Married 31 years, have always lived in a state that is not a community property state.
• Sherina plans to retire in seven years.
• Have four daughters, ages 28 (married with one child), 26 (married with two children), 24 (single), and 22 (single); the two youngest children are not living at home and have just started working as independent consultants.
• Own a vacation home in another noncommunity property state.
• Have simple wills. Jamal leaves his estate to Sherina, and Sherina leaves her estate to Jamal. After the death of the survivor, the estate is left to their issue in per stirpes (by right of representation). The Jacksons estimate they have $2,000 per month (after retirement plan contributions).

Insurance Data

• Sherina’s health insurance is provided by Blue Cross/Blue Shield. The monthly $600 premium is paid by Nopaine Hospital. There is a deductible of $250 per person, a Jackson family copayment of 20%, and the out-of-pocket per family cap is $1,000 per year. The lifetime maximum on major medical is $500,000 per person.
• Sherina’s disability coverage is a group disability contract provided by the hospital that pays a $5,000 monthly benefit for two years. The contract has a liberal “own occupation” definition. The elimination period is 30 days.
• Sherina has a $500,000 universal life policy with XYZ Insurance Company. She pays the annual premium. Jamal is the primary beneficiary, and Sherina is the owner. At the time of the purchase, policy projections were based on the five-year Treasury rates of 6%.
• Sherina has a $350,000 annual renewable group term life insurance through the American College of Physicians. The $760 annual premium is paid through the Jacksons’ personal checking account. Jamal is the beneficiary, and Sherina is the insured and has all incidents of ownership.
• Sherina has a $100,000 group term life insurance policy provided by the hospital. The hospital pays the entire premium. The beneficiary is Sherina’s estate.
• Jamal has a $200,000 whole life policy converted at retirement from his former group term policy; the annual premium is $4,000, and there is no cash value at this time. Jamal is the owner and Sherina is the beneficiary.

Other Financial Data

• Nopaine Hospital sponsors a 403(b) tax-sheltered annuity (TSA) program, but does not contribute to the plan.
• Sherina makes the maximum contributions from her salary to the TSA.
• The current TSA account balance is $375,000. Sherina has chosen a fixed-rate option with these funds, and the present rate is 8%.
• Sherina has a self-employed retirement plan that incorporates both a 10% money-purchase program with a profit-sharing option. Sherina has chosen fixed-rate investments for these assets, and the total for the plan equals $800,000.
• Jamal is the beneficiary of all Sherina’s qualified retirement plans.
• The average after-tax rate of return on invested assets is 7%.
• The Jacksons’ current annual disposable income is $55,000.
• The Jacksons are in the marginal 31% federal tax bracket and a 4% state bracket.
• The Jacksons rent their vacation home for $2,000 to their neighbors for ten days during December each year. During the year, the Jacksons spend every weekend, outside of December, at the home.
• Sherina and Jamal Jackson recently completed a refinancing of their vacation residence and obtained a $400,000 mortgage amortized at 10% for 30 years. The financing was arranged through an independent mortgage broker for two points.

Financial Objectives in Order of Priority

1. Sherina wants to retire in seven years, and they expect to retain both residences.
2. They would like to be able to spend $10,000 (after-tax) per month in today’s dollars during retirement years.
3. They want to reduce income and estate taxes.

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