Wednesday, December 17, 2014

Art in Lieu of Taxes: a Slide Show

This masterpiece by the Venetian Francesco Guardi,
 accepted in lieu of inheritance tax, now hangs in the Ashmolean.
From the estate of artist Lucien Freud,
this work by Frank Auerbach was worth 
£16.2 million in payment of tax.


Winston Churchill's paintings aren't the only ones to be used as a money substitute when paying UK death tax.

As this Telegraph slide show illustrates, many masterworks – and some not so masterly – have helped Brits and their estates meet outsize tax bills.

Could the UK "in lieu of" system work for the IRS? Would it be more workable of contemporary works of volatile or uncertain value were excluded?

Monday, December 15, 2014

Investable Assets Are National, People are Regional

Oldtimers remember when television was expected to homogenize the nation. (The oldtimers' parents had thought radio would do the trick.) Regional accents, customs and preferences were supposed to disappear, blending into a coast-to-coast "Americanism."

In reality, of course, regional differences are alive and well. Elizabeth Currid-Halkett of USC shows the significant variations in conspicuous consumption in this NY Times op ed.

For marketers of wealth management, the striking aspirational differences in  cities across the country deserve attention.

For instance, a New Yorker making a sales call in Minneapolis should not expect
his prospective client to be impressed with his Rolex. And a Dallas wealth manager wooing a Bostonian should not suggest that sending the kids to private school is a waste of money.

Saturday, December 13, 2014

James Brown's Disrespected Will

James Brown performing in Hamburg, Germany, February 1973.
This idea that you can just completely disregard the testator’s wishes is fine if we are going to live in a country where people don’t have a right to say what happens with their assets when they die.

– Virginia Meeks Shuman, Charleston School of Law

When the children and grandchildren don't like the terms of a will, things can get messy. The James Brown mess, The New York Times reports, is super sized. South Carolina seized his estate and wrote Brown a new will. The South Carolina Supreme Court overruled. Now what?

Friday, December 12, 2014

Prince William's Ancestor (an American) Detested British Nobility

William and Kate, that charming young couple, created quite a stir with their visit to this country. Americans love British royalty.

Well, not all Americans. When William and Kate married, we told the story of Frank Work, who would have hated having a prospective king of England as a great-great-great grandson. See The Royal Wedding's American Connection.

Saturday, December 06, 2014

How to Succeed at Investing Without Really Trying

How many articles offering basic advice to investors in stocks have been written over the last few decades? Thousands, for sure. Millions, maybe? Certainly Merrill Anderson's editors have contributed their share in our newsletters.

So how do you create yet another article on the subject and make it fresh and readable? Not easy. Morgan Housel does a notably good job in his Wall Street Journal($) column, 16 Rules for Investors to Live by.

I like Rule 1:
1. All past market crashes are viewed as opportunities, but all future market crashes are viewed as risks. 
If you can recognize the silliness in this, you are on your way to becoming a better long-term investor.
If you don't have access to the WSJ online, browse Housel's columns for The Motley Fool here. He's won the Best in Business award from the Society of American Business Editors and Writers twice.

Could the content on your web site and in your handouts benefit from sounding less pretentious, more like Housel?

Are Perpetual Trusts Unconstitutional?

Scene: divorce court.

Husband's lawyer: In the interests of a swift settlement, my client wants to be more than fair. He's willing to give his wife half his net worth of one billion.

Wife's lawyer: Not so fast. What about his other billion, the one he put into that out-of-state perpetual trust?

Judge: Interesting point. Since our state doesn't recognize forever trusts, I'm including the value of the trust in his net worth. That brings his total wealth to two billion. How does "One billion for her, one for him" sound to you?
Paul Sullivan devotes this week's Wealth Matters column to perpetual trusts. According to Robert H. Sitkoff, a professor at Harvard Law School, some may prove vulnerable to angry spouses or greedy descendants.

Tuesday, December 02, 2014

An amateur executor.

Maurice Sendak named as the executor of his estate a woman who had worked with him and taken care of his home for several decades.  He created a foundation which owns his royalties, and named the same woman, Lynn Caponera, as its president.  Ms. Caponera began working for Mr. Sendak at age 19, has no other work experience, and did not go to college.  However, she does have an intimate knowledge of his property, which includes rare books, and his life's work.

A controversy has broken out with the Rosenbach Museum and Library in Philadelphia, which had expected to be the permanent home of Sendak's papers.  Ms. Caponera instead plans to add a museum to Sendak's home, and open the grounds to the public.  Lawsuits are in progress.

Shades of Albert Barnes, who tried in vain to keep his eclectic art collection in his home and out of the museums of Philadelphia.  See "The Art of the Steal"  for the story of the 60-year effort to break the terms of his will, ultimately successful.

The comments to the NYTimes article are generally more sympathetic to Caponera than the article is.  The commentors have a charmingly naive belief that the terms of the will should be controlling, and they identify with Caponera's decades of loyalty.  Fortunately, Caponera has a committee to help back up her decisions.  But shouldn't Sendak also have named a corporate executor?

Monday, December 01, 2014

$116,273 Christmas Present

Illustration by Xavier Romero-Frias, via Wikimedia Commons
PNC has once again checked out the prices of gifts mentioned in "The Twelve Days of Christmas." This year, if you purchased each gift (one partridge, two turtle doves, etc.) each time it was mentioned in the song, you would have spent a total of $116,273.

Despite the Fed's effort to stoke inflation, that's only a 1.4 percent increase over last year.

Wednesday, November 26, 2014

Ready For a Santa Rally?

For investors in world stock markets, research reveals, "December has been, on average, around four times more profitable than the average month…. "

According to the table published by The Telegraph, the phenomenon is most pronounced in Japan. Alas, it's least evident in the U.S.

Monday, November 24, 2014

Rockefeller Family Office Is on the Move

The View from 30 Rock
Photo by 
André Lage Freitas via Wikimedia Commons
When I was a kid, occasionally my father would mention he'd dropped off a bookbinding job or picked up a check at the Rockefeller family's office. Wow! Who knew a family could have its own office?

The Rockefellers' office dates back to 1882. In 1933 it moved into the newly built 30 Rock. Now the family has found a better rental in an adjoining Rockefeller Center building. The New York Times marks the pending move with this salute to Room 5600. (The "room" once encompassed three high floors in what my father knew as the RCA building.)

The investment-management arm of the office, Rockefeller & Co, was spun off some years ago and now seeks business from outside the family. You'll find it at 10 Rock.

Friday, November 21, 2014

“The richest old generation we’ve ever seen”

By the time Depression Babies finished school, they had become The Silent Generation. They were relatively small in number, and that fact turned out to be their good fortune. In the post-WWII boom the supply of entry level jobs exceeded demand. Though housing prices seemed to be going through the roof (a house worth $8,000 in 1945 was selling for two or three times as much by 1960) homes proved to be a great investment. 

The result, according to Bloomberg Businessweek:  Generation Rich.

Bunny Mellon’s Awesome “Alternative Investments”

Sotheby's went all out to market the sales of Bunny Mellon's art, jewelry and home furnishings. The effort has paid off.

Mrs. Mellon's art sold for $158.7 million, well above estimate. Last evening the sale of her jewelry and other interesting objects began. Prices often exceeded estimates by two or three times.

An apple-tree brooch crafted for her by Verdura was estimated at around $3,000. It sold for $26,250.

Said to be even bluer than the Hope Diamond, her magnificent blue diamond pendent sold for more than twice its estimate, fetching $32,645,000. (Prices include buyers premium.)

Bunny Mellon, an heiress twice over, surely had a good eye for
valuable objects. But I bet she never bought for investment. The old advice about profiting from art and collectibles – buy and hold what you like – still applies.

Monday, November 17, 2014

What If Everyone Knew Your Net Worth?

You might be less inclined  to buy a Bentley,  and you might increase your saving and investing. The same applies for your wealth management clients.

Read Carl Richards column, which includes this napkin sketch:

Wednesday, November 12, 2014

Less Banking, More Wealth Management?

Fitch, the rating agency, has seen the future of U.S. banking. It's wealth management.
Wealth management, including advisor-based guidance and asset management, provides recurring sources of income and requires less capital usage than traditional bank loan products.  Wealth management services can strengthen and make stickier relationships with good customers, which tend to provide additional deposit funding, as well as opportunities for cross-selling a bank's core products, such as mortgage lending.

Wednesday, November 05, 2014

Can a Work of Art Be More Valuable When Not One of a Kind?

In the world of art and collectibles, rarity usually adds value. Uniqueness can be almost priceless.

Here's a contrary example: Giacometti's "Chariot," which just sold at Sotheby's for $101 million. The sculptor produced 'Chariot" in an edition of six, and in this case, Felix Salmon asserts, lack of uniqueness added value.

Monday, November 03, 2014

What Do the Wealthy Like to Read About?

Trusts. Trusts are a regular feature in Penta, Barron's magazine for readers worth five million or more. For example . . .

How to Bust a Trust, an introduction to decanting. Divorce Trusts, for situations where a prenup isn't in the cards. Incentive trusts, the conceptual pros and practical cons.

Note to trust marketers. Make sure your prospects and customers are well read: Ask about Merrill Anderson's newsletters.

Wednesday, October 29, 2014

Digital Wealth Management

Online investing is heating up.

Wealthfront just grabbed another $70 million in financing. Personal Capital raised another $50 million. Charles Schwab announced its own robo-advisory service.

Will the Boomers' children be the generation that abandons face-to-face investment services?

Monday, October 20, 2014

“The Father of Estate Planning"

Give a birthday shout-out to Charles Ives, the American composer born 140 years ago, October 20, 1874. Life insurance was Ives' day job, and when the federal estate tax came along, he realized there was a better way to sell insurance than to ask, "How much do you love your wife?"

The photo below shows Ives in 1913, the year the federal income tax was introduced. The federal estate tax followed in 1916, and two years later his most noted nonmusical work appeared: "Life Insurance with Relation to Inheritance Tax."


Friday, October 17, 2014

Paying Death Tax With Art

A beach scene by Winston Churchill
Winston Churchill's daughter Mary Soames died last June at age 91. To help pay her death duty, the estate has offered 38 paintings by her father.

Should our estate tax include a similar AIL (Acceptance in Lieu) scheme?

Wednesday, October 15, 2014

Mobile Video, Live-Banker Mortgages, Gunless Hunting


Fifty years is only yesterday or ancient history, depending on which ads from 1964 you look at.

Video on the run. In the 1950's Texas Instruments and an Indiana company developed a popular novelty: a little transistor radio. Sony took the idea and ran with it. Now Sony was taking the next step, a portable TV. (You thought mobile viewers didn't start falling off curbs until iPhones came along?)


Live-Banker Mortgages. Five decades ago, private banking aspired to meet the requirements of elite borrowers who didn't always fit the standard mold. Their needs would be evaluated and perhaps met by actual bankers wearing suits. Those days must seem long, long ago to Ben Bernanke, who couldn't talk a computer into refinancing his mortgage.


Gunless hunting. Men with guns were a staple of Chase Manhattan's nest egg ads. But times were changing. Wildlife needed conserving, some said. Chase responded by offering this new age hunter.

Friday, October 10, 2014

Slicing Up Art to Save Estate or Gift Tax

If a painting is worth, say, $4 million, what is a one-quarter interest in the painting worth?

$1 million? Not necessarily, at least not for transfer tax purposes. The Elkins case could prove a game changer, reports Paul Sullivan.

Taking advantage of deep valuation discounts for fractional interests isn't always easy. If you give each of your three children a quarter interest in your Van Gogh, each will be expected to take possession of the painting for one quarter of the year. An alternative method – spotlighted by Christies – might be to gift the art and rent back.
Big wins by taxpayers in estate or gift tax cases have a potential down side. Pressure mounts to "close the loopholes." Senator Sander's bill calling for a 65% estate tax also takes aim at minority discounts.

Wednesday, October 08, 2014

"Treat customers like humans, not as transactions. "

Seems obvious, but it's being cast as the key take-away from the Comcast debacle last summer.  Does the need to become accessible to customers across all communication platforms apply to wealth managers?

I was interested to learn that no one likes 1-800 numbers any more, due to their association with telephone trees and long wait times.

Tuesday, October 07, 2014

Estate Surtax Spreads to Non-Billionaire Estates

That proposed 65% tax plus surtax on billionaire estates seems to have trickled down. The bill Senator Sanders has introduced in the Senate calls for the 10% surtax to apply to estates over $500 million.

Half a billion here, a quarter billion there , , ,

Monday, October 06, 2014

Art As Toxic Investment

Damien Hirst, “Moxisylyte” (2011)
Hundreds of dot paintings from Damien Hirst's workshop are are now on sale at galleries worldwide. (You may remember Hirst's shark.)

Peter Schjeldahl, The New Yorker's art critic, offers potential investors a cautionary comparison:
Just as no law forbids the sale of bundled credit-default swaps on bundled subprime mortgages, no agreed-on aesthetic principle invalidates paintings that are churned out by proxy and then bid up at auction as fungible commodities.
Before their clients plunge into Damien's dots, wealth managers may want to suggest a nice conservative hedge fund.

Saturday, September 27, 2014

Thursday, September 25, 2014

A 65% Estate Tax For Billionaires?

While Republicans work to again reduce the top federal estate tax rate to zero, Senator Bernie Saunders counters with an even more unlikely proposal: an estate tax with rates ranging from 40% (for estates of $3.5-$10 million) to 65% (for estates over $1 billion).

Joseph B. Thorndike comments, "It’s one thing to ask rich people to pay more of the cost of government. It’s another thing entirely to tell those rich people that they are just too damn rich."

The estate-tax charitable deduction now allows wealth to stay in the family by flowing tax free into family foundations. To redistribute billionaire estates through taxation, the deduction would have to go. Can you see that happening?

Wednesday, September 24, 2014

University Endowments Record Double-Digit Returns

Yale's endowment recorded a 20.2% investment return for the fiscal year ending June 30, keeping up with the torrid pace set by the S&P 500.

Reported results from other university endowments:

Dartmouth, 19.2%

MIT, 19.2%

Penn, 17.5%

Harvard, 15.4%

Originally this post erroneously credited Dartmouth's results to Brown.

Friday, September 12, 2014

Background on the inversion mania

From the Tax Analysts blog, which I believe is open to the public. Key takeaway:

Here is the ultimate irony in the story: Investment bankers hired by a foreign multinational confronting acquisition by a U.S. corporation alerted the administration, the politicians, and the country to the imperatives of “economic patriotism.”
It was all part of AstraZeneca's defense against a hostile takeover.

Wednesday, September 10, 2014

It's Not Easy Being Fiduciary

The NY Times reports on the plight of two Deutsche Bank private bankers who were forced out because they balked at pushing DB products – notably, a fund of funds. (Funds of funds answer the perceived demand for investment products that carry even higher annual expenses than regular hedge funds.)

According to this petition to the Supreme Court of the State of New York – we don't have DB's side of the story – the two found "staying fiduciary" was a losing battle.

As big banks try to grow bigger, sales tends to overwhelm service. One result: a marketing opportunity for smaller, fiduciary-minded institutions. 

Thursday, September 04, 2014

Perils of Going Public, Performed Way Off Broadway

"Trading Practices," a participatory production performed in an old building on New York's Governors Island, dramatizes the rise and fall of a family business. The NY Times finds the show "resourceful, whimsical and wearing."

Too bad the production had to open this summer, just after the upheaval at a New England supermarket chain demonstrated that truth trumps fiction. (Rumors that a top tunesmith-lyricist duo has started work on "Market Basket, The Musical," could not immediately be confirmed.)