Saturday, March 28, 2020

Gold is the New Toilet Paper

Forget squeezable Charmin, where’s the gold?

The Wall Street Journal reports that two groups –survivalists seeking tangible wealth to use as barter when their ammunition runs out and investors seeking inflation protection – are threatening to make gold bars as scarce as Clorox wipes. Ability to supply bullion has been reduced by the COVID-19 crisis.

“When people think they can’t get something," says a gold trader, "they want it even more.”

Sunday, March 15, 2020

The King Who Disinherited Himself

Think the British royal family has problems, what with Andrew, Harry and Meghan? For big time royal troubles, look to Spain.

King Felipe VI has disinherited himself. He’s seeking distance from a scandal involving his father’s offshore wealth, which may represent kickbacks from Saudi Arabia.

Wednesday, March 11, 2020

Lemonade from lemons

Don't let a market crash go to waste, say the estate planners at Leimberg.  Lower stock prices make this the perfect time for intra-family taxable gifts, or for converting a traditional IRA to a Roth IRA at a lower tax cost.

Trouble is, with this much market volatility the accuracy of any projections of tax savings are suspect.

Tuesday, March 03, 2020

Celebrity Ads Promote Investment Scam

This European investment scam, promoted with online ads featuring Hugh Jackman and other celebrities, has already reached Australia, so U.S. investors and their advisers should take note. Forewarned is forearmed.

From The Guardian’s report:
British and Australian victims of a sophisticated enterprise were apparently lured by fake ads posted on Facebook and mobile phone games featuring celebrities such as Gordon Ramsay, Hugh Jackman and the moneysaving expert Martin Lewis. 
After responding to the ads, the whistleblower alleges that unsuspecting victims were contacted by call-centre workers operating in a building in the heart of Kyiv’s business district, promising lucrative investment opportunities.

But the investments in bitcoin, commodities and foreign currencies all appear to be fake, as do the follow-up calls from companies telling victims that they could help them recover the losses.
P.S. Martin Lewis, the money expert, just issued a timely tip: In this year of coronavirus, vacationers really need travel insurance.

Thursday, February 20, 2020

How Registered Investment Advisers Became Financial Advisors


Some job titles don’t tell you much.

In the decades following the crash of 1929 and the Great Depression, stockbroker was an off-putting term. To improve their image, wirehouse brokers began referring to themselves as financial advisors. Would the public confuse financial advisors with actual investment advisers? Of course.

Regulators and consumer advocates have been trying to dispel the confusion ever since. This year, the SEC’s Regulation Best Interest generally will bar brokers from referring to themselves as advisors or advisers unless they actually wear two hats and have registered as investment advisers.

A generation ago, that SEC requirement might have been helpful. In our age of passive investing, what’s the point?  Advisers no longer need to give much investment advice. What clients mostly require is financial guidance, usually tax related. Where to stash their investments, for instance: Taxable account? Roth IRA? 529 plan? Revocable trust? Special needs trust? GRAT? Donor advised fund…?

A small advisory firm that creates investment programs with index funds recently opened an office in our fair city. One Day in July (bet they can tell you a good story about that name) doesn’t identify itself as a registered investment adviser. In mailings and on their web site, they're financial advisors.

Sunday, February 09, 2020

Where the Primary is Early but Trusts Last Forever

Tuesday brings New Hampshire’s “first in the nation” primary, after which hordes of political operatives and mainstream media types will move on.

What happens the rest of the year? Trusts. New Hampshire boasts dozens of trust companies, all eager to help wealthholders take advantage of the state’s willingness to let trusts last forever.

New Hampshire’s seal honors
Portsmouth’s shipbuilding heritage.
Best known: John Paul Jones’ Ranger.
As this well-crafted promo from Fiduciary Trust  indicates, New Hampshire also offers other incentives for trustors. Freedom from state income tax on trust income, for instance. (Your obedient blogger pays New Hampshire income tax on his dividends and interest, but irrevocable trusts have an exemption.)

The politicians, pollsters and pundits who descend on New Hampshire every four years give the state economy a significant boost. Does tolerance for perpetual trusts also pay off? Some have their doubts.

Wednesday, February 05, 2020

Help Your Kids be Millionaires

Randy Cassingham’s examples of the advantages gained by investing early and often may not be quite realistic, but they are inspirational.

Wouldn’t it be cool if stocks went up almost 30% every year?

Friday, January 24, 2020

STATs and MARI-CRUTs and TEA POTs – Oh My!

Your obedient blogger retired just in time – never had to learn about various trust arrangements devised to take advantage of the late, lamented stretch IRA rules. Judging from this Forbes column, that was lucky.

How do you suppose a Flip NIMCRUT works? On second thought, never mind.

Tuesday, January 21, 2020

Scam Alert for Wealth Managers

Users of financial services are obvious targets for scammers. So are the providers of those services. “It’s almost as if many of the fraudsters have worked in financial services in the past,” says a Finra official.

Wealth managers, keep your guard up!

Sunday, January 19, 2020

Did Stretch IRAs Deserve to Die?

Individual Retirement Accounts began as simple way to put aside a few bucks. With the passing years, limits on annual IRA contributions increased and top income earners started moving megabucks into rollover IRAs.  Estate planners took notice.

Assets remaining in IRAs and 401(k)s at the owner’s death could be passed to a named beneficiary, and not necessarily in a lump sum. Distributions could be stretched over the beneficiary’s lifetime. Planners saw the potential for “inheritances" that offered many years of tax-deferred investment growth. Potentially, owners of seven-figure rollover IRAs could leave the grandkids a growing income for life.

Just one problem: Bright, imaginative grandchildren weren’t going to let a stretch IRA dribble out payments decade after decade. They would empty the account and use the after-tax proceeds to buy a beach house, start a business, back a Broadway musical. or who knows what.

The challenge for estate planners: Create trust provisions that deterred or prevented such impulsiveness, while also complying with IRA regulations. They rose to the challenge. Now the SECURE act has made their ingenuity almost useless. Except for spouses and with certain other limited exceptions, the SECURE act eliminates stretch IRAs. Most beneficiaries are now required to empty their IRAs within ten years.

The Editorial Board of The Wall Street Journal was not amused by the stretch IRA's demise, accusing Congress of playing a dirty trick on “the 90-year-old banking on this strategy." But the WSJ conceded, "there’s a reasonable case that IRAs weren’t meant to outlive their owners by decades.”

Michelle Singletary in The Washington Post agrees. IRAs weren’t intended to be estate planning vehicles.
There is nothing wrong with trying to minimize your taxes or the tax bill for your heirs. That’s a smart money move. However, IRAs and 401(k)s weren’t meant to be used as a way to transfer wealth. They were designed to encourage people to save by giving plan participants and/or account holders — not their children or children’s children — a tax break. The loophole created by the law that has allowed beneficiaries to stretch out their tax burden was a bonus, not an entitlement that should never be touched.
I’m with Singletary. The death of the stretch IRA is timely.

Friday, January 10, 2020

Tax Wealth by Taxing the “Squatters”?

When it comes to taxing wealth, Eugene Steuerle believes we should pay more attention to three issues.

1. A stockholder’s investment income is already taxed twice, at the corporate and personal levels. Current proposals for an annual wealth tax would result in what amounts to triple taxation.

2. If most returns on investment wealth receive a stepped-up basis at the owner’s death, why are inherited investment gains taxed when the heir withdraws them from an IRA?

3. The best time to tax the returns from wealth is at the owner’s death, as productive New Money passes to heirs and becomes less productive Old Money.

To bolster his last point, Steuerle quotes Winston Churchill:
 “The process of creation of new wealth is beneficial to the whole community. The process of squatting on old wealth though valuable is a far less lively agent.

Thursday, January 02, 2020

The most remarkable decade

I'm not talking about the stock market, though that was good also.  This article by Matt Ridley in The Spectator has been noticed by several bloggers and a NYTimes columnist, and I'm doing my own version for Wealth Management.