Thursday, January 31, 2013

Penalty for Tax Evasion: Almost $22 Million!

Tax evasion is getting costly. Example from The Wall Street Journal: 
The U.S. government already has won about 50 criminal cases and collected at least $5.5 billion in connection with undeclared offshore accounts. On Jan. 8, Mary Estelle Curran, a 79-year-old widow best known for volunteer work, pleaded guilty to criminal charges of filing false tax returns and evading about $668,000 in federal tax on $40 million her husband left her in a secret Swiss bank account at UBS. She agreed to pay almost $22 million, which is believed to be the largest penalty in a criminal case on offshore accounts since the UBS agreement.
Ms. Curran is scheduled to be sentenced in West Palm Beach, Fla., federal court March 26. She faces up to six years in prison.

Tuesday, January 29, 2013

In 1963 Macho Investors Didn't Take Cruises

We've shown you cruise season ads from half a century ago. Here's one that takes a contrarian tack. Real men don't flee to the Caribbean. They stay home, brave the frigid wind and go ice boating.

Chase ran a lot of nest egg ads. This one may take the prize for most precariously perched egg.

Monday, January 28, 2013

Perils of the Art Market

Anybody who bids on "genuine Picasso prints" at a cruise ship auction, as described in Protect Your High-Net-Worth Buyers From Art Ripoffs, probably deserves what he or she gets. But art fraud isn't always obvious. Do high-net-worth art buyers need more protection?

The New York Times thinks so, citing fictitious starting bids at major art auctions and, worse, bids by third parties who have already agreed to buy a painting but who will receive a cut of the profits if they can coax an unwary collector to pay a higher price.

And why do New York art dealers almost never post the prices of works displayed in their galleries, even though they're legally required to do so?

Maybe the art market does need regulating.  Or does risk add zest to art as an "alternative asset?"
As a public service, here's a real Picasso print.

See Nicholas Forrest: How to Spot a Fake Picasso

Thursday, January 24, 2013

Quiet Trusts

Imagined dialogue from late last year:

Top Wealthholder: O.K. Let's put $10 million in trust for our kids and nail down our gift tax exemptions before they disappear. But….

Estate Planner: But what?

TW: I just realized. Once our kids learn about this trust, they'll never work a day in their lives!

EP: Who says they have to know? 

Quiet trusts, also known as silent trusts, gained both fans and foes in the Great 2012 Gifting Stampede. This WSJ column suggests wealthholders will continue to move assets into trusts for unsuspecting beneficiaries.

Is secrecy a good idea? Your answer may show your age:
According to some advisers, whether people favor quiet trusts or not often depends on their age. Older advisers, and older clients, are more likely to think keeping an inheritance secret "is a terrible idea," said Jonathan J. Rikoon, chair of the trust and estates group at law firm Debevoise & Plimpton LLP. Age has given them enough experience to see how secrecy actually plays out, Mr. Rikoon added.

Newer practitioners, especially those working with a new generation of entrepreneurs, may be likelier to see value in keeping things quiet.
This blogger sides with the seniors. (He knows his place.) As a comment to one of the WSJ columns points out, kids who grow up with maids and butlers already expect trust funds. There's nothing to hide.

And there's nothing new about secret inheritances. See Quiet Trusts and Great Expectations.

Saturday, January 19, 2013

“Go Someplace Warm. Leave Your Investments With Us”

Why stay in the snow belt? Take a cruise to someplace warm!

Good idea now, and a popular idea fifty years ago. In 1963 even ocean liners were offering cruises. They had to. Jet planes had drained their transatlantic business.

The couple in this City National ad seems to have skipped the cruise and simply hopped a plane to Colombia.

Why would a well-heeled investor wear a business suit on vacation? Because that's the way it was in 1963. (Times were about to change, drastically.)

Trusts For Gun Owners

January 19th is Gun Appreciation Day– an appropriate occasion to wonder whether gun trusts will increase along with gun ownership.

Gun sales have surged recently. Many buyers reportedly want to add to their collections before a feared government crackdown on sales of semi-automatic weaponry. Others are most likely speculators, looking to flip guns rather than houses.

Thus far, gun trusts have been used to facilitate and share ownership of special types of firearms – including machine guns and sawed-off shotguns – that have been taxed and regulated since the days of Al Capone. Will gun trusts proliferate in response to new restrictions?

Wednesday, January 16, 2013

Will Estate Planning Go Down Market?

For many attendees at the Heckerling Institute of Estate Planning, Deborah Jacobs reports, "it's the end of an era."

The era finished big, as top wealth holders rushed to transfer millions before assets over $1 million became subject to federal transfer taxes. They needn't have bothered. Five million or more continues to be exempt.

This year estate planners may keep busy holding the hands of clients who wonder what they were thinking: "Why did we give that much to our kids?" Next year, Jacobs suggests, tax audits will give planners plenty of work defending their intricate gifting mechanisms. After that . . . ?

Elder law is one option featured at Heckerling. Unfortunately, crass TV and radio commercials have given practitioners an unsavory image. But there's much more to elder law than syphoning off Mom's assets before moving her into a Medicaid-financed nursing home. This video from Bernie Krooks, one of the Heckerling presenters, shows why even something as basic as a durable power of attorney deserves careful thought.

Alas, it's unlikely that drafting revocable trusts and durable powers will pay as well as inventing clever ways to give away $5 million.

Friday, January 11, 2013

Estate-Planning Advice From Unprintable Web Site

In The New York Times Ron Leiber writes that he came across this web site last Tuesday. Does it prove the power of expletive marketing?

$5.25 Million

Bet Jim Gust wasn't the only one wondering what the inflation-adjusted value of the 2013 federal estate-tax exemption (sorry, the "basic exclusion amount") would be. The answer, Deborah Jacobs reports, is $5.25 million.

Wednesday, January 09, 2013

Clowning Around With Taxes

Who says our Congress is full of petty partisans and grouchy grinches? Two Georgia Congressmen have lightened the mood by sponsoring a bill to do away with the income tax, the estate tax and –yes – the Internal Revenue Service.

For funding, they propose that the federal government rely on a national sales tax – high in rate but gaping with loopholes – administered mainly by the states.

Should they have tried out H.R. 25 at an Atlanta comedy club before going national?
Caution: Go ahead and snicker at the idea that Uncle Sam should stop collecting taxes. But be aware that the idea of a national sales or "consumption" tax – to supplement, not replace, the income tax – has a number of serious advocates.

Monday, January 07, 2013

Golfing in the Investment Jungle

The broker was a really nice guy, a golfer who spent much of his time on the course, dispensing tips on hot stocks between holes. Once you signed up as a client, he handled your paperwork right there in the club parking lot. What more could a multimillionaire ask?

Using Philip Horn, rogue broker, as exemplar, Dealbook asserts that Financial Fraud Defies Policing. No Madoff, Horn rigged a system that allowed him to trade with his clients' money and skim off the profits.

Some comments appended to the Dealbook article express little sympathy for Horn's victims. You can see their point. One golfer invested $10 million with Horn but couldn't bother to look at the 50-page statements (implying at least ten or twenty double-sided pages of trades per month?!?) that he received from Wells Fargo. "If I had time to do that, I wouldn't need a broker."

Decamillionaires with that attitude should stay out of the investment jungle – or hire a fiduciary.

Friday, January 04, 2013

The new marriage penalty tax

I wasn't the only one who noticed that a pretty big marriage penalty tax has been added for those in the top 1% of earners.  Here's some details, and the math.

Evidently our Congress critters believe that having a spouse who works is the ultimate luxury.

Tuesday, January 01, 2013


You may recall that Obama called for a "balanced" approach of spending cuts and tax increases.  I remember when President Reagan accepted a deal for $2 of spending cuts for every $1 of tax increases in TEFRA.  The tax increases hit immediately, the promised spending cuts never materialized.

So perhaps we've become a bit more honest in our presentation. The newest deal includes $1 of alleged spending cuts for every $41 of tax increases, according to the CBO.  One wonders why they even bother.

This will be why many Republicans will vote against the deal in the House, but most of the Democrats will get on board. I think it likely to pass.

I also think it's a good time to buy some tax-free munis, and take a wait and see posture on stocks.  After-tax stock returns are about to be hammered, and the value of tax free income will soar.

After all this struggle, will Congress return to meaningful tax reform later this year? Given that the new rates and that AMT patch would be permanent, I seriously doubt it.

Here is the Senate bill.

I'd like to know the federal estate tax exemption for 2013, if anyone sees it.  From my reading of the Senate bill, the exemption is $5 million indexed for inflation since 2010, so it should be higher than the $5.12 million we had in 2012. 

Dangerous Inflation Ahead?

If the House passes the bill already approved by the Senate, the $5-million federal estate tax exemption will be indexed to inflation. Rep. Chris Van Hollen (Md.), the ranking Democrat on the House Budget Committee, expressed dismay. He suggests the cost of living could increase 50% by 2020.

If so, you'll need to pay $15 in 2020 for stuff you now purchase for $10.

Maybe it's finally time to get out of bonds.