Sunday, December 29, 2013

The Street of Trust Companies

Once upon a time, the trust companies you passed on the street were monumental edifices, faced with granite and marble. By contrast, the trust companies on this street are little more than mail drops.

South Phillips Avenue, Sioux Falls, South Dakota
What do you suppose they'll be saying about the recent rash of Forever Trusts a century from now?

Thursday, December 26, 2013

Trusteed IRAs

When IRAs were introduced in 1974, they sounded complicated. An IRA had to be more than just an account. An IRA had to have a bank as custodian or trustee.

Ferrari 458
Long ago that technicality vanished from public view, but now it turns out to be useful. Enter the trusteed IRA. The trustee sees to it that the beneficiary (nobody needs a Ferrari, dude!) takes no more than the required minimum distribution.

Julie Jason discusses trusteed IRAs here and offers an example.

Monday, December 23, 2013

Two Ads Celebrating the Season

During the middle third of the Twentieth Century, at this time of year Coca Cola virtually appropriated Santa Claus. This ad, from 1963, features the next-to-last portrayal of Santa by Haddon Sundblom, the illustrator who brought the jolly old elf of The Night Before Christmas to life.

Christmas holiday ads by banks and trust companies half a century ago were rare. This Chase nest-egg ad was an unusual if partial exception. The ad copy is standard. The photo illustration isn't. It's the only example we've seen of a nest-egg ad where the egg plays second fiddle to the scenery. It's as if Chase were saying, "We want your business but gosh, isn't this an evocative holiday scene?'

Sunday, December 22, 2013

Sunday, December 15, 2013

Asset Protection Trusts, Way Off Shore

The Sunday New York Times takes a lengthy look at asset protection trusts based in the Cook Islands. The Cooks launched their asset-protection initiative, with guidance from an American expert, in 1989.

Asset protection trusts aren't illegal and don't seek to dodge taxes. For doctors facing frivolous lawsuits, such trusts bring welcome peace of mind.

Other users of asset protection trusts may not be so upstanding. As the Times notes, assorted creeps and crooks, including Ponzi prince Allen Stanford, have utilized Cooks trusts.

Lady Joy
Judging from recently leaked data, trust assets are seldom held in the Cook Islands. More likely they consist of European financial accounts and other assets sprinkled around the world. The trust of Denise Rich, former wife of Marc Rich, included her yacht, the Lady Joy.

Friday, December 13, 2013

Two Online Investment Programs

Felix Salmon takes a look at Betterment and Wealthfront: How Online Investment Advisers Add Value.

How important are referrals – from accountants, lawyers or friends – in generating customers for these programs?

Will investors be hearing more about "tax alpha"?

Wednesday, December 11, 2013

1963: The South Rises

Five decades ago, northerners left their wealth to be looked after in New York, Boston or Chicago when they headed to Florida. With this ad, from December, 1963, First National of Palm Beach sought to get in on the action. 

The ad had a name illustrator: Paul Calle. He was best known as a designer of postage stamps, notably this one:

Monday, December 09, 2013

A Classic Investment Ad From 1935

Don't try to make investing your second career, turn your portfolio over to the pros. That's the message Fiduciary Trust delivered in this 1935 ad.

That's the message we were still recycling for Merrill Anderson clients many decades later. Not until digital data-crunching revealed that the average investment pro produced only average results did we have to fall back on "asset allocation."

By 1935 it must have seemed safe to advertise again. After  the market disaster of 1929-32, the DJIA recovered nicely in 1933, remained fairly stable in '34, and soared almost 40% in 1935. Alas, a new, er, "recession" sent the Dow plunging almost 33% in 1937.

 Do you suppose Fiduciary was still running ads in 1938?

Wednesday, December 04, 2013

Inflation Watch (Theater Edition)

Broadway had its best Thanksgiving week ever at the box office, reports The New York Times. 

Top ticket prices at selected musicals:

The Lion King: $197.50 

Wicked: $300

The Book of Mormon: $477

A little over half a century ago, a ticket to the theater in London cost $3.50. According to this 1961 British Travel ad, a mere $100 could buy you a whole week in the U.K.

Guess that's why they call them The Good Old Days.

Selling Life Insurance to the Extremely Rich

One of the  pleasures of retirement is not having to read Tax Court Memo Decisions any more. Yet who could resist this one, with a cast of characters ranging from Fitzgerald and Hemingway to the Koch brothers?

Michael D. Brown and Mary M. Brown v. Commissioner deals with the tax treatment of a private plane. But the context is high-end estate planning, where $300-million insurance policies are deployed to save humongous amounts of tax.


Tuesday, December 03, 2013

When Income Was Income And Principal Was Sacrosanct

Mary Ann Glendon, as quoted in Felix Salmon's column on philanthropy:
Bostonians still tell the story of the respectable society matron who was crossing the Common one day and ran into an old college chum she hadn't seen for years. The matron was dismayed to see that her friend was obviously engaged in the world's oldest profession. "My dear," she said, "whatever has happened to you?" "Well," said her friend, "it was either this or dip into capital."
Related post: The Secret of Perpetual Wealth

Monday, December 02, 2013

A World-Class Tax System for the U.S.?

Cyber Monday! You just bought a huge, name brand LED TV for $999!

Would you have paid $1,130? Would you have been happier to pay $1,130 if you got a sizable income tax cut?

Al Hunt –fondly remembered from his Wall Street Journal days – asks you to imagine the highly improbable: "120 million American families no longer have to file income tax returns; the top individual rate is lowered by 20 percent; the top corporate rate is cut by more than half; the government gets the same amount of revenue; and the tax system is slightly more progressive."

How does the government get the same revenue? A 12.9% Value-Added Tax – sort of a national sales tax.

The Competitive Tax Plan is the brainchild of  Michael J. Graetz, Professor Emeritus at Columbia, now lecturing at Yale Law School. Last week Graetz received an award from the National Tax Association.

Everybody knows the federal income tax is a bureaucratic nightmare. As Graetz has observed, the present system is crazy:
In a recent report, National Taxpayer Advocate Nina Olson estimated that individuals and businesses spend 6.1 billion hours per year on tax compliance—the equivalent of full-time work for more than three million people. I am surprised the number is that small. The Form 1040 instruction booklet spans more than a hundred pages, and the form itself has more than ten schedules and twenty worksheets.
The great sticking point for the Competitive Tax Plan is the proposed VAT. The VAT is also the plan's best selling point. Uncle Sam loses untold billions every year – the taxes dodged by everyone from millionaire drug lords to maids and gardeners paid under the table. Evaders of income and payroll taxes would not be able to dodge the VAT.

Graetz has been promoting and fine-tuning his tax plan for over a decade. Al Hunt reports the tax reformer is prepared to stay the course: 

"Graetz, when comparing his idea to the status quo or other options, relishes a political debate over the next several years: 'These things take a long time.'"

Truer words were never spoken.