Wealth & Risk Management Blog

William Byrnes (Texas A&M) tax & compliance articles

Archive for September, 2010

The Impact of the Small Business Jobs and Credit Act

Posted by William Byrnes on September 30, 2010


President Obama signed the Small Business Jobs and Credit Act of 2010, H.R. 5297, on Monday, September 27, establishing an allowance for partial annuitizations of annuity contracts from January 1, 2011.  In the coming weeks, the Advisors Journal will include in-depth examinations of the provisions of the Small Business Act that are of the most interest to advisors and insurance producers, such as the partial annuitization of annuity contracts and the Roth Conversion Extension to Employer Accounts.

In this AdvisorFX exclusive analysis, we summarize the impact of the Act’s other major provisions.  Please read the article via your AdvisorFX subscription at AdvisorFX (or sign up for a free 30 day trial).

Posted in Tax Policy, Taxation | Tagged: , , , , , , , | Leave a Comment »

The Planning Opportunity Presented When a Client Supports a Parent

Posted by William Byrnes on September 30, 2010


The business owner who supports his parent, or an adult family member, may be missing an opportunity to lower his tax burden. In the context of a properly established insurance funded buy-sell agreement, small business clients have an opportunity to provide an adult family member with a fixed income while also protecting the client’s interest in the business and avoiding adverse tax consequences.

Read the analysis by our experts Robert Bloink and William Byrnes located at AdvisorFX Journal The Planning Opportunity Presented When a Client Supports a Parent

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Wealth Management Employment in the Coming Decade

Posted by William Byrnes on September 29, 2010


Expanding employment opportunities

In 2008, Cap Gemini reported that wealth management firms will sharply increase hiring because of the impending retirement, from 2010-2020, of “baby-boomer” wealth managers. New employment opportunities will also be created by expanding opportunities within the wealth management market.   Over the coming decade, wealth management firms will have substantially more client opportunities because the pool of high-net-worth individuals (HNWI) globally, and their assets, continue to grow steadily, and because half of HNWIs do not have a wealth manager.

Half of HNWIs not receiving advice

According to Oliver Wyman, only 50% of HNWI assets are professionally managed. An unprecedented amount of retiring boomers who had not previously used a wealth manager now require one to transition their asset portfolios to income ones, plan succession, and balance potential medical care needs. Wealth management firms therefore have a pool of approximately five million (and expanding) new client opportunities.

Oliver Wyman reports that the new generation of HNWIs is predominantly (70%) self-generated wealth; through entrepreneurship or executive compensation. These HNWIs consider it normal business practice to seek outside expertise and are more likely to leverage wealth managers.

Senior staff salaries and jobs

The San Diego Business Journal reported in 2009 that wealth management salaries held steady in the midst of the crisis, ranging from USD150,000 to USD400,000.  Even more exciting, Cap Gemini reported that “bidding wars among firms for top advisors are not uncommon” and packages will include “bonuses equaling two or three times the payouts from just a few years ago”.  Reuters reports that brokerage firms offer sometimes triple an adviser’s fees and commission over the previous year, whereas private bankers receive one to two times their previous year’s salary and bonus to move.  (See Private banks battling for advisers to super-rich)  Reuters reports that “Wells, he said, is looking outside the private banking world in its bid to add 150 new recruits. Citi has looked to Goldman Sachs Private Wealth Management as well as Barclays Wealth, a Barclays unit built from a business acquired from Lehman Brothers.  Citi has said it aims to double its private banker ranks to about 260 within three years.”

For my complete analysis in my September article of Offshore Investment magazine – read it online – Wealth Management Employment in the Coming Decade

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The Federal Insurance Office

Posted by William Byrnes on September 28, 2010


Although regulation of insurance generally has been left to the states, the Wall Street Reform Act may foreshadow future federal oversight of the industry. The Act creates the Federal Insurance Office (FIO) within the Treasury, which will monitor all components of the insurance industry—excluding the health, crop, and long-term care sectors.

Today’s analysis by our Experts William Byrnes and Robert Bloink is located at AdvisorFX Journal The Federal Insurance Office

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Life Insurance Ownership Hits Fifty-Year Low

Posted by William Byrnes on September 27, 2010


Life insurance ownership has hit a fifty-year low, according to the August-released Trends in Life Insurance Ownership, a LIMRA study administered once every six years.  But do the economic clouds have a silver—or better yet, gold—lining?

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal Life Insurance Ownership Hits Fifty-Year Low

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Gift Tax Return Disclosures—Adequate or Else

Posted by William Byrnes on September 25, 2010


A recent IRS Chief Counsel Advice addressed the importance of making adequate disclosures to the IRS when filing a gift tax return, demonstrating the dangers of a tight lip. There, a taxpayer failed to disclose the method and valuation discounts used to value gifted stock.  As a result, the taxpayer was unable to seek the protection from gift tax changes based upon the three year statute of limitations.

The statute of limitations for the IRS to question an item on a gift tax return is essentially unlimited if a gift is not “adequately disclosed” on the return, so taxes—and fees and interest—can be imposed on the inadequately disclosed gift any time after the return is filed.

For the complete analysis of this development regarding the disclosures required on a gift tax return by our Experts Robert Bloink and William Byrnes, please read the article via your AdvisorFX subscription at Gift Tax Return Disclosures—Adequate or Else?

For in-depth analysis of this topic, see Advisor’s Main Library Section 7. Gift Taxes D—Valuation For Gift Tax Purposes and from a tax perspective see Tax Facts Q 1534 What are the requirements for filing the gift tax return and paying the tax?

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

Posted in Estate Tax, Taxation | Tagged: , , | Leave a Comment »

Revocable Trusts

Posted by William Byrnes on September 24, 2010


Why is this Topic Important to Wealth Managers?   Provides a view with respect to revocable trust concepts and estate planning.  Presents identifying factors of the trust, what it’s commonly used for, as well as some of the benefits and detriments of its implementation. 

This week has mainly discussed the use of trusts with characteristics of complete transfers by grantors.  This edition will explore the revocable nature of trusts and how they are applicable to estate planning. 

The main difference between a revocable trust and one that is not, is that “the settlor reserves the right to terminate the trust and recover the trust property and any undistributed income.”  “The creation of a revocable living trust involves either the transfer of property to one or more trustees or the settlor’s declaration that he holds the property in trust for himself and that upon his death the property is to be held for other beneficiaries.”

For the complete blogticle and its analysis, see AdvisorFYI.

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Planning Concept: Traditional Private Annuity in Trust Variation

Posted by William Byrnes on September 23, 2010


The traditional private annuity is a transaction used by some wealth managers for clients whose circumstances permit.  Generally a private annuity transaction occurs where the grantor transfers assets to a third party who pays the grantor an annuity, usually for the life of the grantor.

When a trust is involved with a traditional private annuity, the common transaction may look like this:  “The owner of highly appreciated commercial real estate transfers the property to an irrevocable trust in exchange for the trust’s promise to pay an annuity for life. The present value of the annuity equals the fair market value (‘FMV‘) of the property. The trust then sells the property to a third party for a sale price equal to its FMV.”  For additional introductory discussion on private annuity contracts see AUS Main Private Annuity

Planning Concept:  Some wealth managers have recently begun to structure private annuities for their clients slightly differently than the traditional methods.  For a discussion and analysis, please see AdvisorFYI

Posted in Estate Tax, Insurance, Trusts | Tagged: , , , , , , , | Leave a Comment »

Incidents of Ownership and Burden on the Estate

Posted by William Byrnes on September 22, 2010


Why is this Topic Important to Wealth Managers?   Discusses estate tax considerations in regards to life insurance policies.  Also, includes a detailed dialogue of the incidents of ownership concept. 

What do most wealth managers try to avoid when planning with life insurance and trusts?

That the Gross Estate for Estate Tax calculations would include the death benefit from the policy in the estate.

What are some common ways to avoid this dilemma when using a trust and life insurance in regards to estate planning?

For the answer to this question, and planning analysis, see the blogticle at AdvisorFYI

Posted in Estate Tax, Insurance, Trusts | Tagged: , , , , , , , | Leave a Comment »

Trusts that Purchase Life Insurance – Known Formally as the “Irrevocable Life Insurance Trust”

Posted by William Byrnes on September 21, 2010


Why is this Topic Important to Wealth Managers?   The terminology associated with common estate planning techniques is generally misguided. Provides a better understanding of the tax and legal implications, on behalf of the client’s estate plans, of trusts that purchase life insurance

One commentator states “If the practitioner would examine either the Internal Revenue Code or the Treasury Regulation designed to interpret the Code, they will not find the use of the term ‘Insurance Trust’ or the term ‘ILIT.’” For a detailed analysis of the ILIT see the Main Library Section 4. Estate Planning Techniques H—Life Insurance Trusts. 

For the complete blogticle and its analysis, see AdvisorFYI

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The Wealth Manager’s Trust Basics

Posted by William Byrnes on September 21, 2010


Why is this Topic Important to Wealth Managers?  Estate Planning almost always involves some consideration of legal trust(s).  It is essential that wealth managers understand the purpose for trusts and the ways trusts can be used in a comprehensive financial plan.  By example, ILITs can be “an effective estate planning device” because, “life insurance proceeds [are not included] in the insured’s estate.”

We invite you to read about some common uses of trust in estate planning, such as Irrevocable Life Insurance Trusts, and analysis at AdvisorFYI.

Posted in Insurance | Tagged: , , , , , , | Leave a Comment »

Supporting a Surviving Second Spouse without Liquidating the Family Business

Posted by William Byrnes on September 20, 2010


When an adult child has an active role in the family business, how can a client pass that business to the managing child while still providing for the client’s surviving second wife?

Read the answer to this question and analysis by our Experts Robert Bloink and William Byrnes at AdvisorFX Journal Supporting a Surviving Second Spouse without Liquidating the Family Business.

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Life Insurance Ownership Hits Fifty-Year Low

Posted by William Byrnes on September 19, 2010


Life insurance ownership has hit a fifty-year low, according to the August-released Trends in Life Insurance Ownership, a LIMRA study administered once every six years.  But do the economic clouds have a silver—or better yet, gold—lining?

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal Life Insurance Ownership Hits Fifty-Year Low

After reading the analysis, we invite your questions and comments about policies maturing after age 100 by posting them below, or by calling the Panel of Experts.

Posted in Insurance | Tagged: , , , , , , , | Leave a Comment »

IRS Proposed FATCA Guidance Expands Offshore Compliance Initiatives

Posted by William Byrnes on September 18, 2010


The IRS released proposals for FATCA guidance on August 27, 2010, in Notice 2010-60.  The notice outlines the shape of the regulations and raises grave concerns for a wide swath of transactions that have an offshore component— from foreign investments to captives and beyond.

Today’s analysis by our Experts William Byrnes and Robert Bloink is located at AdvisorFX Journal IRS Proposed FATCA Guidance Expands Offshore Compliance Initiatives.

After reading the analysis, we invite your questions and comments by posting them below, or by calling the Panel of Experts.

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Wealth Managers Plan Under Uncertain Tax Conditions

Posted by William Byrnes on September 17, 2010


Why is this Topic Important to Wealth Managers? Provides discussion on current situation of federal tax “stand-off” as it relates to clients’ planning objectives.  Gives insight into market participants current choices in dealing with the Tax Cut dilemma.

Congress’ inaction is causing concern for many high net worth taxpayers. Clint Stretch, managing principal of tax policy at Deloitte Tax LLP in Washington says, “uncertainty over taxes means some individuals are ‘vulnerable to hysteria’ ”. And that some financial advisers are urging clients into “unnecessary or unwise transactions.” [1] With “[a]n estimated 315,000 U.S. taxpayers earn more than $1 million, according to the Joint Committee on Taxation”, it leaves a lot of room for opportunity and error.

Read the analysis at AdvisorFYI

Posted in Tax Policy | Tagged: , , , , , , , | Leave a Comment »

Bush Tax Cuts Linger Long After Sunset

Posted by William Byrnes on September 16, 2010


Why is this Topic Important to Wealth Managers? Provides an overview of how the pending tax cut provisions will affect the national economy and your clients as a part of it.  Discusses generally the relationship between tax and Congressional budget as they relate to the taxpayer burdens.

In the face of bailouts, new legislation and regulation, and a stalling economy, one area, taxes, is certainly being discussed among the public scuttlebutt.  Specifically, the Bush Era Tax Cuts are the center of attention because they will sunset or expire, without further legislative action by the end of this year.

Read the full analysis at AdvisorFYI

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What’s the Correlation Between Capital Gains Rates and GDP?

Posted by William Byrnes on September 15, 2010


Although, Reagan’s administration saw higher growth in total, and annually, on average, than  that of the previous and post 8 years of his term, his administration’s numbers are still below the 50 year trend, as well as the terms of some other Presidents, notwithstanding the unsupportive data on the short term effects of the tax cuts.  However, there is a lack of conclusive evidence, therefore, to determine that a decrease in capital gains tax rates will have the short or long term affect of increasing total GDP.  Yet, neither will an increase in the rate increase tax revenues.

We invite you to read the study and analysis at AdvisorFYI

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Estate and Gift Taxes, Tax Cuts and More

Posted by William Byrnes on September 14, 2010


Why is this Topic Important to Wealth Managers?  Author Ben Terner of the Panel of Experts offers detailed information that has a direct affect on clients’ planning objectives as it relates to estate and gift tax.   Provides a general discussion as well as detailed analysis of the current law and the affect of Congress’ current indecision.

Generally, “[g]ross income does not include the value of property acquired by gift, bequest, devise, or inheritance.” [1] Which means gift income or inheritance income received by the beneficiary is not taxable income to the individual who receives property by such gift, bequest, devise, or inheritance. [2] “Although the donated or inherited property itself is not taxable, income derived from such property is includable in gross income.” [3]

Read the analysis at AdvisorFYI

Posted in Tax Policy | Tagged: , , , , , , , | 2 Comments »

Bush Tax Cuts Set to Expire

Posted by William Byrnes on September 13, 2010


Why is this Topic Important to Wealth Managers? Provides a basic overview of the tax cut provisions that are in effect but set to expire by the end of this year.  Helps financial professional understand implications regarding client’s estate and personal plans in consideration of the Bush Tax Cuts.

As busy as Congress has been over the last year, it’s “finally turning its attention to the expiring 2001 and 2003 tax cuts”, says Robert Rubin who is co-chairman of the Council on Foreign Relations and former Secretary of the U.S. Treasury.  Read the entire analysis at AdvisorFYI

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Safe Harbor for Policies Maturing After Age 100

Posted by William Byrnes on September 12, 2010


The IRS’ Rev. Proc. 2010-28 finally provides guidance on life insurance contracts that now include maturity dates extending well beyond the insured’s 100th birthday.  The IRS Revenue Procedure addresses the actuarial realties of increased longevity, but more importantly it helps clarifies when policy distributions will or will not be taxable to the insured.

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal Safe Harbor for Policies Maturing After Age 100

Posted in Compliance, Insurance | Tagged: , | Leave a Comment »

CBO Analysis Supports Extending Tax Cuts

Posted by William Byrnes on September 11, 2010


In the face of opposition by the Obama administration to extending the Bush tax cuts, analysis recently released by the Congressional Budget Office (CBO) supports extending the breaks for another few years. Douglas Elmendorf, director of the CBO, believes that eliminating the tax cuts in a stagnant economy may hamper growth, and that continuing the cuts beyond December 31st sets the stage for some economic recovery next year: “Under that … scenario, economic growth would be stronger next year; unemployment would be lower next year.”

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal CBO Analysis Supports Extending Tax Cuts

Posted in Tax Policy, Uncategorized | Tagged: , | 1 Comment »

Avoid Transfer Taxes with a Capitalized Entity Sale to an IDGT

Posted by William Byrnes on September 10, 2010


A capitalized entity sale to an intentionally defective grantor trust, utilizing the leveraged purchase of fixed-term life insurance policy to be owned by, and controlled for, the successor generations in order to ensure the efficient maturity of the plan.

Today’s analysis by our Expert by Don Goode, CMO is located at AdvisorFX Journal Avoid Transfer Taxes with a Capitalized Entity Sale to an IDGT.

Posted in Insurance, Uncategorized | Tagged: , , | Leave a Comment »

The History of Life Insurance in America: Producers, Commissions, & Premium Financing

Posted by William Byrnes on September 10, 2010


This article explores the development of life insurance in America through the Civil War.  Many common factors from the old policies and companies are still apparent in the system of Life Insurance underwriting today, including producers, commissions, and premium financing.

Please read my blogticle at Advisor FYI The History of Life Insurance in America: Producers, Commissions, & Premium Financing

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The History of Life Insurance in America: Insurance Companies

Posted by William Byrnes on September 9, 2010


This article continues the exploration of life insurance in America. Here the development of life insurance companies as compared to individuals covering the risk leads to new underwriting standards and objectives.

Please read my blogticle at Advisor FYI The History of Life Insurance in America: Insurance Companies

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The History of Life Insurance in America: New Standards

Posted by William Byrnes on September 8, 2010


This article explores the new development of actuarial analysis to improve life underwriting standards.  The life companies writing insurance in the early period of America experienced significant growth and created the beginnings of the policies we recognize today.

Please read my blogticle at Advisor FYI The History of Life Insurance in America: New Standards

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The History of Life Insurance in America: Development of a New Product

Posted by William Byrnes on September 7, 2010


This article continues the exploration of life insurance in America. In this chapter we follow the development of life insurance itself and its growth and development from a simple concept to complex arrangements.  Learn about how the creation of insurance markets in the Colonies led to the development of life insurance as we know it today. 

Please read my blogticle at Advisor FYI The History of Life Insurance in America: Development of a New Product

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The History of Life Insurance in America: The Beginning

Posted by William Byrnes on September 6, 2010


In a turn from addressing weekly subjects like ‘Alternative Risk Transfer’ and ‘Independent Contractors’,  this week our AdvisorFYI blog will provide the financial advisor with the history of life insurance in America.  AdvisorFX Journal will focus on avoiding transfer taxes with a capitalized entity sale to a defective grantor trust.

This article explores the beginnings of life insurance in America.  The foundations of life insurance is actually found in other areas of risk management at the end of the 18th century.  Follow along as we take a tour though history and examine how insurance evolved to be the way it is today.  Read it as The History of Life Insurance in America: The Beginning

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Stop-Loss in Alternative Risk Transfer

Posted by William Byrnes on September 5, 2010


Why is this Topic Important to Financial Professionals? Provides a basis for creative ideas to share with clients to create an overall more efficient insurance management plan.  Offers examples of common alternative risk transfer techniques that are cost effective and generally easy to implement. 

Please read my blogticle at Advisor FYI Stop-Loss in Alternative Risk Transfer

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Long-term Care Insurance Reform Act of 2010

Posted by William Byrnes on September 4, 2010


If enacted, Congressman Lloyd Doggett’s proposed H.R. 5890, the Long-term Care Insurance Reform Act of 2010 (Long-Term Care Act), would have a drastic impact on insurers and producers who sell long-term care insurance.

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal Long-term Care Insurance Reform Act of 2010

After reading the analysis, we invite your questions and comments about indexed annuities by posting them below, or by calling the Panel of Experts.

Posted in Insurance | Tagged: | Leave a Comment »

Risk and Self-Insurance

Posted by William Byrnes on September 3, 2010


Why is this Topic Important to Financial Professionals? All businesses, as well as individuals face some risk, and that form can vary greatly.  Knowledge and identification of certain risks can help position clients in better risk management positions as apposed to ignoring them.

Please read my blogticle at Advisor FYI Risk and Self-Insurance

Posted in Insurance, Uncategorized | Tagged: | 1 Comment »

Hedge Fund Must Now Register with the SEC Under the New Wall Street Reform Act

Posted by William Byrnes on September 2, 2010


The Private Fund Investment Advisers Registration Act of 2010, part of the Wall Street Reform Act, will require registration of many hedge fund manager who previously escaped registration with the SEC. Hedge fund, and other private fund, managers who do not fit into one of the Act’s exemptions will be required to register with either the SEC or a state regulatory agency. Advisers to larger funds will be required to register with the Securities and Exchange Commission (SEC), while advisers to smaller funds will be required by the Act to register at the state level.

Today’s analysis by our Experts Robert Bloink and William Byrnes is located at AdvisorFX Journal Hedge Fund Must Now Register with the SEC Under the New Wall Street Reform Act (CC 10-45)

Posted in Compliance | Tagged: | Leave a Comment »

Alternative Risk Transfer Basics

Posted by William Byrnes on September 1, 2010


Why is this Topic Important to Financial Professionals? “The ART market unites the risk management and product development skills of financial institutions, insurers and reinsurers with the capital of global investors to give corporate risk managers the best possible means of managing financial and operating risks.” [Source:  Bimaquest – Vol. IV Issue I1, 37, 44.  July 2004.]

Please read my blogticle at Advisor FYI Alternative Risk Transfer Basics

Posted in Uncategorized | Leave a Comment »

 
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