Wealth & Risk Management Blog

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

Archive for October, 2011

Dodd-Frank: Dying on the Vine?

Posted by William Byrnes on October 31, 2011


The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) was endorsed by President Obama as an asset providing the “strongest consumer financial protections in history.” However, almost a  year after the Act was introduced, implementation of its broad reforms is slowing

The complexity of the Act is the root of it’s first problem: The bill came in at an overwhelming 2,319 pages, or 300,000 words, about half the length of the entire Christian Bible. By comparison, other paradigm-shifting financial acts were short-stories; the Federal Reserve Act was 31 pages, Glass-Steagall was 37 pages, and Sarbanes-Oxley was 66 pages long. Even the gargantuan Health Reform Act was shorter than Dodd-Frank. Consequently, even the Federal government can’t  fully ascertain the Act.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the debt limit fight in Advisor’s Journal, see Storm Clouds over U.S. Debt (CC 11-85).

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What Next? ILITs & Estates under 5MM

Posted by William Byrnes on October 26, 2011


Life insurance is a common tool for ensuring estates have adequate liquidity to pay estate expenses and taxes. But recent changes to the estate tax have some people questioning whether the high premiums they’re paying are worth it when their estates are no longer likely to be hit by the estate tax.

With a $5 million exclusion amount and brand-new exclusion portability provisions, far fewer households have to deal with the federal estate tax. But is allowing unneeded life insurance to lapse the best solution?

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life insurance valuation in Advisor’s Journal, see Relative Policy Value of Life Insurance (CC 11-57).

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How to Lose a Charitable Deduction

Posted by William Byrnes on October 21, 2011


As an advisor, your clients look to you for competent advice in planning their charitable giving. It would be terrible to find out that the gift you thoughtful suggest cannot be deducted due to an avoidable paperwork mistake. Although the IRS sometimes forgives these minor errors, others are unforgivable, as illustrated in recent IRS email advice.

The IRS was not so forgiving with a taxpayer, who made what would otherwise qualify as a tax-deductible charitable gift. The problem was that the taxpayer “failed to get a contemporaneous written acknowledgment” from the charitable organization. In its advice the IRS said it will deny the taxpayer’s charitable deduction even if the taxpayer takes remedial measures and the charity amends its Form 990 (Return of Organization Exempt from Income Tax) to acknowledge the donation and include the information required by the Code.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of charitable deductions in Advisor’s Journal, see Qualified Charitable Distributions from an IRA (CC 11-03) & IRS Takes Qualified IRA Charitable Distributions off the Table for 2010 (CC 11-15).

 

For in-depth analysis of the charitable deduction under Section 170, see Advisor’s Main Library: B6—The Income Tax Charitable Deduction—I.R.C. §170.

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Are Unisex Mortality Tables Coming to America?

Posted by William Byrnes on October 6, 2011


“Men Are From Mars, Women Are From Venus,” goes the saying from the popular self-help book. But in a recent ruling, the European Court of Justice said that, although statistically verifiable, you’d better not acknowledge the 100 million mile (sorry, kilometer) gap between men and women when you’re pricing life insurance premiums.

The highest court in the EU ruled earlier this year that the long-standing practice of basing insurance premiums on gender is sex discrimination that is prohibited under EU law. Despite hundreds of years of data verifying the simple fact that women live longer than men, insurance carriers in the EU will soon be prohibited from considering gender when setting insurance premiums.

Under EU law, “[e]quality between women and men must be ensured in all areas, including employment, work and pay.” The European policy generally has been applied to remove gender discrimination in the workplace. But a 2004 European Directive “prohibits all discrimination based on sex in the access to and supply of goods and services.” And that directive has been specifically applied to access to life insurance.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the Life Insurance Gender Gap in Advisor’s Journal, see Is the Life Insurance Gender Gap Really Closing? (CC 11-68).

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Corporate Tax Reform: Easier Said than Done

Posted by William Byrnes on October 5, 2011


Both sides of the political spectrum agree that corporate tax reform is a priority.For reform to happen, tough choices are needed from Washington. Reform would develop a system that forces multinational corporations to pay their fair share without hurting US competitiveness in the world markets. Overtax multinational corporations,  and they’ll move their operations overseas; under-tax and you’ll reduce revenue that is sorely needed by the US government.

As part of the ongoing debate and investigation of the US corporate tax system, the U.S. House Committee on Ways and Means is hearing testimony from tax experts on the US tax system and alternatives.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of corporate tax reform issues in Advisor’s Journal, see Obama’s Blue Ribbon Debt Commission Proposes Complete Overhaul of the Tax Code (CC 10-95).

For in-depth analysis of US Corporate Tax, see Advisor’s Main Library: A – The Corporate Income Tax.

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How Much to Allocate to Annuities: A Critical Analysis

Posted by William Byrnes on October 4, 2011


A commonly known characteristic of annuities is providing retirees retirement income security. However, a more complicated aspect is deciding exactly how much of a retiree’s nest egg should be allocated to an annuity to reduce the person’s probability of outliving their retirement income.

The Employee Benefits Research Institute takes some of the guesswork out of allocation in a study released this month. The study analyzes the impact of longevity and immediate annuities on retirement income adequacy. The study finds that the “optimal level of annuitization and asset allocation that would give a desired level of confidence that people will have enough retirement income, based on the three different types of risk: investment income, longevity, and long-term care.”

The study’s results offer a prescient guide for advisors looking to maximize their client’s retirement success through annuities. Although parts of the study are quite technical, briefly reviewing the results can be enlightening.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of annuities in Advisor’s Journal, see Drama Over the “Drawbacks” of Annuities (CC 11-62).

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Court Holds that STOLI Law Isn’t Retroactive

Posted by William Byrnes on October 3, 2011


A stranger-owned life insurance promoter won a big victory when the California Court of Appeals ruled 2-1 that California’s 2009 anti-STOLI law does not apply to policies issued before the statue was enacted.

The ruling was issued by the 4th Appellate District in an appeal on the case: The Lincoln Life and Annuity Company of New York vs. Jonathan S. Berck, as Trustee, etc, Case No. D056373 (17 May 2011).

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of STOLI cases in Advisor’s Journal, see STOLI Scheme Lands Insurance Agent in Jail (CC 11-92).

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