Posted by William Byrnes on July 29, 2011
In recent years, the IRS has increased its search for taxpayers who fail to disclose a gift tax return for reportable transactions. Now, the Justice Department’s Tax Division is getting in on the action, initiating an unprecedented fishing expedition and scouring state government records for information that may lead to taxpayers who have failed to file a gift tax return.
The Justice Department hopes to collect the identities of taxpayers who have gifted real property to relatives without reporting the transaction to the IRS. 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).
Posted in Taxation, Wealth Management | Tagged: accounting, Audit, gift tax, Internal Revenue Service, IRS, tax, TurboTax, United States | Leave a Comment »
Posted by William Byrnes on July 28, 2011
A significant of number of employee retirement plans don’t use an outside investment advisor, often because of the cost. Demonstrating your firm’s flexibility and splitting fiduciary responsibility for the plan could be the key to securing those underserved plans. Customizing your level of service gives these plans what they need—advice—while allowing you to prune services that aren’t cost effective for your firm.
According to the Retirement Plan Survey 2011, released by Grant Thornton LLP, Drinker Biddle & Reath and Plan Sponsor Advisors, greater than 50% of plans use a limited scope investment advisor and 14% of plans use an outsourced investment advisor. 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).
Posted in Wealth Management | Tagged: Business, Certified Financial Planner, Grant Thornton LLP, Human Resources, Investment Advisor, Pension, Retirement planning, United States | Leave a Comment »
Posted by William Byrnes on July 27, 2011
A recent Businessweek article highlighting what it calls the “drawbacks” of annuities is the latest in a long line of articles panning the financial products. But do annuities—especially variable annuities—endure justified scrutiny, or are annuities just an easy target of the mainstream media? And, where annuities are the right choice for your clients, how can you counter the negative press to help them make the right investing decision? 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).
Posted in Wealth Management | Tagged: annuities, Business, Cash flow, Financial services, insurance, Life annuity, Pension, Retirement | Leave a Comment »
Posted by William Byrnes on July 26, 2011
The New York Department of Insurance, Office of General Counsel, stated on February 25, 2011 that insurance carriers cannot refuse to convert a term policy to a permanent policy on the ground that the policy will be sold on the secondary market. The debated issue was whether the converted policy is a “new” policy that must satisfy the insurable interest requirement. Nevertheless, this ruling will not affect all term policies, since many term life insurance policies are not convertible. 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).
Posted in Wealth Management | Tagged: Business, Financial services, insurance, Insurance policy, Life, life insurance, Policy, term life insurance | Leave a Comment »
Posted by William Byrnes on July 25, 2011
Republicans on the House Financial Services subcommittee are retracting the issue of Registered Investment Advisor user fees, referencing the cost to small businesses. But the SEC maintains that it cannot conduct adequate RIA examinations without either charging user fees or delegating examination authority to an SRO that will charge user fees. The argument over user fees was prompted by the release, earlier this year, of the Dodd-Frank mandated SEC study on enhancing RIA examinations. 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).
Posted in Wealth Management | Tagged: Business, Canada, Food and Drug Administration, Medical device, Registered Investment Advisor, Tony Clement, Treasury Board, User fee | Leave a Comment »
Posted by William Byrnes on July 22, 2011
An executive top-hat plan can be a great way to become desirable to highly qualified executives or supplement a business owner’s compensation. However, these plans are accompanied with a significant downside. Because the plans are generally unfunded, major events at the sponsor, like a sale or insolvency, can decimate a plan and leave participants empty handed. The effect on a top-hat plan when a sponsor liquidates its assets is illustrated by a recent Seventh Circuit Court of Appeals case. 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).
Posted in Wealth Management | Tagged: Business, Compensation and Benefits, Crochet, Government, Human Resources, Small business, Top hat, United States | Leave a Comment »
Posted by William Byrnes on July 21, 2011
The Tax Court has reopened the question of whether status as a limited partner entitles them to an exemption from self-employment taxes—an issue that’s been idle for over 13 years. The Tax Court recently declared that status as a limited partner does not necessarily exempt a partner from self-employment taxes. Instead, the exemption is derivative on how substantial of a role the partner played in the partnership business. 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 small businesses in Advisor’s Journal, see IRS Announces Lenient Lien Program for Small Business (CC 11-48)
For in-depth analysis of partnership taxation, see Advisor’s Main Library: H–Partnership Taxation
Posted in Taxation, Wealth Management | Tagged: Business, Internal Revenue Service, IRS tax forms, Limited partnership, Self-employment, Small business, tax, TurboTax | Leave a Comment »
Posted by William Byrnes on July 20, 2011
Producers and carriers may soon face more stringent compliance requirements, and increased liability for making unsuitable recommendations, when selling annuities. The regulatory change will happen at the state level as a result of the National Conference of Insurance Legislators (NCOIL) executive committee voting unanimously on March 6 to adopt the National Association of Insurance Commissioners (NAIC) Suitability in Annuity Transactions Model Regulation. 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 life insurance regulations in Advisor’s Journal, see NCOIL Adopts Model Act Requiring Insurers to Inform Consumers of Settlement Options (CC 10-104).
Posted in Wealth Management | Tagged: Business, Consumer, Financial services, Government, insurance, life insurance, National Association of Insurance Commissioners, United States | Leave a Comment »
Posted by William Byrnes on July 19, 2011
Individuals in the fastest growing class of investors—the mass affluent—need your advice. According to a recent report, there is a void in representation by financial professionals this group. As a corollary, they lack confidence in their ability to meet their financial goals, making them desirable candidates for professional services.
The mass affluent are investors occupying the upper tier of the mass market—the biggest group of consumers. But “mass affluent” isn’t just a synonym for “upper middle-class”; it is a subset of the upper middle-class with $50,000 to $250,000 in “investable assets.”
Depending on your career trajectory, the mass affluent can be resourceful in establishing the foundation for a successful practice. A majority (55 percent) of the mass affluent believe they will be wealthy one day. Although only a small number of the mass affluent will move into high-net-worth territory, you can get in on the ground floor of the upward career trajectory of those who will. 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).
Posted in Wealth Management | Tagged: Business, Financial services, Investing, Mass affluent, Social media, United States, Upper middle class, Wealth | Leave a Comment »
Posted by William Byrnes on July 18, 2011
Which prevails when it is time to make a claim, a last in time divorce decree or a beneficiary designation made at the time of the application years ago? A wife had her estranged husband, sign a separation and property-settlement agreement to release him from any claims to her estate or property. When the wife passed away, her former husband sought the life insurance proceeds, as did her mother and son. The answer is provided in a cautionary tale of beneficiary designations told in a recent 4th circuit case.
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 beneficiary designations in Advisor’s Journal, see The Effect of Divorce on Life Insurance Beneficiary Designations (CC 10-39) & Don’t Overlook Beneficiary Designations and Settlement Options (CC 09-28).
For in-depth analysis of beneficiaries and settlement options, see Advisor’s Main Library: D – Problems In Beneficiary Designations.
Posted in Wealth Management | Tagged: Beneficiary, Business, Death, Financial services, insurance, Insurance policy, Life, life insurance | Leave a Comment »
Posted by William Byrnes on July 18, 2011
A recent IRS Revenue Ruling provides an important reminder for us of the rules for deducting interest that’s paid or accrued on a business life insurance policy loans. Knowing how and when policy loan interest is properly deductible can mean the difference between closing the sale in the first instance and an IRS audit down line if these rules are ignored.
In general, interest paid on a life insurance policy loan is not deductible for income tax purposes; but there are some exceptions for life insurance purchased for business purposes. The deductibility of policy loan interest has changed significantly over the past 20 years, so an intimate knowledge of the specifics is imperative when selling or transacting on a policy that’s issued to a business. 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 Advisor’s Journal coverage of the exception to the pro rata limitation on interest deduction, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41).
For in-depth analysis of corporate-owned life insurance, see Advisor’s Main Library: D—Deductibility Of Business Insurance Premiums, E—Premiums As Taxable Income To The Insured & F—Taxability Of Corporate Owned Life Insurance Proceeds At Death.
Posted in Taxation, Wealth Management | Tagged: Agents and Marketers, Business, Financial services, insurance, Insurance policy, Internal Revenue Service, life insurance, Taxable income | Leave a Comment »
Posted by William Byrnes on July 17, 2011
Last month, Advanced Market expert Barry Flagg talked about the relevance of policy cash values to the overall suitability of a permanent life insurance policy. This month, he expanded on the cash value topic by addressing how cash value is generally a product of the number of cash value investment options, the historical performance of such cash value investment options, and the cost-effectiveness of the various cash value allocation options.
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 valuation in Advisor’s Journal, see Life Insurance Valuation (CC 10-09).
Posted in Wealth Management | Tagged: Agents and Marketers, Business, Financial services, insurance, Insurance policy, Life, life insurance, United States | Leave a Comment »
Posted by William Byrnes on July 15, 2011
Investment advisors and broker-dealers may be required to disclose their incentive-based compensation programs under proposed rules approved by the Securities and Exchange Commission (SEC) on March 2. The proposed rule is the latest in a series of advisor and broker-dealer reporting rules issued under the mandate of the Dodd-Frank Wall Street Reform Act.
The rapidly increasing compliance obligations for advisory firms and B-Ds has the capability to drastically modify business practices at affected firms. Many will be forced to reconfigure their entire compensation program to comply with the new rules.
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 advisor reporting requirements in Advisor’s Journal, see Advisors Hit with Another Round of SEC Reporting Rules (CC 11-30).
Posted in Wealth Management | Tagged: Broker-dealer, Business, Dodd–Frank Wall Street Reform and Consumer Protection Act, Executive pay, Investing, Investment Advisor, US Securities and Exchange Commission, Wall Street | Leave a Comment »
Posted by William Byrnes on July 14, 2011
Want to minimize a high-net-worth client’s transfer tax liability using a GRAT that is at least partly funded with nonqualified stock options? Although the strategy could save your client hundreds of thousands in gift and estate tax liability, recommending it could cost you and your client hundreds of thousands in legal fees.
Why? Recommending that your client use a GRAT funded with nonqualified stock options would violate the SOGRAT patent, U.S. Patent 6,567,790.
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).
Posted in Wealth Management | Tagged: Business, Capital gain, Derivatives, Grantor Retained Annuity Trust, Incentive stock option, Investing, Options, United States patent law | 1 Comment »
Posted by William Byrnes on July 13, 2011
Treasury Secretary Timothy Geithner sparked outrage when he suggested at a recent House Ways and Means subcommittee meeting that “Congress has to revisit this basic question about whether it makes sense for us as a country to allow certain businesses to choose whether they’re treated as corporations for tax purposes or not.” Geithner’s comments about pass-through entities evoked a sweeping gasp from millions of small business owners who could become virtually non-competitive if subject to a double tax regime. Behind client referrals, professional referrals were the second biggest producer. 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 Advisor’s Journal coverage of the Obama administration’s budget and tax proposals, see Obama Budget Would Undercut Utility of Life Insurance in Small Business Planning (CC-11-41) & Obama Tax Compromise Provides 100 Percent Bonus Depreciation of Business Assets Through 2011 (CC 11-01).
For in-depth analysis of S corporation taxation, see Advisor’s Main Library: B—Corporation’s Election Under Subchapter S.
Posted in Wealth Management | Tagged: Barack Obama, Obama administration, Small business, tax, Timothy Geithner, United States, United States House Committee on Small Business, United States Secretary of the Treasury | Leave a Comment »
Posted by William Byrnes on July 12, 2011
Advisors understand that referrals from existing clients are their best source for new business, but what else is working, and how effective are other methods being used by advisors to generate new business? A recently released survey provides us with a laundry list of approaches used by advisors to solicit new clients and gauges the productiveness of their marketing efforts. The survey, which polled 262 financial advisors in November and December of 2010, found that client referrals are still the top way advisors generated new business. Behind client referrals, professional referrals were the second biggest producer. 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).
Posted in Wealth Management | Tagged: Business, Business and Economy, Canada, Certified Financial Planner, Financial adviser, financial planning, Financial services, Investment | Leave a Comment »
Posted by William Byrnes on July 11, 2011
If you have small business clients who are struggling with back taxes and/or tax liens, you can tell them help is on the way. The IRS is offering assistance for both individuals and small businesses that are struggling to “meet their tax obligations, without adding unnecessary burden to [the] taxpayers.” The new program includes a number of features discussed in today’s Advanced Markets Journal. 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).
Posted in Taxation, Wealth Management | Tagged: accounting, Business, Internal Revenue Service, IRS, Small business, tax, Tax lien, TurboTax | Leave a Comment »
Posted by William Byrnes on May 10, 2011
Inscritos na OAB-SP têm desconto de 20% em curso internacional que começa no dia 5 de julho
A Caixa de Assistência dos Advogados de São Paulo (CAASP), por meio do seu Clube de Serviços, acaba de formalizar parceria com a Thomas Jefferson School of Law (TJSL), de San Diego, Califórnia (EUA). Agora, os inscritos na OAB-SP têm desconto de 20% no curso de verão “Introdução ao Sistema Legal Norte-Americano” (Introduction to US Legal System), que será ministrado de 5 a 28 de julho. Em vez dos US$2 mil usuais, os advogados paulistas pagarão apenas US$1,6 mil. Há também oferta de estadia por valores diferenciados.
Para se matricular, o advogado deve cumprir o seguinte procedimento: no endereçowww.tjsl.edu/graduate/caasp, acionar o aplicativo TJSL/SC/2011, imprimir e preencher a ficha de inscrição. Em seguida, é preciso escanear o documento e enviá-lo para mcewenc@tjsl.edu, endereço eletrônico da professora Carla Lima de Castro McEwen, coordenadora pedagógica do curso.
“O curso habilita para o Exame da Califórnia Bar Association e conta com renomados professores norte-americanos, além da advogada brasileira Carla McEwen, coordenadora pedagógica, que garantirá aos brasileiros todo o suporte necessário em língua portuguesa”, destaca o assessor para Assuntos Institucionais da CAASP, George Augusto Niaradi. “Com mais esta parceria na esfera educacional, a Caixa prossegue em uma de suas linhas prioritárias, que é disponibilizar a todos os segmentos da advocacia paulista cursos que supram sua necessidade de atualização permanente”, afirma o presidente da Caixa de Assistência, Fábio Romeu Canton Filho.
O curso “Introdução ao Sistema Legal Norte-Americano” proporciona uma visão geral da linguagem norte-americana sobre o sistema jurídico baseado na jurisprudência (commom law). O aluno tem a oportunidade de conhecer a estrutura da linguagem jurídica usada na prática legal nos Estados Unidos em petições, apelações ou correspondências, além de participar de uma série de palestras. A programação contempla 15 horas semanais de aulas presenciais e 15 horas semanais de pesquisa e estudos.
A Thomas Jefferson School of Law nasceu em 1969 como campus de San Diego, na Califórnia, da Western University College of Law, tendo evoluído até tonar-se uma escola de Direito de ponta, assim reconhecida tanto por estudantes dos Estados Unidos quanto de diversas partes do mundo. Um fato marcante na história recente da TJSL é a construção de um moderníssimo campus em San Diego Downtown East Village, perto do coração da comunidade jurídica da cidade. As primeiras aulas nas novas instalações foram ministradas em janeiro de 2011. Dotada de um corpo docente de classe mundial, a TJSL conta com três centros de excelência acadêmica: o Center for Global Legal Studies, o Centro para o Direito e Propriedade Intelectual e Centro de Direito e da Justiça Social – todos os três centros têm alcançado destaque em suas áreas por meio de ofertas de cursos e programas de extensão.
Posted in Courses | Tagged: Brasil, Brazil, CAASP, California, education, law, OAB, San Diego, São Paulo, Thomas Jefferson School of Law, United States | 1 Comment »
Posted by William Byrnes on May 9, 2011
As we have discussed in the past at AdvisorFYI, there is no specific Federal law that prohibits an individual from owning any interest in a financial account in foreign jurisdictions. “However, because offshore financial accounts can be used to hide criminal proceeds or evade taxes, federal law does require disclosure of such accounts.”
Generally, “Congress has directed the Secretary of the Treasury to require residents and citizens of the U.S., or persons in and doing business in the U.S., to maintain records and file reports of transactions and relations with foreign financial agencies.”
Specifically, every “U.S. citizen, resident and businessperson who has a financial interest in, or signatory authority over, one or more bank accounts, securities accounts or other financial accounts in a foreign country”, must “report that relationship to the U.S. Department of the Treasury if the aggregate value of the accounts exceeds $10,000 at any time during the calendar year”, annually through Form TD F 90-22.1. Read the analysis at AdvisorFYI
Posted in Compliance, Financial Crimes, Taxation | Tagged: Bank account, Finance, Internal Revenue Service, Offshore bank, Teachta Dála, U.S. Treasury Department, United States, United States Treasury Department | Leave a Comment »
Posted by William Byrnes on May 6, 2011
Not according to a recent U.S. Government Accountability Office (GAO) report which found that annualized returns on a variety of funds with the same target date vary wildly—some with gains as high as 28% and others with losses of up to 31%. Target date funds, which “are designed to provide an age-appropriate asset allocation for plan participants over time,” are essentially an investment advisor substitute. But, unlike a personal financial advisor, target date funds can’t take into consideration the individualized needs of investors and don’t offer investors the level of disclosure that’s mandated of registered investment advisors. 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 target date funds in Advisor’s Journal, see Are Target-Date Funds Failing (CC 09-35), Missing the Target? (CC 07-59), & The Automatic IRA Act of 2010: Boon for Advisors? (CC 10-56).
Posted in Wealth Management | Tagged: Asset allocation, Boon, Business, Exchange-traded fund, Funds, Investing, Mutual fund, Target date fund | Leave a Comment »
Posted by William Byrnes on May 5, 2011
Summit Business Media today announced that it has assembled a “dream team” of wealth management, financial planning and advanced sales professional reference experts to expand the content and scope of Advanced Markets AdvisorFX, the primary online source of practice-building and client-management tools for financial advisors and insurance professionals.
Advisors can try Advanced Markets AdvisorFX FREE for 15 days by going to http://www.advisorfxinfo.com and clicking on the “Free Trial” button to get started.
Rick Kravitz, Vice President & Managing Director of Summit Business Media’s Reference Division, noted thatAdvanced Markets AdvisorFX’s editorial advisory panel is comprised of experts from the international wealth management team at Thomas Jefferson Law School in San Diego led by Prof. William H. Byrnes, Associate Dean. He added, “Prof. Byrnes and his team bring enormous technical expertise as well as broad insights into the larger trends driving client decisions on tax, investment and wealth management strategies.”
Prof. Byrnes is a former Coopers & Lybrand expert in international law who has consulted for foreign governments as well as Fortune 1000 insurance and institutional investment companies. Other members of his team include:
• Robert Bloink, former Senior Attorney in the IRS Office of Chief Counsel and an expert in sophisticated wealth transfer techniques;
• George Mentz, a licensed attorney, MBA, and financial planner who was formerly a Senior Financial Planner and Wealth Manager for an international Wall Street firm;
• Don Goode, an insurance professional and former partner of Potomac West, where he lent active support to the first agent in the history of the insurance industry ever to receive more than $100 million in a single calendar year;
• Mike Rodman, three-time winner of “Top of the Table,” the Million Dollar Round Table’s highest honor, and founder of Advanced Planning Services, a premier advanced sales and advanced underwriting organization; and
• Robert Stuchiner, former Senior Vice President in charge of marketing and strategy for the AIG Affluent Markets Group.
Advanced Markets AdvisorFX’s unique content is designed to give users resources to attract new clients, grow their business and serve more markets. The content menu includes:
• The Advanced Underwriter Service (formerly from Dearborn Financial);
• The Advanced Sales and Reference Service (National Underwriter);
• Concepts and Client Illustrations from Don Cady’s classic estate planning, employee benefits and business planning Field Guides;
• Tax Facts on Insurance and Employee Benefits as well as Tax Facts on Investments, the largest circulation works of their kind in the insurance industry;
• Advisor FYI – daily headlines from media coverage of financial and estate planning issues;
• Advisor’s Journal – lengthy analysis and roadmap guidance on critical taxation and estate planning issues; and
• White papers on major legislation such as the Tax Relief Act of 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Pension Act of 2010 and others.
About Summit Business Media
Summit Business Media is the leading B2B media and information company serving the insurance, investment advisory, professional services and mining investment markets through a variety of channels, including print, online and live events. Summit provides breaking news and analysis, in-depth practice management strategies, business-building techniques and actionable data to the markets it serves. Through its Media and Reference Divisions, Summit publishes 16 magazines, 20 websites and 150 reference titles. Summit’s Event Division hosts a dozen conferences across the spectrum of markets the company services. Summit’s Data Division is the leading data provider of financial, marketing and benefits information on corporations, insurance companies and life, benefits and property-casualty agents.
Summit employs nearly 400 employees in ten offices across the United States.
Posted in Wealth Management | Tagged: American International Group, Don Goode, Financial planner, Financial services, Million Dollar Round Table, Summit Business Media, United State, Vice president | Leave a Comment »
Posted by William Byrnes on May 4, 2011
Advisors choose a hybrid practice model for several client and business oriented reasons. Is a hybrid practice—one allowing you to “conduct both advisory and brokerage business”—right for you? A recently released white paper can help you “understand the considerations [you]… face when choosing the hybrid practice model… and assess the potential benefits and trade-offs that come with the different hybrid choices.” 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 advisor and broker-dealer business in Advisor’s Journal, see Firms Selling Private Placements Face Increased Scrutiny (CC 11-32).
Posted in Wealth Management | Tagged: Business, Electric vehicle, hybrid, Hybrid vehicle, Sport utility vehicle, Subscription business model, Toyota, Toyota Prius | Leave a Comment »
Posted by William Byrnes on May 3, 2011
The SEC recently considered a proposal that would prohibit incentive-based compensation practices that may encourage inappropriate risk.
The proposal arises from Section 956 of the Dodd-Frank Act, which requires the SEC along with six other financial regulators to jointly adopt regulations or guidelines governing the incentive-based compensation arrangements of certain financial institutions. These institutions include broker-dealers and investment advisers with $1 billion or more of assets.
In particular, the Dodd-Frank Act calls upon the regulators to do two things: Read the analysis at AdvisorFYI
Posted in Compliance, Wealth Management | Tagged: Broker-dealer, Business, Dodd–Frank Wall Street Reform and Consumer Protection Act, Financial institution, Financial regulation, Financial services, Incentive, United States | Leave a Comment »
Posted by William Byrnes on May 2, 2011
A recent report by the Internal Revenue Service shows that total return filings are down this year as compared to the same time last year. The report shows that over 51.927 million individual taxpayers have filed through the end of February 2011. During this same period for the 2009 taxable year/2010 filing year the total number of returns by the end of February was around 53.556 million. The difference between the two years amounts to approximately a decrease of three percent.
What’s more, the average refund for the 2010 tax year/2011 filing season is also down from calculations from the same time last year. This year’s average individual refund is currently $3,129, down $20 from $3,149 in 2010. Read the analysis at AdvisorFYI
Posted in Taxation | Tagged: accounting, Fiscal year, Government, Internal Revenue Service, tax, Tax refund, Tax return (United States), United States | Leave a Comment »
Posted by William Byrnes on April 29, 2011
Today we re-examine the case in-depth, focusing on how the IRS utilizes the step transaction doctrine to deny taxpayers valuation discounts. The case is yet another example of how important the dating of transactions is when you’re looking to secure a valuation discount. A single date on a document can mean the difference between a substantial valuation discount on a gift and the expense of fighting the IRS through the court system. 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 valuation discounts in Advisor’s Journal, see IRS Rebuffed by Federal Court of Appeals in Valuation Discount Case (CC 11-21), Vigorous Debate over Qualified Appraisal Standard for Valuation of Donated Policies (CC 10-92) & Valuation Discounts: Only for a Bona Fide Business (CC 10-60).
For in-depth analysis of gift tax valuation discounts, see Advisor’s Main Library: A—Family Limited Partnerships and Estate & Gift Tax Valuation Discounting.
Posted in Estate Tax, Taxation | Tagged: Business, Discounting, Facebook, Foursquare, Internal Revenue Service, IRS, tax, valuation | Leave a Comment »
Posted by William Byrnes on April 28, 2011
In the midst of the tax filing season, the Internal Revenue Service released the 2011 version of its discussion of many of the more common “frivolous” tax arguments made by individuals and groups that oppose compliance with federal tax laws.
The Service suggested that “anyone who contemplates arguing on legal grounds against paying their fair share of taxes should first read their 84-page document, The Truth About Frivolous Tax Arguments.” At AdvisorFYI, we are not contemplating any particular legal grounds for not paying a “fair share of taxes”, whatever that may be, but rather are interested in presenting some of the frivolous positions argued and how the Government generally responds. We’ve presented a few select ones below.
The 2011 IRS document explains many of the common “frivolous” arguments made in recent years and it presents a legal position that attempts to refute these claims. The IRS claims, the document “will help taxpayers avoid wasting their time and money with frivolous arguments and incurring penalties.”
Congress in 2006 increased the amount of the penalty for frivolous tax returns from $500 to $5,000. The increased penalty amount applies when a person submits a tax return or other specified submission, and any portion of the submission is based on a position the IRS identifies as frivolous.
Here are some of positions we found to be commonly marketed to the public, and how the IRS responds to the positions: Read the analysis at AdvisorFYI
Posted in Taxation | Tagged: Internal Revenue Service, IRS tax forms, law, Offer in compromise, tax, TurboTax, United States, United States Congress | Leave a Comment »
Posted by William Byrnes on April 27, 2011
A growing number of consumers are opting for pre-packaged, low-cost portfolio managers. Portfolio-to-go companies can, at least nominally, provide many of the same services as full-service brokerage firms, since the companies are registered as either investment advisors or broker-dealers. And minimal overhead and services allow them to offer those services without the “high” price tag at brick-and-mortar institutions.
Portfolios-to-go have exploded in popularity recently, bringing in over $3 billion in assets over the past three years. Read this two-page article by linking to AdvisorOne – a National Underwriters Summit Business open-access original content wealth management news portal.
Posted in Wealth Management | Tagged: Brokerage firm, Brokerages, Business, Financial services, Investing, Investment Services, TD Ameritrade, U.S. Securities and Exchange Commission | Leave a Comment »
Posted by William Byrnes on April 26, 2011
FINRA and the SEC are actively examining private placements and the firms that sell them. If the regulators believe that something is amiss, they won’t hesitate to impose severe fines on everyone involved in the sale.
FINRA has issued sanctions against two firms and seven individual principals of those firms. FINRA accuses them of causing significant investor losses by failing to conduct a reasonable investigation before offering the private placements for sale to investors.
Read this two-page article by linking to AdvisorOne – a National Underwriters Summit Business open-access original content wealth management news portal.
Posted in Compliance, Wealth Management | Tagged: Business, Canada, Company, Financial Industry Regulatory Authority, law, Private placement, Security, U.S. Securities and Exchange Commission | Leave a Comment »
Posted by William Byrnes on April 25, 2011
If you’re one of the two out of three financial professionals who are out of the social media loop, you could be missing opportunities to boost your advisory business. Although the SEC and FINRA are cracking down on firms for social media misuse, there’s still a wealth of untapped marketing potential for advisors brave enough forge into this new territory.
Social media sites like Facebook, Twitter, and LinkedIn can be used to build opportunities – if you know how to use them to the best of your advantage. Clara Shih, author of The Facebook Era, believes that social media marketing, with training and best practices, can be a formula for success. Shih offers tips to help advisors gain success by using social media as a tool to grow their advisory business by connecting with prospective clients and strengthening existing client relationships.
Read this two-page article by linking to AdvisorOne – a National Underwriters Summit Business open-access original content wealth management news portal.
Posted in Wealth Management | Tagged: AdvisorOne, Business, Clara Shih, Facebook, Financial Industry Regulatory Authority, LinkedIn, Social media, Twitter | 1 Comment »
Posted by William Byrnes on April 14, 2011
From the experts of National Underwriters …. The Portability of the Spousal Credit webinar is an exclusive session covering the opportunities presented by the deceased spouse unused exclusion amount (DSUEA). This no-cost webinar will cover the intricacies of the DSUEA and ensure that you know everything you need to help your clients take full advantage of this tax break. Time will allotted for questions.
No-Cost registration at: https://www1.gotomeeting.com/register/851507536
Posted in Uncategorized | Leave a Comment »
Posted by William Byrnes on April 13, 2011
The Federal Reserve may consider downsizing its original plan to purchase $600 billion in Treasury bonds over fear that inflation could be driven to dangerous levels by the revitalized economy. Quantitative easing—the purchase of Treasuries by the central bank—is intended to raise the price of Treasuries, which should lower long-term interest rates and provide banks with cash to lend to their customers. The expectation is that lower long-term rates will encourage home refis and boost corporate investments and expansion, which, it is hoped, will created new jobs. 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 quantitative easing in Advisor’s Journal, see Fed to Purchase $600 Billion in Treasuries in Move to Stimulate Economy (CC 10-94).
Posted in Wealth Management | Tagged: Central bank, Economic, Federal Reserve System, FederalReserve, Government, Quantitative easing, United States Department of the Treasury, United States Treasury security | Leave a Comment »
Posted by William Byrnes on April 12, 2011
Now more than ever, clients and potential clients are concerned about how they’re going to continue to enjoy the lifestyle they’ve grown accustomed to pre-retirement. Most clients are still looking for the same basic retirement advice from their advisors—advice on how to define and meet their retirement goals.
Following the recent financial crisis, your affluent clients are more likely to gravitate to conservative investment strategies that will preserve their hard-earned principle. But many of them are not clear on the risks of that strategy—they aren’t aware of the opportunities they’re missing.
You can help them reach the retirement they want and find the level of risk appropriate to their long-term goals. Here’s a breakdown of their values and priorities and how you can appeal to them. 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 high net worth investors in Advisor’s Journal, see High Net Worth Clients: How to Find Them, How to Service Them (CC 10-07).
For in-depth analysis of investment planning for affluent clients, see Advisor’s Main Library: Investment Planning.
Posted in Wealth Management | Tagged: Business, Certified Financial Planner, Financial adviser, Financial services, Investing, Investment Advisor, Retirement, United States | Leave a Comment »
Posted by William Byrnes on April 11, 2011
The Obama administration’s 2012 budget includes an attack on corporate owned life insurance that could further erode its tax advantages and put a ding in carriers’ balance sheets. Washington’s repeated assaults on corporate-owned life insurance seem to be motivated by its view of corporate owned life insurance as simply a tax arbitrage opportunity for big corporations, ignoring its importance for smaller businesses that rely on a few key people to keep them afloat. 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 in-depth analysis of corporate-owned life insurance, see Advisor’s Main Library: D—Deductibility Of Business Insurance Premiums, E—Premiums As Taxable Income To The Insured & F—Taxability Of Corporate Owned Life Insurance Proceeds At Death.
Posted in Insurance, Tax Policy | Tagged: Agents and Marketers, Business, Corporate-owned life insurance, Financial services, insurance, life insurance, United States, Washington | 1 Comment »
Posted by William Byrnes on April 11, 2011
Social media marketing is quickly becoming many industries’ go-to medium for low-cost, high-yield advertising, but the Securities and Exchange Commission (“SEC”) may be saying “no so fast” to investment advisors. But the SEC isn’t just asking for general information about advisors’ use of social media. Advisors are also being asked to provide a copy of “communications” made by the advisor on social media sites, including the text of postings, tweets and other messages sent by the firm. 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 SEC initiatives and rulemaking in Advisor’s Journal, see SEC Waffles in Study on Improving RIA Oversight (CC 11-24), Advisors Hit with Another Round of SEC Reporting Rules (CC 11-30) & SEC Approves FINRA Suitability and Know-Your-Customer Rules (CC 11-17).
For marketing tips, see the “Soft Skills” segment of Advanced Markets AdvisorFX: The 7 Deadly Sins of Chief Marketing Officers, To the Moon, Alice!—How to Market Even Though People Are Fed Up with Marketing, & Marketing to the Millennials.
Posted in Compliance | Tagged: Financial Industry Regulatory Authority, Investment Advisor, Registered Investment Advisor, Social media, U.S. Securities and Exchange Commission | Leave a Comment »
Posted by William Byrnes on April 10, 2011
Why is this Topic Important to Wealth Managers? This topic discusses the Recovery Act spending and its effects on the national economy. It provides wealth managers with indicators and information to help clients better understand the use of government (taxpayer) funds and their allocation as a result of the financial crisis and ensuing financial recovery.
The American Recovery and Reinvestment Act of 2009, enacted February 2009,[1] was designed to put Americans back to work and combat the largest downturn in the economy since the Great Depression. Through the Recovery Act, Congress allocated funds in three ways. The single largest part of the Act —more than one-third of it, or $288 billion— was tax cuts. Ninety-five percent of taxpayers have seen taxes go down as a result of the Act. [2]
The second-largest part or $244 billion — just under a third — was direct relief to state governments and individuals. This funding helped state governments avoid laying off teachers, firefighters and police officers and prevented states’ budget gaps from growing wider. On an individual level, the Act ensured those hardest hit by the recession received extended unemployment insurance, health coverage, and food assistance.
The remaining third or $275 billion of the Recovery Act financed the largest investment in roads since the creation of the Interstate Highway system; construction projects at military bases, ports, bridges and tunnels; overdue Superfund cleanups; clean energy projects; improvements in outdated rural water systems; upgrades to overburdened mass transit and rail systems; and much more.
The $787 billion (in total) economic Recovery plan included provisions, in sum, designed to (1) create and save jobs, (2) spur economic activity and invest in long-term economic growth, and (3) foster unprecedented levels of accountability and transparency in government spending.
The Recovery Act was intended to provide a short-term jump start to the economy, but many of the projects funded by Recovery money, especially infrastructure improvements, are expected to benefit economic growth for many years. Thus, the Recovery Act’s longer-term economic investment goals include:
- Initiating a process to computerize health records to reduce medical errors and save on health-care costs
- Investing in the domestic renewable energy industry
- Weatherizing 75 percent of federal buildings and more than one million homes
- Increasing college affordability for seven million students by funding a shortfall in Pell Grants, raising the maximum grant level by $500, and providing a higher education tax cut to nearly four million students
- Cutting taxes for 129 million working households by providing an $800 “Making Work Pay” tax credit
- Expanding the Child Tax Credit [3]
Has the Recovery Act worked? Read the analysis at AdvisorFYI
Posted in Tax Policy | Tagged: American Recovery and Reinvestment Act of 2009, Economic, economic growth, Great Depression, Investment, Pell Grant, Private sector, United States | Leave a Comment »
Posted by William Byrnes on April 9, 2011
Is hedge fund investment without capital gains or estate taxation possible for your high net worth clients? Yes, through the medium of private placement life insurance (“PPLI”). 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 topics relevant to estate planning for high net worth clients in Advisor’s Journal, see High Net Worth Clients: How to Find Them, How to Service Them (CC 10-07).
For in-depth analysis of state tax laws that are favorable for PPLI purposes, see Advisor’s Main Library: Estate Planning and the State Premium Tax.
Posted in Insurance, Retirement Planning, Taxation, Wealth Management | Tagged: Business, estate planning, Funds, Hedge fund, Inheritance tax, Investing, Net worth, Private placement life insurance | Leave a Comment »
Posted by William Byrnes on April 8, 2011
Why is this Topic Important to Wealth Managers? This topic discusses a relatively new form of retirement investment offered by companies to their employees. The topic presents information about target date funds, what they are, who may use them and how they work. The defined contribution retirement market is a prime location for wealth managers to earn fees and commissions. Thus, staying informed about new market updates is provided to give managers an edge when exploring retirement benefits.
The Government Accountability Office recently published a report stating that financial security of millions of Americans in their retirement years will substantially depend on their savings in 401(k) and other defined contribution (DC) plans. [1]The GAO notes, to help ensure adequate financial resources for retirement, participants in DC plans should make adequate contributions during their working years and invest contributions in a way that will facilitate adequate investment returns over time.
To that end, the Pension Protection Act of 2006 (PPA) included various provisions designed to encourage greater retirement savings among workers eligible to participate in 401(k) plans, such as provisions that facilitate plan sponsors’ adoption of automatic enrollment policies. [2]
Under such policies, eligible workers are automatically enrolled unless they explicitly decide to opt out of participation. Because an automatic enrollment program must also include a default investment—a vehicle in which contributions will be invested absent a specific choice by the plan participant—the act also directed the Department of Labor to assist employers in selecting default investments that best serve the retirement needs of workers who do not direct their own investments. Since that time, target date funds (TDF)—that is, investment funds that invest in a mix of assets, and shift from higher-risk to lower-risk investments as a participant approaches their “target” retirement date—have emerged as by far the most popular default investment.
TDFs are designed to provide an age appropriate asset allocation for plan participants over time. However, target date funds vary considerably in asset structures and in other ways, largely as a result of the different objectives and investment philosophies of fund managers. In the years approaching the retirement date, for example, some TDFs have a relatively low equity allocation—35 percent or less—so that plan participants will be insulated from excessive losses near retirement. Other TDFs have an equity allocation of 60 percent or more in the belief that relatively high equity returns will help ensure that retirees do not deplete savings in old age.
TDFs also vary considerably in other respects, such as in the use of alternative assets and complex investment techniques. In addition, allocations are based in part on assumptions about plan participant actions—such as contribution rates and how plan participants will manage 401(k) assets upon retirement—which may differ from the actions of many participants. These investment differences and differences between assumed and actual participant behavior may have significant implications for the retirement security of plan participants invested in TDFs.
Read the analysis at AdvisorFYI
Posted in Retirement Planning | Tagged: 401(k), Government Accountability Office, Investment, Pension, Pension Protection Act of 2006, Retirement, Target date fund, United States Department of Labor | Leave a Comment »
Posted by William Byrnes on April 7, 2011
Why is this Topic Important to Wealth Managers? This topic discusses proposed legislation that would change defined contribution retirement reporting for plan sponsors. The new legislation would require additional information to be disclosed to consumers. Thus, wealth managers that are prepared with the most recent and relevant information with regards to retirement planning are better prepared to work with clients in defined contribution situations.
Senior members of the House Committee on Education and the Workforce, including U.S. House of Representatives Rush Holt (NJ) and Tom Petri (WI), recently introduced legislation which is designed to help ensure that Americans have saved enough for their full retirement.
The introducers of the bill note that many American workers have become increasingly responsible for saving for and managing their retirement investments through 401(k) plans. However, the contention is that many Americans are not saving enough, and they are unsure how quickly to draw down their savings in their retirement years.
To that end, the Lifetime Income Disclosure Act [1] would require 401(k) plan sponsors to inform participating workers of the projected monthly income they could expect at retirement based on their current account balance. The measure is patterned on the Social Security Administration’s annual statements, which are mailed annually to working Americans to inform them of estimated monthly benefits based on their current earnings. Congress mandated annual Social Security statements in 1989, and the government claims they have proven to be very useful to workers in preparing for retirement.
“We should do everything we can to help Americans save for retirement. Our bipartisan bill is a common sense approach to providing Americans with the tools and information they need to plan for a secure retirement future,” Rep. Holt said. The idea behind the legislation is that by providing similar information for 401(k) plans, the Lifetime Income Disclosure Act would give American workers a more complete snapshot of their projected income in retirement.
Specifically, under the legislation, defined contribution plans subject to ERISA – including 401(k) plans – would be required annually to inform participants of how the account balance would translate into a monthly income stream based on age at retirement and other factors. “As retirement plans shift increasingly toward a defined contribution basis, individuals have a greater responsibility to ensure that they are providing adequately for their retirement,” Rep. Petri said. “The information called for in the Lifetime Income Disclosure Act will serve as a scorecard showing savers their progress toward reaching this critical financial goal.”
To help ensure there is no material burden or potential liability on employers who voluntarily sponsor 401(k) plans, the legislation directs the Department of Labor to issue tables that employers may use in calculating an annuity equivalent, as well as a model disclosure. Employers and service providers using the model disclosure and following the prescribed assumptions and DOL rules would be insulated from liability.
“Half of American households will lack sufficient retirement income to maintain their pre-retirement standard of living, but many are unaware of their vulnerability. Our bill will empower Americans to determine whether they are on a path to a secure retirement,” said Senator Jeff Bingaman (D-NM). “This is the kind of common-sense, employer-friendly bill that deserves priority consideration.”
Such information in the hand of the consumer may lead to more retirement planning opportunities for wealth managers as the consumer seeks to “top up” for retirement. If enacted, this bill may lead to a big boost for such retirement savings as Individual Retirement Accounts, and for the corresponding asset management for institutions.
Senators Bingaman, Johnny Isakson (R-GA), and Herb Kohl (D-WI) previously introduced the legislation in the Senate, and Rep. Ron Kind (WI) and David Reichert (WA) are cosponsors of the bill.
Tomorrow’s blogticle will continue to discuss new and exciting planning aspects of 2011.
We invite your opinions and comments by posting them below, or by calling the Panel of Experts
Posted in Retirement Planning | Tagged: 401(k), Herb Kohl, Individual Retirement Account, Johnny Isakson, Pension, Tom Petri, United States, United States House Committee on Education and the Workforce | Leave a Comment »
Posted by William Byrnes on April 6, 2011
Taxpayers with assets hidden in offshore accounts will get a second chance to voluntarily declare their assets to the IRS in return for reduced penalties under the new Offshore Voluntary Disclosure Initiative (“OVDI”).
This newest offshore amnesty program offers a reduced, 25% penalty which will be calculated based on the highest aggregate amount in the taxpayer’s offshore account between 2003 and 2010. In addition to penalties, program participants will be required to pay eight years of back taxes plus interest, accuracy related penalties, and delinquency penalties. 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 offshore issues in Advisor’s Journal, see IRS Planning New Voluntary Disclosure Program for Offshore Assets (CC 10-118), Offshore’s Limited Shelf Life (CC 10-47) & IRS Proposed FATCA Guidance Expands Offshore Compliance Initiatives (CC 10-52)
Posted in Compliance, Tax Policy | Tagged: Douglas Shulman, Internal Revenue Service, IRS, Offshore bank, Switzerland, tax, UBS, United States | Leave a Comment »
Posted by William Byrnes on April 5, 2011
Why is this Topic Important to Wealth Managers? This topic discusses the evaluation report of the financial crisis issued by a Congressionally appointed body. The report presents discussion of events and causes leading up to the ordeal, as well as indications and factors which presented its forthcoming. The discussion is aimed to allow wealth managers to intelligently discuss some causes of the financial crisis with clients and colleagues.
There was a new report issued earlier this year by the Financial Crisis Inquiry Commission, which was created to “examine the causes of the current financial and economic crisis in the United States.” [1] In this report, the Commission presents to the President, the Congress, and the general public the results of its examination and its conclusions as to the causes of the crisis.
The Commission was established as part of the Fraud Enforcement and Recovery Act passed by Congress and signed by the President in May 2009. [2] The independent panel was selected by Congress and composed of private citizens with experience in areas such as housing, economics, insurance, market regulation, banking, and consumer protection.
The report is intended to provide a historical accounting of what brought our financial system and economy to a precipice and to help policy makers and the public better understand how this calamity came to be.
Below are some of the findings issued in the report: Read the analysis at AdvisorFYI
Posted in Compliance | Tagged: Finance, Financial crisis, Financial Crisis Inquiry Commission, Government, Policy, United States, United States Congress, Wall Street | Leave a Comment »
Posted by William Byrnes on April 4, 2011
Last month, we discussed the obvious relevance of pricing competitiveness to overall life insurance product suitability. This month, we discuss the stability of pricing representations which is also a factor of suitability. After all, pricing that appears competitive at the time of sale/purchase but which cannot be maintained can be worse than a less-competitive product with more stable pricing representations.
For instance, while premiums are often considered the price/cost of a life insurance policy, the premium is not the price/cost of a life insurance policy (unless contractually guaranteed like in term life insurance or guaranteed universal life insurance) any more than the $2,000 contributed to an Individual Retirement Account (IRA) is the cost of the IRA. In both cases, the cost is the sum of what is deducted from the premium/contribution. 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 suitability in Advisor’s Journal, see Life Insurance Product Suitability (CC 10-90), Financial Strength and Claims-Paying Ability (CC 10-115) & Cost Competitiveness of Life Insurance (CC 11-11).
Posted in Insurance | Tagged: Business, Financial services, insurance, Insurance policy, life insurance, Pricing, term life insurance, United States | Leave a Comment »
Posted by William Byrnes on April 3, 2011
Why is this Topic Important to Wealth Managers? This topic discusses the new regulatory agency that will have an effect on most life insurance companies doing business in New York. Because the new regulatory agency will oversee insurance and banking, it is likely that changes in the insurance compliance law are just around the corner. After the financial crisis of 2008, it appears New York is taking action to prevent future disruptions in the market. Wealth managers should be aware of the new agency as changes to insurance regulation and compliance are sure to result from the creation of this organization.
New York State is in the process of creating a new Department of Financial Regulation (DFR) which is designed to harnesses the regulatory powers and expertise of the Banking and Insurance Departments, as well as the Consumer Protection Board, by combining the functions of each, to make the State’s oversight of financial services responsive to the 21st century needs of the industry and its consumers.
This new State agency, created pursuant to legislation submitted as part of the 2011-2012 State Executive Budget, consolidates the functions, operations and staff of the Banking and Insurance Departments, along with related segments of the Consumer Protection Board, into a single State agency.
Consolidation of these agencies and activities within a single agency platform is intended to afford the State the ability to unify the State’s regulation of financial services and to more rapidly and capably respond to changing market practices and consumer preferences, thereby ensuring the industry’s continued integrity while shielding consumers from abuses.
In addition to enhancing and refining the State’s regulatory oversight of the industry, the consolidation will provide the State with the opportunity to reduce overall spending with the use of shared services.
The Superintendent of the Department of Financial Regulation will be appointed by the Governor, with the consent of the Senate. The Department’s main offices will be located in Albany and New York City.
The Department’s main responsibilities will be carried out through two major programs: regulation and consumer protection. Read the analysis at AdvisorFYI
Posted in Compliance, Insurance | Tagged: Consumer protection, Financial services, Government agency, insurance, New York, New York State, Regulation, United States | Leave a Comment »
Posted by William Byrnes on April 2, 2011
Life Partners Holdings, Inc. investors have filed a class-action lawsuit against the Waco Texas based life settlement provider, alleging that its directors and officers violated securities laws. The lawsuit comes a month after an announcement was made that the publically-traded company is the subject of an SEC investigation into the life expectancies the company uses to value the life insurance policies it sells to its customers. Life Partners is accused of misleading its customers—investors in life insurance policy—about the life expectancies of insureds on the policies it sells, with insureds outliving the life settlement company’s life expectancy estimates 90% of the time. 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 settlements in Advisor’s Journal, see Life Settlement Provider Accused of Falsifying Life Span Reports (CC 11-23), Life Settlements Funds Performance Fees under Scrutiny (CC 10-116) & Should the Basis of a Life Contract be Adjusted by Mortality Charges? Rev. Rul. 2009-13 Says Yes in Context of Life Settlements; Certain Amounts over Adjusted Basis Treated as Capital Gains (CC 09-19).
For in-depth analysis of life settlements, see Advisor’s Main Library: A—Life Settlements—Introduction.
Posted in Insurance | Tagged: Investor, Life expectancy, life insurance, Life settlement, Public company, Texas, Viatical settlement, Waco Texas | Leave a Comment »
Posted by William Byrnes on April 1, 2011
Why is this Topic Important to Wealth Managers? This topic discusses the potential consequences of not playing by the rules; it is important to constantly keep in mind the balance between providing the most efficient and effective services to clients and crossing the line into illegal territory. Clients may not realize the harsh penalties associated with offshore activity, and although when performed by expert planners under the proper circumstances, that some offshore transactions may be legal and beneficial, it is the job of informed wealth managers to keep clients abreast of information that is useful in making long-term financial decisions.
Four bankers at an international bank incorporated and with its headquarters in Zurich, Switzerland, with offices worldwide, including New York City and Miami, were indicted by a federal grand jury in the Eastern District of Virginia and charged with conspiring with other Swiss bankers to defraud the United States, the Justice Department and the Internal Revenue Service (IRS) announced Wednesday.
According to the indictment, the international bank’s managers and bankers engaged in illegal cross-border banking that was designed to assist U.S. customers evade their income taxes by opening and maintaining secret bank accounts at the bank and other Swiss banks. As of the fall of 2008, the international bank maintained thousands of secret accounts for customers in the United States with as much as $3 billion in total assets under management in those accounts.
The Justice Department announced the scheme dates back to 1953 and involved two generations of U.S. tax evaders including U.S. customers who inherited secret accounts at the international bank.
The indictment asserts that four foreign individuals, members of senior management, bankers and others assisted U.S. taxpayers in evading their U.S. taxes through the use of secret bank accounts in Switzerland.
According to the indictment, the defendants and their co-conspirators solicited U.S. customers to open secret accounts because Swiss bank secrecy would permit them to conceal from the IRS their ownership of accounts at the bank and other Swiss banks. It is further alleged that they provided unlicensed and unregistered banking services and investment advice to customers in the United States in person while on travel to here, including at the international bank’s representative office in New York City and by mailings, e-mail and telephone calls to and from the United States.
Read the analysis at AdvisorFYI
Posted in Compliance, Money Laundering | Tagged: Banking in Switzerland, Internal Revenue Service, New York City, Switzerland, UBS, United States, United States Department of Justice, Zurich | 2 Comments »
Posted by William Byrnes on March 31, 2011
The Tax Court recently calculated the fair market value (“FMV”) of life insurance policies distributed by a terminated 419 welfare benefit plan. The FMV of the policies—which must be included in the taxpayers’ income—was determined by the court based on: (1) surrender charges, (2) conditions imposed on the taxpayers by the insurance company, and (3) “paid-up insurance coverage remaining on the policies as of the date of distribution.” 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 policy valuation in Advisor’s Journal, see Tax Courts Holds Employee Taxable for Value of Life Insurance Owned by Welfare-Benefit Plan (CC 11-14).
For in-depth analysis of welfare benefits plans, see Advisor’s Main Library: B—Welfare Benefit Funds.
Posted in Retirement Planning | Tagged: Business, Employment, Fair market value, insurance, life insurance, Policy, tax, Welfare | Leave a Comment »
Posted by William Byrnes on March 30, 2011
Why is this Topic Important to Wealth Managers? This topic presents discussion on the individual and nonbusiness deductions offered under the Internal Revenue Code. Since April 15th is fast approaching, it is important to review common tax positions with regards to client planning.
In addition this blogticle presents a excerpted preview of new, updated material from Advanced Markets which will be available soon (see www.advisorfx.com). Over the coming 9 months, the entire AUS service is being revised and will be rolling out monthly. The updating will include many new areas and a sharper focus with practical explanations and client presentation aides for current areas. We look forward to helping you secure your next sale.
An expense of an individual may be business, nonbusiness, or personal, depending upon which of the individual’s spheres of activity gave rise to the expense. This Blogticle discusses personal and nonbusiness expenses generally.
Personal Expenses
Personal expenses are all expenses incurred by an individual that are not business or nonbusiness expenses. These would include, for example, food and clothing for the individual and his family, repairs on the family home, and premiums paid on the individual’s personal life insurance. Generally, no deduction is permitted for personal expenses.[1] By specific statutory provision, however, deductions are allowed for some personal expenses, such as certain personal taxes, a limited amount of charitable contributions, medical expenses, certain interest on a principal residence, and alimony.
Most deductible personal expenses are “itemized deductions” and thus may be taken only if the taxpayer chooses to itemize his deductions instead of claiming the standard deduction.
Nonbusiness Expenses
A nonbusiness expense is generally an investment expense incurred in connection with the production of income, other than a trade, business or profession. Expenses of this type would include, for example, fees for tax or investment advice, and the cost of a safe deposit box used to store taxable securities. The deduction of nonbusiness expenses is governed by Code section 212. Specifically, Section 212 allows a deduction for expenses incurred in connection with: (1) the production or collection of income; (2) the management, conservation, or maintenance of property held for production of income; or (3) the determination, collection or refund of any tax.
The deductibility of nonbusiness expenses may be limited or deferred if they arise in connection with a “passive activity” or are interest expenses. Very generally, a “passive activity” is any activity which involves the conduct of a trade or business in which the taxpayer does not “materially participate.” [2] A passive activity also includes any rental activity, without regard to whether the taxpayer materially participates in the activity. Special rules apply to rental real estate activities. Aggregate losses from “passive activities” may generally be deducted in a year only to the extent they do not exceed aggregate income from passive activities in that year; credits from passive activities may be taken only against tax liability allocated to passive activities. Disallowed losses and credits may be carried over to offset passive income in later years. [3]
Once other limitations have been applied to the deductibility of nonbusiness expenses (e.g., the passive loss rule), they are generally deductible only to the extent that the aggregate of these and other “miscellaneous itemized deductions” exceeds 2% of adjusted gross income. “Miscellaneous itemized deductions” are deductions from adjusted gross income other than deductions for (1) interest, (2) taxes, (3) non-business casualty losses and gambling losses, (4) charitable contributions (including charitable remainder interests), (5) medical and dental expenses, (6) impairment-related work expenses for handicapped employees, (7) estate taxes on income in respect of a decedent, (8) certain short sale expenses, (9) certain adjustments under the Code’s claim of right provisions, (10) unrecovered investment in an annuity contract, (11) amortizable bond premium, and (12) certain expenses of cooperative housing corporations. [4]
A nonbusiness expense must also be “ordinary and necessary” to be deductible. [5] It must, therefore, be reasonable in amount and must bear a reasonable and proximate relation to (a) the production or collection of taxable income, or (b) the management, conservation, or maintenance of property held for the production of income. [6]
Tomorrow’s blogticle will discuss important planning aspects of 2011.
We invite your opinions and comments by posting them below, or by calling the Panel of Experts
Posted in Taxation | Tagged: accounting, Adjusted Gross Income, Business, Expense, Itemized deduction, tax, Tax deduction, United States | Leave a Comment »
Posted by William Byrnes on March 29, 2011
Why is this Topic Important to Wealth Managers? This discussion is focused on a hot topic in Washington and around the country. The new 1099 reporting requirements that are expected to come into effect next year may be amended or removed all together. Wealth managers would be well served to be knowledgeable on the subject that not only affects clients and their businesses, but it also directly affects many wealth managers themselves who pay for goods and services as a trade or business. Thus, here at Advanced Markets we bring wealth managers in particular the most relevant and up-to-date information on the web.
Repeal of the health reform law’s business-to-business 1099 reporting requirement is a step closer, with the U.S. Senate passing an amendment on February 2 that would repeal the provision. Praising passage of the Senate amendment, Senator Stabenow said, “Today we provided a common-sense solution for business owners so they can focus on creating jobs, not filling out paperwork for the IRS…. If left unchecked, 40 million small businesses would see their IRS 1099 paperwork increase 2000 percent.”
President Obama even praised the repeal efforts in his state of the union address, receiving a resounding round of applause. Acknowledging that his health care reform law has its share of flaws, and offering to work with the Congress to correct those flaws, he said that “We can start right now by correcting a flaw in the legislation that has placed an unnecessary bookkeeping burden on small businesses.” 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).
The House of Representatives passed H.R. 4, the Small Business Paperwork Mandate Elimination Act of 2011 by majority vote (314-112, with 76 Democrats joining a unanimous House GOP).[1] The legislation, if passed by the Senate and signed into law by President Obama, would repeal an expansion currently scheduled to take effect in 2012 of information that businesses must report to the Internal Revenue Service on Form 1099.
Specifically, the new legislation would amend the Internal Revenue Code to repeal the expanded 1099 information reporting requirements on payments made to corporations, rental property expense payments, and payments for property and other gross proceeds. The legislation would thus strike portions of section 6041 of the Internal Revenue Code which were added by the Patient Protection and Affordable Care Act of 2010 (PPA).
The PPA expanded tax information reporting requirements to require businesses to issue a Form 1099 for any payments to corporations (rather than just to individuals) and for any payments for property (rather than just for services or investment income) that exceed $600 per year per payee. H.R. 4 would strike language requiring “amounts in consideration for property” and “gross proceeds” to be subject to 1099 reporting requirements under section 6041 of IRS Code in order to eliminate the expanded reporting requirements. The bill would also repeal expanded information reporting requirements on rental property expense payments that are currently in effect.
According to the Joint Committee on Taxation, repealing these expanded 1099 information reporting requirements for rental property expense payments as well as certain payments of more than $600 will reduce taxes by approximately $24.7 billion over ten years. [2]
Section 6041 of the Internal Revenue Code outlines reporting requirements and generally requires information returns to be made by every person (payor) engaged in a trade or business that makes payments aggregating $600 or more in any taxable year to another person (payee) in the course of the payor’s trade or business. The information returns must be filed with the Internal Revenue Service and corresponding statements must be sent to each payee.
Beginning in 2012, certain payments not previously subject to 1099 reporting requirements, including those made to corporations and those made for property, will become subject to the reporting requirements under the PPA. The PPA and subsequent legislation expanded information reporting requirements of businesses for payments of $600 or more to any vendor and on rental property expense payments. Some argue, these new requirements would likely impose a huge tax compliance burden on small businesses, forcing them to devote resources to tax filing instead of to business expansion and job creation.
For previous coverage of the Health Care Reform Act’s enhanced 1099 reporting requirement in Advisor’s Journal, see Health Care Reform Causes an Avalanche of 1099s (CC 10-84).
Please check back with Advisorfyi and Advisorfx for more timely information on 1099 reporting.
Posted in Tax Policy | Tagged: Business, Debbie Stabenow, Health care reform, Internal Revenue Service, Repeal, Small business, United States Congress, United States Senate | 1 Comment »
Posted by William Byrnes on March 29, 2011
Why is this Topic Important to Wealth Managers? This topic presents a discussion on information reporting regarding nonresident aliens and domestic interest income. Because some wealth managers work with international clients, or a family in which at least one family member like a spouse or child is foreign, it is helpful to discuss the new proposed reporting requirements as issued by the Department of the Treasury. Having a better understanding of the reported information that will end up in the hands of the IRS will hopefully help wealth managers focus on compliance, as well as wealth preservation and growth.
The Internal Revenue Service recently released new proposed regulations regarding reporting interest payments made to nonresident aliens. A nonresident alien is an individual who is neither a citizen of the United States nor a resident of the United States.[1] We will discuss in a later blogticle this week about how to determine if someone is either a US taxpayer or instead is a non-resident alien (not a US taxpayer).
The new proposed rules require the payor to make an information return on Form 1042-S, “Foreign Person’s U.S. Source Income Subject to Withholding” on interest payments aggregating $10 or more each year paid to a nonresident alien, that is otherwise reportable on a Form 1099 (interest income). [2]
The payor shall generally prepare and file Form 1042-S at the time and in the manner prescribed by the code and the regulations, for the calendar year in which the interest is paid. [3]
The IRS and Treasury Department first published, in 2001, a notice of proposed rulemaking which provided that U.S. bank deposit interest paid to any nonresident alien individual must be reported annually to the IRS. [4] Then in 2002, the Treasury Department and the IRS withdrew these regulations and proposed narrower regulations that would require reporting only on interest payments to nonresident alien individuals that are residents of certain designated countries or, at the option of the payor, on interest payments to all nonresident alien recipients of bank deposit interest. [5]
Under regulations currently in effect, reporting of U.S. bank deposit interest is required only if the interest is paid to a U.S. person or a nonresident alien individual who is a resident of Canada. [6]
The newest proposed regulations published this month withdraw previous regulations and provide proposed regulations that extend the information reporting requirement to include bank deposit interest paid to nonresident alien individuals who are residents of any foreign country.
The Treasury Department notes this extension is appropriate for several reasons: Read the analysis at AdvisorFYI
Posted in Tax Policy | Tagged: Alien (law), Deposit account, Internal Revenue Service, IRS tax forms, Regulation, Report, Treasury Department, United States | Leave a Comment »
Posted by William Byrnes on March 28, 2011
Broker-dealers will be subject to a fiduciary standard of care no earlier than the second half of 2012, predicts Richard Ketchum, Chairman and CEO of the Financial Industry Regulatory Authority (“FINRA”). Mr. Ketchum’s remarks come a week after SEC chairman Mary Schapiro said that the SEC has “a lot of work to do” before putting “pen to paper” and writing the fiduciary standard rules.
Causes of the delay were hinted at by a pair of reports issued by the SEC last month, one of which concluded that broker-dealers and registered investment advisers (“RIA”) should be subject to the same fiduciary standard of care. The other report provided recommendations for improving the examination of investment advisors, concluding that a Self-Regulatory Organization (“SRO”) should be appointed to conduct examinations of investment advisors. An SRO is a private organization that is granted some regulatory authority over a particular industry. SROs are typically funded by member user fees. 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 fiduciary standard in Advisor’s Journal, see SEC Fiduciary Standard Study Answers Few Questions (CC 11-25), Study Finds that Universal Fiduciary Standard Will Hurt Investors (CC 10-97) and What You Don’t Know Yet Might Hurt You: A Broker’s Duties under the Financial Reform Act (CC 10 40)
Your questions and comments are always welcome. Please post them below or call the Panel of Experts.
Posted in Compliance | Tagged: Broker-dealer, Dodd–Frank Wall Street Reform and Consumer Protection Act, Fiduciary, Financial Industry Regulatory Authority, Mary Schapiro, Self-Regulatory Organization, Standard of care, U.S. Securities and Exchange Commission | Leave a Comment »
Posted by William Byrnes on March 27, 2011
Why is this Topic Important to Wealth Managers? A wealth manager should be able to present Advanced Market Intelligence on the long-term economic impact of government spending and its ability to raise revenues with clients.
The United States faces daunting economic and budgetary challenges. The economy has struggled to recover from the recent recession, which was triggered by a large decline in house prices and a financial crisis—events unlike anything this country has seen since the Great Depression.
For the federal government, the sharply lower revenues and elevated spending deriving from the financial turmoil and severe drop in economic activity—combined with the costs of various policies implemented in response to those conditions and an imbalance between revenues and spending that predated the recession—have caused budget deficits to surge in the past two years. The deficits of $1.4 trillion in 2009 and $1.3 trillion in 2010 are, when measured as a share of gross domestic product (GDP), the largest since 1945—representing 10.0 percent and 8.9 percent of the nation’s output, respectively. [1]
Also, the recovery in employment has been slowed not only by the moderate growth in output in the past year and a half but also by structural changes in the labor market, such as a mismatch between the requirements of available jobs and the skills of job seekers, that have hindered the employment of workers who have lost their job. Payroll employment, which declined by 7.3 million during the recent recession, gained a mere 70,000 jobs (or 0.06 percent), on net, between June 2009 and December 2010. [2]
However, under current law, CBO projects, budget deficits will drop markedly over the next few years—to $1.1 trillion in 2012, $704 billion in 2013, and $533 billion in 2014. Relative to the size of the economy, those deficits represent 7.0 percent of GDP in 2012, 4.3 percent in 2013, and 3.1 percent in 2014. From 2015 through 2021, the deficits in the baseline projections range from 2.9 percent to 3.4 percent of GDP. [3]
Nevertheless, the deficits that will accumulate under current law will push federal debt held by the public to significantly higher levels. Just two years ago, debt held by the public was less than $6 trillion, or about 40 percent of GDP; at the end of fiscal year 2010, such debt was roughly $9 trillion, or 62 percent of GDP, and by the end of 2021, it is projected to climb to $18 trillion, or 77 percent of GDP. [4] Read the analysis at AdvisorFYI
Posted in Tax Policy | Tagged: China, Congressional Budget Office, Deficit, Employment, Government spending, Great Depression, Gross domestic product, United States | Leave a Comment »
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