Ryan Barradas is scheduled to speak at the CFO Playbook West for Private Companies confernce being held in San Francisco, CA. Succession planning and the CFO
For Immediate Release
Media Contact: Chris Fiscus (602) 254-7312; ChrisFiscus@mosesanshell.com
PHOENIX, February 13, 2013 – WealthPoint, LLC, a leading provider of succession, exit and wealth transfer planning to affluent clients throughout the U.S., announced today they are making their proprietary financial modeling tool, IV™, available to their legal, tax and wealth management partners for use with their clients.
WealthPoint’s new service line will allow advisors to have access to the IV™ modeling tool for their clients, which was previously exclusively available to WealthPoint consulting clients. “IV™, which stands for Instinct Verification, and is also a very intentional play on the word intravenous, provides a main line to the information clients need to make big decisions confidently.” said WealthPoint Managing Partner, Ryan Barradas.
The financial modeling tool helps clients see exactly where they are at in relation to macro goals in several areas of their financial life – financial independence, spousal security, estate transfer, business valuation, cash flow objectives and more. In addition to establishing a credible baseline, the tool allows clients to evaluate the impact of their current planning, entity structure, etc. verses alternatives and then stress test it under various economic conditions and assumptions. “We believe the only way to help clients make confident progress is through a careful process of Instinct Verification.” said Director of Business and Tax, Bailey Tocco, CPA.
“Affluent and/or entrepreneurial family groups instinctually know that a plan is only as good as the day you make it so any planning needs to be stress tested. No assumptions are 100% accurate so we do extensive financial modeling to test various unknown twists and turns their life will take after execution, including but not limited to ‘worst case’ scenarios,” said WealthPoint partner Tim Young. “Without this, smart people might move forward in planning for a little while, but when it comes time to execute they back away from the table. There’s simply too much at stake with their wealth, their business and their relationships to risk faltering.” said Barradas.
For a flat fee WealthPoint will model a client’s current situation layering their business and personal cash flows and balance sheets integrated with their current entity structure and planning strategies. Advisors can now provide their clients clarity and the assurance they need with the process WealthPoint has perfected with its own consulting clients. Through a streamlined process, WealthPoint will provide clients with access to their dynamic modeling tool along with an Executive Summary report describing their findings, strengths and weaknesses in the client’s current estate, business and financial planning strategies. Clients will also meet with one of WealthPoint’s Partners and their Director of Business and Tax. In addition to baseline financial modeling, WealthPoint will provide continued scenario modeling, brainstorming and consulting at a blended hourly rate.
About WealthPoint, LLC
WealthPoint, LLC is headquartered in Phoenix, Arizona and specializes in providing a holistic approach to succession, exit and wealth transfer planning. WealthPoint serves affluent families and middle-market, family-owned and controlled companies throughout the United States. The company’s unique process combines thorough discovery, collaborative and flexible solutions, and an unbridled commitment to implementation and on-going support. WealthPoint is an Affiliate firm of M Financial Group, one of the nation’s premier financial services design and distribution companies, serving the ultra-affluent and corporate markets through an exclusive network of more than 125 of the nation’s most successful and innovative financial services firms. More information is available at www.wealthpoint.net.
Happy New Year. We begin this year as we ended the last – approaching another cliff. To start the year off right, Andy Friedman appeared yesterday on CNBC to discuss the ramifications of the fiscal cliff compromise. You may access the segment by clicking here.
As we wish you and your family a Happy New Year we’d like to provide you with some insight into the most recent tax legislation affecting your family and business. Congress passed the American Taxpayer Relief Act early Tuesday morning enacting tax hikes to the wealthiest Americans while extending other pro-business tax incentives. The act’s nontax features include extensions of the emergency unemployment insurance and postponement in automatic cuts in Medicare payments to physicians. It also delays until March automatic federal sequestration that otherwise would have begun this month.
Individual Tax Features
All the individual “Bush era” tax rates are retained with the addition of a new top rate of 39.6% imposed on income over $450,000 for married taxpayers filing jointly. Personal exemption and itemized deduction phase-outs are reinstated at a higher threshold of $300,000 for married taxpayers filing jointly. The capital gains and dividend rate has increased to 20% for those taxpayers in the top bracket and remains at 15% for the middle brackets and zero for taxpayers in the 10% and 15% brackets. In addition, the law permanently indexes the Alternative Minimum Tax exemption amount for inflation, extinguishing the need for the annual “patching” of the AMT.
The American Opportunity Tax Credit for qualified college tuition expense was extended through 2018, and the above-the-line deduction for qualified tuition was extended through 2013. The Act also extends tax-free distributions from IRA’s to charitable organizations through 2013.
Gift and Estate Tax Features
The estate and gift tax exclusion amount remains unified at $5 million indexed for inflation but the top rate increases from 35% to 40% effective January 1, 2013. Also, the “portability” election, allowing the surviving spouse to utilize the deceased spouse’s unused exemption, has been made permanent.
Business Tax Features
Enhanced depreciation incentives have been extended through 2013 including increased expensing under Section 179 and additional 50% first-year bonus depreciation. Also the fifteen-year straight-line cost recovery for qualified leasehold improvements has been extended.
The Act temporarily extends the 100% exclusion of gain on Qualified Small Business Stock held for more than five years. In addition, it extends the reduction in S corporation recognition period from 10 years to 5 years for built-in gains tax.
The credit for increasing research and development activities has been slightly modified and extended through 2013.
Healthcare Reform Legislation
In addition to the various provisions discussed above certain provisions from the Healthcare Reform Legislation took effect January 1. The employee portion of the Medicare tax, normally 1.45% of covered wages, increased by 0.9% on wages exceeding $250,000 for married taxpayers filing jointly. An additional Medicare tax on investment income also took effect January 1. The Legislation imposes a tax on individuals with modified adjusted gross income greater than $250,000 for married taxpayers filing jointly. The 3.8% tax is on the lesser of the taxpayer’s net investment income or the excess of the taxpayer’s modified adjusted gross income in excess of $250,000 for married taxpayers filing jointly. Net investment income includes interest, dividends, annuities, royalties, rents, capital gain and passive activity trade or business income.
As always should you have a client matter you would like our assistance with, please feel free to contact us.
The WealthPoint Team
Market Trend: Beginning in 2013, a new 3.8% Medicare tax will apply to certain investment income, and income taxes generally may increase if the Bush tax cuts expire. Thus, individuals could have difficulty structuring their financial affairs in a tax efficient manner given the current uncertainty regarding future tax rates.
Synopsis: Owners of traditional IRAs who are considering a Roth conversion may wish to do so in 2012. Conversions after 2012 could be subject to higher income tax rates if the Bush tax cuts expire as scheduled on Jan. 1, 2013. Further, post-2012 conversions will increase the IRA owner’s modified adjusted gross income for purposes of determining whether the owner exceeds the income thresholds for application of the new 3.8% Medicare tax on net investment income (although the Medicare tax itself would not apply to the taxable income resulting from the Roth conversion). Taxpayers may retroactively reconvert the Roth IRA back to a traditional IRA before the taxpayer’s filing deadline (including extensions) for his or her 2012 tax return without penalty if recommended by subsequent changes in the tax laws or the taxpayer’s circumstances.
Take Away: Regardless of whether tax reform occurs or the Bush tax cuts expire, certain tax increases under President Obama’s health care legislation will take effect in 2013. Accordingly, owners of traditional IRAs should analyze (1) the potential benefits of a Roth conversion for their particular circumstances, and (2) whether doing the Roth conversion in 2012 would increase the conversion benefits given the tax changes scheduled for 2013, keeping in mind the opportunity for a retroactive re-conversion if circumstances later change.
For hundreds of years, affluent families have been guided by their advisors to steward their material assets. Attorneys, CPAs, investment and insurance advisors and financial planners all come to the table to help you identify the best course of action. The stewarding of your financial or material assets is actually only one-third of the process. The two additional elements are beginning to surface in more conference rooms and family rooms than ever before.
The second and third elements of planning include 2. the communication of your decisions to those who’ll be impacted by them, and 3. The quality of communication that exists within the family system in general. When all three areas have been tended to, families achieve holistically wealthy relationships.
Why is open communication with heirs important?
So many times we see families concerned that if their heirs knew of their substantial impending inheritance, it would rob them of drive and work ethic and implant a sense of entitlement that derails their adult life.
In reality, there are many programs and models available for mentoring heirs to be effective wealth owners. By beginning the process while you’re here to participate, you can observe and influence the training process. You can help ensure that the inheritance doesn’t derail the heirs and that the financial resources are used for great causes, not squandered. You can leave this world knowing that your heirs understood who you were, how you amassed the wealth and what you hope will happen with it in the future. That’s why communicating the nature of your decisions is so crucial to establishing wealthy relationships.
Quality of communication: not just what but how…
The third element of wealthy relationships is the quality of communication that exists or can be aspired to within your family system. Just like in marriage, the better the foundation for communication, the greater the likelihood that relationships can survive difficult times. This is a crucial and wonderful area that can be addressed during your lifetime regardless of the age of your heirs. Even relationships with and between adult children can be repaired and strengthened. Again there are entire processes and advisory disciplines based on the improvement of family communication.
Picture your heirs thirty years from now sitting around a family dinner table. What do you aspire for in the future of those sibling relationships and developing family units? Consider your ability to influence what’s happening at that family dinner simply by doing the heavy lifting to increase the quality of communication in your family today – to equip them with communication skills just as you’ve equipped them with morals, values and integrity. This is the third element of wealthy relationships.
If these aspects of planning appeal to you, ask your advisors how to bring the process and conversations to the proverbial planning table. And with the holidays approaching, there’s no better time for families to rally around their long term goals and commitments to each other.
In our society, the act of giving or gifting has become somewhat clinical. We give because a Hallmark holiday shows up on the calendar, or because the tax code looks upon us more favorably if we gift at certain intervals. Or, we gift because an organization approaches us and pleads its case. Giving or gifting becomes an item to check off the long task list of daily life. We sometimes bypass the social dynamic and the sheer enjoyment that could have accompanied the action.
Why we give…
At the most basic level, we give so we may receive – not from a selfish perspective – but because it feels good to help a person or a cause for whom we care deeply. Giving feels good because many of us have received so much during our lifetimes – gifts of mentorship, education, career opportunities or wisdom. Giving lets us right the equilibrium of the give/receive dynamic.
The lost art of participation
Even though it has the opportunity to carry all the enjoyment and meaning described above, giving instead becomes a reaction or a default, often triggered by external circumstances. In the process, our own receiving becomes an afterthought.
Consider how it can feel – to you and the recipient – to harness the lost art of participation. The next time you’re ready to initiate a gift – to sign a check or mail a package – ask yourself a few questions. Then, consider enclosing a note with your gift – the gift of your own experiences or intentions.
- What’s the impetus for this gift?
- How do you feel about this instance of giving?
- What do you want the recipient to know about what this act of giving means to you?
- What has been your most profound experience of receiving a gift (consider gifts in the broadest sense – money, opportunity, mentorship)?
- What could the receiver of the gift you’re about to impart learn from your past experiences of receiving?
Participation in the giving process allows us to reclaim the give/receive dynamic that is so central to the experience. Giving up your seat on a train to someone who needs it more creates a reciprocal flow of gratitude. If you carry out the same action yet you add eye contact and a smile, you’ve reclaimed the lost art of participation. Participation allows gifting to carry its full impact for both the giver and the recipient.
In our adult lives, we’re often naturally inclined toward philanthropy. Whether we give our time, talent or financial resources, doing so is a response to feeling grateful for our own good fortune. Many who have succeeded in business and career feel that much has been given to them to make their success possible – mentorship, training, education and opportunity. We find ourselves wanting to give back – applying gratitude to restore the equilibrium.
How do we teach and imbue the philanthropic cycle with young people who have yet to complete their first decade of life? Creating practices and awareness around gratitude is a place to start.
Embracing non-financial philanthropy
You can begin the process by sitting down with a grandchild, niece or nephew and discussing the aspects of life that make him or her feel safe or happy. Record the young person’s thoughts in a dedicated notebook that you’ll come back to for future parts of this adventure. After you’ve created an initial list together, ask the young person to specifically consider things that can’t be held in two hands – intangible things that make him or her feel safe or happy. This might include playing outdoors, laughing with friends or learning new things in school.
Through the course of your conversation, help the young person understand that to “have” isn’t limited to physical possessions. When you become aware of what you have that doesn’t cost anything, there can be an unlimited supply to give away.
Creating contrast: take an observation field trip
With your notebook in hand, take the young person out and about into the community. Visit a mall or a playground, a soup kitchen or a hospital. Select an environment that will stretch his or her thinking without being overwhelming or scary. Ask the person to notice what the people around them have and what they don’t have. Ask them to consider things that are intangible – that they can’t hold in their hands. This could be a special talent on the playground, a beautiful smile or an inclination to share.
Anchor the experience with gratitude
Consider creating a regular connection time to continue discussing what the young person noticed in his or her life and the lives of others. Help the young person understand the connection between being happy about your circumstances and being thankful. Awareness of gratitude takes people to that adult response of wanting to give – to restore equilibrium for all we’ve received.
Overtime you can transition your discussions to help the young person identify behaviors he or she would like to donate and to whom he or she wishes to donate. This could be as simple as giving a special smile to a kid at school, or as involved as going back to the soup kitchen to play games with or serve soup to the people in the room. Throughout your interactions remember to pause and be grateful for the experiences.
A new excerpt from Andy’s speeches, added to the front page of his website, discusses his current thinking on the likely Congressional deliberations over the extension of the Bush tax cuts at year end. You may access the video by clicking here.
The Washington Update from Andy Friedman
Roth IRA conversions: Tax rates are likely to rise at year end as Washington considers whether to permit some or all of the Bush tax cuts to expire. On the other hand, tax reform efforts in 2013 could reduce rates. Fluctuating tax rates provide an interesting arbitrage opportunity for Roth IRA conversions in 2012. Investors who expect to remain in the same tax bracket in retirement might wish to convert their IRA to a Roth IRA this year so that they can receive future earnings tax-free. If tax rates then fall next year, they can act before October 2013 to re-convert back to the traditional IRA. A new white paper on the site discusses the rules governing Roth IRA conversions (and re-conversions) and identifies the types of investors who might be well-advised to pursue this strategy.
And now to this quarter’s mailbag:
Is there a chance that Congress will repeal or ameliorate the alternative minimum tax?
The alternative minimum tax has become a chronic headache for many taxpayers. The AMT was enacted to ensure that wealthy individuals pay their “fair share” of taxes. Over the years, due to tax cuts and bracket creep caused by inflation, the AMT has crept very much into the middle class, affecting an ever increasing number of taxpayers.
Given outsized federal budget deficits, the government cannot afford simply to repeal the AMT and lose the significant revenue it raises. Although this inability may frustrate affluent taxpayers, the alternative could be worse. If Congress were to repeal the AMT, it would need to recoup the lost revenue. It likely would do so by raising further the taxes imposed on the people the AMT was initially intended to affect — namely, the wealthy. So affluent taxpayers may be better off with the current system, under which middle class taxpayers contribute to the revenue raised by the alternative minimum tax.
Although Congress is unlikely to repeal the AMT as a standalone “rifle shot”, there is some prospect that next year Congress will tackle tax reform — eliminating loopholes, simplifying the tax code, and reducing the top tax rates. Part of reform likely would be the elimination of the AMT. Whether Congress can agree on tax reform legislation in today’s partisan atmosphere is far from certain. Absent successful tax reform legislation, the AMT is here for the foreseeable future.
Ironically, the AMT may offer affluent investors some salvation from higher tax rates. The Bush tax cuts are slated to expire at year-end. The Obama Administration is proposing permitting the tax cuts to expire only for families with income over $250,000 (individuals with income over $200,000). Either way (whether the cuts expire for everyone or only affluent payers), higher-income taxpayers face the prospect of increased tax rates next year. But many taxpayers’ alternative minimum tax will continue to exceed their regular tax, even when regular tax is computed at the new, higher rates. These taxpayers will feel no effect from the expiration of the Bush tax cuts. Other taxpayers will move out of the AMT position as the regular tax rates rise; that is, their regular tax computed at the new, higher rates will exceed their AMT. Taxpayers in this position, however, are permitted to carry forward the AMT paid in prior years and offset that amount against regular taxes due. For these taxpayers, the carryforward of prior AMT paid will blunt the effects of the tax increase.
One final point. Every year, Congress keeps the AMT from expanding even further into the middle class by passing an “AMT patch.” Currently, there is no patch in place for 2012. Congress is likely to seek to enact this patch in the lame duck session at year-end or, failing that, early next year on a retroactive basis.
Are we likely to see Congress enact a value added or national sales tax?
Heightened concern about the budget deficit has led to talk of the need for a federal “consumption tax”, perhaps in the form of a value added tax (VAT) or a national sales tax. Among other advantages, such a tax would address the revenue loss from the “underground economy” by imposing tax when unreported income is spent.
Both parties have rejected a national consumption tax, albeit for different reasons. Even small increases in the consumption tax rate would bring in billions to the federal government. Republicans thus reject a consumption tax as a money machine that inevitably will lead to less fiscal discipline and higher government spending.
Democrats, too, have concerns about a consumption tax. A consumption tax falls most heavily on the Democrats’ natural constituency: middle- and lower-income taxpayers, who spend a greater portion of their income. So Democrats do not want to tax what people spend; they want to tax what people earn that they don’t spend. Thus Democrats want to keep the income tax and further stratify it, raising rates on the wealthy to capture some of the money they are earning but not spending.
In 2010, the Senate passed a resolution against a consumption tax by a vote of 85-13. The Simpson Bowles deficit reduction panel viewed the enactment of a consumption tax as so politically unlikely that it did not propose such a tax in its final report. Given this sentiment, a consumption tax is unlikely to be enacted anytime soon, regardless of which party is in power.