Home for the Holidays

The holidays provide a time to reconnect with family members. So this is an appropriate time to discuss the family of financial planners. For decades, this financial planning family, as covered by the financial press, has included Chartered Financial Consultants® and CERTIFIED FINANCIAL PLANNERSTM. One family member absent from the published festivities has returned—the CPA Personal Financial Specialist (CPA/PFS).

In this season I am reminded of the critical role of CPAs in the financial planning process because of another cyclical event: the recruiting of CPAs by financial services firms. About every ten years financial services firms go on a binge to recruit CPAs to both refer business (and share in compensation) or to recruit the CPA into Financial Planning, asset management and product sales. The economy has recovered and the season as begun anew. Some recent headlines that have come across my desk are: “10-Step Plan to Meet More CPAs” and “What CPAs Want.” The articles opine that financial services firms through “strategic arrangements” with CPAs hope to provide financial services and products to the CPA’s clients. [Read more…]

Quack, Quack! Discernment Needed!

I am a fan of humor, which is off-kilter, offbeat and unconventional. One of my favorite authors of this genre is Douglas Adams. In his book Dirk Gently’s Holistic Detective Agency, he provides the following reinterpretation of a familiar phrase: “If it looks like a duck, and quacks like a duck, we have at least to consider the possibility that we have a small aquatic bird of the family anatidae on our hands.”

In a previous posting I made mention of how critical it is for consumers to understand how financial planners are compensated. I stated that for the majority of the financial services industry “compensation falls into two broad categories: products and services provided and employment relationship. Both of these categories can have an impact on recommendations provided by the financial planner.”

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Essential Health Benefits: Pablum for the Masses

I am having entirely too much fun with the Affordable Care Act. The next item I would like to review is the list of Essential Health Benefits. I have entitled the posting “Pablum for the Masses.”

Pablum is an entendre on several levels: it means bland or insipid, which this Act most certainly is. It is a bland soft cereal for infants, and our government is certainly treating its citizens as infants by the passage of the act. Finally, it may mean simplistic writing, speech, or conceptualization, and the act is simplistic to the point of absurdity. [Read more…]

Major Tom to Ground Control!

“Once again, please check to make sure your seat belt is securely fastened, your seat back and tray table are in the full upright and locked position, and all carry-on luggage is placed completely underneath the seat in front of you.” At some point, everyone who travels by air has heard this familiar refrain. There’s even a feeling of comfort in this familiar routine of flight. But what if the next time the Emergency Briefing Public Announcement said, “Once we reach our cruising altitude we will engage the auto pilot and return to the cabin and begin our cabin service.”

I’m fairly certain fear would break into our “comfort bubble.” Feelings of unbelief and incredulity probably would surface and maybe even some anger. We might think, I’m paying for a service: air transportation. For this service I expect flight attendants in the cabin to provide safety and a snack. I also expect the flight crew to pilot the aircraft! These feelings and responses are entirely appropriate and natural, and yet . . . .

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Payable Unto Death: Halloween Etymology

All Hallows Eve is an unofficial kickoff to the Fall holiday season, and one of the more ghoulish refrains I have heard this season is from financial advisers. Their endless refrain is that mortgages are bad, and if you have a mortgage, you should pay it off. Their endless cacophony is like the wail of a Banshee, or the howling of a wolf:  “All debt is bad. It is ungodly to have debt.” It sounds as if they are trying to scare children or to manipulate their clients through fear. Obviously, they have never considered the needs of a business owner.

I would like to begin this posting with a little etymology. Mortgage, like many of the words we use in finance, is from the French language. And yes, its root meaning will bring a chill to your bones: mortgage means payable unto death.  The presumption is that the borrower will be servicing the debt until they die.

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Don’t Let the Bogeyman Get You!

An adviser forwarded the following email string along to me—you can’t make this stuff up!  Only in America. . . .

The adviser’s clients had landscaping work accomplished at their home. After the work was completed a final bill was sent by the landscaping firm.  At the bottom of the invoice was the following handwritten note:

“P.S.  I know I quoted you $635.00 for the project. However, being a business owner I don’t mind asking if you can pay in cash, or write a check out to me in my name. If you do so, I will reduce the price for my services to $600.00.  My taxes are horrible.  If you don’t want to, I will not be upset at all and will understand 100%.  Please let me know.  I can stop by and pick up the check at your convenience.”

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DOMA Update & The Department of Defense

I have selected to review the Department of Defense (DoD) and the Department of Veterans Affairs (DoVA) response to the Supreme Court’s (SCOTUS) ruling (June 26, 2013) on the Defense of Marriage Act (DOMA) first, because the DoD was an early riser and was the first department with a response to the DOMA ruling. As a matter of fact, it was on February 11, 2013, that the then Secretary Defense, Leon E. Panetta, first issued a memorandum on extending benefits to same-sex domestic partners of military members—predating the SCOTUS ruling.

The memorandum reviewed 20 programs available to military members in which they could designate benefits to someone other than a spouse. These programs cover education, survivor, travel and transportation benefits. The memorandum then identified additional benefits that would be provided “to same-sex domestic partners of Military Service members and their children through changes in Department of Defense policies and regulations.” The memorandum ended with a list of benefits which could not be made available to same-sex spouses because of statute. Health care and housing allowances are examples of two of those benefits.

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Revocable Living Trusts – “All is fair in love and war”

The quote used in the title of this blog entry is often incorrectly attributed to William Shakespeare.  However, it is John Lyly, an English dramatist and writer who first coined the phrase. It means that in matters of war and love, there are ‘no holds barred,’ and that an individual should not be blamed for acting in their own interest. Their actions, no matter how deceitful or morally wrong, are justified as a means to an end.

“All is fair in love and war” is how I begin my conversations with clients regarding their estate planning. Family members, once amenable to one another become hostile antagonists. The system of probate court, established to protect the creditors and the heirs of an estate, becomes a party to an industry which preys upon individuals at their weakest moments.

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Estate Planning Tips for CPAs

Challenge: Shifting From Estate Tax Planning to Estate Planning

The American Taxpayer Relief Act of 2012 (ATRA) has changed the complexion of estate planning for CPAs and how they provide services in this area. So how do CPAs offer clients value in estate planning if it’s not tax planning related?

Solution: Start with your client’s tax returns.

When I meet with a client for the first time, the most important documents I examine are their last two years of tax returns. As I review them, I mentally go through The Checklist for Using the Tax Return to Identify Personal Financial Planning Opportunities. I am then able to identify and analyze the key financial and estate planning issues. Imagine, using a tax return to help clients in the areas that matter most to them—financial and estate planning!

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Pitfalls of Required Minimum Distributions

According to the Oxford English Dictionary a pitfall is a trap or a snare. Typically this trap is a pit flimsily covered or camouflaged. Another definition for pitfall is a hidden or not easily recognized danger or difficulty. Pitfall is the most appropriate word to describe the difficulty a taxpayer encounters when trying to navigate Required Minimum Distributions (RMD) and account types.

Almost everyone has heard about, or read the phrase, Required Minimum Distribution. The RMD is a requirement that taxpayers begin to take distributions from their retirement accounts. This is the government’s way of finally making you pay taxes on all those deferrals and the tax deferred growth in those accounts. The RMD is to begin no later than April 1 of the year after the taxpayer turns 70 and a half. So with that said: Are you beginning to see a pitfall?

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