CPS Resource Center

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Randy Dickinson — Fri, 20 Mar 2009 05:24:55 +0000

Capital Gains Taxes - Obama’s Plan

Randy Dickinson — Mon, 16 Feb 2009 19:24:02 +0000

Dow Jones Newswire: Obama’s capital gain tax plan may include:

Increase the top two marginal tax rates from their current levels of 33 percent and 35 percent to 36 percent and 39.6 percent, respectively. Based on 2009 income thresholds, that would result in a tax increase on singles making $171,550 or more and married couples making $208,850 or more.

Taxpayers in those brackets also face increased taxes because Obama plans to restore phase-outs of personal exemptions and itemized deductions. This means that high-earners would not only face higher tax rates, but they would also lose some or all of their personal exemptions and itemized deductions.

Obama has also proposed raising the tax rate on capital gains income from 15 percent to 20 percent for single taxpayers making more than $200,000 and for married couples earning more than $250,000 annually.

Exempting seniors earning less than $50,000 from income tax.

Of course, nothing is set in stone yet but high net worth individuals will be looking for astute advice regarding taxes and the impact on estate taxes.

PARTNERSHIP VALUATION DISCOUNTS AT RISK

Randy Dickinson — Tue, 03 Feb 2009 04:10:27 +0000

By Charles Rubin

On January 9, 2009, Representative Earl Pomeroy introduced HR 436 (”Certain Estate Tax Relief Act of 2009″). The Bill would freeze the Federal estate tax exemption at $3,500,000 (the 2009 level), and retain the tax rate for estates exceeding that amount at 45 percent (50 percent for estates between $10 million and $23.5 million). The Bill, however, would also seek to eliminate popular estate planning techniques by disallowing most discounts associated with family limited partnerships containing “non-business assets” (such as marketable securities). A Democrat controlled White House and Congress, coupled with the current economic climate, have also caused predictions of additional estate tax reforms and there are at least four such bills currently pending in the House. Valuation discounts (particularly of the minority and marketability type) may significantly reduce the values of transferred property. Under current law, if a taxpayer transfers interests in a non-publicly traded partnership, whether by gift or at death, the partnership interests would be valued at the “fair market value” of the property, generally defined as the price that a willing buyer would pay a willing seller for the partnership interests. Since family partnership interests are not publicly traded, and typically do not represent a controlling interest in the partnership, under current law, business appraisers typically assign substantial discounts when valuing properly structured partnership interests.

These valuation principles apply to any non-publicly traded entity and allow shifts in assets to younger beneficiaries in a tax effective manner. If HR 436 is enacted and becomes law, taxpayers would not be able to receive a discount on “non-business” assets held by their partnerships. Instead, those assets would be valued as though they had been owned directly and transferred to the recipients.

Finally, HR 436 would seek to deny “minority interest” discounts by providing that, in the case of the transfer of partnership interests other than an interest which is “actively traded”, no discount shall be allowed by reason of the fact that the partner does not have control of the partnership if the transferor and his or her family have control of the partnership.

As proposed, HR 436 would apply to transfers occurring after the date of enactment. Nevertheless, there is the possibility that any tax law may be applied retroactively. Although it is uncertain whether this legislation will be enacted, it may reflect the attitude of the new administration of retaining and expanding the current estate tax laws.

Thanks to Jordan Klingsberg of our office for the above summary.

Keynotes on the Future of Business

Randy Dickinson — Mon, 26 Jan 2009 04:00:28 +0000

This is a compilation of keynote speeches on the “state of the economy”. It may not be true, but this is what your customers are listening to.

Click here to view the embedded video.

Broker cited for bilking elderly clients

Randy Dickinson — Thu, 08 Jan 2009 16:37:45 +0000

ARMANDO RIOS • BULLETIN STAFF WRITER • JANUARY 8, 2009

This event reminds us why Integrity and Honor are so cherished and why people can be so mistrusting or our services.

The Arkansas Securities Department issued a cease-and-desist order Tuesday against Mountain Home resident Robert Kyle Stewart for the allegedly fraudulent misappropriation of more than a half-million dollars from two elderly Baxter County residents. Arkansas Securities Commissioner A. Heath Abshure scheduled a hearing to determine whether Stewart’s broker-dealer agent and investment adviser representative registrations should be permanently revoked in connection with an alleged misappropriation of more than $600,000 from two elderly female clients.

It’s alleged Stewart, while employed by A.G. Edwards & Sons Inc., improperly designated himself as beneficiary of one of his client’s charitable trusts and adjusted the monthly benefits payable, reducing an 89-year-old widow’s monthly income by 50 percent.

In addition, the securities staff alleges Stewart misappropriated $283,734.29 from the client’s account on June 23, 2007.

Stewart was to repay the loan through yearly payments of $5,000. Stewart made three payments, according to the Securities Department.

According to the department, in 2007, the client created a charitable remainder trust funded with approximately $1.6 million from a stock sale, and she understood she would receive $10,000 per month from the trust for the rest of her life with the remainder to be donated to certain charities. Stewart was designated as the donor adviser, allowing him to determine which charities would be beneficiaries.

According to the department, Stewart submitted a revised application that removed him as donor adviser and named himself a 50 percent beneficiary for his life, unknown to the client. As a result, the first client’s monthly income was reduced from $10,000 to $5,000.

Stewart received $27,610.54 from the client’s trust before being removed as an income beneficiary by the client with the assistance of A.G. Edwards & Sons. At the same time, A.G. Edwards & Sons removed Stewart as the client’s broker, the complaint states.

The securities staff alleges Stewart took advantage of a second client, who was 102, by enticing her to invest more than $340,000 in CCK Corp., an entity in which Stewart served as president.

“Stewart fraudulently represented to the client that CCK was a ‘farming or cattle ranching’ venture, when in reality CCK’s only ‘asset’ was a checking account used by Stewart to convert the client’s funds to his personal use,” according to the Securities Department. “The records of the Arkansas Securities Department showed no registration or exemption filing for the CCK Corp. investments to be sold in Arkansas.”

Account statements revealed funds were used to buy a 2006 GMC Yukon XL, pay gambling debts and to pay for home improvements. Checks written on the account were signed by Stewart, according to the complaint.

The cease-and-desist order notes A.G. Edwards conducted an internal investigation which resulted in Stewart’s termination and a monetary settlement paid to Stewart’s victims.

According to the Securities Department, Abshure also found Stewart committed securities fraud in violation of the Arkansas Securities Act in dealings with both clients and, in addition, Stewart violated a number of activities prohibited by sales practice rules by the commissioner, including rules prohibiting borrowing customer funds and other “fraudulent, dishonest and unethical practices.”

The investigation continues and any residents with additional information concerning the matter are urged to contact Arkansas Securities Department attorney Shannon Underwood at (501) 324-9260 or 1-800-981-4429.

According to the amended complaint, Stewart had been registered as a broker and dealer agent in Arkansas since July 5, 1999 and as an investment adviser representative since May 7, 2002.

Stewart was employed with A.G. Edwards & Sons, Inc. from Sept. 10, 1990, until his termination Dec. 6, 2007 when the company cited a violation of RIM policy and industry rules.

According to the Securities Department staff investigation, A.G. Edwards & Sons began an internal review Nov. 9, 2007 of Stewart’s activities with the clients after a telephone call from an attorney representing the two clients. The attorney told A.G. Edwards & Sons that Stewart was designated a second income beneficiary for the first client’s charitable trust but the client did not understand how Stewart could be designated as such.

A.G. Edwards & Sons settled complaints regarding Stewart’s actions with the first client for $264,734.29, and with the second client for $345,914.13, according to the complaint.

Bailout?

Randy Dickinson — Tue, 06 Jan 2009 21:54:19 +0000

A comic strip 5 years ago! (Click to enlarge)

Happy New Year

Randy Dickinson — Fri, 02 Jan 2009 02:56:32 +0000

I saw this and couldn’t resist!

mistakes

The Emergence of the Digital Elite

Randy Dickinson — Fri, 26 Dec 2008 17:33:44 +0000

In a way, the pressure of real-time information is polarizing - the hard-working people are becoming harder to replace, while slackers and perhaps less knowledgeable people are just not needed. We have seen this trend in software engineering for a while - a handful of smart people can accomplish much more than an army of mediocre workers. A skilled, quick professional stands out these days. The people who shine are the people who get the new world - a no-nonsense approach, courtesy, and most importantly, speed.

Recently, my insurance broker switched companies. He quickly contacted me, offered an attractive new package, and then drove 1.5 hours from his office to my home to sign the papers. His commission would not want warrant the trip, but he was smart to make the investment of his time because he won me as a client. On the other hand, the cost of losing a talented employee for his old company just increased - they also lost a client, and I am sure I was not the only one.

Although my insurance agent lives in the technical world, he is part of new breed of folks that I call the digital elite. He uses Facebook to keep in touch with his friends, he was savvy enough to look up my company on the web, and he knows all the cool financial websites. In other words, he is on top of what’s going on. He knows all about the speed of information in our world. And this makes him a serious and important player, of the type that is really hard to replace.

Wealthy donors say they don’t make a difference?

Randy Dickinson — Thu, 18 Dec 2008 00:44:05 +0000

By Jeff Brooks
Something’s wrong with fundraising. At least, that’s one conclusion you could draw from a study reported in the Wall Street Journal Wealth Report blog at Why the Rich Give to Charity.
The survey, by the Center on Philanthropy and Bank of America, asked people with incomes of $200,000 or more or a net worth of $1 million-plus, about their motivations for giving to charity. Here’s the key finding:… 46% of respondents said their charitable donations have a “greater impact on their own personal fulfillment” than on those who receive their gifts.
Less than 20% believed their giving has a major impact on the organizations they support, and only 6% feel that they’re making significant impact on society.
If you pay a lot of attention to donors, the fact that giving creates a lot of personal fulfillment will be no real surprise. What’s distressing is the low level of belief in their impact on the organizations they support and on society in general.
Why are these donors so unimpressed with the impact they’re making through their giving?
It’s (at least in part) a failure of communication.
Are you doing your part to persuade your donors (major donors especially) that their giving does have a major impact on your organization and that they do significantly impact society?
Maybe more important, do the facts support those two assertions? (If they don’t, what is your organization doing wrong, and how are you going to fix it?)
You know how I feel about surveys: They don’t necessarily uncover truth; they only reveal what people said in the survey. But really, a strong, smart, donor-centered nonprofit should make it so abundantly clear to its donors that they matter that it would be impossible for them to say they don’t.

Comprehensive Estate Plans

Randy Dickinson — Mon, 15 Dec 2008 16:29:08 +0000

By Hannah Shaw
Developing a comprehensive estate plan with an experienced legal professional can cost tens of thousands of dollars. Not having an estate plan in place and operational at the time of death can cost both time and money in the form of unnecessary complications and taxes for the estate’s heirs. This is the reason many wealthy individuals decide to create estate plans in the first place; there is general agreement that having an estate plan can help ensure that the greatest amount of an estate’s assets make it to the designated people and organizations. Unfortunately, many plans never become real, getting derailed before documents are drafted and executed and the trusts, partnerships and other legal structures are created. We spoke separately to trust and estate attorneys and affluent individuals to compare their views on the situation and understand why.

Nonchalant Professionals
In 2003, and again in 2006, we conducted separate surveys with trust and estate attorneys who had designed and prepared estate plans for wealthy clients that were not implemented. Given the amount of effort and expertise it takes to develop an estate plan, we were surprised to find almost no concern among these attorneys for their clients’ lack of follow-through. In 2003, just 17% of them expressed concern, and the number dropped sharply to about 7% three years later (Exhibit 1).

Next, we asked about the type of follow-up initiated by the attorneys to encourage plan implementation. Roughly 80% of the attorneys that expressed concern about their clients’ inaction sent letters or e-mails suggesting they come in to sign their documents. Very few—only 13% of them—initiated personal contact either by calling or arranging a meeting (Exhibit 2). While those figures may seem grim, the lack of follow-up by unconcerned attorneys was startling. More than 80% of them met the clients’ lack of action with their own inaction and did nothing to promote further activity. Just 17% sent letters and e-mails, and only 1% placed phone calls.

The reasons behind the attorneys’ apathy lie in the very nature of the trust and estate business. It is largely transactional, meaning that lawyers are retained to work on a specific project or plan. Estate plans are long-term initiatives—designed to work over a period of many years—so once a project or a plan has been completed, the lawyers must find new clients. In effect, they close the books and move on without dwelling on whether their plan ever makes it to fruition. Furthermore, once a client has paid his bill, making sure the documents are signed becomes less important.

While this seems to be the status quo, it is an unsustainable situation for both trust and estate attorneys and for the wealthy individuals who need estate planning expertise.

Dissatisfied Customers
To understand why many wealthy individuals choose not to follow through on their estate planning efforts, we constructed survey samples in 2003 and 2006 of families that had net worths in excess of $10 million and that had not implemented their plans.

The overriding reason cited in both studies was that the plan did not satisfy the families’ goals, wants and objectives (Exhibit 3). Many clients begin the process not knowing exactly what they want or are unable to express it clearly, hoping that the attorney will be able to guide them through the process and help them crystallize their priorities and values. In the case of abandoned estate plans, the attorneys had been clearly unsuccessful in identifying their clients’ core issues but proceeded with plan development anyway.

Furthermore, most families felt uncomfortable with the attorney they had retained, which had a direct impact on their interest in pursuing the process. Unease is a typical reaction when service professionals are perceived as poor listeners, are not appropriately empathetic, function clinically or are not consultative in their approach. An interesting and perhaps related finding is that dissatisfaction among clients escalated in the three years between studies while concern among attorneys diminished.

It’s worth noting that roughly half of the families surveyed in both studies felt their estate plans were too complicated to implement. Oddly, though, most affluent families expect sophisticated and intricate strategies from their attorneys to protect their wealth. Nevertheless, it’s clear that many trust and estate lawyers fail to assess their clients’ level of knowledge about estate planning and their comfort with complexity, and do a feeble job explaining abstract legal concepts to laypeople.

Confusing And Condescending
Adding insult to injury, it seems that many trust and estate attorneys have other weaknesses when it comes to client interaction. Most of the families surveyed said they were unable to determine if the final plan presented by their attorney was, in fact, going to help them accomplish their objectives (Exhibit 4). Their attorneys did not, or could not, explain how the plan would work and their role in the process. Clients felt further alienated by the lawyers’ overuse of legal jargon and condescending behavior. Further analysis revealed that the perception of arrogance was derived from the consistent use of legal terminology, a “presumptuous air of authority,” and the unwillingness to devote extra time to helping clients understand the details and nuances of their plan.

Across the board, trust and estate attorneys were rated much lower by their clients in 2006 than they were just three years earlier, underscoring their inability to communicate the value of their work. This also shows the financial pressure facing attorneys with a largely transactional business model.

An Exercise In Futility
As noted previously, affluent clients have a lot at risk when they choose not to implement an estate plan. However, our research shows that trust and estate attorneys have much at stake as well when they leave their clients unsatisfied.

We all recognize that one bad experience can have an insidious and lasting effect and, in this case, can cast a pall over both the attorney and the law firm. Very few of the wealthy clients surveyed expect to work with the lawyer or the firm again, and a similarly small number would refer a family member, friend or business associate to the firm (Exhibit 5).

What’s worse is that instead of simply choosing to work with another attorney or directing their colleagues and confidants elsewhere, these unhappy and dissatisfied clients will advise other people to avoid the professional or the firm altogether.

These simple actions, while imperceptible to the trust and estate attorney, can have a compounded effect and cause business to flatline or suffer. As they were on the other questions, proportionately more clients are critical of their experience and their professionals in 2006 than they were in 2003. In that period of time, the structure of the trust and estate business has become less client-oriented and, therefore, less client-friendly while the superwealthy have become more astute and demanding purchasers of professional services.