Archive for June, 2012

Harris myCFO Expands Trust Capabilities for Wealth Clients by Forming BMO Delaware Trust Company

Adding to the scope of integrated wealth management capabilities made available to its ultra-high net worth clients, Harris myCFO® today announced the opening of BMO Delaware Trust Company, a limited purpose trust company, which will provide a full range of services afforded by Delaware trust laws.

The office, based in Greenville, Delaware, is led by Deborah Korompilas, President and Douglas Lundblad, Vice President.

Recognized for offering unique opportunities for tax planning, Delaware has become an established leader in addressing the sophisticated planning needs of ultra-high net worth families and individuals.

“The range of services allowable under Delaware statutes provides our clients with a meaningful set of strategies to protect, preserve and grow their wealth,” said Ms. Korompilas.

Ms. Korompilas pointed out that having a presence in Delaware makes significant added flexibility available to the planning strategies for Harris myCFO’s ultra-high net worth clients, such as enabling trustees to pour or ‘decant’ assets from one trust to another and splitting or ‘bifurcating’ administrative and investment fiduciary duties.

Along with a full range of trust services, Harris myCFO provides investment, tax, financial reporting, risk management, philanthropy, and capital advisory and custom banking services to ultra high net worth clients throughout the U.S.

For more information on BMO Delaware Trust Company, please visit:

About Harris myCFO®
Harris myCFO® provides integrated wealth management solutions with independent investment advisory services and the comprehensive capabilities of a multi-family office. This integrated wealth management model provides clients with the assurance that all their wealth matters are planned and integrated with seamless oversight and management ensuring greater client visibility and control while reducing the complexity and risk that often comes with significant wealth.

Services include Investment Advisory, Tax Planning and Compliance, Trust & is a brand used by Harris myCFO, Inc. providing Family Office Services, Harris myCFO Investment Advisory Services LLC, an SEC-registered investment advisor and certain divisions of BMO Harris Bank N.A. a national bank with trust powers. Not all products and services are offered in every state and/or location.

Source:  Harris myCFO

Posted by Steven Maimes, The Trust Advisor



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2012 Changes in Virginia Trust Law (Part 2): Decanting & Directed Trusts

Last week, we discussed in Part 1 of this topic how Virginia recently passed several bills that will revise state trust law on July 1, 2012.  Today, in Part 2, we will continue our discussion about these changes in the law.

As a reminder, while these rules are currently the law in a minority of states, the following is intended as an overview of these concepts for readers in any state.

Senate Bill 110 – Trust Decanting Powers

On April 4, Governor McDonnell signed Senate Bill 110 into law.  As of July 1, 2012, trusts with decanting powers can be used in Virginia.  Virginia is now one of at least 15 states to allow this kind of provision.

What Is a Decanting Power?

This is a power granted in a trust that enables its trustee to transfer all principal and income interests from the original trust to a newly-created, similar trust that serves to take the place of the original trust.

What’s the Big Deal?

Trusts can be revocable (changeable during the lifetime of the settlor) or irrevocable.  By design, irrevocable trusts are intentionally very difficult to modify, even if common sense would dictate a change, so that the original purposes and desires of the settlor are protected.  Decanting powers are essentially an end run around this problem.

A trust with decanting powers includes language that enables the trustee to transfer assets out of one trust into a second, similar trust that maintains the “spirit” of the original trust.  This is done so that the terms of the original trust can be modernized and/or create less administrative hassle for the trustee, thereby creating more flexibility in an otherwise unchangeable situation.

Attorneys Anne Marie Levin and Todd A. Flubacher of Morris, Nichols, Arsht & Tunnell, LLP in Wilmington, Delaware recently wrote this article describing state decanting statutes.  They include several scenarios where the inclusion of decanting powers in the original trust would be quite useful, because the powers would enable the trustee to adjust for future changed circumstances:

  • A beneficiary has special needs – the original trust would help the beneficiary a great deal more if it were a special needs trust.
  • The original trust does not provide for transfers of the trust to a new jurisdiction with more favorable laws.
  • The original trust does not provide for a trustee to resign or be replaced.
  • The original trust has errors.

At this point in time, it appears as if the majority of states still find that such powers create too much flexibility for these trusts to be able to maintain the facade of irrevocability.  However, Virginia residents will now how this option available to them.

Senate Bill 180 – Directed Trustees

On April 4, Governor McConnell also signed Senate Bill 180 into law.  As of July 1, 2012, trustees can now be protected against liability if they follow the directions of specifically named “trust directors”, “trust protectors”, or “trust advisors” in Virginia.  See this post from McGuireWoods LLP for further details on SB 180.

What Are Trust Directors / Protectors / Advisors?

These are individuals or organizations named in the trust document to either oversee or advise the primary trustee on specified aspects of running the trust.  In general, they are specifically named in the trust to help advise the named primary trustee, who may lack enough experience or expertise to run the trust effectively.  They are also named to help provide the primary trustee with an unbiased viewpoint, and can even be given the power to “break ties” between disputing trustees.

What’s the Big Deal?

If this new law is specifically referenced in a trust, the primary trustee can avoid personal responsibility for any breaches of fiduciary duty by the trust director.  In other words, the person you appoint as your primary trustee will not be held liable for any illegalities or acts of bad faith performed by anyone else you name to guide or direct your trustee.

For example, let’s say you name Joe as primary trustee of your new trust and also name ABC Bank as the trust director to run the trust’s investments.  Over time, Mary, the ABC Bank representative who oversees your trust, embezzles hundreds of thousands of dollars.  Before Joe discovers any problem, Mary moves to a foreign island country in the Caribbean, never to be heard from again.  If your trust references the new Virginia law on directed trustees (i.e. lists the specific Code section in the document), then even though Joe is the primary trustee, he would be personally protected from liability for ABC Bank’s negligence, fraud, irresponsibility, etc.

So obviously, this new law presumably will increase the chances that the person you name as trustee will even take the job.

Can These Updates Help You?

Asset protection trusts, trust decanting powers and liability protection for following the lead of a directed trustee represent some of the new directions in trust law that have developed over the last decade.  Including these provisions in your own estate planning documents can be of great use.

On the other hand, because these new rules lack the hundreds of years of legal precedent standing behind it, we still may experience some growing pains as we begin to implement them in our own documents.

Therefore, be sure to take great care if you begin including these rules in your own trusts in the immediate future.

Source:  The Zucker Law Firm

Posted by Steven Maimes, The Trust Advisor


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John Napolitano: Real Financial Planners

There is a lot of uncertainty among the public about what a financial planner actually does. Plenty of advisers call themselves financial planners even though they really aren’t. In fact, a recent study from Cerulli Associates found 59% of advisers call themselves financial planners, but only 30% actually offer Planning Services. This makes it even more difficult for potential clients to know what to expect from us as advisers.

When I tell people what I do, they want to talk about investments. But investing is only part of a “real” financial plan. CFPs who help their clients create a comprehensive plan give advice on everything in their clients’ financial lives.

Real financial planners start with the qualitative side. This part of the plan drives the rest, because it is basically what the client wants in life. The quantitative side of the planning process, from the risk analyses to actually investing the assets, comes later.

It takes a good 20 to 40 hours for me to create a real comprehensive plan. But I’m not working alone. I think of myself as the head coach. On any team, the head coach gets all the press, but he has 25 assistant coaches offering their own specialty.

I used to take my story on the road to share with other firms that wanted help with improving their efficacy and success with clients. Advisers would often say they already understood what I was saying about a real plan. But did they actually create real plans for their clients? Not always. They’ll say their client is small and they don’t need a comprehensive plan. Small-net-worth clients don’t want to pay for more than investing advice, they explain. But I believe that risk management becomes all the more important for those clients without much income.

Another reason advisers don’t implement real financial plans is because they don’t want to expose themselves to the liability that comes with accepting the fiduciary role. Most big name firms don’t allow their representatives to provide financial plans for this reason.

But the big secret is that clients want someone who is willing to take a look at everything, and go under the hood where other advisers have never gone. They want someone who is going to make sure their financial house is in order and ensure that it will remain that way forever.

It’s a lot of work and involves at least a three-year turnaround. If you want to take this approach, you need to expand your value to your client, which means expanding your services. In the first year you’re going to spend a lot of time and money developing the necessary administrative support and infrastructure, but it’s worth it. If you do it right, you’re going to uncover lots of opportunities.

I don’t expect every financial adviser to be an expert on every aspect of a financial plan, but I do expect them to know how to implement a plan that protects what’s important to their client. If you’re not going to do that, don’t call yourself a financial planner.

–  John Napolitano is Chairman and CEO of Braintree, Mass.-based U.S. Wealth Management.

Source:  WSJ Blogs

Posted by Steven Maimes, The Trust Advisor


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Nora Ephron On Divorce: Remembering Nora Ephron Through Quotes

“Marriages come and go, but divorce is forever.”

Nora Ephron penned those words as the tagline of HuffPost Divorce in 2010. Among her many literary and onscreen accomplishments — “When Harry Met Sally…,” “Heartburn” and “Sleepless in Seattle,” to name a few — The Huffington Post’s Divorce section was Ephron’s brainchild, and she served as our guiding force and editor-at-large.

Today, we mourn the loss of Ephron, who died Tuesday.

Ephron was a two-time divorcee, and divorce was a constant theme in her life. Her second marriage to — and subsequent divorce from — famed journalist Carl Bernstein inspired her 1983 novel “Heartburn,” which was adapted into the acclaimed film by the same name starring Jack Nicholson and Meryl Streep.

Ephron was one of the first women to talk about divorce with sophistication, humor and wit; her honesty about the subject added an inspired and relatable degree of poignancy to her work.

To honor Ephron and her legacy, we’ve collected some of her best quotes on divorce below:

The divorce has lasted way longer than the marriage, but finally it’s over. Enough about that. The point is that for a long time, the fact that I was divorced was the most important thing about me. And now it’s not. Now the most important thing about me is that I’m old.

– Nora Ephron, “I Remember Nothing”

Of course, there are good divorces, where everything is civil, even friendly. Child support payments arrive. Visitations take place on schedule. Your ex-husband rings the doorbell and stays on the other side of the threshold; he never walks in without knocking and helps himself to the coffee. In my next life I must get one of those divorces.

– Nora Ephron, “I Remember Nothing”

And then the dreams break into a million tiny pieces. The dream dies. Which leaves you with a choice: you can settle for reality, or you can go off, like a fool, and dream another dream.

– Nora Ephron, “Heartburn”

Above all, be the heroine of your life, not the victim.

– Nora Ephron, Remarks to Wellesley College Class of 1996

Jess: Marriages don’t break up on account of infidelity. It’s just a symptom that something else is wrong. Harry Burns: Oh really? Well, that ‘symptom’ is f*cking my wife.

– Nora Ephron,”When Harry Met Sally”

You want monogamy, marry a swan.

– Nora Ephron, “Heartburn” screenplay

I think that men were allowed to write about their marriages falling apart, but you weren’t quite supposed to if you were a woman. You were just supposed to curl up into a ball and move to Connecticut. But you know, it didn’t really matter because, as I said, I knew what the book was. It’s a funny book, and I was very happy that it sold a lot of copies.

– Nora Ephron on her book, “Heartburn”

Source:  Huffingtonpost

Posted by Steven Maimes, The Trust Advisor



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Balentine Takes Unusually Bold Approach to Social Media with Facebook Page

Among wealth-management firms, Balentine’s presence on Facebook isn’t at all typical.

The firm’s “wall” is crowded with news and insights from staffers, including messages from industry conferences, summer-reading recommendations and descriptions of kids’ baseball games.

It looks, in other words, like the Facebook page of an outgoing and intelligent person. And that’s exactly what the firm has in mind.

“People don’t go to Facebook to look up mutual-fund performance,” says Joe Stallings, communications chief at Atlanta-based Balentine, which manages about $1.5 billion. “We use it to let people know that we’re people with families who like to share things.”

That’s how Facebook and other social media can help firms build positive brand awareness–and do it at a safe distance from compliance obstacles, according to Mr. Stallings.

Mr. Stallings’s background, somewhat unusual for a wealth manager, has perhaps given him a sharper sense of how to use social media. While he began his career in financial service 20 years ago, he spent most of the past 13 years as a producer with Electronic Arts Inc. (EA), one of the world’s biggest computer-game companies.

“He’s absolutely right about the power of social media to put more depth on a firm’s brand and personality,” says Derek Brown, head of content at Jennifer Connelly Public Relations in Parsippany, N.J. “It shows that more advisers should be looking outside their industry for marketing ideas.”

Mr. Brown has shown his own talent at using social media for marketing financial advisers, helping JCPR shape an entertaining YouTube spot for wealth-management firm HighTower that ended up going viral.

For the moment, most financial firms seem frightened of social media–even though the Securities and Exchange Commission recently made it clear that regulators view social-media communications as they do any other type of electronic publishing.

To be compliant, a company–a registered investment adviser or broker-dealer–has to have approved the “profile” page. The back-and-forth chatter inherent to social media such as Twitter and Facebook isn’t subject to prior compliance-department approval, but it is subject to common sense. So don’t make performance guarantees, don’t make specific investment recommendations, and don’t post testimonials. On the “do” side, post a disclaimer if outsiders can chime in, and make sure every scrap and utterance is archived.

In a recent examination of seven independent firms’ public Facebook pages, picked at random, Dow Jones Newswires found that none encouraged interaction. Two looked like placeholders, with no profile or identifying information other than the firm’s name. The others featured only a company name and contact information.

To be successful with social-media brand building, Mr. Stallings says it helps to understand what brand building means–and how much time and money it warrants. “Branding is about the immediate associations people make with a company, but it’s not about getting referrals or new business, so we don’t spend much time on it and really no money,” he says.

It is also helpful to grasp the nuances of social-media types. While Facebook works for touchy-feely branding, Twitter is better for “asserting thought leadership” through short statements linked to economic analysis and other compliant content, he says.

Mr. Stallings doesn’t claim that Balentine has social media all figured out, however. “All we’ve got are anecdotal insights; people saying it’s refreshing we’re not talking about investments and products and services–and of course it’s nice when the same people who told us we didn’t need to be on Facebook in 2010 call now to ask for help with their own social-media plans,” he says.

– By Thomas Coyle


Posted by Steven Maimes, The Trust Advisor



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Growth Is Good, Efficiency Is Essential for Advisors Who Want To Thrive

Everyone in the industry knows they need to bring in new assets and new accounts, but it takes more than bolted-on AUM to take a viable business to the next level. We asked thousands of financial advisors for the keys to success and you told us: efficiency is king.

According to ByAllAccounts data, firms of all sizes — whether they’re under $25 million in AUM or $1 billion or more — cite the need to grow AUM and strengthen client acquisition as their most important priorities.

No surprises there. But what’s striking is what’s cited next on the wish list: maximum operational efficiency and on the other side of the coin, an end to the headaches of manual data entry.

Our data tells us that on average, the bigger the firm, the greater the perceived need for operational efficiency.

Firms with $700 million in AUM stress operational efficiency more than firms with $300 million in AUM, who in turn rank it higher than firms with $100 million.

This correlation holds true for firms of all sizes up to $1 billion at AUM, at which point the importance of operational efficiency seems to level off.

Three conclusions we can draw from this data set:

1. Growth requires scalability, and all too often, that’s lacking.

Business growth brings its own unique set of challenges. With manual data entry, for example, you can get by on a smaller scale—but once volume increases, you’re saddled with an inefficient and potentially error-prone process that is not inherently scalable.

So many human hours required to enter data, but so little time to actually do it!

Thus, the bigger a firm becomes, the more urgently its advisors cry out for scalable solutions that meet operational requirements for timely, error-free data reconciliation, performance reporting and the full range of back-office functions. (For additional information on how to overcome the limitations of manual data entry, see our Operational Efficiency eBook.)

2. As firms grow, their principals confront hard questions about efficiency, productivity and accuracy.

The stated need for operational efficiency suggests that advisors are keenly aware of the limitations of manual data entry — and are asking the tough questions that go hand in hand with it:

What’s my time worth? And the time of my colleagues and staff? How many hours do I really want anyone at our firm spending on inefficient operations when, instead, they could be servicing our valued clients? What are the costs of incorrect or delayed information being given to these clients? And how does that impact our ability to meet clients’ expectations for the excellent client service they deserve?

Perhaps these questions sound familiar. If so, you’re dealing head-on with issues of operational efficiency, even if you haven’t formally put it at the top of your list of pertinent issues that require attention.

3. Pent-up demand for efficiency-enhancing solutions is finally being answered.

For the past several years, with uncertain financial markets, some firms have held off on investing in the people and technology that can help them improve operational efficiency.

Now, with growth topping the list of business needs, this trend appears to be reversing as more and more firms gear up and re-commit themselves to building their human and technological infrastructures.

At ByAllAccounts, this has created even greater demand for our account aggregation solutions. Advisory firms rely on us to electronically aggregate billions of dollars of account balance, holding and transactional information from thousands of financial institutions on a daily basis.

Each of these advisory firms receives a single, consistent feed to their back office operation and gains easy access to hard-to-reach accounts like 401(k)s, 529s and variable annuities.

This enables them to efficiently provide clients with a complete investment picture — and provide holistic investment advice — while eliminating the need for making point-to-point connections with multiple custodians and going through the laborious process of manual data entry.

For a more detailed look at how ByAllAccounts helps today’s advisory firm, please take a moment to review our Operational Efficiency eBook.

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Outsource Portfolio Providers Debut New UMAs This Fall at Upscale Advisor Expo

Model-only outsourced portfolio solutions are still making headway as cost-conscious industry leaders realize the pre-credit-crunch days of “business as usual” are never coming back. Upcoming conference lays down the new law.

Last summer, there was still a lot of resistance to the idea of wealth management firms unbundling their in-house investment operations while the global markets were melting down.

After all, many advisors still consider themselves investment managers first and foremost, so few were eager to hand their client portfolios to outsiders at such a vulnerable moment.

But now, after another year of crisis in the euro zone, more of the industry’s movers and shakers are embracing the concept in order to protect their clients and their margins.

The hottest flavor of outsourced management — the unified managed account or UMA — has so much traction right now that UMA-centric approaches are headlining Financial Research Associates’ managed accounts summit this year. (Register here.)

The appeal boils down to cost, says managed account guru David Gardner of SMART Consulting.

“Despite all the rhetoric about which flavor of platform is superior, it always comes back to the solutions that provide the ability to control costs and be creative,” he explains.

The “U” may stand for “ultimate”

Acknowledging all the “rhetoric” out there is refreshing in a corner of the industry that’s survived more than a few cycles of hype and stagnation.

UMAs have been around for decades in various forms, but it’s only in the last few years that vendors have more or less gotten behind what to call the category, much less how to get advisors on board.

Even if you still call it “overlay management,” “model-only accounts” or the up-and-coming “unified managed household” approach, a UMA is really just a way to keep the assets on your platform while sending out the responsibility for investing them.

It doesn’t necessarily replace conventional separately managed accounts — in which the assets actually move to the outside manager’s platform — so much as it creates a new structure in which SMAs, mutual funds, individual stocks and bonds or even alternatives can share space.

In other words, UMA isn’t a new asset class so much as a new way to hold whatever asset classes your outside manager of choice decides your clients need, not to mention anything the industry thinks up in the future.

Because each new asset class fits into a “sleeve” or silo in the account and sleeves can be added or eliminated at will, firms that invest the time and money in migrating to a UMA platform now will theoretically never need to do it again down the road to chase tomorrow’s hot products.

That in itself is both a big incentive and a true evolutionary leap over SMAs, which started out well 35 years ago but hit a wall well before accumulating $1 trillion in assets.

Cost and flexibility win plenty of fans

The problem with SMAs is that they just weren’t flexible enough to prove their worth to the richest investors or cheap enough to scale down to the retirement account crowd.

Firing an SMA manager meant calling in, liquidating the positions and waiting for the cash to come back before you could reinvest it somewhere else — a process that could easily take days.

The UMA instantly sells off the old manager’s security choices and buys whatever the new manager recommends. Depending on liquidity, the changeover could be practically instantaneous.

And it’s cheap. The outside managers may grouse about their share of the basis points, but in general, advisors can give their clients institutional-quality portfolios at a fraction of what it would cost to deliver any other way.

That means lower fees for clients or, more realistically, less pressure on the advisor’s own margins, David Gardner says.

“Simply consolidating everything that was once on multiple platforms onto a single platform generates plenty of efficiencies,” he points out.

“And cost inefficiencies are what caused the collapse in SMA margins in the first place, so we seem fairly well shielded from that here.”

Gardner says the number of firms pushing the button has dropped a bit as people circle their wagons and wait to see what will happen in Europe and then in the November elections.

However, there’s still a lot of activity as decisions made late last year translate into real action.

Get ahead of the trend

Needless to say, not every UMA platform was created equal. Some are winning prizes for advanced risk management capabilities, like Citi’s advisor-controlled OpenWealth offering.

Others are charging stunningly high fees to advisors who sign aboard.

Either way, a lot of the vendors putting new assets on their platforms — not to mention the consultants weighing in — will be at the FRA conference in September.

Naturally, you’ll see quite a few of them in our upcoming guide to the top advisor-friendly portfolio management outsource firms, which should be ready for download at about the same time.

Even firms that never thought they’d outsource their investment solution have started reaching out to vendors and asking questions, Gardner says.

After all, the industry hasn’t seen a real shift on this scale since the dawn of the mutual fund era.

With the mutual funds now running $12 trillion, there’s a huge opportunity for advisors who get in the new game ahead of competitors.

“Every firm that survives is either on this kind of model or considering it,” Gardner says. “I don’t think we’ve seen greater pressure to change in the entire near 30 years I’ve been in the business.”

Scott Martin, senior editor, The Trust Advisor


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To Give or Not to Give, Up to $5.12 Million

Written by Paul Sullivan, NYT 6/23/12

TIME may — or may not — be running out for one of the biggest tax breaks for wealthy Americans: the chance to give up to $5.12 million to heirs tax-free and then pay a comparatively low 35 percent rate on any gift above that. The break is scheduled to expire in six months, but no one will hazard a guess about its fate because it is just one of many tax and spending measures expiring at the same time.

Betsy and Jonathan Blattmachr of Eagle River Advisors devised a complex system of trusts as part of their estate plan. (NYT)

When this break was agreed upon by President Obama and the Republican Congress at the end of 2010, I expected it would spur the wealthiest to give away huge amounts of their estate to take advantage of the break. (The original $5 million limit was increased this year for inflation; it is separate from the $13,000 annual exclusion gift.) But the rush that I expected was initially just a trickle. While the tax break was enticing, the fear of what lay ahead in the economy and financial markets made people cautious.

Now, some of the wealthy are faced with a choice that seems designed by a behavioral economist to test rational decision-making: Do they give their heirs the full amount of the exemption, happy that the money will help the heirs now and reduce their eventual estate tax bill? Or do they give less, or none at all, for fear that they could be left with not enough to live on?

“I’ve gone through this with lots of people, and based on the reactions, no one whose net worth is in the nine figures has worried about having enough,” said Edward F. Koren, chairman of private wealth services at the Holland & Knight law firm. “Below that, it depends on their spending levels and their values. That’s so personal to the client.”

The deadline for making a decision is fast approaching because advisers say it takes at least three months to do everything that needs to be done to set up a gift of this size.

All advisers agree that every financial decision is about more than saving on taxes. But in this instance, the math on both taxes and compound interest is compelling, particularly for younger people with wealth who have decades to live.

While none of the advisers would make a prediction on what might happen, no one thought the exemption would remain this high or the tax this low in 2013. After years of a $1 million gift exemption, the advisers agreed that this was a once-in-a-lifetime opportunity.

Adding to the benefit of the large tax exemption is the amount the gifted money can grow. For a child who received $5 million today in a trust that was invested broadly, that gift could grow in 30 years to nearly $29 million, at a 6 percent return every year, according to calculations by Jonathan Blattmachr, a principal of Eagle River Advisors, which consults on estate planning. Meanwhile, the parents’ estate would have been reduced by $29 million, cutting the tax due on the estate.

And that is why some wealthy people — those who could run out of money in their lifetime — have been seduced by this opportunity but are, at the same time, trying to work out how to do it. (The exemption for the estate tax is also $5.12 million until the end of the year, but, obviously, only those who die in 2012 can take advantage of it.)

Some people are also questioning the effect such a large gift will have on their heirs. Their main concern is that it will it rob their children of motivation, said Catherine McDermott, senior wealth planning strategist for Wells Fargo Private Bank.

But she said that fear may be misplaced. “A lot of the education around stewardship of wealth occurs during a lifetime as you’re raising children,” she said. “Many of those questions parents face as they’re raising children.”

In other words, by the time you have made enough money to think about leaving a lot of it to your heirs, you have either set them on the right path in life or led them to believe that your money will be their cushion.

For those who do decide to make a substantial gift, there are many different ways to do it. Writing a check is the simplest way, but advisers would tell you that would leave the money unprotected against creditors. It would also waste an opportunity to use various strategies to multiply the gift.

Putting appreciated securities in a trust would seem to be a good idea, but that could lock up liquid assets that might be needed.

Another option for people worried about having enough liquid assets is to put real estate or a share in a private business into a trust.

“Transferring a home doesn’t feel the same as transferring $5 million in stocks or bonds,” said Diane E. Lederman, president and chief executive of the Neuberger Berman Trust Company.

She cautioned that anyone doing this should make sure that all the paperwork was perfect because the people making the gift would essentially be renting their home back from a trust in their heirs’ names. “When you’re giving an asset away and you’re continuing to reside there, it’s going to attract I.R.S. scrutiny,” she said.

But those who worry that they may need the money back should understand that a gift that satisfies the Internal Revenue Service has to be irrevocable, and the person making that gift can no longer have control over the assets.

That would seem to be straightforward, but the world of tax planning is anything but. Mr. Blattmachr, who built his own wealth interpreting tax law for his clients at the law firm Milbank Tweed, where he was a partner for 35 years, has structured trusts with his wife, Betsy, that are so complex they boggle the mind. They enable the Blattmachrs to take advantage of the current exemptions and gift money today to reduce future estate taxes. But he has structured the trusts, which each hold about $4 million, in such a way that they have a built-in safety valve if something goes wrong: they can get the money back.

One risk to trusts like these is that they mirror each other and could then get disallowed by the I.R.S.

Another risk would be if the Blattmachrs divorced, but after 42 years of marriage, he said he was not worried about that. Many estate planners are wary of these trusts. “There is very little out there from the I.R.S. on this,” said Paige Ben-Yaakov, a partner in the tax section at the law firm Baker Botts. “It’s not as easy as taking the assets and giving them away because you know that works.”

Mr. Blattmachr has put great effort into making sure his trusts will be allowed. At the beginning of 2011, he began setting up his trust, naming his children, grandchild and his wife as beneficiaries. Earlier this year, he set up a trust for his wife that named their children, grandchild and him as beneficiaries. Setting up trusts at different times is one way to counter any future allegations by the I.R.S. that the gifts were not real and the trusts were reciprocal.

But Mr. Blattmachr went further. He put their two homes in his trust — and now lives in them as a guest of his wife — and put securities in her trust. He made sure the trusts had different sets of trustees, giving her the right to replace hers but denying himself that ability. Her trustees can convert her trust to pay her 4 percent a year regardless of the principal; his can make distributions only for health, maintenance and support.

“The I.R.S. always wants the low-hanging fruit,” Mr. Blattmachr said. “You want to get yourself way, way up in the tree.”

He added, “I don’t think anyone can tell you that this absolutely works or this absolutely doesn’t work. But what they’re going to tell you is the I.R.S. will go after others before you.”

– By Paul Sullivan

Source:  NYTimes

Posted by Steven Maimes, The Trust Advisor



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10 States With The Worst Economic Security

Economic insecurity is on the rise.

One-fifth of all Americans saw at least a 25 percent drop in income year-over-year between 2008 and 2010 and were unable to make up for those losses, according to the latest Economic Security Indexa report released by researchers at the Rockefeller Institute and Yale University.

The study also shows economic insecurity was growing before the recent recession hit. “While the Great Recession produced peak levels of insecurity in nearly all states, insecurity rose substantially before the downturn as well,” the study’s authors wrote. Economic insecurity was higher in all states between 1997 and 2007 than between 1986 and 1996.

But the recent major income loss has been worse in some states than others. The Economic Security Index ranked states by the share of population that lost at least a quarter of its income from one year to the next between 2008 and 2010.

New Hampshire had the ‘best’ economic security ranking, but still 17 percent of New Hampshire residents lost at least one-quarter of their incomes in a single year in that period. That means it was even worse in the 49 other states.

Check out the 10 states with the worst economic security here, according to the Economic Security Index:

10. Nevada. Percentage of residents that lost at least one-quarter of their income, 2010: 22.10 percent.

9. Idaho. Percentage of residents that lost at least one-quarter of their income, 2010: 22.63 percent.

8. West Virginia. Percentage of residents that lost at least one-quarter of their income, 2010: 22.15 percent.

7. South Carolina. Percentage of residents that lost at least one-quarter of their income, 2008: 22.01 percent.

6. California. Percentage of residents that lost at least one-quarter of their income, 2010: 22.67 percent.

5. Georgia. Percentage of residents that lost at least one-quarter of their income, 2009: 22.82 percent.

4. Florida. Percentage of residents that lost at least one-quarter of their income, 2008: 23.73 percent.

3. Alabama. Percentage of residents that lost at least one-quarter of their income, 2010: 23.19 percent.

2. Arkansas. Percentage of residents that lost at least one-quarter of their income, 2010: 23.64 percent.

1. Mississippi. Percentage of residents that lost at least one-quarter of their income, 2010: 24.54 percent.

Source:  Huffingtonpost

Posted by Steven Maimes, The Trust Advisor



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The 16th Annual World Wealth Report 2012

A new collaboration from Capgemini and RBC Wealth Management

The overall financial wealth of high net worth individuals declined across all regions in 2011, with the exception of the Middle East, according to the 16th annual World Wealth Report from Capgemini and new partner, RBC Wealth Management. The 1.7% decline is the first since the 2008 world economic crisis, a year in which HNWI global wealth declined by 19.5%.

The World Wealth Report covers 71 countries in the market-sizing model, accounting for more than 98% of global gross national income and 99% of world stock market capitalization. The report has built a strong and lasting reputation as the industry benchmark for HNWIs market sizing—originally at a global and regional level but increasingly at a country level.

Download the Report (registration required) to learn more about trends in HNWI wealth worldwide.

Source: Capgemini 

Posted by Steven Maimes, The Trust Advisor


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