News About IRS And Tax

Friday, 30 June 2017

Weekend Reading for Financial Planners (July 1-2)

Enjoy the current installment of “weekend reading for financial planners” – this week’s edition kicks off with the news that, as predicted previously on this blog, the DoL fiduciary debate is open once again, as the Department of Labor has issued a new Request For Information (RFI) about potential modifications to the DoL fiduciary rule (including whether full applicability and enforcement should be delayed even further past January 1st of 2018, and whether a new streamlined exemption should be added for the use of clean shares). Also in the news this week were several notable industry studies, including one from PriceMetrix showing the rapid growth of fee-based accounts in brokerage firms (which in the near term are generating lower fees and less revenue as firms switch from upfront commissions to ongoing AUM fees), and a Fidelity white paper showing how tech-savvy “eAdvisors” continue to outpace all other advisors in everything from AUM to success getting HNW clients and take-home profits and even job satisfaction!

From there, we have a few technical articles on retirement strategies, including Wade Pfau on what he calls the “Four Ls” of retirement planning goals (Longevity, Lifestyle, Legacy, and Liquidity), a look at how the HEART Act of 2008 allows widow(ers) of military servicemembers to roll over up to $500,000 of SGLI and related death benefits into a Roth IRA (but with a limited 1-year time window), and how managing retirement liquidations from a blend of traditional and Roth IRA accounts is superior to the “traditional” approach of simply liquidating all pre-tax retirement accounts first and the Roth accounts last.

We also feature several articles specifically on wirehouse trends this week, from a look at what wirehouse advisors should consider when thinking about whether to break away, the intense flurry of phone calls (150 client calls in 48 hours!) it takes to successfully break away, and how wirehouses are now reinvesting into new-advisor training programs as wirehouse-to-wirehouse recruiting continues to slow.

We wrap up with three interesting articles, all focused around personal productivity and business success: the first examines the concept of a “Mastermind Group”, what it takes to form one, and best practices for running one; the second explores the research on what it takes to have moments of inspiration and creativity (either artistic, or for your business), and that the key is finding time to relax and step away; and the last looks at the growing base of personal productivity research finding that the best way to increase your results is to say “no” more often… recognizing that whenever you say “yes”, you’re just closer to running out of time and being forced to say “no” to something else later anyway, so you may as well be more proactive about saying “no” so that you still have the room to say “yes” to the right and best opportunities when they come along!

Enjoy the “light” reading!

Social Media Tips for Your Small Business

One of the great things about owning and running a business these days is the boundless opportunity. In the past, your clients likely lived very close to you. Now small businesses can have clients and customers all over the world!...

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source http://blog.turbotax.intuit.com/self-employed/social-media-tips-for-your-small-business-31196/

Thursday, 29 June 2017

How Some RIAs Sell Life Insurance Through A BGA Without A B/D

One of the primary blocking points for those at a broker-dealer who want to transition to an RIA is how to handle insurance once they make the switch. Investment portfolios can be shifted from commission-based products with 12b-1 fees to institutional shares with an advisory fee… but there are still virtually no “no-load” insurance products (and few fee-based annuity products) available to RIAs. However, the reality is, RIAs actually can sell – and get paid for – many types of insurance and annuity products, without a broker-dealer relationship!

In this week’s #OfficeHours with @MichaelKitces, my Tuesday 1PM EST broadcast via Periscope, we discuss how RIAs can leverage a relationship with a Brokerage General Agency (BGA) to get paid for implementing most insurance and annuity products, without a broker-dealer relationship!

The key is to understand the different types of investment and insurance licenses that exist. The Series 7 exam (to become a “General Securities Representative”) is actually only necessary to get paid a commission to sell “securities” – stocks and bonds, along with mutual funds, ETFs, and variable annuities and insurance. In turn, those with a Series 7 (or a Series 6) must have an affiliation to a broker-dealer, as technically it’s the broker-dealer that sells the product and collects a Gross Dealer Concession (GDC) commission, a portion of which is then remitted to the selling broker.

By contrast, in order to sell insurance products, it’s only necessary to have a life (and health) insurance license from the state, and to get appointed by the insurance company to sell their products. In some cases, there’s an overlap – given that products like variable annuities are both an annuity and a securities product. However, for those who just want to implement term life insurance, whole life insurance, or universal life insurance that is not variable, then the advisor simply needs a life insurance license… but not a Series 6 or 7, and thus the advisor does not need a broker-dealer, either!

Of course, this still raises the question of how an RIA gets appointed by a company to sell insurance in the first place, and manages product selection across a wide range of companies. If the goal is to sell fixed products, the solution is for an RIA to work with a Brokerage General Agency (BGA). Conceptually, a BGA is similar to a broker-dealer, except they only work in the realm of (fixed) insurance products. Fortunately, there are a lot of BGAs out there to choose from (some work nationally, many work regionally, and some simply operate locally), of which many will work with RIAs – for which the primary differentiators are the BGA’s service, breadth of products, and commission payouts (though notably because insurance commissions are standardized with the state insurance department, the products themselves will generally still be the same price to the client, regardless of the BGA).

But the bottom line is that if an RIA wants to sell fixed insurance products, then a broker-dealer relationship isn’t necessary, as the RIA can work through a BGA relationship instead. Though it’s important to remember that a BGA relationship must still be disclosed on Form ADV Part 2, and that CFP professionals at the RIA cannot call themselves “fee-only” if there are insurance commissions involved (even if paid to a separate-but-related entity)!

Wednesday, 28 June 2017

Taxes 101: The Gift Tax

“It’s my money and I’ll do with it what I want.” Nice thought, but not quite true. You needed to account for it when you earned it, and likely paid tax at that time, and you need to be aware of the rules for giving it away if that’s your intention.

source http://blog.turbotax.intuit.com/tax-tips/taxes-101-the-gift-tax-2705/

IRS Extends Portability Deadline (Retroactively) Under Rev. Proc. 2017-34

Since 2011, when one member of a married couple passes away, the surviving spouse is eligible to carry over any unused portion of the deceased spouse’s estate tax exemption amount. This rule, allowing “portability” of the deceased spouse’s unused exemption (DSUE) amount, provides a substantial reduction in estate tax exposure for couples whose combined net worth is more than $5 million (or is expected to grow above that amount in the future), and reduces or eliminates the need for many couples to utilize a bypass trust in their estate plan.

However, the caveat to portability of the estate tax exemption at the death of the first spouse is that it only applies if a Form 706 estate tax return is filed in a timely manner to claim portability – even, or especially, if the estate under the filing threshold and otherwise wouldn’t even need to file an estate tax return.

Unfortunately, though, many executors don’t even realize that there is a requirement to file an estate tax return for those who are not subject to an estate tax, and the oversight often isn’t discovered until the surviving spouse subsequently passes way. And by that time, it’s too late to go back and file for portability. At least, not without submitting a potentially costly request to the IRS for a private letter ruling to be granted an extension.

To help ameliorate this common oversight of executors – and the high volume of PLRs the IRS was receiving – in 2014 the IRS granted executors the opportunity to retroactively claim portability by filing an estate tax return for anyone who had passed away since 2011, under Rev. Proc. 2014-18. Yet since those rules lapsed (at the end of 2014), it has once again become increasingly common for executors to submit PLR requests to the IRS to receive an extension for an accidentally missed Federal estate tax return deadline.

Thus, the IRS has now issued Rev. Proc. 2017-34, which grants a permanent automatic extension for the time to file an estate tax return just to claim portability, beyond the original 9 months requirement. In order to utilize the extension, the executor merely needs to file a not-otherwise-required-to-be-filed Form 706 estate tax return within 2 years of the decedent’s date of death, and note on the return that it is being filed as a permissible extension under Rev. Proc. 2017-34.

In addition, the IRS has granted prior estates yet another opportunity for retroactive portability as well. For any member of a married couple who died after 2010, there is once again an opportunity to file a (now very late) Form 706 estate tax return to claim portability, with a deadline of January 2^nd of 2018. Which allows surviving spouses (including same-sex married couples) to claim a carryover of the DSUE amount for any spouse who passed away in 2011 or later. And in situations where the then-surviving spouse also passed away and owed an estate tax, there’s even an opportunity to retroactively claim portability, and then file an amended estate tax return, and receive an estate tax refund of up to $2 million!

For most, though, the new rules simply provide an extended time window for executors to realize the need to file a Form 706 estate tax return to claim portability in the first place. Nonetheless, in situations where at least one member of a married couple passed away in 2011 or later, there is a limited time window to claim retroactive portability through the end of the year as well!

Tuesday, 27 June 2017

Can Unpaid Taxes Keep Me From Buying a Home?

If you have tax debt that you’re unable to pay, there are simple steps you can take to avoid further tax consequences. It’s important to understand the IRS can take several actions to collect if you don’t pay your taxes...

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source http://blog.turbotax.intuit.com/tax-planning-2/can-unpaid-taxes-keep-me-from-buying-a-home-30920/

#FASuccess Ep 026: Stop Asking For Referrals And Improve Your Referrability Index Instead with Steve Wershing

Welcome back to the twenty-sixth episode of the Financial Advisor Success podcast!

This weeks’ podcast guest is Steve Wershing. Steve is a practice management and marketing consultant for financial advisors, with a particular focus on how to generate more referrals to grow your business.

But what’s unique about Steve, though, is his approach to referral marketing, which starts with a simple statement: Stop. Asking. For. Referrals. And instead of asking for referrals, focus on how to make yourself more referraBLE in the first place – by having a clear niche. Because as Steve puts it, “a Niche is simply a need”, and if you can fulfill a clear need, then people with that need will be referred to you… without even asking for it. Or viewed another way, Steve finds that the best way to get more referrals is not to hunt for them one at a time, but to plant the seeds for a large number of them, and then harvest them over time.

In this episode, Steve talks about the 6 different types of niches that financial advisors can form – including technical, educational, experiential, psychosocial, affinity, and values niches – with great examples of each. And based on his own experience as a financial advisor and former broker-dealer executive, Steve talks about how advisory firms can interview their clients and leverage a client advisory board to better understand what they’re most valued for and then formulate a niche around that value over time. Because the reality is that, while it’s not required, it’s still usually easiest to build into a niche where you already have some initial connections or solution.

And be certain to listen to the end, where Steve talks about how to manage a niche practice over time, and why it’s OK that your clients may eventually move on from or outgrow your niche – because even if they came and picked you in the first place for your niche, once they’re working with you, they’ll stay for the service and the relationship they have with you as their financial advisor.

So whether you’re struggling to figure out what niche you should go for, are looking for ideas on how to create a greater focus on your niche, or are simply looking to better understand how to get more referrals (without just asking for them more often), I hope you enjoy this latest episode of the Financial Advisor Success podcast!