For married couples seeking tax savings and lifetime access to cash, a spousal lifetime access trust (SLAT) has become increasingly popular in estate planning in recent years.
The SLAT—the spousal lifetime access trust-- is creating positive buzz because it combines the estate tax savings of an ILIT used for life insurance, but with lifetime access to tax-advantaged cash value inside a quality life insurance policy.
Rather than tying up money irrevocably, the SLAT offers the spouse lifetime income on a tax free basis, while providing exceptional estate planning and asset protection benefits.
Steve and Doc break it down in Segment 2. In the Q & A segment, estate planning attorney Richard Dwornik joins the A-Team to continue the analysis of the SLAT.
Once, it was a good thing to have money in the bank.
Now, Danish companies pay taxes early to rid themselves of cash. At one small Swiss bank, customer deposits will SHRINK by an eighth of a percent a year—not after inflation. Before inflation. It actually is more profitable to keep money in the mattress than the bank.
But it isn’t all bad. Some Danes with floating-rate mortgages are discovering that their banks are paying THEM every month to borrow, instead of charging interest on their home loans.
Such is life in the upside-down world of negative interest rates, in which banks impose a LEVY on customers to hold their money, instead of paying interest on deposits. And its not in a Grimm Fairy tale. Its happening about thirteen hours away in Europe.
Steve and Sinclair review an intriguing Wall Street Journal report on why rates are falling below zero in Europe and how it could happen here.
In the Q & A segment, CFP and Certified Investment Management Analyst Murray Titterington with IQ Wealth joins the A-Team to analyze portfolio strategy life expectancies.
Kinder Morgan is under siege. Shares of the energy pipeline giant, whose shares show up in many portfolios seeking dividends, were slammed in heavy trading last week, falling $7, or 29%, to $16.82 and fell another 2% on Monday, amid growing concerns that the Houston-based company may have to cut its quarterly dividend, now 51 cents, to shore up its leveraged balance sheet. Kinder Morgan stock (symbol KMI) is down 60% this year while the Alerian MLP index is off a painful 42%.
Citigroup analyst Faisel Khan put out a note this week titled “Debt Rating at Risk, Dividend Cut Possible Amid Limited Options.” He wrote that the company needs to cut debt to maintain its investment-grade debt rating: “The most expeditious way of achieving this would be to reduce the dividend by around 40%, allowing the firm to retain about $1.9 billion per year, rather than paying out so much revenue in dividends. Steve and Sinclair review a Barrons report.
In the Q & A segment, real estate attorney Stephanie Wilson, partner in the law firm Stoops, Denious, Wilson, and Murray joins the A-Team to review what can go wrong when buying or selling investment properties run by Home Owners Associations with too many investors rather than residents.
Steve and Sinclair update trends and markets, followed by a visit from gold expert Nick Grovich, who gives factual insight on the metals markets.
Steve then reviews a key element of today's investment environment: Americans are feeling poorer and it follows that their ability to keep buying stocks at the same pace may decline long term. Currently, 51% of Americans say they are middle class or upper-middle class, while 48% say they are lower class or working class. In multiple surveys conducted from 2000 through 2008, an average of more than 60% of Americans identified as middle or upper-middle class.
Using the same cross section rules in 2015, the change is remarkable. Only 1% say they are Upper class—that’s a 66% decline in what is described as a strong feeling of affluence. But inflation has stepped in: You need $2.4 million to be a "1980 millionaire" and $5.1 million to be a "1960 millionaire. A million no longer buys what it once did. What will it buy in 20 years?
As an investor, no matter what YOUR net worth is, even if you are in the top five to ten percent in net worth, you must pay attention to the rest of Americans. Today, 70% of Americans make less than $50,000 a year, with less than $50,000 in savings. Although the reported unemployment rate is "low", low paying service jobs dominate, and the idea that young Americans can expect 30 years of high paying work, a big 401k and a pension, is out the window. Steve points out that this is an excellent time, while the market is near all time high's, to determine how you want to manage your money going forward. How much of it do you want protected from market declines at all times? Some of it? None of it? Most of it? Or, all of it?
More and more people would like to own a pension when they retire, but fewer and fewer companies are offering them. Business owners can create their own defined benefit plans that can be turned into a high paying pension after five, seven, or ten years.
One type of defined-benefit plan is growing fast. Cash Balance Plans are gaining popularity among business owners and medical practitioners who are behind on retirement savings.
Kiplingers reports that many business owners are turning to these plans to turbocharge their retirement savings. Cash-balance plans have generous contribution limits that increase with age. People 60 and older can sock away well over $200,000 TO $300,000 annually in pretax contributions. In 401(k)s, total employer and employee contributions for those 50 and older are limited to only $57,500. Steve and Sinclair review the fundamentals.
In the Q & A Session, professional actuary and plan administrator Brad Lankford joins the A-Team to dig into Cash Balance, 401k, and Defined Benefit Plans.
You think you have it bad with 1% CDs? If you lived in Europe, you'd be thrilled.
In the topsy-turvy world of negative interest rates, the ECB’s deposit rate is minus 0.2%. But yields on the safest government bonds have fallen so far that a substantial slice of the securities the ECB will be looking to buy in their $63 billion dollar a month "stimulus" program, now falls below zero. Two-year German bonds, for instance, yield minus 0.4%.
Bond yields across the eurozone have tumbled, meaning investors are effectively paying a fee to have their money stored. They’d be making more in the mattress. Steve and Sinclair review a Wall Street Journal report on the state of interest rates going into 2016. How will it affect you and your investments?
In the Q & A, CPA Nick Stefaniak joins the A-Team to answer questions on "what happens if your parents or an ex-spouse dies owing a bunch of back taxes?" Are you liable? Always? Sometimes? Join us--Nick has the answers.
The future price of copper and the growth of companies that produce it could hinge on a single precious resource: water.
Scott Patterson writing for the Wall Street Journal reports that mining the important industrial metal requires huge volumes of water to control dust and separate copper from the earth.
But a seven-year drought enveloping Chile, the world’s largest producer, is forcing big mining companies to curb output and pitting them against small communities like Caimines, Chile high in the Andes. Steve and Sinclair examine the challenges for copper and how its price could fall in 2016 but rebound in 2017 to 2019.
Sinclair broadcasts live from the Economic Conference in downtown Phoenix, while Steve holds down the fort in studio. Certified Financial Planner Murray Titterington with IQ Wealth joins the A-Team for the Q & A to discuss how the PEP and Pease provisions are affecting more and more tax returns.
It has been so long since the Federal Reserve last raised interest rates that few people probably remember when it last happened: it was June 2006. The odds of a rate increase in December of 2015 are very high, but the increase will be very low: fractions of a percent. What will be the effects on bonds when it happens? Michael Pollock, writing for the Wall Street Journal, points out that even if the Fed raises rates gradually, higher short-term rates will eventually ripple through the markets and affect a wide range of financial products, but the impacts will be uneven.
Some borrowing costs are likely to rise closely in sync with short-term rates, but others won’t, And people who depend on interest income might not benefit from rising rates for months, and/or years. A sudden move from zero to 4% would be more than a four hundred percent shift and would shut down the financial system—which is still highly leveraged with derivatives- just as surely as the events of 2008 toppled the derivatives market. Steve and Sinclair examine the outcomes.
In the Q & A Segment, experienced real estate attorney Christopher McNichol of Gust Rosenfeld joins the A-Team to review the differences between options to buy real estate and first rights of refusal. He also makes a strong recommendation for anyone tying up a property with an option.
In the past 12 months, companies in the Standard & Poor’s 500 have doled out nearly $1 trillion to shareholders in the form of both dividends and stock buybacks, the highest level since 2007. For years, hedge fund managers have been big proponents of share buybacks. Now, though, they are viewing them with a more critical eye, says Sarah Max writing for Barrons. Worse yet, when corporations sell their bonds, they are no longer using the money to expand or create jobs. Instead, well known companies have gone into debt with bond sales at a pace of over a trillion dollars in the first nine months of 2015. That's more corporate debt than the U.S. treasury took on to form the budget deficit.
That borrowed money got poured back into the stock market to buy back shares to try to boost their share prices. It has been working for years, but suddenly the Law of Diminishing Returns is having its say.Steve and Sinclair review a timely article by Sarah Max of Barrons on the subject. In the Q & A, Steve answers some hard questions on annuities and income planning.
Corporate inversions are the rage as corporations look to save billions of dollars in taxes by buying or merging with a foreign company in a lower tax environment, often Ireland. The law firms making it happen are racking up big fees. Just ask the team at Skadden, Arps, Slate, Meagher & Flom LLP working on Pfizer Inc.’s $155 billion deal with Allergan PLC. Their immediate task is getting the biggest tax-lowering merger in history past U.S. authorities.
Meanwhile, they are facing off with the Internal Revenue Service to get tax-free treatment for Yahoo Inc.’s spinoff of its $20 billion stake in Alibaba Group Holding Ltd.—an effort the agency dealt a setback in September—as well as shepherding a pair of other big transactions that would move U.S. companies overseas.
Steve and Sinclair review a Wall Street Journal report on whats behind the Pfizer-Allergan merger and why it is a slam dunk to occur. Hint: Pfizer stands to save at least $3 billion in taxes.
CFP®, CIMA® Murray Titterington joins the A Team to review and recap new social security rules and how widow and divorce benefits work in the new environment.