Posts Tagged ‘news’

Heckerling: Day 1

HalTerr-12-09Today’s blog post about the Heckerling Institute is written by Withum’s Private Client Services Partner and Practice Co-Leader, Hal Terr.

After the ball drops in Times Square for the New Year a considerable number of attorneys, accountants and trust officers finalize their travel plans to go to Orlando, Florida the second week of January.   No, it is not to go see Mickie and Minnie Mouse at Magic Kingdom but to attend the Heckerling Conference held by the University of Miami to listen to the preeminent speakers in estate planning.   Once again, the Private Client Service tax partners at Withum will be summarizing each day’s discussion from the insights they have heard.   Leading off the insights of the first day is Hal Terr, co-Practice Leader of the Private Client Services Niche.

This year’s conference has 3,400 professionals attending, exceeding the prior year attendance records which emphasizes that even with great change in the law, there will always be the two constants of death and taxes.   The Recent Developments section this year was presented by Steven Akers, Samuel Donaldson and Amy Kanyuk and provided an overview of recent IRS pronouncements of the 2017 Tax Act as well as tax court decisions in the areas of estate and gift.

The recent proposed regulation from the IRS indicates that there will be no claw back if a taxpayer utilized the increased gift exemption, currently $11.4 million, under the 2017 Tax Act prior to 2025 and the law sunsets after 2025 to $5 million, indexed for inflation.   This will provide some certainty to high net worth individuals that they can utilize the increased gift and estate exemption and not created a tax liability if the exemption is less when they eventually pass away.   In addition, it was discussed that the increase in the Generation Skipping Tax (GST) exemption can be allocated to pre-existing trusts established prior to the passage of the 2017 Tax Act.   For some trust this can then lower or reduce the inclusion ratio to zero for prior GST trust to reduce any GST tax in the future.

The new year brings a new administrative change by the IRS for the filing of gift and estate tax returns.   For a long time, gift and estate tax returns have been mailed to the IRS processing center in Cincinnati, Ohio.   Effective January 1, 2019 all gift tax returns will be filed and mailed to the IRS processing center in Kansas City, Missouri and effective after June 30, 2019 all estate tax returns will be filed and mailed to the IRS processing center in Kansas City, Missouri.

With the increased estate exemption some high net worth individuals do not want to incur the expense of filing of an estate tax return on the death of the first spouse just to elect portability.   Prudent practice of estate attorneys and accountants would get in writing the surviving spouse’s intentions to avoid any disputes at a later time.   There is not extension for portability election if the estate is required to file an estate tax return if the estate exceeds the estate exemption at the time of the decedent’s passing.   However, if the estate is not required to file estate return, the executor can make portability election within 2nd anniversary of decedent’s passing under administrative relief and not have to apply for a costly private letter ruling.

Recent proposed regulations for Qualified Business Income and deductions for trusts and estates were then discussed.   The details of the operations of the Qualified Business Income (QBI) deduction will be discussed in a future presentation but there were three important items that were highlighted.  The first is that the QBI deduction does not reduce an individual’s tax basis in the flow-through entity.    For trusts, the QBI deduction will be allocated between trusts/estates and the beneficiaries in the same proportion of the allocation of Distributable Net Income (DNI).   Finally, there will be a presumption by the IRS under code section 643(f) that multiple trusts with the same grantor and substantially the same beneficiaries will be combined if the only reason for the multiple trusts is to get a benefit for the QBI deduction.   Final regulations to provide additional clarity for the QBI deduction are expected but delayed to the recent government shutdown.

For individuals, miscellaneous deductions such as tax preparation fees and investment management fees are no longer deductible under the 2017 Tax Act.   There was some uncertainty of the deductibility of these items for fiduciary income tax purposes for trusts and estates.   The IRS issued Notice 2018-61 to allow trusts and estates to deduct expenses incurred for the administration of the trust/estate, including trustee fees, accounting and attorney fees.   However, investment management fees would not be deductible, including any investment management fees incorporated in the trustee fee.

The priority guidance plan of the IRS was issued in November 2018 which provides an insight of future pronouncements by the IRS.   In the estate and trust area, the guidance plan addressed the IRS’s intention to reduce the administrative burden for basis consistency reporting to beneficiaries of an estate.  Currently executors are required 30 days after the filing of an estate tax return to report the basis of assets inherited by a beneficiary.   In addition, the IRS included in the priority guidance plan issuing rules to determine basis adjustments for assets owned by a grantor trust.

Those were the highlights from the first day.   Stay tuned for tomorrow’s blog post you will hear from Ted Nappi on Heckerling’s Tuesday presentations.

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Today’s blog post is written by Withum Wealth Management’s Investment Advisor, Austin Hagaman, CFP, AWMA. 

Every year Barron’s, a widely respected financial news publication, interviews Wall Street’s “Top” Investment Strategists regarding their thoughts on the year ahead. Included in this article is a section where Barron’s asks each strategist to forecast which sectors they think will perform the best and worst over the coming year.  Barron’s published their “2017 Outlook” on December 19, 2016.

pic 1Now that we are a little more than half way through 2017, I think it is fitting to check in on how Barron’s “Top” Wall Street strategists are doing. Spoiler alert: At this point, they don’t deserve much more than a participation trophy (which, for the record, I am firmly against).


To evaluate Barron’s “Top” Wall Street strategists I calculated their consensus forecast for each sector by totaling the number of positive and negative forecasts issued in the article.  You will see from the chart below that Financials was predicted to be the favorite in 2017 with eight of the Wall Street strategists giving the sector positive reviews and none of the strategists listing it as a sector to “avoid”. Consumer Staples found itself at the bottom of the list earning an almost unanimous “avoid” recommendation.


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To measure the Wall Street strategists forecasting abilities, I simply compared the top three best performing sectors in the first half of the year to the strategists’ top three most favored sectors. As you can see in the charts below, thus far it has been a questionable year for Barron’s “Top” Wall Street strategists. Only one of the strategists’ three most favored sectors, Health Care, was a top performer in the first half. Financials, the sector the Wall Street strategists favored the most, turned out to be one of the worst performing, underperforming both the S&P 500 and 7 out of the other 9 sectors in the index. Consumer Discretionary also looks to be defying the strategists’ expectations. Their forecast called investors to “avoid” Consumer Discretionary, one of the best performing sectors in the first two quarters Lastly, the Industrial sector seems to be holding strong—albeit marginally—for the strategists. Industrials was their third most loved sector and it is currently outpacing the S&P 500 by 0.20%.

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To be fair, we are only about half way through 2017. A lot can happen over the next couple of months that could shed a better light on the strategists’ forecasting abilities. But how does their performance in the first six months of 2017 compare years past? According to Fritz Meyer, an independent economist who runs a very similar annual assessment, the strategists don’t have a great track record.  Meyer notes that since beginning his study in 2005 there has not been one year where the strategists have outperformed the S&P 500. Meyer writes in a blog, “The predictions of Wall Street’s so-called “top” strategists’ are about as reliable at sector forecasting as monkeys throwing darts.”


There were two thoughts that came to mind when I assembled and assessed the data for this piece:

  1. While a lot of news is centered on truth, this is a reminder that we need to appreciate media outlets for what they are, entertainment, and not get too caught up on the sensational story of the moment. It is prudent for investors to stay focused on meeting their long-term goals and resist the urge to try to drastically outsmart the market. Making small tactical changes to a portfolio can certainly pay dividends, but abandoning the principles of diversification by excessively under or over-weighting a sector can humble even the most experienced Wall Street investors.
  2. Unfortunately, Wall Street has become exceptionally good at pushing themes that are easy to sell and sound good in theory but fail to play out as proposed. Investors should be cautious not to overpay for “smoke and mirrors”. While there are plenty of honest advisors in the industry, working with large retail institutions and brokerage houses in an investment advisory capacity can come with conflicts of interest that work to the investor’s disadvantage. Investors can look to reduce these conflicts of interest by making sure their advisor is a Registered Investment Advisor (RIA) with a fiduciary responsibility.

I am proud to say that Withum Wealth is a Registered Investment Advisor (“RIA”) regulated by the SEC that operates independent of the large Wall Street intuitions and brokerage houses. As a firm that takes our fiduciary duty seriously, we choose not sell products to clients that may provide further compensation to the firm. Removing these potential conflicts of interest helps us center our attention on what we believe the client truly needs: an advisor that will help them cut through the noise and focus on what actually drives long-term returns.

Stay tuned for more updates on financial news!

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The following is a news alert that we received from Thomson Reuters/PPC, the tax research service to which we subscribe.  It is very disturbing, and all our clients and friends of the firm should be aware of it:

Consumers and Tax Professionals Targeted in IRS E-mail Schemes:  The IRS has seen an approximate 400% surge in phishing and malware incidents so far this tax season. The emails are designed to trick taxpayers into responding to official communications that lead to websites designed to imitate official looking websites. The sites ask for social security numbers and other personal information. The sites also carry malware which infect computers and allow criminals to access files or track keystrokes to gain information. “While more attention has focused on the continuing IRS phone scams, we are deeply worried this increase in email schemes threatens more taxpayers,” Koskinen said. Tax professionals also are reporting phishing schemes to obtain their online credentials. If a taxpayer receives an unsolicited email that appears to be from either the IRS e-services portal or an organization closely linked to the IRS, report it by sending it to phishing@irs.gov. IR-2016-28.

Rules of Thumb:

  • If the “IRS” or “Treasury Department” calls you threatening legal action against you for a tax issue of which you are unaware, hang up – IT IS A HOAX!  As we have pointed out in earlier blog posts, the IRS will never initiate action against you without following strict protocol and they will certainly not call you about something without corresponding with you in writing beforehand.
  • Similarly with e-mail – if an e-mail claims to be an official communication, don’t believe it.  Actually, try not to open it to avoid malware issues.  The bottom line is, the IRS does not use e-mail for “official communication.”[1]  However, if you have a doubt about the authenticity of an e-mail, you can call the IRS at the appropriate number (found at:  https://www.irs.gov/uac/Telephone-Assistance) and speak with them about it.  And, of course, consider reporting the incident as indicated above.

The Internet is a wonderful thing, but with the good comes the bad, and the ability to defraud uninformed taxpayers is right up there with the bad.  Don’t let these geeky, tech-savvy criminals take a bite out of you.

[1] If you are already under examination and working with an agent, s/he may use e-mail to communicate with you, but you will already know who s/he is.  In any event, the communication will not be “official.”

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