John Burns – Bingham, Osborn & Scarborough
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The market has been pretty resilient, said Mr. Burns.
“There has been a lot of positive movement and portfolios are getting higher,” he said. “The temperament and anxiety level of clients is a lot lower in the last few years.
“One thing our clients are making use of is the Roth IRA conversion. While the law changed this year to allow anyone, not just people with income under $100,000, there were a lot of retirees that were fairly wealthy that got below that income level, and we were working with their accounts to do some conversions in 2008 and 2009,” he said.
He said the situation with Roth accounts is interesting in terms of tax diversification, which he looks at in addition to asset allocation and diversification.
“As far as taxes are concerned, everybody should have three buckets of money,” he said.
One is taxable money, a revocable trust or a joint account; one is retirement money, a 401(k) and profit sharing; and one is Roth money, tax free.
“Who knows what the government will do? If they raise taxes, you can take out of Roth; if it lowers, take it out of retirement,” he said.
Joe Delany – Vista Wealth Management
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Mr. Delany said he hears a number of questions about education, retirement issues, financial planning, how much to pass to children, what is appropriate or what is not.
He said clients are either goal-based or value-based.
“Some are concerned about the uncertainly of the market and how to get a well-thought-out investment plan. Clients who are not financially set play more in the market,” he said.
In 2008 he said it was more difficult to keep people on the right path and to stick to the plan they had.
“We encouraged that because over the long term there will be appreciation,” he said.
He said valuation opportunities are low for closely held businesses and real estate, and it is a great time to explore intergenerational giving, family limited partnerships and interfamily loans.
It is also a favorable time for installment sales and real estate, and the intentionally defective grantor trust is more effective.
Mr. Delany also mentioned Grantor Retained Annuity Trusts, where during the term of the trust the grantor gets an annuity payment and the balance is distributed to the beneficiaries.
“You are making a bet that the assets you are putting into the GRAT will appreciate faster than the annuity rate."
He said there is a twist on the GRAT called Charitable Lead Annuity Trust, where a charity is the beneficiary during the time of the trust.
“Say Mr. Smith puts $1 million in a 20-year charitable lead trust to benefit his alma mater. The trust agreement stipulates that the school is to receive $70,000 in income annually for the purposes spelled out in the trust agreement. At the end of the 20-year term, Mr. Smith’s son, Jack, is to receive the trust principal,” he said.