Archive for financial planning

Tax reform is here. What does it mean for high-net-worth individuals?

As we enter tax season, the real-world effects of the recently enacted Tax Cuts and Jobs Act of 2017 are becoming clearer for many taxpayers. Although there remains a great deal of detail to be understood, from what we know today, there are plenty of changes for high-net-worth individuals to be excited about.

Estate taxes

A significant change in the new legislation is an increase in the estate and gift tax exemption to roughly $11.2 million ($22.4 million for married couples). This doubles the former exemption of $5.6 million for individuals and $11.2 million for couples. Only a small percentage of households paid the tax at the old levels, and even fewer will pay it now.

Tax reform

The real effects of the recently enacted Tax Cuts and Jobs Act of 2017 are becoming clearer for many taxpayers.

For high-net-worth households who might have been affected before but are now safely under the line, this change could make a difference in the way they approach their financial future.

“The new tax laws may change their planning,” said Timothy Barrett, senior vice president and wealth advisor based in Argent’s Louisville office. “They may have created trusts to capture and preserve a $5- to $6-million estate tax exemption, or double that for a couple. With the exemption amounts now doubled, couples with estates currently smaller than $10 million may be able to simplify their planning tremendously or switch their focus to income tax planning. But be aware that most of the personal tax changes revert back to 2017 law after 2025, which complicates permanent solutions.”

“Depending on how much you have and what age you are, 2018 ought to be a year to review and decide what is right for you and your individual financial situation,” said Howard Safer, CEO of Argent’s Nashville office.

Tax bracket changes

Marginal tax rates under the new tax bill will be lower for many taxpayers starting in 2018 and running through 2025. The top rate has been reduced from 39.5 percent to 37 percent, and will now apply to individuals with over $500,000 in income and couples with over $600,000.

Previously, the top tax rate had applied to individuals making $426,700 or more and couples making $480,050 or more.

A couple filing as “married/joint” with combined income between $237,000 and $351,000, for instance, will see their marginal tax rate fall from 33 percent to 24 percent. Assuming there are no changes in other deductions, this could result in a tax savings of around $10,000.

“Lowered brackets are one piece of much more complex tax change. It all depends on your mix of state and local taxes, mortgage interest and other itemized deductions and whether it makes sense to use the new higher standard deduction. Some people will end up keeping more of their income, and the rate changes are meaningful for all tax brackets. But there are too many moving parts at this point to make a definite call on how much someone will save,” said John McCollum, senior vice president – investments in Argent’s Atlanta office.

“Even though many details are yet to be worked out, the change does benefit high earners who aren’t independently wealthy, because you don’t jump to that top rate so fast now, ” Barrett says.

Pass-through income

A new deduction for pass-through businesses could benefit many high income earners who have an ownership stake in a business. Sole proprietors, LLCs, partnerships and S corporations may be able to deduct 20 percent of qualified business income, albeit with some limitations. This may create an opportunity for certain taxpayers to form limited liability companies that would be eligible for the deduction.

“People will be trying to take advantage of pass-through entities,” Barrett says. “Any high-earner who can work on a non-employee basis will want to explore using a limited liability company.”

Fewer itemized deductions

Some taxpayers may see a benefit from the near-doubling of the standard deduction, which has been raised to $12,000 for individuals and $24,000 for couples in 2018, up from $6,350 and $12,700, respectively, in 2017.

However, new rules regarding itemized deductions — affecting state and local taxes, medical expenses and mortgage and home equity loan interest, among other areas — will play out differently for every taxpayer depending on their individual financial situation. Some may opt for the standard deduction when they may not have before.

“One approach that may be useful for many taxpayers is bunching, in which deductions such as charitable donations are pooled every other year to maximize tax savings through itemization, with taxpayers taking the standard deduction on alternating years,” Safer says.

Boost to the economy

The tax bill’s benefits to corporations are also likely to benefit individual high-net-worth investors. In addition to receiving a permanent cut in the corporate tax rate, from 35 percent to 21 percent, companies will benefit from a sharp drop in the tax rate for repatriation of foreign earnings. This change will allow companies with large amounts of overseas income to bring it back to the U.S., paying 15.5 percent instead of the old rate of 35 percent.

“Many companies had accumulated large amounts of cash earned overseas, and the vast majority was just sitting there. By reducing their tax burden, it eliminates barriers, real and perceived. Companies are going to increase dividends and pay more to employees — you can find hundreds of those stories. More importantly, that cash is going to get invested,” McCollum says.

There is a great deal of detail about these changes that won’t be fully understood until the IRS releases its regulations on how to put these new tax changes into effect.

“The last major tax reform was in 1986, and it took years to fully understand and make that come together,” Safer says. “These laws will evolve in their interpretation.”

“The effects on individuals and pass-through businesses will be more complicated, but the benefit will be real for sure. It just remains to be seen how these various pieces will end up working together to change behavior,” McCollum says. “The bottom line of the tax change is that it’s putting more money in the hands of businesses and consumers to spend and invest instead of sending to the government, and I think that’s why the market has reacted so strongly.”

The Wedding Metaphor

by Whitney Hufnagel, Investment Analyst

After five years of dating, Kevin finally asked me to marry him. I was so excited to start planning the next chapter of our lives and the wedding I had dreamt of since I IMG_9974was a little girl.

While mostly enjoyable, the wedding planning came with some challenges. We knew sticking to our budget would be difficult to accomplish a traditional Catholic wedding ceremony followed by a reception with dinner, drinks, and dancing with a large guest list. Therefore, we started by prioritizing what was most important to us which helped us define our wishes and compromise where needed.

Adequate time allowed us to carefully plan every detail at the best possible price. Planning also helped us identify and calmly navigate minor obstacles which included finding the perfect baker upon learning our original choice was already booked as well as finding a more suitable photographer after receiving lackluster engagement photos. However, neither of us truly realized the complete value of all the planning until our wedding day arrived. Our blueprint provided organization, a sense of security, and allowed us to achieve our goal of having a stress-free wedding day where we could focus on one another and our journey all while being able to fully engage in celebration with family & friends.

Just like the time spent planning a wedding can help pull off a successful wedding day, creating a comprehensive financial plan can help pull off a successful financial future. While the size of your wealth helps determine the time and resources required to build and update a comprehensive financial plan, it is never too early to start and no asset size is too small to benefit. As with wedding planning, financial planning helps couples and families prioritize how to allocate money to achieve dreams and goals. Planning also helps make sure all involved are on the same page and compromise when necessary.

Being proactive with planning and making appropriate updates creates an opportunity to identify warning signs and make corrections before it’s too late and
provides ample time to make better informed decisions. A financial plan can help ease concern when it comes to investment returns and taxes and has the power to put all the pieces of your financial puzzle together to help build and ensure sustainability. Like planning a wedding, the value in a comprehensive financial plan is often seen in hindsight, but you will be pleased you invested your time and money on your financial blueprint.

Photo courtesy Horton Studios

Heritage Book Review : PREPARING HEIRS

This month’s book recommendation comes from Nancy Ellis, Chairman Emeritus and Member of the Board of Directors.

Nancy selected:

Preparing Heirs: Five Steps to a Successful Transition of Family Wealth and Values

“Preparing Heirs is a road map for families that desire to build a successful family business that will go into all generations of business,” said Ellis.

From the publisher:41tEVFJiKTL._SX300_BO1,204,203,200_

Preparing Heirs discloses the surprising findings from the authors’ research into the legacies of 3,250 wealthy families. With extraordinary insight, they reveal what the relatively small number of successful families had in common-how they achieved and maintained family harmony, and ensured the smooth transition of their wealth to well-adjusted heirs. They also warn of the wide range of factors that cause the majority of wealthy families to fail in their transition. Preparing Heirs offers clear, concise, well-organized, and easy-to-follow instructions that will enable you to evaluate your plan for transitioning family wealth. Preparing Heirs is an assessment tool that can be used in conjunction with the services of qualified professionals such as attorneys and accountants. It addresses the major causes for the 70% failure rate in estate transitions, which lie within the family itself and are within the family’s control. This book can help you develop a plan to transmit the family values underlying the accumulation of wealth and prepare your heirs to be good stewards and thoughtful administrators of that wealth.

To find out more about the book, click here. 

5 Ways to Show Your Financial Plan Some Love

Valentine’s Day is typically about roses and chocolates, but nothing is lovelier than a beautiful investment strategy. Below are five things a savvy investor does to show their financial plan some love. womanheart

1. Stay Curious

Whether you manage your own investments or pay someone to manage them, be informed. Every person should have enough understanding of financial nomenclature to ask educated questions regarding his or her investment accounts, stocks, bonds, mutual funds, etc. Also, be sure to review your statements. It is very important to keep up with your financial position. You never know when you might come across something in your statement that needs clarification. If you do have questions about your financial statement, financial position, or performance, do not be afraid to ask questions. Being inquisitive is key to understanding your financial position, and it is likely you will learn in the process. Your financial advisor should always be willing to provide answers to your questions in terms you can understand, as well as provide you with your financial statements. If your advisor is being evasive, proceed with caution.

2. Control Expenses
Remember that fees, trading costs, and timing of tax gain/loss recognition are the only controllable components of investment returns. Your goal should be to maximize your NET return after subtracting trading costs, management fees, taxes and inflation. If possible, investments should be held for at least a year to recognize favorable capital gain rates, and if you do not know how much you are paying in fees, ask! If your financial advisor leads you to believe you are not paying a fee, find out how they are paid. Is it through 12b-1 fees, loads or commissions? If so, ask yourself if that advisor is truly working in your best interest or working in their own best interest by making investments that increase their commission.

3. Increase Your Savings
At the beginning of every year, you should make it a point to increase your retirement plan contributions and/or personal savings.  Don’t just stop at the amount your employer will match, and if applicable take advantage of Roth options.  While it seems simple, most people do not actively follow a budget and instead, think they intuitively know what they spend and where. But by being intentional about your family’s budget, it will ensure you can accomplish your long-term goals and sets a good example for your children and grandchildren. Make sure you talk with them about the savings process and help pass on these important disciplines.

4. Rethink Charitable Giving
If your individual stocks saw significant capital appreciation last year and you are planning on making a gift to a charity this year, consider making a gift of those shares of stock.  By gifting appreciated stock, you will get the full tax deduction, without having to sell and recognize capital gains.  This allows the charity to receive more, and you’re able to give (and deduct) more.  Also, if you are 70 ½ and are required to take a distribution from your IRA or retirement plan, that amount can also be gifted directly to a qualified charity without recognizing the income.  Contact the business development officer at your favorite charity to find out if this is an option.

5. Talk About Death
Finally, no one likes to talk about the inevitable, but you need to make that a priority this year. That’s what investment is all about: taking care of you and yours. Talk with your family about your estate plans. Take time to create a will or revocable living trust if you do not already have one. Be sure to check the beneficiaries listed on your IRAs, 401(k)s, payable-on-death accounts, and insurance policies. Has someone preceded you in death, been married or divorced? Update the beneficiaries on those accounts if necessary, as they are not subject to your will or probate. Taking time to think through and talk about these issues with your loved ones will ensure your wishes are carried out.

Happy Valentine’s Day from our family to yours. We love serving you.


Image courtesy of stockimages at

Fiduciary Duty: Know your Trustee

by Kevin Karpe, Senior Vice President, Trust Officer

fi·du·ci·ar·y: “ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.

 “Fiduciary”, “fiduciary duty” or “fiduciary standard” are terms we hear from time to time. We all recognize that a Board of Directors has a duty to its shareholders.  We know an executive has an obligation to act solely in the interests of his employer.  And we know elected officials have the sworn duty to prudently administer public resources.   In each example, the board member, the executive, and the elected official are all considered fiduciaries.   Common Law says fiduciaries are bound by equity to suppress their own interest in favor of a client, shareholder, employer or even taxpayers. At Heritage Trust Company, our fiduciary obligation results from an appointment as a trustee, an agent, a guardian or a personal representative.Kevin Karpe

All too often we hear in the news about how a member of a corporate board somehow places himself in a position of conflict by trading company stock based on information exclusive to the board. We read about investigations into why a politician has appointed a colleague to a post for which they are not the most qualified, or a stock broker receiving compensation for a transaction which is obviously contrary to the needs of his client. It is apparent many of those occupying fiduciary positions do not fully understand their obligation, an obligation to act with total loyalty at all times for the sole benefit and interest of another.

It’s difficult to know if our culture has experienced a measurable change in the application of fiduciary standards over time, but I’ve heard many in the investment industry attempt to explain the various degrees of duty and suggest if a conflict exists, it is simply remedied by a disclosure buried in the fine print of an account agreement.   It’s truly a shame an organization may be inclined to take the path of least resistance in the case of disclosure rather than recognize an opportunity to build loyalty with a client. Avoiding breaches of fiduciary duty or conflicts of interest might sound simple.   Breaches or conflicts are most typical in situations where a broker or agent is compensated in manner that is an incentive for him to recommend an investment or transaction that obviously ignores the best interest of the client. A variable annuity sold to a ninety year old woman is a good example of a fiduciary breach in the investment industry.

It’s refreshing to know that consumers are hearing more about fiduciary duty and as a result, the investment industry is now focused on formalizing internal standards. I find it interesting that their best examples are the policies of the old fashioned trust companies.

At Heritage Trust, we believe our experience counts. Our approach to our duty reveals solid relationships with our clients, their kids and grand kids will always contribute to successfully transitioning a legacy.

 Originally published by Heritage Trust in 2011.

Heritage Trust Investment Process Starts with the Client

John McCollum, CFA, led the team that developed the investment process Heritage John McCollumTrust uses today. In the interview with John below, who now serves as Senior Vice President-Investments with Argent Financial Group, we find out the nuts and bolts behind the Heritage Trust process and how our clients benefit from it.

Why is it necessary to have an investment process?
All investment firms have philosophies that guide their approach to managing portfolios. These core beliefs underpin our entire investment process. The process is i05n place to guide the management of portfolios during normal times but importantly, can also serve to protect portfolios from the human emotions that come with times of euphoria and stress. The process serves as a constitution of sorts.

How was the process developed?
The investment process at Heritage Trust was developed over years of study, observation, and reflection and resulted in an approach to managing investment portfolios that struck the proper balance between the art and science of investing. We set out to develop an approach to portfolio construction that took the best parts of Modern Portfolio Theory, the well accepted idea that diversification reduces risk, and blended it with a system of in-house asset class and security valuation, a focus on the minimization of fees and taxes, a recognition that it is difficult to outperform in many asset classes and finally the use of a dedicated portfolio manager to interpret the individual risk and return needs for each account. The result is customized portfolios that mitigate risk while enhancing return.

What are the strengths of the process that continue to make it work for Heritage Trust today?
Like the Constitution, the policies that underlie the Heritage Trust investment process should stand the test of time. Market conditions change. Valuations change. Expectations for growth, inflation, and productivity change. One’s overall approach to investment management must be adaptable to changing market conditions. The approach remains the same, even if the outcomes or the people involved in the process change. I think it is that aspect of the Heritage Trust approach that makes it so valuable to Heritage clients. It does not rely on the opinions or forecasts of one person. It has been embedded in the organizational approach to managing investments.

How do Heritage Trust clients benefit from the process?
The values of Heritage Trust are rooted in our fiduciary duty to always act in the best interest of clients, and our investment process was developed around that. We understood that excessive, and in many cases unnecessary, fees harmed investor’s long-term returns. We also understood that unnecessary trading and frequent portfolio adjustments mostly detracts from long term results. As a result, the established investment process provides a customized portfolio based on the individual’s needs, time horizon and risk tolerance while minimizing fees for the best possible net return.

John, you’ve been involved with Heritage Trust since 2000 and you’re now a leader in our sister company Argent Financial. What is one aspect of Heritage Trust that has kept you involved?
I most appreciate the people and the way clients are valued at Heritage Trust. The team at Heritage genuinely puts client interests first. I think the Heritage Trust investment process is driven by the motivation to do the right thing for clients’ long-term investment performance even if it means not doing the popular thing.

Learn more about John’s new role with Argent Financial Group here. 


by Kenny Brown, Heritage Trust

October Book of the Month: The Opposite of Spoiled by Ron Lieber51pk7D-zV3L._SX331_BO1,204,203,200_

My wife, Erin, and I recently traveled to Denver, Colorado and visited a popular candy store downtown. Anyone who knows me knows how much I love candy and my inability to discipline myself, either when purchasing or consuming it. I paid for my lack of self-control later that evening when I consumed almost a pound of gummy bears. Why do we, even as adults, continue to make poor decisions when we know the consequences of our actions? My initial thought when we entered the candy store was “I am on vacation, I can spoil myself as I worked hard this week and I deserve it!” Unfortunately, for many of us it is this same attitude we have about our money. We make poor financial decisions, because we work so hard and the thought of having to wait to make that purchase makes it almost impossible. It wasn’t until I had read The Opposite of Spoiled by Ron Lieber did I realize my behavior as an adult was a reflection of the habits I developed as a child. The good news is that inside Ron’s book are great ideas and suggestions from other parents that can help to establish and reinforce the behaviors that can create long-term financial success for generations to come.

According to the author, “The Opposite of Spoiled is a generational manifesto first and foremost—a promise to our kids that we will make them better at managing money than we are and give them the tools they need to avoid the financial traps that still ensnare so many adults.” So, I have to fully disclose: I don’t have kids, which is sort of ironic that I would be reading such a book. But here is the thing: I really want kids. My role as a relationship manager at Heritage Trust and as a future parent led me to this book, and I knew I had to read it!

  • The first part of the book does a great job of breaking down and analyzing why it is so difficult to even talk about money especially with our kids. The biggest take-away from reading this book was the reality that if I remained silent on the issue of money when I have my own kids, that someone else “wouldn’t” be. Now I feel much more prepared to answer questions about money and handle decisions regarding giving an allowance or teaching them to be disciplined and comfortable with delayed gratification.
  • Overall, I highly recommend the book even if your children are already grown and you want to learn more about it yourself. I think it gives great insight in a practical sense of our own biases and views on money – especially the final chapter when the author ask the readers, “How much is enough?” I love the author’s final plea as not to overemphasize the topic of money, “So over the 20 years or so that our children live with us, we should try to have just enough conversations about money and the values behind our financial decisions. Only then will they have a complete picture of where we stand, what we stand for, and how we make financial decisions.”

As one who may be a parent in the not too distant future, I really appreciate the author’s decision to do this project and incorporate so many great ideas from others who have had to learn the hard way. Get the book here or your favorite book retailer.