In the context of financial planning, much attention is properly given to life insurance as well as to health, disability and long term care coverages for the clients we serve. The recent – and ongoing – pandemic and related issues have highlighted the need to understand and perhaps update coverage for business property damage or loss, premises liability, business interruption and event cancellations, as well as residential real and personal property coverages including loss of use.  This applies not only to ourselves and our businesses but to the wide variety of clients we advise.

A common technique for taxpayers with large IRAs and relatively lower income is to engage in conversion of traditional IRA funds to Roth IRAs. A conversion requires the taxpayer to declare as income the amount converted in the year the funds are removed from the taxable IRA and transferred to a Roth IRA. The obvious benefit to this technique is that under current law future appreciation in the Roth IRA is not subject to income taxation while distribution of principal from the Roth IRA is likewise not taxed.

In the last twenty or so years, several major life insurance companies, owned by their policy holders as a group, determined to change the format to become a shareholder owned business. This process is called a demutualization. Members receive either a cash payment or shares in the company in exchange for their voting and liquidation rights, while retaining their life insurance policies.  

The receipt of cash or shares will be considered taxable income to the extent the value received exceeds the former member’s cost basis in the property – rights – exchanged for the cash or shares.

It is always important to periodically review one’s estate planning to ensure that it stays up to date with client goals, changing circumstances, current tax law and more. This spring, with the enormous impact of the pandemic on most of us, is certainly a time to consider our planning and how we are protecting our loved ones. The task may seem daunting, but it is worthwhile to make sure a plan is in place no matter where you are or the state of your health.

Of course, if you are in one of the riskier categories for the pandemic, it is imperative to take a look at your situation and to be sure that things will be taken care of appropriately if you become ill, or worse.

Another of the many outcomes of the pandemic has been the stream of advisories coming from the IRS regarding the relaxing of various tax requirements. The usual date of April 15 for filing and paying one’s 2019 income tax return has been extended all the way to July 15. This extension also includes the timing of IRA contributions counting towards the 2019 tax year. If you owe taxes and need time to get things in order to file and pay, this is a blessing. However, if you are expecting a refund, the extension has little, if any, value to you and you likely would not wish to delay your filing.

The coronavirus pandemic, with its accompanying shutdowns, has dramatically and negatively impacted small business (as well as large). Among the legislative enactments intended to help deal with the pandemic, the CARES Act includes provision for Emergency EIDL Grants which legislation allows qualifying small businesses to receive grants of up to $10,000. If you are a small business owner, affected by the pandemic, it may well be worth applying for a grant.
Covered businesses include those with fewer than 500 employees, sole proprietors, independent contractors and the like.

The seemingly endless market drops that have been a feature of the so-called pandemic have many investors and some advisors in a panic. For those investors it is not a question of simply rebalancing and investing cash at the bottom of the market (since we don’t know where or when that is). Many are so fearful that they may abandon common sense and their investment plan to hope for a magic bullet that will restore their investments. This generally doesn’t work.
More importantly, though, one should be concerned about where things are going with our extremely unprepared and overleveraged governments.

Most types of insurance involve an annual premium and renewal to ensure continuity of the coverage. One should review the terms of the renewal offer with care and an open mind as to whether it is preferable to take the easy course and renew or to update what coverage you may require. Although many of you won’t have experienced this, years ago insurance renewals – home, auto – were not fraught with double digit increases, non-renewal or changes in terms. In fact, in cases where the insured did not experience any claims or problems, it was not uncommon to see a decrease in premium at renewal time.

A central goal of much estate planning is ensuring that assets pass to and are available for a person’s loved ones. One such method is the spousal lifetime access trust (SLAT), an irrevocable trust created by a lifetime gift to the trust which provides for the grantor’s spouse and children as beneficiaries. Using a portion of the lifetime exemption of the grantor for the transfer to the SLAT allows this trust to avoid gift tax when created and estate taxation in both the grantor’s and spouse’s estates at death.

Speaking of fears of investing, investors may encounter the burden of the 3.8% net investment income tax in addition to many other potential taxes on income. Though the percentage may not seem very high when we consider the top regular income tax brackets, it is important to remember that it is a separate tax stacked on top of federal income tax, state and local income tax (where applicable), not to mention consideration of the other additional costs of investing such as advisory and other professional fees.