Todd-Hall

Important Information for College-Bound Children

By: Todd Hall

07/12/2019

This is an exciting time for parents with children headed off to their first year of college. Over the past 18 months or so, you have been planning for this transition, and it may be hard to believe that freshman orientation will be starting soon. Hopefully you have had time to have a meaningful conversation with your son or daughter about what it means to be 18 years old and living away from home for the first time.

In the midst of all the change, many parents and young adults preparing for college may not be aware of how their changing legal status will impact them in a variety of ways. For that reason, we encourage parents who have college-bound children to think about estate planning for their young adults. Estate planning for this age group is easy to overlook, however, having certain documentation in place is highly recommended.

Specifically, we recommend that all parents living in Georgia who have children over the age of 18 should ask their children to sign the Georgia Advance Directive for Health Care form. This statutory form enables a child to name a parent or another trusted individual as a health care agent, and it authorizes health care providers to share medical information with the named agent.

Why this is important: Once children reach the age of majority (which is 18 in Georgia and most other states), they are legally considered adults. As adults, privacy laws generally protect their medical information. We hope you don’t ever need to use it, but in the unfortunate scenario where a child experiences a medical emergency, this document helps avoid any challenges in obtaining information about your child’s medical condition or making decisions on his or her behalf. Additional information, including the form itself and some helpful instructions can be found here: https://aging.georgia.gov/.

Once completed, you should give a copy of this form to people who might need it, such as your health care agent, your family, and your physician. Keep a copy of this completed form at home in a place where it can easily be found if it is needed. Many clients also ask their HB client service team to keep a copy in our files.

If you have children who live in other states, we recommend signing both the Georgia form and the appropriate form for the other state. If you sign more than one form, please be sure to name the same health care agent and backup agent on both. You can find links to forms from other states at this website: http://www.caringinfo.org/i4a/pages/index.cfm?pageid=3289

Tricia Mulcare

Divorce Aftershock

By: Tricia Mulcare

06/28/2019

Divorce affects one in four marriages for couples over the age of 50. As soon as the decision to divorce is made and your emotions settle, you need to muster your own team of professional advisors. In addition to your divorce attorney, hire a CPA or financial planner knowledgeable about divorce planning.

Marital dissolution can be managed in various ways. Many couples choose arbitration or mediation in an effort to avoid the fees associated with litigation. One model, collaborative law, is a process in which each party hires its own team of professionals (attorneys, therapists, financial advisors, etc.) and all parties agree to focus on a mutually agreeable settlement.

No matter the legal situation, your financial planner should walk you through these important first steps toward establishing financial freedom:

  1. If you do not already have a budget, develop an estimate of your current necessary monthly expenses.
  2. Open a separate post office box to ensure delivery of confidential documents.
  3. Establish separate checking, savings, brokerage, and credit card accounts, all of which will allow you to begin building individual credit. Be aware that on a joint credit account, all named individuals are liable for debts incurred.
  4. Review credit reports from each of the three major credit agencies. Check the reports for accuracy and identify all joint accounts that will need to be closed.

Your team of financial advisors will often request specific documents to support your assets and expenses. You will also want to contact your insurance agent for copies of your insurance policies and gather vehicle registrations, property deeds, and any recent property appraisals. Finally, copies of payroll stubs, W-2s filed with your previous tax returns, a marriage certificate, and employment contracts may be requested.

Your attorney will likely advise you to consider which martial assets are especially important or have sentimental value. Your team of advisors should evaluate the tax consequences of keeping certain assets. Often overlooked marital assets include season tickets, club memberships, and timeshares.

There may be considerations to make with respect to your career as well. For example, small business owners should inform any partners of a pending divorce. Similarly if you and your spouse are involved with a family business, examine the roles of each spouse and how they will be affected.  Stay at home moms should consider the implications, via a cash flow analysis, of continuing in this role versus going back to work.

Georgia applies a doctrine of “equitable division of marital property” in divorce. This doctrine is designed to ensure that property accumulated during marriage is fairly distributed and can frequently override the current legal title of property owned by both parties in the divorce. As a result, the spouse who does the best job of planning in advance of the divorce hearing is often the party who stands to gain the best settlement. For this reason, be sure to select a team that has experience with your special needs during this time of transition.

 

The information reflects Homrich Berg’s views, opinions and analyses as of 6/28/2019 unless otherwise indicated, with no obligation to update. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters.

Awards Financial_Times-logo

Homrich Berg Named to 2019 Financial Times 300 Top Registered Investment Advisers

June 27, 2019 – Homrich Berg is pleased to announce it has been named to the 2019 edition of the Financial Times 300 Top Registered Investment Advisers. The list recognizes top independent RIA firms from across the U.S.

This is the sixth annual FT 300 list, produced independently by the Financial Times in collaboration with Ignites Research, a subsidiary of the FT that provides business intelligence on the investment management industry.

RIA firms applied for consideration, having met a minimum set of criteria. Applicants were then graded on six factors: assets under management (AUM); AUM growth rate; years in existence; advanced industry credentials of the firm’s advisers; online accessibility; and compliance records. There are no fees or other considerations required of RIAs that apply for the FT 300. The final list includes advisers from 37 U.S. states.

The final FT 300 represents an impressive cohort of established RIA firms, as the “average” practice in this year’s list has been in existence for over 22 years and manages $4.6 billion in assets. The FT 300 Top RIAs hail from 37 states.

This information reflects Homrich Berg’s views, opinions and analyses as of 07/02/2019 unless otherwise indicated, with no obligation to update. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters. Rankings are not necessarily indicative of future performance.

 

Ford-Donohue

The US China Trade War

By: Ford Donohue

06/21/2019

For months headlines have been dominated by the US China Trade War. As an investor, it’s easy to get caught up in the day to day swings in the market; but we believe that it’s important to take a step back, understand the drivers behind the US-China trade tensions, and make decisions that put portfolios in the best position for long-term growth.

There are two main factors driving the trade war between the US and China: the large bilateral trade deficit and China’s lack of protection for US Tech Intellectual Property (“IP”). As an example of the first factor, the US imports roughly $540bn in goods from China on an annual basis, while China imports just $120bn worth of goods from the US. As an example of the second factor, China often forces US tech companies to divulge proprietary technological information in order to gain access to its market.

The large trade imbalance put consumers at risk when the cost of goods coming from China increase, and the IP transfer issues negatively impact our prized tech sector. Although not everyone agrees on an exact strategy, many politicians and economists agree that imposing tariffs may be an effective way to battle the trade imbalance with China. Due to the large trade deficit, a trade war fought via tariffs is likely to have a much bigger impact on China than it will on the US.

The trade war continues to evolve in real time, and it is difficult to predict where it will go in the weeks and months to come. The US has currently placed 25% tariffs on $200bn worth of goods imported from China and that may increase to cover more imports in the months ahead. However, taking a long-term view, both the US and China have leaders with strong incentives to see their economies grow, not stagnate. As a result, it is unlikely that the trade war continues to escalate significantly from here. At some point, we expect tensions to ease as both leaders will be looking to claim a “victory” in this dispute, although it is impossible to predict exactly when and how.

As investors, it is important to be aware of the facts and understand the impact that the tariffs will have on both economies. We expect the overall impact of this trade dispute on US corporate earnings and GDP to be minimal. Therefore, we believe that investors should stay committed to their long-term plans given the current situation and incentives for both sides.

Jeff-Rosengarten

Social Security Strategy: Restricted Application for Spousal Benefit

By: Jeff Rosengarten

06/14/2019

Are you between the age of 65 ½ and 70? If so, you may be leaving free money on the table from Social Security.

Those who will be age 66 or older by the end of 2019 may be able to claim what is called a “spousal benefit” at age 66 and wait to take their own increased benefit until age 70.

To take advantage of this strategy, you must be over age 66 and your spouse must currently be receiving his or her benefit. If this applies to you file a “restricted application” which allows you to receive one-half of your spouse’s Full Retirement Age (FRA) benefit.

This strategy works best if the lower earner claims their benefit, then the higher earner files a restricted application to receive spousal benefits for a few years and then switches to their own benefit at age 70. In general, we recommend the higher earning spouse delay claiming their own benefit as long as possible to age 70. Each year you delay benefits past age 66, you receive an 8% per year increase in your benefit.

For example, if your spouse is the lower earner and receiving their FRA benefit of $1,000 per month, you would be eligible for a spousal benefit of $500 per month. You could claim the spousal benefit of $500 per month for four years (ages 66 to 70) for a total of $24,000. At age 70, you would switch to your own larger benefit.

Claiming the spousal benefit early at age 66 does not affect your higher benefit so you can keep your increased age 70 benefit intact and still receive some benefits early. The increased benefit will also transfer 100% to your spouse if you pass away first and will continue for your spouse’s lifetime.

If you are divorced and currently unmarried, you can also use this strategy to claim spousal benefits on your ex-spouse’s record at your age 66 and delay taking your own benefit until age 70. You must have been married at least 10 years and divorced for at least two years. Unlike a married couple, your ex-spouse does not have to be currently receiving their own benefit for the spousal benefit to be available, but your ex-spouse must be age 62 or older.

Delaying taking Social Security acts as a hedge against three major risks to your investment portfolio; high inflation, poor markets, and longevity risk (the risk that you outlive your money). Social Security provides Cost of Living Adjustments to keep up with inflation and your benefit does not depend on market performance like the rest of your investment portfolio.

The future of Social Security is largely unknown and out of your control, but deciding how and when to claim your benefit is your choice and will be one of the most important decisions many retirees face. Social Security has no shortage of rules, which means there are plenty of tips and strategies and an equal number of pitfalls. Make sure to do your homework and talk to your advisor to figure out what is best for your situation.

Julian-Davis

Demand For Your Dollars

06/07/2019

By: Julian Davis

In today’s world of Amazon, Apple Pay, Venmo and many other convenient technologies that make it so easy (maybe too easy) to spend money without much effort or thought, it can be hard to keep up with where your money is going. You don’t have to pull out your wallet or checkbook, or even get out of bed, to spend money. On the other hand, there are many technological products – ranging from Microsoft Excel to various free and paid budgeting apps – that make it convenient to track your spending without having to balance a checkbook or utilize the envelope system.

While I personally enjoy making a budget and tracking my adherence (or lack thereof) to the plan, I realize that not everyone considers this a favorite pastime. However, the first step in achieving your financial goals is establishing your financial goals. A key factor in setting and achieving these goals is to manage the demand for your dollars. Ultimately you want to make sure you are living below your means (spending less than you earn) and working to increase your personal bottom line a.k.a. your net worth.

It may sound very simple, but many people cannot identify where their money has gone at the end of each month. I am not suggesting that you track every penny, but you should have a general idea of the categories in which you are spending your hard-earned money. A rule of thumb that I find helpful is the 50/30/20 rule. The basic premise is that you should allocate 50% of your take-home earnings toward your “needs” or fixed costs, 30% toward your “wants” or variable costs, and 20% toward your financial goals or increasing your net worth by savings and/or debt reduction.

We all have different lifestyles so one person might consider cable television with the premium channel package or super high-speed internet as “needs”, whereas another person would classify these as “wants”. In general, expenses such as housing, transportation, and groceries would go in the “needs” bucket. Taking vacations, going shopping, or buying season tickets to the Falcons game would typically fall under “wants”. There is some gray area, for instance, while going shopping may be a “want” you could argue that clothes are a “need” (just maybe not the latest trends that everyone “likes” on Instagram). The point here is not to get bogged down in the details, but to develop a plan that fits your lifestyle, work to achieve that plan, and potentially set your sights toward more lofty goals (40/30/30 rule?) once you’re able to consistently achieve the current plan.

There are a couple of nice features of the 50/30/20 rule. Many people like to see tangible results or milestones when working toward achieving goals. Whether you are working to pay off student loans (unless you are a fortunate member of Morehouse College’s Class of 2019) or you are making maximum contributions to your 401(k), this rule of thumb gives you credit for both actions because they both positively impact your net worth. We often hear that we should avoid “lifestyle creep” as our earnings increase over the course of our careers. While this is good advice to follow, most of us like to reward ourselves for working hard. The 50/30/20 rule allows you to perhaps increase your vacation budget as long as you are still paying yourself 20% first. At the end of the day, one of the ultimate rewards of hard work is achieving your financial goals and attaining financial freedom.

Anthony Guinta

Meet Anthony Guinta

05/31/2019

If you asked Tony what he wanted to be in high school, he would have said a roadie for AC/DC. If you ask him now, he’d probably say the same thing. Tony is a native of the small New York town of Elmira (population 29,200); a place he describes as having more cows than people. Understandably, the prospect of traveling the world with a rock band was beyond appealing, but his post-college plans changed when he got married and had his first child. “Our first financial plan was fumbling for loose change in the cushions of the couch we bought from the thrift store so we could buy diapers,” Tony remembers with a laugh. Wisely, Tony made the decision to trade his t-shirts for a suit and enter the business world.

After an early stint at Market Street Trust Company, a private trust company providing family office services for the descendants of the founders of Corning, Inc., Tony landed a job at Arthur Andersen. The catch? They wanted him to move to Georgia. “We’d never actually been to Atlanta before, but I figured the weather had to be better than in New York and the housing was probably cheaper” Tony recalls. With that, the Guinta family packed their bags and moved to Atlanta.

Working at Arthur Andersen proved challenging for Tony, who didn’t like the large corporate feel or the company culture. He remembers a project in which countless hours were spent calling different offices around the country for answers just to find out the firm’s expert he needed to reach was two floors above him. When he asked why he wasn’t told this, the response was his manager didn’t like that person.

So, shortly after completing the CFP exam, Tony met with David Homrich and Andy Berg. “Within the first ten minutes of talking to them I realized this is where I wanted to be,” Tony says. “These guys gave advice without conflicts, without selling. They acted in their clients’ best interest, and that’s exactly why I got into this field in the first place.”

The rest is history: Tony joined Homrich Berg in 1999 when the firm had approximately 12 people and a goal of $250 million AUM by the end of the year. Throughout his 20 year tenure at HB Tony has provided expertise primarily in financial planning, including estate and income tax, and charitable giving. Tony was recognized by Worth magazine as one of the country’s top wealth advisors for five consecutive years. He has also been quoted in publications such as The Wall Street Journal, and The New York Times.

Today, Tony serves as the firm’s Chief Financial Officer, a position that he enjoys immensely: “I find it challenging. I’m like a forensic accountant at times trying to piece together a puzzle. After serving clients for many years, I like having a job that’s different but still can make an impact. As they say, the CFO only controls a small percentage of what happens but gets blamed for 100% of any problem.”

When asked about retirement and if he still plans on touring with AC/DC, Tony laughs. “I think Atlanta has become a good centralized base for us. I love being near an airport where I can fly anywhere and my kids live nearby. Besides, I can’t leave HB because my wife doesn’t want me at home – it would drive her crazy.”

Todd-Hall

Charitable Giving with Donor Advised Funds

By: Todd Hall

05/23/2019

The Tax Cuts and Jobs Act, which took effect in 2018 was a significant tax overhaul that has impacted the way that taxpayers give to charity. The new law significantly increased the standard deduction, which can reduce or even eliminate the tax benefit that some taxpayers get from annual donations to charity. Many taxpayers won’t collect the necessary deductions to surpass the new standard deduction threshold. And the elimination or reduction of many popular deductions may put itemization out of reach entirely.

One way to overcome this issue involves the use of a charitable vehicle called a Donor Advised Fund (DAF). DAFs have been around for many years, but they are now an even more valuable tool for many charitably minded taxpayers. Donors with DAFs can use a strategy called “bunching,” in which they fund a DAF with multiple years’ worth of charitable gifts in a single year in order to surpass the itemization threshold, and distribute cash to charities from the DAF over time. Some donors will only itemize deductions in the “bunching” years, and take the standard deduction in off-years (or “skip-years”). Bunching can also be beneficial if a donor has a year with abnormally high income (e.g. from the sale of a large asset or payout of a large bonus). Funding several years’ worth of charitable gifts in the high-income year will maximize tax benefits.

What is a DAF?

A DAF is a charitable account that allows a donor to:

1) “Pre-fund” future charitable gifts when it is advantageous for the donor, and

2) Make large or small grants to charities of the donor’s choice over any period of time. Any amount not granted right away can be invested and will grow tax-free.

The donor receives a charitable deduction for making contributions to the DAF account. This is generally done with appreciates securities when possible, but the account can be funded with cash or other assets as well. The donor can then make grants to virtually any 501(c)(3) IRS-qualified public charity – that means everything from the donor’s alma mater to the local church. Donors can even support international causes through a DAF.

How a DAF Works

A DAF is technically an account at a public charity that enters into an agreement with a donor. The agreement gives the donor the right to advise the fund on how the donor’s contributions will be invested and how grants to charities will be made. Because the DAF is technically an account at a public charity, contributions to the DAF are irrevocable, and qualify the donor for an immediate tax deduction (subject to the same Adjusted Gross Income limitations as other public charities).

Donors decide on their own fund name (e.g. The Jones Family Fund) and who will have authority to request grants from the account. During life, the donor (or the donor’s designee) can make ongoing, non-binding recommendations to the fund as to how much, when, and to which charities grants from the fund should be made. Additionally, the donor can advise on how contributions should be invested. The donor may suggest that, upon death, grants be made to charities named in his or her will, or the donor may designate a surviving family member(s) to recommend grants.

In order for gifts to a DAF to qualify for a charitable deduction, the gift must be irrevocable and technically the charity that holds the DAF account is not obligated to follow any of the donor’s suggestions — hence the name “donor-advised fund.” As a practical matter, though, the fund will generally follow a donor’s wishes.

See Figure 1 for an illustration of how DAFs work.

Some Additional Advantages of DAFs

Using a DAF to “pre-fund” future charitable gifts can have several advantages, including:

  • Simplified process for making multiple gifts – For example, if a donor has appreciated stock worth $5,000 and would like to make gifts of $500 each to 10 charities, paperwork is only needed once to transfer the stock to the DAF, and there is only one charitable gift to report for tax purposes. Grants can easily be processed online from the DAF to the desired charities.
  • Anonymity – Grants from DAFs are typically identified as being made from a specific donor’s account, but they can be made anonymously at the donor’s request.
  • Expert advice – Many charities that offer DAF accounts offer expert advice on grantmaking.

How to Establish a DAF

Donors can open a DAF at several organizations. Below are some common examples:

  • National low-cost options include:
    • Fidelity Charitable – a separate charitable entity affiliated with Fidelity Investments
    • Schwab Charitable – a separate charitable entity affiliated with Charles Schwab
  • Local community foundations – Usually community foundations will have specific expertise in local community needs and the charities established to meet those needs. Often they will provide additional support in connecting donors to charities in the community. Community foundations often charge higher fees than the national organizations in order to support these additional services. The Community Foundation for Greater Atlanta is an example. Many other large cities have similar organizations.
  • National and local religious charities – Like Community Foundations, religious charities have specific expertise in charities that support their religious philosophy or affiliation. Examples include:
    • National Christian Foundation
    • Jewish Federation of Greater Atlanta (or other local affiliates in various cities)

Other Important Details

There are fees associated with establishing and/or maintaining DAFs. Large national organizations generally charge between 0.10% and 0.60% of assets in the account, depending on the balance. Other administrative fees may also apply, though these are generally small. Charities that offer significant additional services such as community foundations and religiously affiliated organizations generally charge more. However, many donors view these higher fees as an additional charitable donation to help support causes they care about. There are also management fees charged for underlying investments that can vary significantly. With large enough account balances, HB can manage the account, which may enable you to choose investments with lower fees than the investment options for smaller accounts.

Some DAFs can accept non-cash assets other than securities, such as real estate, private alternative investments, or certain complex assets such as privately held company stock. Not all DAFs are equal in this regard, so you will want to plan ahead and work with your HB advisor if you plan to fund a DAF with non-cash assets other than publicly traded securities.

Saving For College – 529 Planning Options

By: Philip Clinkscales

05/17/2019

A 529 plan gives parents, grandparents, and others a vehicle in which to save funds for college, invest those funds, and receive possible tax-free treatment of all gains, dividends, and interest. Some states offer incentives such as tax deductions or tax credits for contributions to their 529 plans. While both federal and state taxing authorities promote these plans, their treatment of contributions or distributions may not always align. Depending on the state, the newly added K-12 tuition qualified education expense may not prove quite as valuable as initially thought.

Contributions

The federal contribution limitation lines up with the annual gift tax exclusion of $15,000. This exclusion allows gifts up to the exclusion amount from a donor without paying gift tax or using your lifetime exemption. There are other nuances like the five year gift tax averaging that allows for super funding a 529 plan, but this limitation also coordinates with the annual gift tax exclusion.

As mentioned above, many states promote contributions through tax incentives. Georgia, for example, allows a tax deduction up to $2000 for single filers ($4000 for joint filers) per beneficiary per year. Each state is different.

Distributions

The investments in a 529 plan grow and cash distributes tax free if distributions are spent on qualified educational expenses either directly or through reimbursement. Qualified educational expenses include tuition, fees, books, supplies, equipment, computers (added in 2015), and sometimes room and board. Non-qualified distributions are “discouraged” similar to an early IRA distribution. Both incur a 10% penalty and income taxes on any growth distributed.

Conclusion

There are many factors to consider in any planning decision, but all things being equal, a 529 should still be used for qualified higher education costs (college). The 2 main reasons are:

1) The primary benefit to 529s remains the possible tax free growth especially over longer periods of time due to compounding returns. Contributions in the plan for a short term with little or no growth and used to pay for K-12 tuition leave the state tax deduction as the only possible substantive benefit. This can be slightly more advantageous than paying directly.

2) The state may not actually allow spending on K-12 tuition without making one pay income tax or a penalty, so please check with a tax advisor to confirm state distribution qualifications before writing the check.

Generally, one would want to contribute more funds to a 529 early in the beneficiary’s life, maximize any state incentives in continuing years, earn strong positive returns on the investments, spend the funds late in the beneficiary’s educational career rather than early, and, if you live in Georgia with multiple children like myself, hope that the beneficiary receives the Zell Miller scholarship!

Ross Bramwell

Did You Stick To Your Plan During The Last Correction?

By: Ross Bramwell

05/10/2019

The S&P 500 fully recovered from its fourth quarter market correction last week and reached a new high. The recent recovery took only four months, which is precisely the historical average for recoveries after stock market corrections.

This is a good reminder that a large part of investing is emotional and behavioral. Although we know we need to be patient, it is often hard not to dwell on short-term performance and to block out the noise. When we’re able to do so we are in a much better position to stay invested, stay on track with our financial plan, and achieve our long-term goals. As the saying goes, the only way to achieve long-term returns is to stay invested for the long-term.

The market was able to recover this year as the recession that was so feared to be imminent, has yet to materialize. Inflation is tame, the Fed has paused on any future rate hikes, and wage growth continues to be positive. Even as last week’s surprise positive GDP reinforced, the U.S. economy continues to grow even if it is at a slower rate.

However, we acknowledge that risks are still out there. Although economic expansions do not end just due to age, we believe the economy is experiencing more late-cycle characteristics.  We expect market volatility to remain as a normal part of the investor experience. Markets are inherently choppy and volatile. We believe the best way to manage this is not to jump in and out based on emotions, but to main a diversified portfolio that expects a bumpy road ahead.

S&P 500 Reaches New Highs After Fourth Quarter Correction

Disclosures: The information reflects Homrich Berg’s views, opinions and analyses as of April 29, 2019 unless otherwise indicated, with no obligation to update. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters. Certain of the information herein is based on third party sources believed to be reliable but which have not been independently verified. Certain of the information is forward-looking in nature and reflects Homrich Berg’s outlook and forecasts as of the date of the document and is not to be relied upon; actual results may differ materially. Past performance is not a guarantee or indicator of future results; inherent in any investment is the risk of loss.