Skip to main content
Feb 17
Love0

Are Big Estate Tax Changes Coming?

By Estate Taxes

Key Takeaways:

  • Currently, some big estate tax provisions of the 2017 Tax Cuts and Jobs Act are set to expire at the end of this year.
  • Strategies to consider include accelerated gifting, stress testing an estate plan and certain trusts.
  • Other possible changes on the horizon mean now could be a good time to review your overall wealth plan.

Around this time next year—January 1, 2026, to be exact—we will see some very big changes to laws and rules governing estate and gift taxes.

Well, maybe. Or maybe not.

What’s clear is that many key components of the Tax Cuts and Jobs Act are currently scheduled to expire at the end of 2025. It’s less clear, however, whether things will stay that way by the time the calendar turns over to 2026. The resulting changes, should they occur, could have big wealth transfer implications for many families with significant wealth—as well as families seeking to join the ranks of the ultra-wealthy and take care of their heirs financially.

The keys to planning for these potential changes are to pay attention and begin your efforts earlier rather than later, as amending wealth transfer plans may take a significant amount of time and effort. With that in mind, here’s a look at some possible developments on the horizon—and some ideas you might want to consider during the coming months.

2017 law may sunset

Back in 2017, the Tax Cuts and Jobs Act was passed by Congress and signed into law. Among many other things, it doubled the lifetime gift and estate tax exemption, indexed for inflation (while keeping the top estate tax rate at 40%) from $5.6 million for single filers to $11.2 million and from $11.2 million to $22.4 million for married couples filing jointly. In 2024 the individual exemption limit stood at $13.61 million.

At the end of this year, however, that exemption will sunset unless Congress extends it—resulting in an exemption limit that is expected to be around just $7 million in 2026 (and adjusted for inflation moving forward).

 The upshot: Families with a net worth of more than $7 million (around $14 million for married couples) could find themselves facing—virtually overnight—the prospect of a large estate tax bill. The estate amount over the exemption amount is subject to a 40% federal estate tax.

That said, much uncertainty remains about the ultimate direction and magnitude of any estate tax law changes. For example, Congress could act to extend the law as is, arrive at a new agreement, or do nothing at all (in which case the above scenario will come to pass).

Planning in an uncertain environment

Given the many question marks that currently exist, you might wonder why you should be thinking about doing anything at all to your estate plan.

One big reason: When it comes to tax laws and rules, perfect clarity is rarely achieved. It seems there are always new guidelines from the IRS or proposals from Washington, D.C., that could shift the tax landscape. In other words, if you waited for absolute certainty to make your wealth transfer plans, you probably wouldn’t have any such plans—which could, in turn, result in less of your wealth going where you want it to go.

The good news is that you don’t need 100% certainty to evaluate options and make informed considerations about your wealth. An estate plan—or any component of an overall wealth plan, for that matter—that is set up to be dynamic and flexible can be well positioned to evolve along with new developments in the financial and tax arenas.

Ideas to consider

Here are some ideas to consider as 2025 progresses. Keep in mind that there’s no one-size-fits-all approach to wealth transfer planning—and that this in-no-way-comprehensive list of possibilities likely includes some ideas that are worthy of your attention along with others that could be irrelevant given your particular situation.

The key, ultimately, is to discuss your situation with your trusted advisors to determine which steps—if any—could potentially position you for better outcomes.

Consider accelerating your outright gifting schedule

Given the current high exemptions and the possibility of much lower ones on the way, affluent individuals could choose to gift more of their assets today—removing those assets from their estate for tax purposes—than they might have originally planned to. This might involve transferring stocks or income-producing property to family members who could be in lower tax brackets. One caveat: If you transfer an appreciated asset to an heir, they will generally pay capital gains tax on the original cost basis of the asset. In contrast, if that asset passes after death, it will benefit from a step-up in cost basis. Choosing which assets to gift pre-death should be part of the estate planning process.

 Making large gifts now won’t harm estates after 2025

The IRS in 2019 formally clarified that individuals taking advantage of the increased gift tax exclusion amount currently in effect will not be adversely impacted if the exclusion amount falls in 2026.

Look into a SLAT

Some married couples might benefit by creating a spousal lifetime access trust, or SLAT, in today’s high exemption environment. A SLAT is an irrevocable trust for your spouse into which you gift assets and use your exemption amount. Unlike some other trusts, however, a SLAT can allow access to the funds in it if certain conditions are met (such as withdrawals for health or educational reasons). However, SLATs are complex and there can be risks—such as losing the money in a divorce or if the beneficiary spouse dies unexpectedly.

Consider maxing out one spouse’s lifetime exemption

A married couple can opt to fully use one of their lifetime exemptions completely by gifting assets but preserve the other spouse’s exemption. If the current exemption rules do end with the sunset of the Tax Cuts and Jobs Act, one spouse’s exemption would still be usable in 2026.

Engage in scenario planning/stress testing

You might not know exactly how things will shake out, but you can model different potential scenarios to see how various changes to the tax laws and rules might impact your outcomes. Armed with that information, you might decide to make changes now—or simply be ready to implement new solutions if certain trigger points occur.

In recent years, we’ve seen stress testing become an increasingly common action step taken by wealthy families and their advisors. At its core, stress testing is a formal process designed to put a wealth plan (or certain components of it) “through its paces.” That means evaluating and assessing it to see if the strategies being used are likely to achieve a wealthy family’s key financial goals and objectives.

Often that’s done by examining how a wealth plan would likely behave in a variety of scenarios—both positive and negative—that would have an impact on it. The goal is to ensure that the plan doesn’t spring any unpleasant surprises on the family. But stress testing also seeks to identify any strategies or opportunities that are currently being overlooked in the plan but that could add significant value to the family’s financial life.

Revisit your plan anyway

How long has it been since your estate plan was drafted—and have you looked at it once since then? If your estate plan is more than a few years old, it’s probably a good idea for you and your trusted advisors to review it. Regardless of whether current tax laws change, there’s a decent chance that your life, your goals and your net worth have evolved in the past few years—and those developments might mean that it’s time to alter your plan to reflect your current situation or your revised goals for the future of your family.

Don’t overreact

When big changes that could impact your wealth appear likely, it’s easy to get excited and let your emotions override your logic. Yes, the estate tax landscape might look very different in 2026. But your goals should drive your decision-making at least as much as external changes do. Discuss your priorities with your team of professionals so that you’re all clear on what you’re hoping to accomplish with your generational wealth planning. Then assess how you might create or revise a plan based on the information you know while building in a level of flexibility (to the extent possible) to help address new developments.

The bigger picture

If you’re evaluating your estate plan in light of these upcoming potential changes, keep in mind that other provisions of the Tax Cuts and Jobs Act are set to expire, too. If they do, we’ll see results such as higher marginal tax brackets, a lower standard deduction and many others.

 The upshot: A broader, bigger-picture look at your overall wealth plan might be in order. While trying to predict what Congress will do next can seem like a fool’s errand, we believe that thinking carefully about how you’re positioned for the future is never a bad idea.

 

VFO Inner Circle Special Report

By John J. Bowen Jr.

© Copyright 2025 by AES Nation, LLC. All rights reserved.

No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.

The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience.

The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

 

 

Jan 28
Love0

Keeping Those New Year’s Resolutions

By Setting Goals

Key Takeaways:

  • Making New Year’s resolutions, and then soon falling short on them, is a very human practice. (One that dates back millennia, in fact.)
  • The human brain craves habit—and making new, healthier habits is hard.
  • Prioritizing positive, proactive, “approach-oriented goals” is just one way to potentially set yourself up for success.

So many of us start each January 1 with such high hopes. This will be the year we stick to our New Year’s resolutions, we tell ourselves. The weight loss goals, the exercise regimen, the pledge to get organized or learn a new skill—regardless of the objectives, the motivation to see them through is at its strongest when the calendar flips.

Of course, quite often that “eyes on the prize” attitude sours in short order—leaving us with a sense of disappointment that we got off track so quickly.

With that in mind, consider focusing on what is commonly the hardest part of resolutions—keeping them well into the new year and beyond. The good news: There are plenty of strategies that can potentially help you do a better job at identifying the right goals for you, framing them so you pursue them consistently, and ultimately generating the outcomes you most want for yourself.

Why it’s so tough

The history of New Year’s resolutions is a long one. The ancient Babylonians are said to have started the practice more than 4,000 years ago. They would make promises to the gods when crops were planted at the start of the new year. If they kept their word, those gods would smile on them during the year to come. If not, they would fall out of the gods’ favor.

Put another way, people have been making New Year’s resolutions—and often failing to keep them—for four millennia. So maybe don’t beat yourself up too much if you find yourself falling short of your goals by the time February starts. Certainly many of us find it a whole lot easier to make resolutions than to execute on them.

The good news: If that describes you, it’s probably not the case that you have some great moral failing. Turns out there’s some science behind humans’ pattern of losing interest in New Year’s resolutions.

For example, one longitudinal study of “resolvers” published in the National Library of Medicine tracked 200 people who set out to tackle a wide array of milestones in the New Year, with goals both concrete (quitting smoking) and abstract (improving romantic relationships). It found that by a week into January, 77% of study participants had kept up with their resolutions. But that number decreased to 55% by February 1. And it lowered still further to 43% after three months, 40% after six months and just 19% after two years.

The challenge is that creating a new course of action and sticking with it involves changing behaviors—whether building new and healthier habits or jettisoning old, unhealthy ones. And the human brain is a creature of habit, craving the familiar and treading well-worn paths of comforting actions (or inaction, as the case may be). Don’t be surprised if it takes around three weeks to start a new habit.

But the good news is that experts have shown that healthy new habits can be cultivated with repetition and mindfulness, reinforcing beneficial behaviors by cultivating a positive and rewarding feedback loop. “Habits aren’t just there, but you get them by repetition and reinforcement,” Dr. Nicole Calakos, professor of neurology and neurobiology at Duke, told PBS North Carolina. “The repetition part is obvious, because a habit means regularly doing something, and the more you do it, the conditions are ripe that will make you prone to have a habit. The second is reinforcement. In other words, is the outcome good? Does it help you get about your business? Is it rewarding?”

Framing your goals

Science doesn’t just tell us that it’s a common occurrence to fall short on our resolutions. It also offers tried-and-tested ways to stay on track and achieve success, cultivating better habits and lasting change.

Ultimately, it’s all in how you frame it.

In one peer-reviewed study from 2020, Swedish researchers studied the success rates of various New Year’s resolutions. Their conclusion: “Approach-oriented goals are more successful than avoidance-oriented goals.”

Essentially, that means you’re a lot more likely to find staying power with a resolution that you can build toward, iteratively and proactively, and that gives you positive motivation along the way. That’s a much better way to frame your goal than a deprivation-based system (“I must give up bad habit X!”) that only denies you the things you’re used to craving.

A one-year follow-up on the Swedish researchers’ study cohort showed that more than half (55%) of the subjects thought they’d been successful in sustaining their resolutions. And those who embraced the approach-oriented model were significantly more successful than those who’d tried to simply avoid bad habits: 58.9% versus 47.1%.

Also try to set approach-oriented goals that you can measure—key performance indicators, if you will. Choosing specific numeric targets for your resolutions and then working proactively toward them can be a valuable and rewarding way to rewire your brain with healthy new habits.

Example: Strapping on the Fitbit and then pledging to walk an extra 5,000 steps a day or jog seven miles per week can be much better than just saying “exercise more.” It’s motivating because it gives you a specific goal to work toward within a specific time frame.

That then allows you to track your progress—giving you warm feelings of satisfaction when you meet or exceed that total, and encouraging you to try harder the next day when you fall short of your goal.

Action steps

Armed with the understanding that achievement is a much better approach to resolution-keeping than avoidance, here are some fine-tuned tips to help you take the goals of January and carry them right through the calendar year.

  1. Keep your goals limited and reasonable. Keep your resolutions to a handful of two or three achievable goals. Don’t try to boil the ocean!
  2. Be specific. As noted, having numeric benchmarks to work toward and track is an immense motivator. It’s not just about “spending less.” It’s about making a budget and trimming monthly expenditures by X amount. It’s not about “eating better,” but rather cooking a specific number of healthy dinner recipes at home each week or only getting takeout on weekends.
  3. Plan it out. By looking strategically at your goals and then being tactical about divvying them up into discrete and doable milestones, you can set yourself on a good path to success and avoid feeling overwhelmed with something that seems abstract and unattainable.
  4. Keep an eye on KPIs. Tracking your progress toward your goal is critical—and it’s easier than ever with any number of smartphone apps that can help you make notes, keep a journal or log specific accomplishments along the way. When you’ve notched a specific win, however small it might be, consider a small treat to celebrate.
  5. Make yourself accountable (but not too much). The goal of a New Year’s resolution is to build a better you. It defeats the purpose of the whole endeavor if you beat yourself up every time you slip up or fall behind on your progress. Holding yourself to account is healthy—but so is being flexible and shrugging off small setbacks.
  6. Slow and steady wins the race. “Rome wasn’t built in a day” is a cliché—but that doesn’t mean it’s incorrect. Consistent, day-in, day-out repetition of productive and healthy behaviors is what will make your resolutions stick. With iteration, success can have a tendency to build on itself.
  7. But also don’t be afraid to change course. If, a month or two into the new year, you decide your resolution was too ambitious or too broad, it’s okay to trim sails and try another tack. Even more modest progress toward a goal is better than abandoning your plan entirely.

Conclusion

Of course, you don’t have to make New Year’s resolutions at all. It’s good to want to improve yourself. But the arbitrary date of January 1—and the self-imposed pressure to comply with the goals you set for yourself—may not be worth the agita when all is said and done.

Many people have decided that the idea is just silly when they know, from experience, the failure rate. One survey found that most people opt to skip the trend entirely—with only four in ten people making resolutions, and of those, barely more than 15% keeping all of them.

If you do decide to go all in for a transformative, new-year, new-you start to 2025, try to take it easy. Stay motivated, track progress toward your goals, reward small victories and forgive small slipups. But ultimately—no matter whether you follow through on your goals in splendid fashion or fall short of them spectacularly—remember to be proud of your efforts.

 

VFO Inner Circle Special Report

By John J. Bowen Jr.

© Copyright 2025 by AES Nation, LLC. All rights reserved.

 

No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.

The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience.

The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

 

Jan 10
Love0

2024 Year End Markets Overview and Outlook

By State of the Economy - 4Q 2024

At the end of 2024, investors had good reason to pop the confetti. Last year was the second consecutive year with S&P 500 gains of over 20%, the first time that has occurred since the late-1990s. The S&P 500 closed 2024, up 23% to an all-time high of 5,869.

The impressive performance begs the question: Is this momentum built on actual muscle or helium balloons? And while the party is certainly going strong, should investors be looking elsewhere for better future opportunities?

  • Valuations: The forward P/E ratio on the S&P 500 hovers at 21.4x, well above the 30-year average of 16.9x and pushing 1.4 standard deviations over typical levels.

In regular-person-speak, the market is quite optimistic about the promise of artificial intelligence and market-friendly policies from the incoming administration.

  • Market Concentration: The “Magnificent 7” (Apple, Alphabet, Nvidia, Microsoft, Amazon, Meta, Tesla) keep hogging the limelight, contributing 55% of 2024’s gains. Their enviable profit margins, at 23.5% versus 9.3% for the rest of the S&P 500, are proof that market darlings can do no wrong—until they do. The top 10 S&P 500 stocks currently represent a record-breaking 38.7% of the total market cap.

  • Earnings Outlook: Analysts forecast even rosier profits for 2025. S&P 500 margins checked in at 12.8% for Q3 2024, well above historical norms.

We’d like to think of it as the market humming along to its favorite tune—albeit one pitched a few octaves higher than usual. In 2022, the Equity market fell because the Magnificent 7 margins started to fall because of shrinking profit margins.  In 2023, the companies cut their workforces, improved profit margins, and mostly stayed disciplined with their expense management. Will they remain disciplined in the face of growing capital expenditures for Artificial Intelligence? We will need to watch this closely.

International Markets

Overseas, it’s the same music, different volume knob. While the US markets are belting out show tunes, international equities are more like your moody cousin who’s got loads of potential but keeps to the sidelines.

  • Valuation Contrast: The MSCI All Country World ex-US index trades at a whopping 37.8% discount to the S&P 500 on a forward P/E basis—a historically wide gap. To put that in perspective, the 20-year average discount is a mere 17.8%. If you have ever been tempted to shop for bargains abroad, you’ll find an entire clearance rack waiting.

  • Regional Performance: 2024 returns were a mixed bag:
    • Asian Equities: Overall, Asian markets were up +2.06% (USD terms), as a strengthening US dollar hurt Asian market returns, which performed well in local currency terms, with Japan up 15% and Australia up 7.5%. Japanese corporate governance reforms have turned the once-sleepy sector into a relatively bright spot.
    • European Equities: Overall, European Equities were up 2.22% as a strong dollar and persistent economic woes again hurt returns. Picture a soccer match that just can’t seem to find a winning goal.
    • Emerging Markets: Emerging market equities ended the year up a respectable +11.63%, proving resilient despite a slowdown in China. If you ever doubted EM’s scrappy nature, let these numbers be your reminder.
  • Sector Disparities: Across the globe, technology and consumer discretionary showcase the most significant discount compared to their US peers. Value investors have started drooling, but it remains to be seen if global fundamentals will turn that drool into actual profits.

Fixed Income Markets

Ah, bonds—a once-forgotten stepchild now strutting back into the limelight. With real yields higher than anything we’ve seen in recent memory, fixed income is now starting to get a second look from the “cool kids” table in finance.

  • Yield Curve: The 10-year Treasury yield is around 4.6%, and the Fed, while having paused its rate cuts, is still making not-so-subtle hints about easing. The dot plot calls for a gentle decline in rates with a long-run estimate of short rates falling to 3.0%.

  • Credit Conditions: Credit spreads, or the difference in yield a corporate borrower pays to borrow compared to the US government, remain historically low. These low spreads are a sign that the market does not see strains in corporate credit quality or risk of a recession:
    • Investment Grade: 80 bps (19.7th percentile historically).
    • High Yield: 282 bps (21.9th percentile)
    • Defaults? Practically on a spa holiday, sitting “well below” historical averages.

  • Credit Conditions: Credit spreads, or the difference in yield a corporate borrower pays to borrow compared to the US government, remain historically low. These low spreads are a sign that the market does not see strains in corporate credit quality or risk of a recession:
    • Investment Grade: 80 bps (19.7th percentile historically).
    • High Yield: 282 bps (21.9th percentile)
    • Defaults? Practically on a spa holiday, sitting “well below” historical averages.

Market Outlook & Investment Implications

In a nutshell, We have a poster-child bull market in the US, with extra sprinkles of valuation risk and a discount bonanza abroad. Meanwhile, the fixed-income markets show expected returns that could give the asset class its first real moment in years.

Top of Mind Risks:

  • Valuation Hangover: US equities are priced for a party that may or may not go till dawn.
  • Market Over-Reliance: With top heavyweights disproportionately driving returns, any big stumble could jolt sentiment.
  • Earnings Surprises: Analysts are collectively whistling “Don’t Worry, Be Happy”; any sour note could cause a market shuffle.
  • Geopolitical Wrinkles: Because the world loves a good plot twist, be it trade disputes or diplomatic entanglements.
  • Shifts in Monetary Policy: The Fed might have an itchy trigger finger—whether on rate cuts or more policy maneuvering.

Portfolio Positioning:

  • Rebalance: If US equities have ballooned into an unwieldy portion of your portfolio, trimming is wise.
  • Bonds Are Back: Higher yields mean more substantial forward return potential. It’s a novel concept, but yes, bonds can be interesting again.
  • International Opportunities: Even if global equities haven’t been the life of the party lately, their discount may offer a compelling entry point.
  • Quality Focus: Late-cycle dynamics reward companies that can navigate choppy waters—i.e., strong balance sheets and stable cash flows.
  • Dollar-Cost Average: Given lofty valuations, it’s prudent to dip toes gradually rather than cannonball in.

In times like these, diversification isn’t a luxury—it’s the main dish on a market buffet that could soon see more volatility. Don’t forget: the best time to prepare for unexpected storms is when the skies are still blue. And if there’s one thing we’ve learned about markets, it’s that sunny days are often followed by quick—and occasionally entertaining—thunderclaps.

Stay diversified, stay curious, and keep a bottle of confetti leftover from 2024 on standby. You never know when the next party (or pivot) might begin.

 

Oct 10
Love0

State of the Economy as Seen Through the Bond Market

By State of the Economy - 3Q 2024

My experience as a bond trader and fixed-income portfolio manager during the Asian currency crisis, the Worldcom and Enron bankruptcies, as well as the Great Recession has given me a unique perspective on risk. As we enter the final three months of the year, the “Bond Guy” in me thought that it would be helpful to take stock of what is happening in the bond market, as it often picks up on changes in the economy that other sectors of the financial markets are slow to recognize. 

Bond investors focus on the risk of recession and inflation, as these risks can reduce or sometimes eliminate the expected returns from bonds.  Looking at how investors value sectors in the bond market and how the bond market is pricing certain risks can give us a good idea of how bond investors view the risk of a recession or a rise in inflation. Three particularly helpful indicators are: corporate bond spreads, the 2-10 year spread, and the 10-year breakeven inflation spread. These indicators can be found on the St Louis Federal Reserve’s economic data website: https://fred.stlouisfed.org/. 

To gain insight into how the bond market sees the risk of a recession as well as the health of the balance sheets of corporations, my favorite indicator to look at is the BBB corporate bond spread as shown by the ICE BofA BBB US Corporate Index Option-Adjusted Spread.   It shows us how much extra-yield bond investors demand when investing in a BBB-rated bond issued by a US corporation instead of a US government bond, which has virtually zero risk of default.

The chart above shows bond investors require 1.15% of the extra yield relative to a US Treasury note.  Over the last 20 years, the additional yield required by bond investors to invest in BBB-rated securities has averaged 2.0%.  The lowest amount of extra interest bond investors have required is 1.07%. When the market requires a low level of extra yield, it is a sign that bond investors see a lower-than-average risk of corporate defaults and, by extension, a lower risk of recession over the near term.  The highest spread we have seen was in December of 2008 during the financial crisis when it hit 7.98%. The downward trend in the spread over the last year indicates that bond investors see corporate balance sheets and the economy as strong.

On the risk of inflation, the bond market can tell us how bond investors view the risk of future inflation.  One indicator that can help us see how the market views inflation is the 10-tear breakeven inflation rate. It takes the yield on a 10-year US Treasury note and compares it to the yield on a 10-year US Inflation-protected note.  The difference in yields is the implied inflation rate bond investors expect over the next 10 years.   The chart below shows that the current 10-year breakeven inflation rate is 2.21%.  Over the last 20 years, the average has been 2.09%, and the median is 2.19%.  The highest this number has been is 2.94% in March of 2022, which coincides with inflation hitting its highest level after the pandemic, and the lowest level was 0.11% in December of 2008, the height of the financial crisis.  So, the 10-year breakeven inflation rate shows that bond investors are not worried about inflation over the coming years.

Finally, one indicator that has become very popular over the last few years is the 2-10 yield spread.  The 2-10 spread, or the difference between the 2-year and 10-year Treasury yields, is a common indicator of the yield curve’s steepness. A negative 2-10 yield spread, or “inverted yield curve,” has historically indicated an impending recession. A yield curve is considered inverted when long-term interest rates fall below short-term rates.  An inverted yield curve leading to a slowing economy makes intuitive sense, as many consumer loan rates, such as credit card and car loans, are tied to short-term interest rates.  If short-term rates are high, consumers and businesses will slow their spending due to the high cost of financing. The 2-10 yield spread turned negative in July of 2022 in reaction to the Fed raising short-term interest rates. At the time, many market observers pointed to the inverted yield curve as a sign that the economy was heading into a recession. The 2-10 yield spread stayed negative until August of this year, when the spread finally turned positive, as the yield on the two-year treasury fell in anticipation of the Federal Reserve lowering short-term interest rates at its meeting at the end of September.

As we see from the chart above, the yield curve becoming inverted two years ago has not led to a recession.  Has the indicator lost its value? One reason the inverted yield curve did not cause a recession may be that most borrowers took advantage of the low interest rates in 2021 to reduce their exposure to short-term interest rates.  Consumers refinanced mortgages and used the extra cash flow to pay down credit card and auto loan debt.   In April, a New York Times article said that 70% of all mortgage holders had rates more than three percentage points below what the market would offer them if they tried to take out a new loan.   So, the subsequent rise in short-term rates did not affect the economy as much as it would have in the past. The spread turning positive in early September indicates that the bond market expects the Fed to reduce short-term interest rates over time in reaction to the inflation rate, which is now closer to the Fed’s long-term target. 

In summary, the bond market can give us insights as to how investors view the risk of a recession as well as the risk of inflation.  It’s signaling that bond investors are not overly concerned with a recession or inflation.  It seems that the equity markets would agree, as the S&P 500 recently hit an all-time high.  These indicators can and do change, so it is important to keep an eye out for changes in the bond market that can alert us to changes in the economy.

Sep 12
Love0

Smart Ways To Work On Yourself—and Live Your Best Life

By Health and Wellness

Key Takeaways: 

  • Bring your end goal back to the present day and envision yourself doing the necessary work in the moment to ensure your vision actually comes into being. 
  • Set your intentions for tomorrow before you go to bed tonight.  
  • Expressing gratitude each day can potentially evolve your thinking in important ways. 

“Your level of success will rarely exceed your level of personal development, because success is something you attract by the person you become.” 

That famous quote, by renowned entrepreneur and motivational speaker Jim Rohn, perfectly encapsulates a simple fact of life for many highly successful and highly happy people: The work we put into ourselves—at work and throughout most areas of our lives—empowers us to evolve, move forward and reach higher levels of success as each of us defines it.  

Chances are, you’ve come across that quote—and you may well agree with it. And yet, how often do we sacrifice our personal development in favor of working one more hour or one more weekend, or of “vegging out” in front of the TV, or of any number of habits that don’t help us grow as individuals (or as business owners or bosses or spouses or parents)? 

It’s no wonder many people aren’t terribly satisfied with where they’re at in life. Consider, for example, that when asked to rate their general satisfaction with life on a scale from 0 to 10, people on average registered it at just 6.7. One likely—and big—reason: We keep ignoring that crucial personal component that helps drive great results in areas that can make all the difference. 

The good news: Taking steps to develop yourself personally is not as challenging or painful as you might think—not even close! One of the best approaches to personal development that we’ve encountered comes from Hal Elrod—author of the bestselling book The Miracle Morning. Elrod researched the most effective, proven personal development practices used by top entrepreneurs. They included techniques such as meditation and visualization—strategies that were so well known and obvious that Elrod nearly dismissed them due to their familiarity. 

The upshot: Don’t write off the tried and true in favor of new and flashy development ideas that capture the latest headlines. According to Elrod himself: “We all want the latest and greatest thinking or the newest app to solve our problems, but I ultimately had to admit that these fundamental, well-established ideas were what the most successful people out there swear by.” 

Six steps to personal development 

Most of us benefit when we can take organized, systematic action steps toward a goal. Elrod decided the best route to success was not to try one or two of these strategies, but to commit to all of them. To that end, he created his Life S.A.V.E.R.S. system—a model that frames six key components of development in digestible pieces that can help you get, and stay, on track:

  1. Silence. This can include meditation, prayer or both—any method to quiet the mind and regain calmness and focus. 
  2. Visualization. Simply visualizing your ideal outcome can trick your brain into thinking you’re already there—and reduce your drive to do the actual work needed to achieve it. The key, says Elrod, is to bring your end goal back to the present day and envision yourself doing the necessary work in the moment to ensure that your long-term vision actually comes into being. 
  3. Exercise. Increasing the amount of blood and oxygen going to your brain boosts your cognitive function as well as your mental and emotional capacity, so that you can have the clarity needed to, as Elrod puts it, “crush every single day.”
  4. Reading. Elrod emphasizes the importance of self-help books and articles to stay focused on continually improving yourself. Consistency is the key here. Often we stop reading when things are going well. But if you read just ten pages per day, which might take 15 minutes, you can get through approximately 18 200-page self-help/personal improvement books in a year. Think of what all that insight could mean for your development.
  5. Scribing. Keeping a journal can also boost your personal growth, especially if you keep a daily gratitude journal in which you write down three things within the previous 24 hours for which you are grateful. The key with gratitude is to be thankful for something specific from your day—even if it is something very small. The power comes from the act of expressing gratitude—not from the magnitude of the thing you’re thankful for.  

    The early bird 

    That said, Elrod has a big caveat about these practices: “You have to prioritize your own development, or you’ll find ways to ignore it.” 

    Indeed, how many times do we put aside important personal and health-related matters so we can hit the office early—and then never end up going for that run or reading that book? “How you start your day isn’t just one strategy that you could or could not do. It’s literally the linchpin to your success and to reaching the next level,” says Elrod. 

    To combat that counterproductive procrastination, Elrod strongly encourages people to wake up early and dive right into their routine: 

    “These strategies will give you the edge to do superior work throughout your day, so waiting to fit them into your day doesn’t really make sense. Meditation is proven to help you focus better. Exercise brings oxygen to the brain and helps you be a better thinker. If you do these things later on in your day, you won’t harness the benefits when you need to make important decisions.” 

    Can’t fathom the thought of waking up earlier than you already do? Elrod offers the following tips—so easy a child could follow them, he says—to get up and go: 

    1.  Set your intentions before you go to bed. Our first thought in the morning is almost always the same as the last thought we had before falling asleep. So it’s when you go to bed that you get to determine how good or bad you will feel when you wake up. 
    2. Put your alarm clock across the room. If you have to get out of bed and walk across the room to shut off your alarm, you’re instantly three to four times more awake than if you shut it off from the comfort of your bed. This is another example of how something really obvious can be extremely powerful. “A CEO recently told a group of people at a conference that the most important thing he learned from me is to move his alarm clock far from the bed,” laughs Elrod.
    3. Start your day with a full glass of water. After five to eight hours of sleep, our bodies are dehydrated. Yet most of us reach for a cup of coffee right away, which only further dehydrates us. Instead, make sure there’s a full glass of water on your bathroom counter each morning, and drink it all as soon as you wake up. This primes your body to take action. 

    You can take these actions while you’re half asleep. By the time you’re done, you’ll find that you’re fully awake and ready to make great things happen. 

    Conclusion 

    Ultimately, the time we spend on ourselves may have a big impact on our ability to pursue what we most want from life and achieve the great things we aspire to. But the right intention and focus are crucial, of course. Make the time you focus on yourself a true investment—one that can generate real returns—by taking steps that will help you improve in meaningful ways and truly live your own best life. Or, to once again quote Jim Rohn: “It takes a person of character and discipline to be successful for a long time.” 

     

     

     

     

     

     

     

    If you have any questions, please don’t hesitate to contact me, Tony Baruffi, at Baruffi Private Wealth. You can reach me at 425-472-3050 or via email at tonybaruffi@baruffipw.com.

    Based in Bellevue, Washington, Baruffi Private Wealth is a boutique wealth management firm offering personalized services as a Virtual Family Office. We cater to clients throughout Seattle, Bellevue, Kirkland, Sammamish, and the surrounding areas, and also extend our services to the Portland and Bend regions in Oregon.

     

    VFO Inner Circle Special Report 

    By John J. Bowen Jr. 

    © Copyright 2024 by AES Nation, LLC. All rights reserved. 

    No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.  

    This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication. 

    The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience. 

    The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. 

     

     

     

     

     

     

     

    Aug 12
    Love0

    Foiling the Financial Fraudsters

    By Cyber Security, Insights

    Key Takeaways

    • Financial criminals have their sights set on the affluent.
    • Their methods include email phishing, fraudulent investments, tax scams and beyond.
    • Some of the best moves you can make to shut them down involve simple changes to your behavior. 

    When it comes to financial scams, it’s easy to assume that the only victims are the ones we hear about so often in the media—the “little old ladies” who are tricked by nefarious call center workers in distant lands urging them to send what little money they have.  

    But the fact is, financial fraudsters are working overtime to target those of us with significant assets. Even worse: They’re having far more success at parting us from our wealth than you might imagine.

    The upshot: Just because you’re “good with money” or careful in who you deal with when it comes to finances doesn’t mean you won’t be pursued by financial scammers—nor does it guarantee you’ll avoid their traps.  

    With that in mind, consider some of the key ways you may be targeted—and what you can do to avoid these scams, as well as how to best respond if you eventually get scammed. 

    You’re a target 

    It should hardly be surprising that the affluent represent a target-rich environment for financial crooks. After all (to borrow a quote from famed bank robber Willie Sutton), “that’s where the money is.” Consider just how focused these criminals may be on you and your wealth: 

    • Cybercriminals stole the identities of 6.4% of the public overall but 8.1% of individuals with $1 million or more, according to Javelin Research.  
    • The affluent are 43% more likely to experience identity theft, according to research done by Experian and the Department of Justice. 
    • More than a quarter of ultra-high-net-worth families, family offices and family businesses (with an average wealth of $1.1 billion) have been the target of a cyberattack, according to Campden Research. 
    • In the past several years, numerous high-profile examples of fraud and alleged fraud targeting the affluent have come to light (such as Anna Sorokin, Sam Bankman-Fried, Billy McFarland and Elizabeth Holmes). 

    Additionally, you may be more susceptible to their efforts than you realize or care to admit. One of our biggest biases is overconfidence in our abilities. People who are high achievers in one area can have a tendency to overestimate their skill level in a different area. That can lead to, for example, assuming that because you manage a successful business or division, you are equally adept at identifying great investments or top professionals to manage your investing. Consider the many rich and respected individuals who famously fell for Bernie Madoff’s Ponzi scheme. 

    Ultimately, being smart or wealthy doesn’t necessarily make you an expert at spotting scams or shielding yourself from them. One study of British high-net-worth investors found that those whose net worth was more than £3 million were twice as likely to report being a fraud victim as were those with a net worth of £250,000-£500,000. 

    Be on guard 

    The good news is that you can take steps to better protect yourself from financial scams and fraud. A good first step is to get a handle on the many ways the crooks are trying to get at you and your money—and the damage those efforts may cause. 

    In broad terms, many scams typically start with the fraudster’s pitch to you, which is designed to evoke strong emotions such as fear or greed. The criminal then uses various persuasion tactics to get you to take action—for example, by making you feel obligated to follow through on a commitment you made, or making you feel rushed to act because of the scarcity of the “opportunity.” Alternatively, thieves using technology might literally steal your information without your ever having a single known interaction with them.  

    More specifically, the actual methods used—both high-tech and low-tech—include the following (with the caveat that financial fraudsters seem to be continually adapting and tweaking their strategies): 

    1. Phishing and ransomware attacks 

    These may be the two categories with which you’re most familiar. A type of online scam, phishing occurs when scammers impersonate a legitimate company using legitimate-looking emails or texts. You, acting under the assumption that the communication and the links in it are trustworthy, inadvertently share sensitive data with the crooks. Ransomware is a type of malicious software that encrypts your files in a way that makes them inaccessible to you, then demands a ransom for the “key” to get them back. 

    Ransomware has commonly targeted big businesses and large organizations, which of course have mission-critical technology and deep pockets. That said, small businesses are now the targets of 82% of ransomware attacks—likely because they’re seen as easier prey with less adequate security measures.  

    2. Wire transfer fraud 

    This occurs when criminals fool you into wiring money to them. Often they do so by presenting themselves (via an email or a text) as a trusted individual or organization, such as a family member, a business partner or even a charity. One well-publicized example: Real estate investor and “Shark Tank” judge Barbara Corcoran was scammed out of nearly $400,000 after criminals pretending to be Corcoran’s assistant emailed Corcoran’s bookkeeper to wire funds to pay for a nonexistent investment property.  

    3. Account takeovers 

    This is a type of identity theft in which scammers get unauthorized access to an online account—for example, by setting up a legit-sounding public Wi-Fi network and using it to capture usernames, passwords and payment information.  

    4. Card-not-present fraud 

    Using stolen credit card data to buy items online (or by phone or mail) has become increasingly common, along with the rise in both online shopping and working remotely.  

    5. Tax scams 

    There are numerous tax-related scams that leave taxpayers owing excessive amounts of money. One scam that directly targets people with a high net worth involves getting excessively high valuations for their art in order to get bigger income tax deductions.  

    Avoid getting scammed 

    Armed with insights into how scammers might come at you and your wealth, you can start taking steps to avoid them or shut them down when they try to strike. Some ideas to consider: 

    1. Check your “basics.”  

    Secure your home network, use strong passwords and multifactor identification, and install anti-malware and other internet-security programs. Such plain-vanilla safeguards should form the foundation of your efforts.  

    2. Slow down and use caution. 

    Many financial criminals demand that potential victims act quickly, creating a false sense of urgency to their pitch. That means one key move is to resist the urge to take immediate action, giving you time to dig deeper. Communicate this expectation to your financial professionals, too—advisors, insurance specialists, bookkeepers and so on. Tell them to double-check any financial transaction requests—especially ones marked urgent—with you directly (by calling you to confirm, for example).  

    3. Verify requests independently. 

    Say you get an unsolicited email (or text or call) from your financial institution, the IRS, tech support, etc. demanding that you take action immediately. Rather than click on the link provided to you, call or email the person or company directly to determine whether the communication is legitimate. If it’s a phone call, hang up and look up the callback number. 

    4. Root out impersonators. 

    Would-be online fraudsters often create fake accounts on social media that they use to gather intel they can use against you. Alert the companies if you see that someone has set up a profile claiming to be you, don’t accept friend requests until you verify them as legit, and don’t respond to requests from complete strangers.  

    5. Separate your personal life from your business life. 

    Entrepreneurs should consider using different email addresses for family communications and business communications. This can help prevent a hack in one area of your life from spilling over into the other—and help you avoid some of the scams outlined above.  

    6. Check in on your finances. 

    Review your financial statements for odd or unfamiliar transactions or any unauthorized activity. The same goes for credit reports and other statements that involve your wealth. This won’t prevent you from getting scammed—but it can help you identify possible fraud and shut it down as soon as possible.  

    7. Ask for help if you need it (or even think you might). 

    Even when people get scammed or worry they may be stepping into a fraudulent situation, they often don’t tell anyone or reach out for advice or help. They fear that admitting they’ve been duped will make them look stupid or weak—particularly if they’re known for being financially savvy or intelligent in other ways. Don’t fall into that trap: If you think you’re getting taken or are on that path, enlist the help of the authorities, trusted advisors or others to review the situation and offer potential next steps. 

    8. Consider hiring experts. 

    Fraud prevention firms catering to the affluent can build bespoke strategies designed to wall you off from financial fraud. Other services can monitor social media for scam accounts or posts that could threaten your wealth.  

    Conclusion 

    Note how many of the tactics to avoid getting scammed involve personal behaviors rather than high-end technology. Using both together can be more impactful, but it’s important to remember that keeping financial criminals at bay can depend greatly on the actions you take—and don’t take—when interacting with the world around you. 

     

    VFO Inner Circle Special Report 

    By John J. Bowen Jr. 

    © Copyright 2024 by AES Nation, LLC. All rights reserved. 

    No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.  

    This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.  

    The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience. 

    The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof. 

    Aug 07
    Love0

    Market Volatility

    By Insights, Markets

    Equity markets have been falling over the last week as disappointing earnings from technology companies and concerns regarding slowing job growth have caused investors to sell many of the securities that have shown the most growth since the beginning of the year. The sell-off is happening despite many indicators showing that the economy continues to grow.

    Disappointing earnings from Microsoft and Amazon last week caused worries that earnings from A.I. businesses may take longer to develop. On Friday, markets fell in reaction to a weaker-than-expected jobs report, which fueled concerns that the Federal Reserve has kept interest rates too high, increasing the risk of an economic slowdown.  The markets also fell in response to a surprise move by the  Bank of Japan last week, which raised its benchmark short-term interest rate. Many investors have been borrowing money in Japan to invest in other markets, and the rise could cause investors to sell securities in the U.S. and other global markets.

    Currently, the S&P 500 is down  8.7% from its high in July, and the Nasdaq, more heavily weighted in technology companies, is down 13.4%.   The 10-year U.S. treasury note yield has fallen to 3.74%, down from its high of 4.70% in April.

    Fundamentally, while the economy has slowed in terms of job growth, other economic indicators point to a growing economy.  Personal consumption expenditures continue to grow at 2.5% above inflation, and corporate earnings are expected to grow at a relatively strong 4.70% this quarter.  Despite the sell-off, the S&P 500 is still up close to 10% year to date and up over 15% over the last 12 months.  Corporate bond spreads have also stayed relatively steady, indicating that a recession is not a near-term risk.

    The market now places a 95% probability that the Fed will lower short-term rates to less than 4.50%, a reduction of over 1.00% from the current 5.5% target.  Reducing short-term rates will help consumers and the housing market by making borrowing money less expensive.

    Overall, while the fall in equity prices has happened relatively quickly, it is in line with historical downturns.  Long-term investors who rebalance their portfolios regularly and stick to their investment plan can benefit from this downturn.

    Aug 06
    Love0

    Are You Doing All You Can to Avoid—Not Evade—Taxes?

    By Tax Planning

    Key Takeaways:

    • Qualified retirement plans are a smart tax-mitigation strategy for many entrepreneurs.
    • Advanced solutions like captive insurance companies and freezing the value of a business are often overlooked by business owners.
    • Enlist the guidance of a tax pro who is both technically skilled and interested in understanding your goals, challenges and needs.

    Question: What’s the difference between tax avoidance and tax evasion?

    Answer: About four inches—the width of a typical prison wall.

    Sure, not all tax cheats end up behind bars. But when it comes to lowering your tax bill—something seemingly all entrepreneurs want to do—it’s crucial to make sure you’re avoiding taxes and not evading them if you don’t want to end up in legal trouble. The difference:

    Tax avoidance is the use of governmentally sanctioned methods—legal methods—to minimize your tax liability. When you’re engaged in tax avoidance, you’re not breaking the law.

    Tax evasion is when you use illegal means to not pay your taxes. Evasion can include not reporting income or investment profits as well as claiming fake business expenses on your (fraudulent) tax return. But it can also be very complex—using trusts, partnerships and other structures (as well as sham transactions) to illegally not pay taxes.

    With that in mind, let’s explore some ways to avoid taxes—a few of which too often are overlooked by business owners looking to keep more of their wealth.

    Tax avoidance is good—and it’s encouraged

    Many people don’t fully appreciate an important and valuable fact: The government supports tax avoidance in many ways. They know it’s good for you and good for the country. The government has social goals and uses the tax code to foster them. That’s why the government intentionally creates ways for you to legally lower your tax bill.

    Take, for example, the social goal of people having money to take care of themselves when they’re no longer working. The government wants its citizens to be financially secure, so it forgoes money presently. Thus, when you put money into a qualified retirement plan, you take a tax deduction.

    Another example: charitable contributions. The government wants to promote philanthropy—yet another social good. So when you make contributions to recognized charitable causes, you get a tax deduction. With the intent of fostering charitable giving, the government has created various tax benefits depending on the way you donate. For example, using a charitable trust to sell some of the equity in your business can enable you to get a tax deduction—as well as avoid capital gains taxes on that equity.

    A relatively recent strategy is the creation of economic opportunity zones. The incentive for investors is tax benefits. The social goal is to increase investment in distressed communities and foster economic development and job creation in these areas.

    Two purposes of tax avoidance

    When you’re using the types of tax avoidance strategies described here, you have two purposes. Arguably, the most important purpose is the social and personal goal. The second purpose is tax mitigation.

    Take retirement plans. Having significant amounts of money later in life can be highly advantageous. So too can be taking current tax deductions. The money in a qualified retirement plan grows tax-free—and there’s the possibility that you’ll be in a lower tax bracket when you eventually withdraw the money from the plan.

    There are different types of qualified retirement plans. While most entrepreneurs are familiar with defined contribution plans such as a 401(k), fewer are as aware of defined benefit plans. Business owners could potentially benefit significantly from understanding the pros and cons of the different types of qualified plans.

    Five ways to avoid taxes

    There are many ways to lower your income tax bill. Some strategies that entrepreneurs can potentially benefit most from include:

    1. Use qualified retirement plans.

    Money put into a qualified retirement plan is tax deductible and grows tax deferred. For various reasons, not all business owners set up qualified retirement plans. However, among those who do establish such plans, the tendency is to go with a defined contribution plan—such as the well-known and highly familiar 401(k) plan.

    That could be shortsighted, however. Defined benefit plans—or DB plans—might do a much better job for business owners. One big reason: DB plans can allow business owners to put in a lot more money.

    2. Use captive insurance companies.

    A captive insurance company (aka a “captive”) is a closely held insurance company set up to insure the risks of the parent company. The owner of the parent company wholly owns the captive insurance company. That means the business owner controls the captive insurance company’s operations—including underwriting, claims decisions and the investment strategy. The underlying reason to use a captive insurance company is risk management.

    There are different types of captive insurance companies that are appropriate for different business scenarios. In all cases, however, entrepreneurs can use captives to reduce income taxes. Under the right conditions, the premiums paid into a captive insurance company can be tax deductible. A company is then able to get a current-year write-off, even though losses may never occur.

    Pro tip: The services of a high-quality accountant can help you get the most from your possible deductions.

    There’s also the issue of avoiding capital gains taxes. This is often a big goal when entrepreneurs sell their businesses. Too often, however, entrepreneurs wait until just before the sale to think about capital gains avoidance—at which point it’s generally too late. Instead, consider tax mitigation strategies well before the sale of a business or any appreciated asset.

    3. Use charitable trusts.

    If you gift some or all of the appreciated equity in your business to a charitable trust and the trust sells it, the capital gains taxes on the equity will be eliminated. A percentage of the money in the trust can also be used to provide you (or someone you designate) with an income stream. Also—and perhaps most important—a nonprofit of your choosing will end up getting funding.

    The upshot: Charitable trusts are very powerful tools for entrepreneurs because they’re one of the few ways to eliminate capital gains when selling appreciated assets such as a business. They’re also a way for entrepreneurs to provide money to loved ones and charitable causes they care about.

    4. Use tracking partnerships.

    Within the business world, disharmony among family members or unrelated business partners can also mean a higher tax bill if the owners are forced to divide assets. Through the use of sophisticated partnership structures, entrepreneurs can structure a division of their companies, eliminating capital gains taxes at that time.

    As a general rule, any asset can be contributed to a partnership and can be distributed from a partnership to a partner, tax-free. There is no need for disgruntled partners to continue to work together—and they pay taxes only on the businesses they control.

    Finally, there are estate taxes. If you’re really successful, you might create enough personal wealth that you’ll owe estate taxes when you die. But with careful and thoughtful wealth planning, you may be able to significantly reduce—and maybe even eliminate—future estate taxes.

    5. Freeze the value of a business.

    You can lock in the current value of your business for estate tax purposes. This means if your company increases in value between now and when you sell it, for instance, the appreciation over that time is not included in your estate—and therefore not subject to estate taxes.

    Working with a high-quality tax professional

    All of these types of tax avoidance approaches are considered “bright line transactions.” That means there’s no question about their legality, as they’re clearly specified in the tax code. Moreover, knowledgeable and capable tax professionals—lawyers, accountants, wealth managers and the like—should know about these (and other) ways to help you potentially legally avoid or reduce taxes.

    The catch, however, is working with a knowledgeable and capable tax professional.

    The tax professionals you want to work with will not only be very technically adept but will also seek to truly understand you—your personal and professional objectives and dreams, concerns, and anxieties. Armed with an in-depth understanding of your world, a high-quality tax professional can work with you to design and implement solutions that are best suited to serve your particular situation in terms of tax mitigation.

    Important: All high-quality tax professionals have access to the same legal tax mitigation strategies. Because of the formal government-created tax code, no strategies are secrets known only to a few. Indeed, if someone claims to have a proprietary tax strategy, it’s a potential red flag that they could be veering into tax evasion territory. At a minimum, you should probably get a second opinion on that strategy’s legitimacy.

    Best advice: Avoid taxes as best you can, using the advice of smart tax pros—but stay on the right side of that wall by steering clear of all tax evasion strategies and the people who peddle them.

    Disclosure: Tax laws are subject to change, which may affect how any given strategy may perform. Always consult with a tax advisor.

    VFO Inner Circle Special Report
    By John J. Bowen Jr.
    © Copyright 2024 by AES Nation, LLC. All rights reserved.

    No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

    This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.

    The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience.

    The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

    Jul 03
    Love0

    Live Longer, Live Better: How Leading-Edge Longevity Technology May Be Able to Help

    By Health and Wellness

    Key Takeaways:

    • Longevity has become a hot-button issue, particularly as so many of us enter our 60s, 70s and beyond.
    • Improvements in technology can potentially help us adopt and stick with healthy habits.
    • Emerging tech also can help catch health issues early on.

    We all want to live long, healthy and fulfilling lives. The good news? The ability to do so may be more within your control than you realize.

    Chances are, you know the basics: Eat right. Exercise. Sleep seven to nine hours each night. Stay hydrated. And you probably try to follow those best practices of health (much of the time, at least). If not, well—the numbers behind the power of healthy habits are hard to ignore. For example:

    • According to research published in the journal Sleep, regularly sleeping less than five to seven hours a night causes inflammation and increases the risk of diabetes, heart disease and obesity. It’s also linked to a 12% increase in earlier death.
    • Even 15 minutes of daily exercise could tack on an additional three years to your life, says a report published in The Lancet.
    • One Harvard study, meanwhile, found that embracing just a handful of healthy habits—such as more veggies, fewer fatty foods, weekly exercise, weight control, limiting alcohol, no smoking—could extend life expectancy by 12 years (for men) and 14 years (for women), on average.

    If the science doesn’t motivate you, maybe some tech-enabled tools will help. Today, as you’ll see, there are a plethora of medical services, apps, gadgets and other emerging connected health tools designed to help you maximize your efforts at day-to-day wellness—and live a much longer and better life.

    The longevity trend

    If you hadn’t already noticed, longevity has become a hot topic in recent years. One likely reason: Today there are more 65-year-olds than five-year-olds.

    Consider, for example, the popularity of the book Lifespan: Why We Age—and Why We Don’t Have To by David Sinclair, Ph.D., co-director of the Paul F. Glenn Center for Biology of Aging Research at Harvard Medical School. Sinclair puts forth the idea that humans are on the cusp of an era when they’re not just living much longer than in centuries past but also leading better, healthier and more fulfilling lives. “I have come to see aging as a disease—the most common disease—one that not only can but should be aggressively treated,” he writes. “Prolonged vitality—meaning not just more years of life but more active, healthy and happy ones—is coming, sooner than most people expect.”

    “What’s the upper limit? I don’t think there is one,” he adds.

    Time will tell if Sinclair is right. But it’s worth noting that about half of the babies who were born in the U.S. in 2007 are expected to live to 104.

    Living well—with some help from technology

    That said, living longer isn’t enough. Becoming a supercentenarian is not fun if the last decade of one’s life is spent bedridden or suffering chronic pain—which brings us back to the importance of cultivating healthy habits.

    With that in mind, consider some ideas* that could potentially set you on a path to a longer and healthier life of real significance.

    Concierge medicine

    Also known as boutique medicine, this membership-based model offers high-quality personalized care for those willing to shell out their own money (as concierge practices typically don’t take insurance). Prices vary widely depending on the situation, from a few hundred bucks a month to more than $20,000 a year for specialized treatment. One key benefit: fast access to preventive care services in an era when waiting lists for overworked physicians are getting ever longer. You might, for example, work with doctors who have a few hundred patients rather than doctors at traditional practices who may serve 2,000 or more patients.

    Telehealth

    It’s also possible to subscribe to a virtual healthcare service that can help connect you with clinicians where and when you need them. Telemedicine companies (one example: WorldClinic) focus on connecting traveling business execs and other busy professionals with on-demand care.

    Health tracking

    Personalized health-tracking devices and sensor-based wearables are other emerging weapons in the anti-aging arsenal. One of the most well-known of these wearables is the Oura Ring. Wear it on your finger to track sleep quality, exercise, and activity levels, active and resting heart rate, oxygen saturation, and more.

    Sleep

    We may be the only species on Earth that tries to deprive ourselves of sleep—which should tell us something right there. Getting four hours of sleep or less has been shown to reduce NK white blood cell immunity by more than 70%. One approach to boosting duration and quality of rest is a sleep mask that “blacks out” all light in the bedroom. (Manta is one such offering.)

    * The examples and specific companies mentioned are for illustrative purposes only and do not constitute recommendations.

    Exercise

    Exercise is one of the most effective and essential ways to slow the aging process and prevent muscle loss as we get older. But aerobic activity isn’t always easy, especially on the knees, hips and other joints. One tech-enabled offering that may help in that department is an electro-muscle stimulation suit, a wearable that sends low-frequency pulses of electric current to various parts of the body in order to generate muscle contractions and build strength. Katalyst is a well-known brand in this space. Alternatively, VR headsets (such as the Oculus Quest) now offer a menu of virtual reality fitness apps that can get your heart rate up with e-boxing or even e-sword fighting—right in your living room.

    Breathing

    Breathing through your nose may have various benefits that breathing through your mouth doesn’t have—such as lowering blood pressure, filtering allergens and even decreasing anxiety. But mouth breathing while sleeping is common. In response, so-called mouth taping has become increasingly popular in recent years (driven by books such as Breath: The New Science of a Lost Art). It involves using a specialized type of skin-safe tape on your mouth to help promote nasal breathing overnight. Proponents say it’s greatly improved their sleep quality; others say the improvement is negligible. Of course, consult with a physician before taking this step.

    Dental care

    About 70% of Americans are brushing incorrectly—which means one of them could be you. And nearly half of all adults aged 30 years and older have some form of gum disease—which may be linked to cancer, heart disease and mental health issues. Tech-y toothbrushes have upped their game over the past decade, with options that deep clean using tens of thousands of sonic vibrations per minute. (Burst is one option here.)

    Labs and imaging

    Early detection of potentially deadly health problems can be crucial to effectively combating them, of course. Advances in testing mean there are now options such as a multi-cancer early detection test that looks for a signal shared by more than 50 types of cancer (offered by health care tech company Grail) and a full-body MRI scan aimed at helping detect the presence of some 500 different health conditions (done by Prenuvo).

    Note: It’s also important to focus on the health information that may be especially relevant to you, personally. Thanks to the ability to map the human genome as well as a better ability to identify ancestors’ ailments, it’s easier than ever to determine your most pertinent health risks. Armed with that information, you can set out to track the metrics that matter most in your life. Example: Say your family history reveals that the men tend to die from heart disease in their 70s. You might work with your provider to do regular targeted cardiac screenings such as a high-sensitivity CRP test (a blood test that reveals how much plaque you have throughout your vascular system) and a cardiac myeloperoxidase test (which reflects your risk for the rupture of unstable plaque).

    Pushing back

    Aging is a natural part of life (for now, at least), which means we have a tendency to accept whatever comes along with the process of getting older. But there are so many ways to “push back” against many bad outcomes that typically crop up in our 60s, 70s, 80s and beyond. Smart habits, supported by helpful technology, won’t guarantee you’ll live to 100 or beyond and stay in good health—but if you can do so and have a bigger impact on the world, isn’t it worth trying?

     

     

     

     

    VFO Inner Circle Special Report

    By John J. Bowen Jr.

    © Copyright 2024 by AES Nation, LLC. All rights reserved.

    No part of this publication may be reproduced or retransmitted in any form or by any means, including but not limited to electronic, mechanical, photocopying, recording or any information storage retrieval system, without the prior written permission of the publisher. Unauthorized copying may subject violators to criminal penalties as well as liabilities for substantial monetary damages up to $100,000 per infringement, costs and attorneys’ fees.

    This publication should not be utilized as a substitute for professional advice in specific situations. If legal, medical, accounting, financial, consulting, coaching or other professional advice is required, the services of the appropriate professional should be sought. Neither the author nor the publisher may be held liable in any way for any interpretation or use of the information in this publication.

    The author will make recommendations for solutions for you to explore that are not his own. Any recommendation is always based on the author’s research and experience.

    The information contained herein is accurate to the best of the publisher’s and author’s knowledge; however, the publisher and author can accept no responsibility for the accuracy or completeness of such information or for loss or damage caused by any use thereof.

     

     

     

    Jun 28
    Love0

    When It’s Time To Update Your Estate Plan

    By Estate Planning

    Key Takeaways:

    • Don’t “set and forget” your estate plan—revisit it regularly and revise it if necessary.
    • Be sure you’re getting advice from someone with superior technical expertise.
    • Revise an estate plan around your goals, your values and the results you want to see become reality.

    Estate planning—the process for how you transfer your wealth to heirs and others—can be very important for anyone who wants to be certain that their loved ones are adequately provided for and taken care of. When done well, estate planning aims both to allow you to pass on your assets as you see fit and to minimize the state and federal tax bite that often accompanies the transfer of significant wealth.

    Chances are, you have an estate plan in place. But if you think that your current plan is up to those tasks, you might want to think again. More than half of the estate plans that affluent individuals have in place are more than three years old, according to AES Nation.

    Some reasons why that’s a potentially big problem:

    • Continual changes in tax laws mean that older estate plans may not take full advantage of current opportunities to transfer assets optimally.
    • Tax law changes also could mean that some aspects of an older estate plan are no longer effective.*
    • Changes in your wealth status mean that your estate plan may no longer accurately reflect your financial situation—and your future needs and goals.
    • Changes in your personal and family situation may make your estate plan ineffective in accomplishing what you actually want it to do given those changes.

    In order to attain the greatest benefits from estate planning, it’s a good idea to stay on top of your plan and revise it when appropriate—especially when events occur that could potentially affect your wealth.

    Two components of strong estate plans

    We believe that strong estate plans involve two key components:

    • Technical expertise consists of the various strategies and tactics—the techniques and methods for structuring your estate.
    • The human element comprises the psychological and emotional aspects of estate planning

     

    Let’s take a closer look at each.

    Technical expertise

    Exceptional estate planning requires exceptional technical expertise about estate planning laws, rules and strategies (some of which can be very complex).

    The tools and techniques of exceptional estate planning can range from the basic to the cutting edge. The basics might include the legal strategies and financial products that are readily recognized and generally applicable to many families. More sophisticated solutions could involve discounting and the astute use of financial products in creative ways.

    From the technical side, these are two estate planning strategies and tools you might end up considering.

    Trusts

    In many ways, trusts are often cornerstone solutions for many successful individuals and families. A trust is a means of transferring property using a third party (the trust). Specifically, a trust lets you transfer title of your assets to trustees for the benefit of the people you want to take care of—also known as your designated beneficiaries. The trustee will carry out your wishes on behalf of your beneficiaries.

    You can use trusts in all sorts of ways to transfer your wealth and determine how it is to be deployed. Trusts also may be useful in shielding your assets from plaintiffs and creditors. Depending on the kind of trust, there are different tax consequences.

    Partnerships

    As with trusts, there are many types of partnerships. They can determine how the partners of a business address ownership issues, and they have varying tax benefits. For example, within the business world, disharmony among family members or unrelated business partners can mean a higher tax bill if the owners are forced to divide assets among the partnership’s members. Through the use of sophisticated partnership structures, business owners can divide their companies—and possibly reduce taxes.

    The human element

    It’s important to recognize that the true goal of exceptional estate planning is to transfer your wealth in accordance with your wishes. Tax mitigation, while often important and beneficial to individuals and families, should not be the overriding driver of your estate planning decisions. The role of an estate planner—who may be a top lawyer, accountant or wealth manager—is to make it possible for you to achieve your desired agenda and to be as tax efficient as possible in pursuit of that agenda.

    That’s where the human element comes into play. While technical expertise is absolutely required, it is the human element—understanding your agenda on a deep level and then designing a plan around that agenda—that distinguishes exceptional estate planning from merely good estate planning.

    That’s because today, most estate planning legal strategies and financial products are available across the board to any high-end estate planner. So a big difference among estate plans and planners—and a plan’s outcomes—is the ability to put the pieces together so that you get the results you’re seeking.

    Clearly, then, an estate planner you work with should have a deep understanding of you—your situation, your values, your goals and your concerns. Without that knowledge, the tools themselves (good as they may be, technically) might not get you what you want because they’re not the appropriate ones for the job you want done.

    Think of it this way: A band saw is an effective tool—but you wouldn’t try to hang a picture with one!

    Pro tip: Don’t get so wrapped up in any particular strategy that you overlook what you want to achieve and what strategy is best for that goal. And don’t let an estate planner do so either.

    A process to follow

    There is a process you can follow that we believe can potentially increase your chances of ending up with an exceptional estate plan that satisfies the technical and human aspects and reflects your latest thinking on your needs and goals (see Exhibit 2).

    1. Start with the end in mind. Start by thinking through what you want to have happen—the outcomes you ideally want to see occur. Let’s say your family consists of you, your spouse and your children. In that case, there are four scenarios to consider:
    • You die.
    • Your spouse dies.
    • You and your spouse die simultaneously.
    • Your whole family is in a disaster and dies.

    Envisioning these scenarios is not a cheery exercise—but it’s vital that you do it. For each of these possibilities, you need to specify what happens to your assets—life insurance proceeds, property, investments and so on. You’ll also need to decide who is in control at different points in time—making decisions such as when your children will have control of the assets.

    1. Determine your desired results. Share your desired results in each scenario with an estate planner whom you find to be highly capable. They should be able to come up with ways to enable you to best achieve your preferred results. Your estate planner will also likely be able to provide additional perspective and recommendations, and help you revise and hone your desired outcomes (if necessary).
    2. Make a decision. Based on input and insights from the estate planner, choose a course of action.
    3. Implement the plan. Once you have made a decision, the estate planner will formalize everything and create the estate plan. This step is actually the easiest part, as all the hard work—thinking through goals and possibilities—has already been done.

    Don’t ignore your plan once it’s done

    Revisiting an estate plan every few years should be part of your agenda. It’s best to think about your exceptional estate plan as perpetually being a work in progress.

    If you have any doubts about whether your estate plan is likely to achieve your wishes, consider stress testing it—that is, have your wealth manager review the plan and your particular situation to answer two questions:

    1. Is the plan likely to deliver the outcomes you currently want?
    2. Is the plan missing anything that can make it more effective or efficient?

    Ideally, a stress test will reveal your plan is still on track. But if it suggests there are changes that should be made, you can then consider taking steps to realign your plan with your key estate planning goals.

    Regardless of the conclusions of the stress test, know that you’ve taken an important step by revisiting your plan instead of letting it gather dust and potentially become outdated and less effective.

    Conclusion

    Estate planning should be a part of pursuing the outcomes you want in your financial life and the lives of the people you care about most. What’s more, your existing estate plan needs to be reexamined every so often—and revised if necessary.