The path to success can be lengthy and seem inconvenient. Embrace the pain when required. Appreciate the process when possible. Stay true to your values and mission. Success and a perspective of gratitude will follow.
On Monday September 13, the House Ways and Means introduced proposed tax changes for debate this week in an initial bill. The tax changes would be significant for many taxpayers and is intended to finance a broader $3.5 Trillion domestic investment plan. The changes proposed in the House bill will almost certainly evolve and deviate to a degree from how they are originally drafted, if it even ever becomes law. At the moment, these are purely provisions as part of the House Ways and Means initial bill proposal and should not be relied on as specific tax law or guidance.
Financial Planning, Executive Compensation, Equity Compensation Plans, Investments, Personal Finance, Trust & Estate, Wealth Transfer
Many of our clients first come to us with concentrated stock positions that they have obtained either through their employment, equity compensation, sale of a business, a well-timed trade, from family, or through some other means. They all share a common theme of idiosyncratic (non-systematic) risk which is inherent in owning a concentrated position. The specific risks however, and potential rewards, can be unique to each situation. They also all have unique wealth and tax considerations that need to be independently addressed. The facts of each unique situation, along with the stock owner’s financial goals and profile will guide the appropriate course of action in response to the common question of “What next?”.
Trust & Estate, Wealth Transfer
The Grantor Retained Annuity Trust (GRAT) is a classic wealth transfer planning tool, but in order to properly implement this technique the grantor must feel compelled to make the transfer. In families with means that may look to implement this technique it can be helpful to begin having conversations about the family wealth well in advance of actually implementing such a strategy. Appropriately involving family can help create a sense of awareness, responsibility and eventually gratitude for the wealth that could be coming their way.
Tax, Investments
Volatility is the price investors must pay in the search for higher future returns in capital markets. To many savvy investors with taxable investment accounts, the declines we saw in February and March (and quite possibly going forward still for some time) may have actually presented opportunities. One such opportunity has been to capture valuable tax losses from their investments. However, these same investors need to be especially careful to navigate the wash sale rules of the Internal Revenue Code (IRC) Section 1091, or their tax loss strategy may have all been for nothing.
Behavioral Finance, Investments, Risk Management
COVID-19 and the resulting global pandemic has tested our global community, economy and markets. Investors with a diversified portfolio may have faced the following emotions of “I lost money” as the market first fell, followed by “I didn’t make as much” as the market has recently recovered (but for how long?). Yet, over a 20-year period, a diversified portfolio has still provided a higher total return, while assuming much less risk than the S&P 500. In the end, diversification wins, even when it feels like losing.
