Austin Jarvis, J.D., MBA

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The CARES Act and Its Implications

April 14, 2020by Austin Jarvis, J.D., MBA in Financial Planning, Industry Continuity Updates

The CARES Act
Within three months of the passage of SECURE Act—a law intended to provide more opportunities for Americans to save for retirement—the federal government passed another historic piece of legislation that essentially does the opposite.

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, a historic $2 trillion dollar emergency fiscal stimulus package and the third piece of major legislation passed since the coronavirus outbreak began.

The CARES Act is sweeping in scope. Here a few of the most important provisions as they pertain to individuals.

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Eye on Congress: What Does the SECURE Act Mean for Businesses?

February 4, 2020by Austin Jarvis, J.D., MBA in Financial Planning

What does the SECURE Act Mean for Businesses header

On December 20, 2019, President Trump signed into law the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which has a laudable goal of expanding opportunities to increase individual retirement savings. The new law enacts several changes to employer-sponsored retirement savings plans, which historically have helped individuals save more for retirement than traditional IRAs.

Advisors working with business owners who have or are considering an employer-based retirement plan should familiarize themselves with the four most prominent changes laid out in the SECURE Act:

  • Offering lifetime income annuity options in retirement plans
  • Changes to enrollment requirements, tax credits, and tax-filing deadlines
  • Adoption of multiple employer plans (MEPs)
  • Eligibility of part-time employees in 401(k)s

Enhancing Lifetime Income

Several provisions in the new law encourage employers to offer lifetime income annuity options in their retirement plans. The key change of the SECURE Act is an enhancement of the fiduciary “safe harbor” protections for employers when assessing financially secure life insurance companies that provide annuities in employers’ qualified plans.

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Will the SECURE Act Affect Your Clients’ Financial Plans?

January 14, 2020by Austin Jarvis, J.D., MBA in Financial Planning

SECURE Act image

On December 20, 2019, President Trump signed the Setting Every Community Up for Retirement Enhancement Act (SECURE Act). The new law has the laudable goal of expanding opportunities for individual retirement savings. However, several key changes made by the SECURE Act may affect your clients’ retirement and legacy plans, requiring possible reconsideration and adjustments.

Age Restriction for IRA Contributions Eliminated

Old Law: No traditional IRA contributions are allowed in the year the IRA owner turns 70½, or any subsequent years.

New Law: For tax years 2020 and beyond, contributions to traditional IRAs are allowed at any age.

Charitable Implications—Qualified Charitable Distributions (QCDs): QCDs of up to $100,000 are allowed once the owner of the IRA reaches 70½ (age unchanged). If the IRA owner requests a QCD in the same year that a deductible contribution is made, the QCD is decreased by the amount of the deductible portion of that contribution.

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Time May Be Running Out on FLPs

December 17, 2019by Austin Jarvis, J.D., MBA in Advanced Markets

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Why a FLP Strategy in 2020 Could Benefit Your High-Net-Worth Clients

Harry met Wilma and started a family. Now, they’re looking for a valuable wealth preservation or asset protection instrument for their $100 million estate. Family Limited Partnerships (FLPs) have been and continue to be one of the most powerful tools in an estate planner’s toolbox due to the ability to significantly discount the value of gifts made from parents to the next generation(s). Utilizing the doubled lifetime exemption afforded by the Tax Cuts and Jobs Act ($11.4 million/single, $22.8 million/married), a parent may be able to use a FLP strategy to gift heirs more assets from their estate than what they’d otherwise be able to directly gift, while also maintaining some control over those same assets.

To help you better understand FLPs and the value they provide, Harry and Wilma’s opportunity is demonstrated in the following hypothetical example:

Harry & Wilma’s Opportunity

Harry and Wilma have a total net worth of $100 million and are looking for ways to:

  1. Reduce their estate
  2. Benefit their two children, Steve and Darla
  3. Retain control over the management of their assets

Under current law and assuming no prior gifting, Harry and Wilma currently have $22.8 million in available estate and gift tax lifetime exemption.

If they were to gift their children $29,400,000 directly, without the use of the FLP strategy, they would report a gift of $29,400,000. Because this amount exceeds the couple’s current lifetime exemption amount of $22,800,000, they would immediately owe gift taxes in the amount of $2,616,000.

Instead, Harry and Wilma determined they want to form a FLP and fund it with $30 million of income-producing commercial real estate. Through the FLP, they then gift their two children 98% (49% each) in the form of limited partnership interests which, at first glance, would appear to have a value of $29,400,000. Harry and Wilma keep the remaining 2% ($600,000) for themselves in the form of a general partnership interest.

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Family Ties: The Secret to Foreign National Prospecting

May 8, 2019by Austin Jarvis, J.D., MBA in Foreign National

Family

The Foreign National market is large, lucrative, and underserved. But to excel in this market it’s important to qualify clients upfront. The following case study provides an example of how to qualify a prospect and then offer the right solution.

Jessica, 26, recently graduated from UC Berkley with a master’s degree in Software Development. An American citizen both by birth and family ties, she had just accepted a lucrative job from a leading social media company. She has arranged to meet with Susan Smith, her advisor, to start professional financial planning.

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