The Impact of Coronavirus for Investors

What we’re doing with our portfolios:

Public health outbreaks and epidemics like the recent coronavirus can quickly scare investors and, eventually, affect economies and businesses. The recent coronavirus outbreak has shut down airports, halted trade, and led to the rapid construction of new hospitals in China. The effects of the outbreak may push China’s economy into a period of slower growth, with stocks trading lower as investors seek protection.

So, what does that mean for the portfolios we run?

Key Takeaways

  • Looking at nine major outbreaks since 1998, there is little evidence linking global epidemics with long-term investment fundamentals.
  • The Chinese economy may slow, perhaps even meaningfully, but that is not a reason to invest or divest. Long-term investing is often best disconnected from short-term economic reactions, so we implore investors to maintain their focus on what matters.
  • Across the portfolios we run, we do have a relatively small exposure to Chinese assets (both directly and indirectly) but remain confident these holdings will deliver positive outcomes for long-term investors.

Rest assured our portfolio managers are closely monitoring your investments.  Please reach out to your advisor with any questions.

PFG Private Wealth Management, LLC

Year-End Donations & Giving

A list of things to consider as you think about year-end charitable donations

With its blinking lights, family traditions, and festive music, December is the most wonderful time of the year. And according to Charity Navigator, the month of December really is wonderful because December sees approximately 30% of all annual charitable giving occur.

Unfortunately, despite the greatest of intentions, many will inevitably make mistakes in how they give, especially if they wait until the last minute. So, here is a list of things for you to think about as you consider your year-end charitable donations.

Make a Plan
Last year, donations from America’s individuals, estates, foundations and corporations reached approximately $410 billion, according to Giving USA in their Annual Report on Philanthropy. Hoping that 2020 is similar, that means you and your neighbors will donate over $120+ billion dollars in December alone!

How much of this was more impulse-giving vs. a well-thought-out charity plan?

Ideally, at the beginning of every year – with your financial advisor – you would map out a plan to maximize the tax benefits of your giving. Really think through what is important to you and what you want to support. Is it an organization that supports literacy? Or provides food? Or shelter for families? Creating a plan will help you be less reactive and feel less boxed in when friends ask for your charitable support.

Research Your Charity
It’s easy to get fooled by a charity’s name so you need to do your homework. And beware of scam artists pretending to represent an organization that doesn’t exist. Read a charity’s financial statements to see how they spend their (your) money. Even better, volunteer before you write a check.

Donating Stock
If you have owned stock for more than a year and it has appreciated, then don’t sell it first and then give the cash to charity. Those appreciated assets can be donated directly to charity without you or the charity incurring capital gains taxes (consult your tax professional to be sure).

Selling Your Personal Info
Quite a few charities will rent or sell the addresses, phone numbers, email addresses and detailed social media profiles of their donors, which means you might start getting a bunch of unwanted calls, emails and friend requests. Make sure you review a charity’s privacy policy before you give them your information. And many times, you have to actively “Opt Out” to ensure your personal information is not used.

Ask for A Receipt
Remember, for charitable contributions of $250 or more, you need a donor’s acknowledgement letter. And generally it’s a good idea to obtain receipts, especially when donating goods.

Don’t Delay
Shockingly, a whopping 12% of all giving occurs in the last 3 days of the year! But if you mail a check postmarked after December 31st, then you might run into trouble. Make it easy on yourself and don’t wait until the last minute.

Money Can’t Buy Happiness, But Maybe Donating to Charity Can?
Consider research from Elizabeth Dunn of the University of British Columbia, Lara Aknin at Simon Fraser University and Michael Norton at Harvard Business School. Essentially what they found in their study is the following:

  • Spending money on other people has a more positive impact on happiness than spending money on oneself
  • Spending more of one’s income on others predicted greater happiness

Discuss with Your Financial Advisor
If you have any questions or need help mapping out your Charitable Plan, set an appointment to discuss with your financial advisor.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

How to Control Holiday Spending

If advertisements and commercials are beginning to feature scenes of happy families, clad in brightly colored sweaters, gathered by a fire, surrounded by an assortment of presents, then the countdown to the holidays has begun. Although it may be a joyous time that reunites old friends and distant family members, one dilemma you may face is how can you avoid the pressure to overspend, yet still have the pleasure of buying presents for your family and friends? 

The key strategy is to plan ahead. Begin by writing down the names of those you plan to buy for—at least one gift idea for each person on your list—including a general idea of where you might find his or her gift. If you don’t know what type of gift you would like to give, browse through mail order catalogs, TV advertisements, and newspaper flyers for some ideas. This could help you avoid the trap of making your decision while in the store—when impulse buying may cost you more than you wish to spend.

Setting a limit on the number—and cost—of the gifts you plan to buy can help you stay within your budget and allow you to purchase appropriate gifts for the special people in your life. Once you have your list, and estimate the cost of your proposed purchases, you can adjust it so the total expenditures fit into your holiday budget.

Shopping Strategy

To prevent overextending yourself, keep the following principles in mind:

  • Shopping early and using the layaway plans offered by many stores might help you complete your shopping before the “holiday rush” begins. However, you may want to remember that some of the better sales come closer to the holidays.

  • Whenever possible, pay by cash or check, rather than by credit cards. High interest rates and the enticement to “pay later” may lead to a larger debt than you can afford.

  • Consider exchanging names among a group of friends or family with a set dollar limit to purchase a gift for one person. Remember, it’s quality, not quantity that matters when giving.

  • Think about pooling your resources with other family members to buy gifts for individuals, particularly if it involves a rather expensive
    present.

  • When in doubt, purchase a gift certificate from a person’s favorite store. With this type of gift you avoid overspending because you are purchasing a pre-determined amount. Chances are, your loved one will have some fun picking out the item they desire.

  • Look to purchase “stocking stuffers” at a discount store all in one trip. This will help you avoid impulse buys.

  • Prevent the “return blues” by saving all your receipts for gifts in one envelope. Label each slip with the items you purchased, where you purchased them, and for whom.
  • Handmade gifts and cards are sometimes the best gifts received. Use your creativity and talent to give the gift of yourself, it’s often a personal touch that is greatly appreciated!

Taking an organized approach to holiday shopping can make the experience enjoyable for many reasons. First, you will be getting the most value for your dollar. Second, you will now have the time to really relax and enjoy the holidays, knowing your preparations are complete.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

How to Divide an Inheritance Equally

Minimize the need to decide taxes and transaction costs for all beneficiaries

Nothing ignites family arguments like inheritance. If you plan to leave money to more than a few beneficiaries, for the sake of peace and your own emotional legacy, know how to divide the proceeds fairly.

First, you can divide your estate among however many heirs you want: three, seven, 11 or 13 and so on. Here are best practices for how to divide your wealth.

Beware of Taxes
Dividing an estate doesn’t need to trigger taxes. Don’t try to be the financial advisor of each beneficiary when you divvy the estate. Afterward, each beneficiary can decide financial and tax moves based on individual circumstances.

For example, let‘s say Jim, Susan and David become heirs of a taxable account of stocks, bonds and mutual funds. The account includes:

  • 351.362 shares of XYZ mutual fund at $36.34 per share, worth about $12,768.49
  • 2,000 shares of ABC stock at $100 a share, worth about $200,000 (this holding comprises two trade lots of 1,000 shares each and each trade lot has a different cost basis, or original price)
  • $85,000 face value of CorpCorp bond at $97 par value, about $82,450 (traded in $5,000 face value units)
  • $100,000 face value of MuniMuni bond at $102 par value, about $102,000 (also traded in $5,000 face value units)
  • $5,236.45 in cash The total account value is $402,454.94, making each heir’s share $134,151.64 with two pennies left over.

To Divide the Account Evenly
The 351.362 shares of XYZ can be divided into three equal portions of 117.12 shares, leaving 0.002 shares left over. Jim and Susan receive 117.121 shares and David 117.12 shares, plus 0.001 times the closing valuation of XYZ on the day of transfer. This probably results in David receiving about four cents in lieu of missing out on 0.001 of a share.

The ABC stock comprises two trade lots: 1,000 shares purchased one year ago at $80 a share, and 1,000 shares purchased six months ago at $105 per share. Both positions divide equally into three 333- share portions, leaving just two shares to be divided, each with a face value of $100.

If all three heirs are in the 15% capital gains tax bracket, the value of each share is the closing valuation on the day of transfer adjusted for 15% Copyright © 2019 RSW Publishing. All rights reserved. Distributed by Financial Media Exchange. capital gains taxes. In large estates with many assets to distribute, divide leftover shares as evenly as possible to minimize the difference between capital gains that heirs incur.

Note that taxable assets usually receive a stepped-up basis, meaning that the asset resets to its fair market value at the date of the holder’s death. Often, however, half an estate’s assets will go into a marital trust when the first spouse in an estate-holding couple dies.

When the second spouse dies, the entire estate is settled. But assets in the marital trust might have received a step-up in basis years earlier. In that case, potential differences in capital gains do apply when planning.

You can divide the $85,000 face value of CorpCorp equally only into 17 units each worth $5,000 in face value. In our example, each heir receives five $5,000 units, with two $5,000 units left over. Whoever doesn’t receive a unit receives the equivalent in cash instead.

The $100,000 face value of MuniMuni divides equally only into 20 units each worth $5,000 in face value. Each heir therefore gets six $5,000 units with, again, two left over. Also again, whoever doesn’t receive a unit receives the equivalent in cash instead.

(These examples assume no significant tax considerations on either bond. One recommendation is to vary who receives the cash.)


Common Questions
Why not just sell everything and split the money? Tax consequences to one or more heirs, illiquidity in one or more assets and the custodian fees to sell are all considerations to immediately selling and splitting.

What if two heirs want to sell an asset before dividing the money equally? Jim and Susan both wanting to sell the CorpCorp bonds doesn’t need to affect David. Of the 17 units of CorpCorp, you can sell 12 units and agree to split the proceeds. Jim and Susan each receive 47.22% of the proceeds and David 5.56%, plus the five unsold units.

Dividing your estate this way minimizes your need to decide on behalf of all beneficiaries what to sell and how and what transaction costs and taxes to incur.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

12 Estate Planning Must-Dos

Many of you already have estate documents, probably executed many years ago. You need an estate attorney to look over your documents every 10 years or so. Here are a dozen points to review.

i. Do you have a will and powers of attorney for health care and property? These are part of every complete estate plan. With health-care power, you choose an agent to act on your behalf if you become unable to make your own decisions. With durable power for property, you select an agent to act if you are incapacitated and can’t sign a tax return, make investment decisions, make gifts or handle other financial matters.

Make sure your health-care power addresses the Heath Insurance Portability and Accountability Act (HIPPA). This Governs what medical information doctors can release to someone other than the patient.

ii. Do you need to change any beneficiaries, executors, trustees, guardians or others named in your documents? Are all still living? Can someone you recently found fill a role better?

iii. Any updates needed to addendums to your will that specify who gets what of your personal property? Often, I read wills that mention addendums for personal property and the addendums don’t even exist.

iv. Did you move to a different state since the execution of your estate documents? If so, seek out a local estate attorney to check any legal differences for planning between your old and new states.

v. Do you still need your trust documents, or can you decant, which allows you to change some provisions? Consider this technique of emptying the contents of an irrevocable trust into another newly created trust if you are unhappy with your irrevocable trust. Not all states allow decanting.

You may also want to discuss possibly moving assets out of a living trust (where a trustee holds them, a technique sometimes used to avoid probate) and holding them in the name of an individual.

This discussion will weigh the income tax benefits of a step-up in cost basis, the original cost of an asset, versus other reasons to keep the trust. (“Step up” means that the cost basis of an asset resets to the fair market value of the security as the date of the holder’s death – potentially a much higher value than when they bought the security.) The higher the cost basis, the less capital gains tax your heirs pay when they sell the asset.

You may also want to see whether you need an irrevocable life insurance trust, a device once used to move assets, typically life insurance, out of a taxable estate. Now that thresholds are higher -individuals can leave $5.34 million and married couples $10.68 million tax-free – you may not need to move assets.

Also check when your life insurance expires. Consider how long to keep it if you think you might outlive the policy

vi. Have your children passed the ages specified in a children’s trust (in which you designate money for such specific purposes as education, home down payments or weddings once the kids reach stipulated ages)? If your estate documents call for a trust to give children access to money at certain ages after you die, you may be able to delete that language if the kids are older than the specified ages.

vii. What happens if one of your kids gets divorced? A trust can help you protect assets for your child or grandchild.

viii. Do you have heirs with special needs? Don’t assume typical estate documents help such an heir. Seek out a financial advisor and attorney who specialize in this planning.

ix. Check beneficiary designations on brokerage accounts, insurance policies and retirement accounts. Anybody you don’t want there?

x. If you filled out a brokerage account application (or any beneficiary designation), understand the firm’s policy when one beneficiary dies before the others. If you want the share of the assets to pass by blood line – to the deceased’s children, for example – you may need to put in language specifying per stirpes (distribution of property when a beneficiary with children dies before the maker of the will).

Otherwise, the remaining listed beneficiaries may simply divide the assets.

xi. Often a parent names a child on a bank account so the child can access or use the money if the parent can’t act. Understand that if you name your child as a joint owner on an account, the money passes to your child no matter what your will dictates. The child splitting the money with someone else constitutes a gift, though one probably not subject to gift tax now that gifts of less than $5.34 million aren’t taxed. Still, think carefully so you keep the family peace.

xii. Do your heirs know where to find all your important information? Let someone know the password to the app where you keep all your passwords – you must remember digital assets now, too.

PFG Private Wealth Management, LLC is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. This material and information are not intended to provide tax or legal advice.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.