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Vol. 73, No. 5, September 2019
FOCUS ON Estate Planning & Financial Planning
Final Rules Developed for the Section 199A Deduction
Anthony P. Curatola, PhD
J. William Harden, PhD, CPA, ChFC
Treasury issued Treasury Decision 9847 on February 8, 2019, providing final regulations for the determination of the amount of the deduction (of up to 20 percent) for qualified domestic businesses. The preamble to the final regulations is approximately 61 pages, which includes responses by the Treasury and the IRS to questions raised by over 335 responders to the proposed regulations. Although many of the comments and requests are addressed in the final regulations, Treasury and the IRS do acknowledge there are some issues that will still need further thought before guidance is provided. In this article, the focus is on those decided issues that are more relevant to those in the financial services area.
Special Needs Estate Planning—Seven Overlooked Challenges
Harry L. Ehrenberg, CLU
Parents of children with special needs face seven estate planning challenges unique to their situation. This article will address those challenges as well as provide planning tips.
Administering Employment-Related Split-Dollar Arrangements
David K. Smucker, CPA, CLU, ChFC, MSM
Split-dollar arrangements can be attractive alternatives to traditional nonqualified deferred-compensation plans. However, they require administration. This article reviews the traits of split-dollar arrangements, then presents case studies illustrating the calculations related to administering the two most popular split-dollar arrangements: equity loan regime split dollar, and nonequity economic benefit split dollar. The author feels that with a little bit of effort the financial service professional can consider offering administration services as a way to facilitate installing split-dollar arrangements. In the alternative, the article could be given to the employer to help the employer learn how to administer the plan.
401(k) Plans Are Changing Investors’ Experiences
Sarah A. Holden, PhD
Over the past four decades, the 401(k) plan has evolved and grown to be the most common defined-contribution (DC) plan. This article explores how plan sponsors’ decisions with respect to plan design and investment offerings impact the financial experience of 401(k) plan participants over time. Millions of Americans are first introduced to investing through their 401(k) plans, and changes in 401(k) plan design impact the financial experience of 401(k) participants. Given that many households with rollover individual retirement accounts (IRAs) seek the assistance of financial advisors, the changes in 401(k) plan investors’ engagement with their accounts’ investments may change the financial background of these new advisory clients. This article provides insight into how American workers approach saving for retirement by explaining innovations in plan design and exploring how newer 401(k) plan designs impact participants’ investment experience in their 401(k) plans.
401(k) Design: Contribution Formula, Plan Eligibility, and Vesting Choices
Kenn Beam Tacchino, JD, LLM
Designing a 401(k) plan is a complex and arduous task. There are a variety of choices that must be considered. An examination of some of the design possibilities presented in the adoption agreement will enable the financial planner to provide better service to their clients who sponsor 401(k) plans.
Accounting & Taxation
Planning for Capital Gains and Losses
Stephanie Wendling, CPA, MSTFP
All financial planning strategies involve purchasing assets and holding them for a period of time before either selling them or gifting them to another individual or entity. Planners need to understand what tax liability they are creating for their clients when they sell different assets so that they are able to create a holistic plan for their client. It is important to consider what the client’s after-tax rate of return will be if they follow their investment strategy as well. Otherwise, there could be a shortfall in funds if a planner did not account for tax liability as an expense and the client may not meet their financial goals. This column seeks to inform financial planners of different strategies to utilize when developing investment strategies for their clients.
Economics & Investment Management
A Primer on Finding Finance and Economics Research Relevant to Practice
John E. Grable, PhD, CFP
This column provides an introduction to strategies a financial service professional can use to find practice-relevant research focused on finance and economics topics. The column discusses differences between academic journals and trade publications, as well as providing insights into the use of search tools that can be used to identify the most relevant research on a financial services topic.
Succession Planning for Trustees (and Grantors)
Dennis C. Reardon, JD, LLM, CLU, ChFC
We consider methods of ensuring that the trust can be successfully managed in the future, whether by current or future trustees. Consideration is given to the issues of revocable versus irrevocable trusts, succession patterns, individual versus corporate trustees, federal estate taxes, and special situations.
The Impact of a General Release on an Executive’s Right to Litigate an Employee Retirement Income Security Act Claim
Paul J. Schneider, JD, LLM
We examine court cases to review the validity of waivers granted in severance situations under the Employee Retirement Income Security Act (ERISA).
It’s Time to Think More Broadly about Estate Planning: A Gerontologist’s Perspective
Sandra Timmermann, EdD
Most people think holistically about their retirement life stage and what they will face as they age—the physical, psychological, and financial aspects. That’s why a broad approach that bridges the gap between traditional estate planning and end-of-life care planning can be useful and effective. Here are 10 topics to raise with clients that give financial services professionals an opportunity to add value and can open doors for related discussions of products and services.
Pharmacy Benefit Managers
William S. Custer, PhD
A look at the evolving role of pharmacy benefit managers reveals both pros and cons. The current and future parameters of this position are examined.
Internal Revenue Code (Sub)Section 101(j)—Unintended Consequences, Unexpected Opportunities
Douglas B. Richards, JD, MBA, CLU, ChFC
Internal Revenue Code Section 101(j) offers the chance to provide tax code compliance opportunities to build relationships with business owners and CPAs. A thorough analysis of the implications of employer-owned life insurance is in order.