Wealth Management Advisor, May/June 2016

160501 WMA Newsletter

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Articles Include:

International Estate Planning: How to avoid tax traps

Taxable vs. tax-advantaged: Where you hold your investments matters!

Protect your self from tax identity theft

Should you “undo” a Roth IRA conversion?

What the heck is going on!?!

 As the markets continue their flight south for the winter there seems to be a growing disconnect between the U. S. economy and the stock market.  If you look at the markets’ performance since the beginning of the year, you’d think we were falling into a substantial recession, with rising unemployment, and rampant inflation.  None of which is the case!

 In reality, the economy is doing pretty well with GDP growing at over two percent and continuing job gains that have put us nearer full employment as the unemployment rate drops.  There’s scant evidence of any inflation, despite the fact that the Fed decided to raise short-term interest rates at its December meeting.

 If you’re looking for more concrete evidence of how the economy is doing, you can focus on the auto industry as your example.  Car sales in the U. S. hit an all-time high at nearly 18 million last year .  Auto sales have usually been a good predictor of how well the overall economy is doing, since the industry has so many “spin-off” jobs in parts, sales, etc.

 Also, there’s good evidence that auto sales will continue to remain strong as the average age of cars in the U. S. is about eleven years so replacement of aging vehicles will continue for years to come, with an added spark from the lower fuel prices brought by lower cost oil.

 Could things be better? Of course!  It would be nice to see GDP growth closer to three percent and if unemployment dipped even more, many part-time and underemployed people could find good, full-time jobs.  It would even be helpful if inflation picked up a bit, giving consumers more of an incentive to shop.

 Finally, every four years as we engage in the presidential election process the general media coverage tends to emphasize the negatives and minimize the positives rather than presenting a more balanced and realistic view of the nation’s economic circumstances. 

 With all that, it gives me pause to look at the falling numbers in the market, but since the economic numbers seem to be in place, I’ll stand with Warren Buffett and hang in there with my well diversified portfolio, doing some rebalancing and putting some money to work at these lower prices.

Charitable Gifts on Behalf of our Clients and Friends

In 2015 the professionals at Wealth Management Advisors have chosen to make donations to the following organizations on behalf of and in honor of our wonderful clients and friends.


Care Dimensions

National Parkinson Foundation

Alzheimer’s Association

American Cancer Society

Bentley University

Lazarus House

American Lung Association

Juvenile Diabetes Foundation

Wounded Warrior Project

Fight Colorectal Cancer

Doctors without Borders

Combined Jewish Philanthropies

Access our September/October 2015 newsletter here!

150901 WMA Newsletter

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This installment covers:

Currency movements and your portfolio

Taking the right steps when using an Family Limited Partnership (FLP) or Limited Liability Company (LLC)

Are you at risk for an Alternative Minimum Tax (AMT) Liability?

3 Benefits of Using Donor-advised funds for charitable giving

Supreme Court Issues Historic Decision on Same-Sex Marriage

The U.S. Supreme Court has ruled that same-sex couples in the United States have a constitutional right to marry, no matter where they live. This means that same-sex marriage is now legal in all 50 states.

The central questions

On April 28, 2015, the Supreme Court heard oral arguments in the collective case of Obergefell v. Hodges, which bundled together challenges from four states. The Court considered two questions: (1) Does the Fourteenth Amendment require a state to license a marriage between two people of the same sex? and (2) Does the Fourteenth Amendment require a state to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state? On June 26, 2015, the Court ruled 5-4 that “The Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.” This ruling effectively means that the 13 states that currently prohibit same-sex marriage must reverse their bans.

Highlights of the opinion of the Court

The majority opinion was written and delivered by Justice Anthony Kennedy, joined by Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan. In the opinion, Justice Kennedy writes that “The history of marriage is one of both continuity and change. That institution–even as confined to opposite-sex relations–has evolved over time.” (p. 6)

He continues, “The limitation of marriage to opposite-sex couples may long have seemed natural and just, but its inconsistency with the central meaning of the fundamental right to marry is now manifest. With that knowledge must come the recognition that laws excluding same-sex couples from the marriage right impose stigma and injury of the kind prohibited by our basic charter.” (p. 17-18)

Justice Kennedy ends with, “No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice, and family. In forming a marital union, two people become something greater than once they were. As some of the petitioners in these cases demonstrate, marriage embodies a love that may endure even past death. It would misunderstand these men and women to say they disrespect the idea of marriage. Their plea is that they do respect it, respect it so deeply that they seek to find its fulfillment for themselves. Their hope is not to be condemned to live in loneliness, excluded from one of civilization’s oldest institutions. They ask for equal dignity in the eyes of the law. The Constitution grants them that right.” (p. 28)

Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, and Samuel Alito filed dissenting opinions. Opinions on this case can be read at the Supreme Court’s website, www.supremecourt.gov.

Supreme Court Upholds Health Insurance Subsidies

In the case of King v. Burwell (Case Number 14-114), petitioners argued that the language of the Affordable Care Act (ACA) specifically provides that health insurance subsidies can only be issued through state-based exchanges (also referred to as marketplaces) and not through the federal exchange. In a 6-3 decision issued June 25, the U.S. Supreme Court upheld the ACA by confirming that health insurance subsidies may also be offered through the federal exchange.

What is the issue?

A goal of the Affordable Care Act (ACA) is to provide more Americans with access to affordable health care. One of the ways the ACA attempts to make health care affordable is through federal subsidies that reduce insurance premiums and out-of-pocket costs for eligible consumers who purchase health insurance through a health insurance exchange. At issue is a specific provision in the ACA authorizing subsidies for health-care coverage purchased “through an exchange established by the State.” The IRS has interpreted the law to include subsidies for health insurance purchased through either state-based exchanges or the federal exchange. The petitioners alleged that the IRS could not promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government.

What did the Court decide?

Writing for the majority, Chief Justice John Roberts acknowledged that the language of the ACA relative to exchange tax credit provisions is ambiguous. However, given the intent of the ACA as a whole, “the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any state with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the act to avoid.”

Citing studies that suggest that eliminating the tax credits could lead to insurance premiums increasing by as much as 47%, while enrollment might decrease by upwards of 70%, Roberts opined that “it is implausible that Congress meant the act to operate in this manner.”

What states have their own exchanges?

As gleaned from the Court’s majority opinion, 16 states and the District of Columbia operate their own state-based exchanges. These states include California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington. The federal government operates exchanges in the remaining states. Most consumers access federal exchanges through the federal government website, www.healthcare.gov.

What if the Court ruled against the ACA?

According to the Wall Street Journal, more than 6 million people would have lost health insurance tax credits if the Court ruled against the ACA. As of March 2015, the Department of Health and Human Services estimates that 16.4 million are covered due to the ACA.

Copyright 2006-2015 Broadridge Investor Communication Solutions, Inc. All rights reserved.

Holiday Giving

This year the professionals at Wealth Management Advisors, LLC have made donations to the following organizations on behalf of and in honor of our wonderful clients.

Bentley University

Lazarus House

Alzheimer’s Association

American Lung Association

American Cancer Society

Winchester Hospital Foundation

Combined Jewish Philanthropies

College costs increase!

The College Board has released college cost figures for the 2014/2015 academic year in its annual Trends in College Pricing report. Here are the highlights:

Public colleges (in-state students):

  • Tuition and fees increased an average of 2.9% to $9,139
  • Room and board increased an average of 3.2% to $9,804
  • Total average cost* for 2014/2015: $23,410 ($22,826 in 2013/2014)

Public colleges (out-of-state students):

  • Tuition and fees increased an average of 3.3% to $22,958
  • Room and board increased an average of 3.2% to $9,804
  • Total average cost* for 2014/2015: $37,229 ($36,136 in 2013/2014)

Private colleges:

  • Tuition and fees increased an average of 3.7% to $31,231
  • Room and board increased an average of 3.4% to $11,188
  • Total average cost* for 2014/2015: $46,272 ($44,750 in 2013/2014)

*”Total average cost” includes tuition and fees, room and board, and a sum for books, transportation, and personal expenses.

Boston CPA & Wealth Advisor Puts the Market swings in Context

It seems you can’t get away from the “fear trade” during these last few weeks. It is all over the news, in your email inbox, on social media, etc… it is hard to tune it all out.

Remember, we have been here before when panic drove the markets, and some investment managers are falling in again, trimming back their equity exposures in a time where the economic fundamentals do not support such a move. Currently, there are many causes to this recent pullback, not the least of which is time (we were due for a correction in the market). But, as you listen to the pundits and talking heads, they only seem to be focused on what will get them ratings, and that is usually fear.

We are continually looking at the economy (domestic and international) and the prospects for the markets overall, over time. Based upon that analysis, this last pull back was an opportunity, just as the last one was. We are still not that far from the all-time highs achieved by the markets a short time ago and the intraday movements may exceed them today! This tumult will pass and our economy will continue forward, but the volatility in the equity markets will be here until several fears settle down. Currently the fear factor seems to be the most prevalent issue moving the market, Ebola, ISIS, Ukraine are all adding to fear. The rise in value of the US dollar is helping the Fed back off on their tightening plans, and corporate earnings are starting to come in (positively). And we are in October, which has historically been a tough “transitional” month for the markets.

On the other hand, we have extraordinary drop in the cost of doing business in the US. Oil is down significantly and will be a boost to international consumer spending. Natural gas is still plentiful (and local) providing us with lower manufacturing costs and bringing jobs back to the US. The US dollar is strengthening giving us the ability import more goods at lower costs which should help drive US consumption. The employment picture keeps getting better.

Our sense is that you are seeing a lot of profit taking on the fear. This great article recently ran on CNN Money:
“Is it time to exit stocks?” by Heather Long

That sums up our thoughts quite well.

We have a very diversified long-term investment approach with an asset allocation that is designed to provide you with a reasonable return that will meet your needs. These down trends and adjustments happen. They will always happen. But you have plenty of time to wait a pullback out and watch the markets continue forward.

Don’t get caught up in the hype or lose track of the facts!


Our friend, John Tener, shared the following facts with us for us to share with you:

1. The U.S. now had had 63 straight months of economic expansion, including 54 straight months of private sector job growth (the best recovery in almost any measurable way since FDR).

2. The 54 straight months of private sector job creation is the longest period of job creation since the Labor Dept. began keeping statistics.

3. Unemployment had dropped from 10.1% in October, 2009 to 5.9%, and is projected to reach 5.4% by the summer of 2015.

4. The stock market has seen steady growth since early 2009, with the Dow Jones average reaching a record 17,098 this past August, 2014. 401k retirement plans, mostly affecting middle-class Americans have directly benefitted.

5. The Federal deficit continues to shrink, and has been reduced by two-thirds since 2009. In 2009, just after President Obama was sworn in, the deficit was $1.4 trillion. the 2014 deficit is projected to be around $500 billion, the smallest since 2007.

6. Federal spending since the beginning of 2009 has increased only 1.4% annually, the lowest rate since Eisenhower. (Under Reagan it was 8.7%; under G.W. Bush it as 8.1%.)

7. For 95% of American taxpayers, income taxes are now lower than just about anytime in the past 50 years. (The only people whose income taxes have gone up are those making $400,000 per year or more–less than 2% of the population).

8. Our dependence on foreign oil has shrunk since 2009 due to record domestic oil production and vastly improved fuel efficiency standards for cars and trucks.

9. Since 2010, at least 7 to 10 million more Americans now have real, effective, affordable health insurance, which will inevitably lead to better health, more work productivity, less time loss, and longer lives.

10. Health care reforms (under the ACA) have added years to the life of Medicare, which was on course to exhaust its funds by 2018. It is now fully solvent to a projected 2030.

11. Health care reforms (under the ACA) have lead to the slowest rate of increase in health care costs since 1960.

12. There are now fewer soldiers, sailors and airmen in war zones than at any time in the last 10 years.

13. There have been zero successful attacks by al Qaeda on U.S. soil in the last six years.