Monthly Archives: September 2016

Join Us in Congratulating Amanda Muse on Obtaining the CFP® Designation

amandaPlease join us in commending and congratulating Amanda Muse, who recently received the CERTIFIED FINANCIAL PLANNER™  designation from the CFP Board of Standards. At Willis Johnson and Associates, we are once again honored that another one of our professional staff earned this highly regarded distinction.

Amanda’s focus and commitment to advancing her profession have allowed her to reach this important milestone in her career. As a recent graduate of the Rice University CFP® Certification Education Program, Amanda passed the exam in July of 2016.

 

Amanda’s journey into the arena of financial services has been somewhat of a happenstance occurrence. Shortly after receiving her undergraduate degree in Sociology in 2011 from Louisiana Tech University, Amanda accepted her first position in financial services. Amanda’s original plan was to retain this as an interim position while applying for a masters program in social sciences, however, to her surprise she quickly grew to love financial planning and decided to pursue it as a career. Amanda learned the basics of the industry from her two previous positions and moved into a full-time paraplanning role with our firm at the beginning of 2014. Her role as a paraplanner at WJA has given her the opportunity to help clients achieve their financial goals as she helps clients navigate through life’s challenges while developing trusting and long-term relationships with them.

Continue reading Join Us in Congratulating Amanda Muse on Obtaining the CFP® Designation

How to Get More by Giving More: Pros of Donor-Advised Funds for Charitable Giving

Advantages of Donor-Advised Funds: Tax Reduction and Charitable Giving Perks

It comes as no surprise that during and after retirement years, many of our clients achieve their highest income earning potential. Whether due to a large severance package on top of earned income, or non-qualified deferred compensation plans that force large taxable payouts, retirees are often pushed into the highest tax bracket during these years.

 

The question we receive from most of our clients during this time then is, “How can I reduce my tax burden?”

 

For clients who are charitably inclined and who are committed to continue donating to their favorite charities throughout retirement, we often recommend that they consider using a donor-advised fund (DAF). The beauty of donor-advised funds is that they allow an individual to receive the tax deduction for a large charitable donation on the front end,  while spreading out the actual donation of the funds to charities over multiple years.

 

A donor-advised fund can be funded with cash, securities, and in some cases, non-publicly traded assets. Only a small donation to charity from the fund is required each year, and you can wait until you are ready to make a grant out of the fund to the charity of your choice. In addition, while you wait to make your donation from the fund to charities, the cash and securities inside the fund can be invested and any growth is tax-free. The funds can also be used to fund a charitable legacy for your family, and are a much less complex and less expensive alternative to setting up a family foundation.

 

Understanding Donor-Advised Funds

To better understand the benefits of a donor-advised fund, let’s review the following example. Joe Smith, 59, is an executive at a Houston oil company, where he worked for 25 years. He and his wife, Jane, have three children. He opted to take early retirement, effective September 2016, and will receive a large severance package. In addition, his company sponsors a non-qualified, deferred compensation plan that forces out the entire balance immediately after retirement, and is taxed at ordinary income rates.

 

Joe and Jane are very charitably inclined and donate approximately $20,000 per year to a select charity that is important to them. Joe and Jane would like to pass the value of charitable giving on to their three children, and leave a charitable legacy in their community. With Joe’s severance payout and non-qualified plan payout, his total earned income for the year will be over $1,000,000 and the majority of his income will be taxed in the maximum 39.6% tax bracket.

 

Joe and Jane decide to open up a donor-advised fund to alleviate some of their tax burden this year. They make a contribution of $300,000 to the fund. They are able to put the entire $300,000 contribution on their tax return as a charitable donation. This amount is sufficient to provide for the Smith’s charitable contribution of $20,000 for 15 years. In addition, while the $300,000 cash sits inside of the donor-advised fund, it can be invested, allowing for additional growth of the fund for donation to charity. The growth portion of the cash inside of a donor-advised fund grows tax free and will never be subject to capital gains taxes.

 

Another option Joe can utilize to contribute to the donor-advised fund is appreciated securities, which provide further tax benefits. By donating appreciated securities to the fund, Joe will avoid paying capital gains on the growth of the securities and he will get the charitable deduction.

 

Furthermore, Joe and Jane name their fund the Smith Family Foundation and name their three children as successor owners. They allow their children to assist with making the charitable donation from the fund each year, and this helps them pass along their charitable values. The fund allows Joe and Jane to make a donation to any public charity recognized by the IRS. This flexibility allows Joe and Jane to leave an impact on their community by donating to the charities of their choice.

 

financial-fact-septSource: http://wealth.kiplinger.com/reader/kiplinger/giving-to-charity-learn-the-ins-and-outs-of-donor-advised-funds

 

By using the donor-advised fund, Joe and Jane Smith are able to accomplish many of their financial and charitable giving goals. They receive a large tax deduction in the year of highest income by ‘pre-funding’ charitable donations for future years. While they make the donation to the fund this year, they are able to spread the donations to the charity of their choice over as many years as they choose. 

 

If they choose to make their contribution using appreciated securities, they also can take advantage of capital gains tax avoidance. Joe and Jane are also able to pass their charitable values along to their children, and can leave a legacy in the community that they care about without having to deal with the complexity of setting up a private foundation. Many of the clients we work with experience the same challenges as Joe and Jane during their retirement years, and we have helped many who are charitably inclined with the use of a donor-advised fund.

 

 If you would like to speak with us about your goals and specific situation to see if a donor-advised fund could benefit you, please contact us to set up a conversation.

 

Willis Johnson & Associates is a registered investment advisor. This material is intended for informational purposes only and is not intended to be a substitute for specific individualized tax or legal advice. Federal tax laws are complex and subject to change.  Neither Willis Johnson & Associates, nor its investment advisor representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

What Nick’s Reading | “History Does Not Repeat Itself, But Oftentimes it Rhymes.” – Mark Twain

Published September 13, 2018

The Economic History as Discussed in Land of Promise

The social-political debate continues to grow as we approach the election.

The United States election is coming up in November and the social-political debate continues to grow. Many people are keeping up with the current 24-hour news cycle for economic issues such as:

 

1) Protectionism vs. Free Trade

2) Social Welfare

3) Immigration Reform vs. Deportation

 

There is not an easy answer for these monumental subjects nor are we the only ones debating the best solution. We see similar issues driving political concern within the UK’s Brexit. For instance, polls show that the most important issues for voters was immigration and the Syrian refugees. As the Olympics brought the world’s attention to Brazil, we saw how policies involving protectionism and social welfare wreak havoc on an emerging market economy that is suffering from a commodity price collapse.

 

Oftentimes, clients ask me how these issues will affect the market and what my opinion is on what is best for our economy and country. I explain why I like the quote that is often attributed to Mark Twain: “History does not repeat itself, but it rhymes.” I believe an appreciation for our history is crucial in order to understand the impacts and ramifications of the political choices we are making today. Although I may not have the answers, I do have a recommendation on a great book to read: Land of Promise: An Economic History of the United States by Michael Lind.

 

In Land of Promise, Lind takes us inside the minds of two great American forefathers with strongly divergent beliefs: Thomas Jefferson and Alexander Hamilton. Watching from their perspective, Lind guides us though America’s economic history illustrating how these divergent policies and beliefs shaped our country. Even in the early formation of out country, we can see how these two leaders debated the very same issues we are wrestling with today and how their choices shaped America between these two forbearers and their followers. I do believe the unique insight into our past can offer us lessons for our future.

 

 


nick

Nick Johnson, CFA®, CFP®

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Nick Johnson believes that financial planning is more than numbers on a balance sheet and a standardized process. People are unique and should be treated as such.

 

As Vice President and a Wealth Manager at Willis Johnson & Associates, his goal is to really get to know his clients, all the while providing a proactive approach to comprehensive wealth management.

 


Willis Johnson & Associates is a registered investment advisor. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Insurance products and services are offered or sold through individually licensed and appointed agents in various jurisdictions. 

The Markets (as of market close August 31, 2016)

Market Update 2016With no Federal Open Market Committee meeting and little news to jar the markets, the lazy, hazy days of August seemed to lull investors into a state of lethargy. Trading was light and volatility, limited. Despite the fact that several of the indexes tracked here posted new highs during the month, weekly changes shifted up and down within a narrow range. The month’s end saw mixed results, with large caps losing whatever momentum they had gained, while technology, small caps, and international stocks posted respectable monthly gains.

Long-term bond yields also showed limited movement over the month, ending 13 basis points higher than where they started. The price of gold (COMEX) slumped, selling at $1,312.20–about $46 lower than July’s closing price of $1,357.90.

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