As 2020 comes to an end, we look forward to what 2021 will bring.  We hope more happiness, less uncertainty, stronger relationships, and more time together will take place.  With only a few weeks left in 2020, we would like to remind you there are some steps you can take to make the most of this year financially.

Gifting to Family Members

Gifting to Charity

Tax

These are just a few examples when it comes to planning strategies.  The planning team at Acumen is here to help if you have any questions.  Please remember that due to increased processing times, we need to execute any strategies well before year end to ensure they are processed in time. Smart financial decisions year after year help increase the probability of financial success.  As Warren Buffett says, “The more you learn, the more you earn.”

Thank you for working with us and stay safe!

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

Sources:

This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice.  Any opinions expressed in this commentary should not be considered as fact.  All opinions expressed are as of the published date and are subject to change.  Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities.  Investments in securities involves risk, will fluctuate in price, and may result in losses.  The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.  It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.  Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.  Do not act or rely upon the information and advice given in this publication without seeking the services of competent and professional legal, tax, or accounting counsel.  Any projections, targets, or estimates in this report are forward looking statements and are based on the firm’s research, analysis, and assumptions.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser.  Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure.  Past performance is no guarantee of future returns.  Investing involves risk and possible loss of principal capital.  No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

We are proud to announce Jerome You was recently awarded the Certified Trust & Financial Advisor (CTFA) professional certification from the American Bankers Association.

The CTFA certification is awarded to individuals who demonstrate excellence in the field of wealth management and trust. To qualify for the CTFA certification, individuals must have certain levels of experience and education in the trust profession, pass an exam, and agree to abide by a code of ethics. The CTFA exam covers many areas including fiduciary and trust activities, financial planning, tax law and planning, investment management and ethics.

Jerome is a Financial Planner and has been with Acumen Wealth Advisors for nearly five years.  He is responsible for assembling financial plans and creating projections based upon a client’s historic data, present financial standing, and future financial goals.  Jerome works alongside Acumen’s CFP® in discussing investment strategies, estate planning considerations, risk management protection through insurance, tax efficiency strategies, charitable intent, and retirement accumulation and distribution tactics.  Jerome is active in the community and is proud to serve on the Northside Neighborhood House (NNH) Board which promotes the independence of residents in North Chattanooga by providing education and assistance through various programs.

Financial services professionals, working through ABA, initiated the CTFA certification and seven others in order to establish meaningful standards of knowledge in specialty areas of the financial services industry. ABA Professional Certifications formally recognize those who meet these standards and meet professional continuing education and development requirements.

ABA Professional Certifications promote the highest standards of performance in the financial services industry by validating individuals’ knowledge and expertise. To learn more, visit www.aba.com/certifications.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

With the presidential election only 27 days away, our team at Acumen has been researching a variety of topics relating to the potential impacts of the election and we are sharing this information with you in a three-part series called “The Election Effect.”  In today’s second installment, we explore the tax plans of the presidential candidates.  We hope you find this information interesting and welcome your thoughts on the series.

The Election Effect: Part 2 of 3

Tax Plans of the Presidential Candidates

The November election is drawing closer and with all of the news coverage surrounding this event, the tax plan of each candidate seems to have been put on the back burner by political pundits and voters alike despite tax reform being one of the most influential and pivotal platforms.  Any change in tax policy has the potential to create immediate, mid-term, or long-term effects on fiscal policy, the economy, and the markets.  The Tax Cuts and Jobs Act of 2017 (TCJA) was the most sweeping reform to the tax code made in the past 30 years but is scheduled to expire after 2025 and revert back to pre-2017 policies unless the changes are made permanent.  Although the specific details and policies regarding the candidates’ respective tax plans change, there are broad concepts and motives that differentiate the candidates.  The Republican candidate, Donald Trump, aims to make the TCJA changes permanent while the Democratic candidate, Joseph Biden, would most likely advocate for an increase in taxes for high income individuals and corporations.  What we believe is, no matter the result of the election, tax policy will remain the same for 2020.  If there is a change in control, we believe there may be a short window to implement certain strategies.  For this reason, Acumen is ensuring we have a plan in place to execute quickly, if needed.  Please keep in mind everyone’s tax situation differs, and the possible strategies outlined below are general strategies and should not be considered as an individualized recommendation or investment advice.

Although the result of the November and the Congressional elections will ultimately dictate what changes to tax laws will be made, Acumen Wealth Advisors’ Financial Planners are diligently keeping track of the proposed changes as well as formulating strategies to mitigate increased tax liability which may be produced as a result.  Please feel free to reach out with any questions.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

 

Sources:

https://www.cnr.com/insights/article/tax-plan-proposal.html

https://www.cpapracticeadvisor.com/tax-compliance/news/21152588/election-2020-comparing-the-biden-and-trump-tax-plans

https://www.accountingtoday.com/list/election-2020-trump-vs-biden-on-tax-policy

https://aboutbtax.com/R7C

The opinions expressed in this commentary should not be considered as fact.  All opinions expressed are as of the published date and are subject to change.  Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities.  Investments in securities involves risk, will fluctuate in price, and may result in losses.  The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.  It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.  Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.  Diversification does not protect against loss of principal.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser.  Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure.  Past performance is no guarantee of future returns.  Investing involves risk and possible loss of principal capital.  No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

 

In the past eight months, multiple changes have been made to tax law through the SECURE Act as well as the CARES Act.  These changes are the most sweeping retirement account reforms made in recent history and Acumen’s financial planners have been diligently watching and incorporating these changes into strategies as they may provide long-term tax benefits and planning opportunities for a majority of our clients.

 SECURE Act

  1. Age to Begin Required Minimum Distributions Extended – Previously, the age which an individual was required to take Required Minimum Distributions (RMDs) from a retirement account or plan was 70½. The new age to begin RMDs is now 72.  Those who turned 70½ in 2019 must keep taking RMDs according to the rules prior to the passage of the SECURE Act.
  2. IRA Contributions can be Made Past 70½ – Individuals who have earned income or individuals whose spouses have earned income are now eligible to contribute to an IRA no matter what age they are.
  3. Some Part-Time Employees Eligible for 401(k) – Part-time employees who have worked at least 500 hours each year for three consecutive years and are 21 and older may be eligible to make 401(k) contributions and deferrals. This eligibility is contingent upon plan provider.
  4. Stretch IRA Provision Eliminated – Some non-spousal beneficiaries will now have to deplete the balance of an inherited IRA within ten years. Exceptions to this rule include:
  1. Penalty-Free Withdrawals from Retirement Plans for Childbirth or Adoption – Each parent can take a $5,000 penalty-free withdrawal from their retirement plan for expenses associated with childbirth or adoption. This new benefit means married couples can withdraw a combined total of $10,000.  It is important to note any withdrawal will be taxable as income.
  1. 529 Plans Can Be Used for Student Loan Repayment – 529 plans can now be used to pay a maximum of $10,000 towards student loan repayments. This lifetime amount is for the 529 plan beneficiary, but an additional $10,000 lifetime amount can be used for the sibling(s) of a beneficiary.

CARES Act

  1. Penalty-Free COVID-19 Retirement Plan Withdrawal – Qualified individuals, whose health or financial situation has been affected by COVID-19, can make a penalty-free withdrawal from an eligible retirement plan up to $100,000 or take a loan up to 100% of their vested balance if the plan provisions allow. The IRS has set guidelines as to who qualifies for this withdrawal, taxability of this withdrawal, and repayment stipulations HERE.
  2. 2020 RMDs are Waived – Individuals are not required to take RMDs for 2020 from 401(a), 401(k), 403(a), 403(b), governmental 457(b) plans, and IRAs. This RMD waiver also applies to inherited IRAs but not to defined benefit plans.
  3. 2020 RMDs Already Taken Can Be Rolled Back In – When the CARES Act was first passed, those who had already taken their 2020 RMD earlier in the year had 60 days from the date of distribution to roll those funds back. The IRS now allows for RMDs taken at any point in 2020 to be rolled back into a retirement account as long as this transaction is done by August 31st, 2020.
  4. Tax Deadline Extension – The new deadline to file and pay taxes is July 15, 2020. This date is also the deadline to make 2019 IRA or Roth IRA contributions.

Other Relief

  1. Tax Deadline Extension for Victims of April Tornadoes – Victims of the April tornadoes, severe storms, and flooding in Mississippi, Tennessee, and South Carolina will have until October 15th, 2020 to file their individual and/or business tax returns and make tax payments.  All residents, not only victims, of certain counties are eligible for this extension, including Hamilton County, Tennessee.  The information can be viewed HERE.

In addition to these reforms, the income brackets for tax rates have been updated for 2020:

The standard deduction amounts have changed as well:

*There is an additional standard deduction of $1,300 for taxpayers who are age 65 or older and/or legally blind.  A married couple filing jointly may be able to claim $2,600 in additional standard deduction.  Unmarried taxpayers and those filing as head-of-household who meet these same conditions can claim $1,650 in additional standard deduction.

This is not a comprehensive list of changes but include pertinent changes for individuals taxpayers.

Earlier this year, Acumen wrote an article regarding the benefits of a Roth IRA, the Roth conversion process, and how this may be an opportune time for the strategy HERE.  The benefit of Roth conversions may be increased with some of these changes:

  1. The extension of the RMD age allows more years of Roth conversions before additional income through RMDs must be recognized.
  2. The waiver of 2020 RMDs allows those in a high tax bracket to “replace” their 2020 RMD income with Roth conversion income without encroaching on a higher tax rate.
  3. The elimination of the “stretch” IRA can create accelerated tax burdens for beneficiaries of a traditional IRA.

We encourage you to speak to one of the planning professionals at Acumen Wealth Advisors if you believe you may benefit from any of these changes or you believe a Roth conversion is beneficial for your long-term financial plan.

To learn more about how Acumen can help you Invest Intentionally®, please contact us.

 

 

 

 

The opinions expressed in this commentary should not be considered as fact.  All opinions expressed are as of the published date and are subject to change.  Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities.  Investments in securities involves risk, will fluctuate in price, and may result in losses.  The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.  Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.  Diversification does not protect against loss of principal.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser.  Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure.  Past performance is no guarantee of future returns.  Investing involves risk and possible loss of principal capital.  No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

03/17/20

Recently, the domestic and international markets have experienced volatility due to the economic concerns regarding the Coronavirus as well as an oil price war between Russia and Saudi Arabia.  Acumen’s Portfolio Management Committee (PMC) has been conferring daily amidst this market volatility and have made adjustments to allocations when observations evolve into convictions.  One topic the PMC is addressing during these daily conversations is regarding when to buy into the market.  Acumen’s PMC recognizes the potential for opportunity during market corrections and is diligently monitoring for what we believe to be undervalued equities.

Acumen’s financial planners see correlated opportunities to capitalize on current market conditions through IRA contributions and Roth conversions.  In our January 2020 article, titled “Roth Conversions”, we explained the strategy and tax benefit of performing Roth conversions.  This process converts tax-deferred IRA assets into a forever-tax free Roth IRA.  In this article, we discuss the main benefits of performing Roth conversions during current market conditions including a reduction in taxes paid on the conversion1 and potential for growth.

(1) Reduction in Taxes Paid on Conversions – Very simply stated, if the value of the potential conversion of a traditional IRA has decreased, the taxes paid on the conversion of that amount to a Roth IRA will decrease. Paying taxes on a conversion when the account is at a lower value reduces both the tax liability and also allows the converted amount to grow tax free forever in a Roth IRA when the market rebounds.  While Acumen’s PMC looks for investment opportunities, Acumen’s financial planners analyze income figures to stay within the bounds of the appropriate and lowest tax rate found to be optimal for conversions.  In addition to the advantage of converting with a lower traditional IRA account value, Acumen believes today’s individual tax rates are relatively low compared to what they may be in the future.  From a tax perspective, now is an opportune time to perform Roth conversions.  The Tax Cuts and Jobs Act of 2017 provided a cut to individual tax rates and effectively doubled the standard deduction but these changes sunset (or end) in 2025.  With no legislative action, tax rates will revert back to 2017 rates.  Meaning in 2026, these rates could be 7.9% higher in aggregate and the standard deduction is set to be halved as well.

(2) Potential for Growth – Whether through a Roth conversion or a contribution into a 401k, traditional IRA, or Roth IRA, Acumen sees current market conditions as an opportunity to “buy low” and enjoy future growth. Since its inception, the stock market’s history shows an overall upward trajectory with some of its highest periods and years of growth following directly after negative performances.  Acumen does not believe timing the market is anywhere near as effective a strategy as time in the market.  The impact of time in the market can benefit from entering at a lower price point and active asset allocation.

The Roth versus traditional IRA consideration is a complex one Acumen’s financial planners must take time to assess with each client.  Having a traditional IRA or making traditional IRA or 401k contributions may be an appropriate strategy for some and Roth conversions are not necessarily an appropriate strategy for everyone.  While growth is favorable and can be expected as a long-term investor, growth in a traditional IRA has the potential to create substantial future tax liability without proper tax planning.  Although one receives a a tax deduction for making contributions to a traditional 401k or traditional IRA, the funds will be taxed when distributions are made.  As of now, an individual is required to start drawing a percentage of their traditional IRA assets at age 72.  This requirement is known as Required Minimum Distributions, (RMDs) and are taxed and count towards annual adjusted gross income.2 The more growth realized in an IRA equates to a higher IRA balance and a higher IRA balance means a higher RMD amount.  Although a higher RMD amount may seem like a positive with no downside, a combination of potentially higher future tax rates and additional income through pensions, social security, and RMDs may result in a traditional IRA account owner being pushed into a higher tax bracket.  The resulting tax rate applied to income could reduce the effectiveness of the growth that was experienced in the traditional IRA account.  Conversely, a Roth IRA does not have RMDs and its distribution will not be taxed when taken.  Essentially, this means a Roth IRA account holder (and their beneficiary) will fully capture and enjoy the growth of the Roth IRA without ever having to pay taxes on the distributions.

Market detriments, such as the Coronavirus or an oil price war, are out of our control.  Acumen doesn’t believe in dwelling on those factors out of our control but believes in the value of making opportunistic and deliberate changes within our control at optimal times for a better financial future.  In line with our belief, investment management and financial planning must be cohesive for an optimal approach.  We believe investment opportunities can also open doors for financial planning strategies.  Most of all, we believe in being transparent and the adherence to the fiduciary standard of recommending and doing what is in the best interest of our clients.

For these reasons, we encourage you to reach out to our team if you have any questions or would like to further discuss the strategies outlined in this communication to help you plan and protect your legacy.  For additional information regarding market conditions and Acumen’s perspective, please refer to recent Market Insights written by members of the Portfolio Management Committee here: March 9, 2020 Update, February 26, 2020 Update, February 3, 2020 Update.

1.A reduction in taxes only applies to a value which has decreased due to market conditions.  This does not indicate a conversion of the same value in an up market and down market will yield a different tax liability.

2.RMDs sent directly to charity do not count as income and will not be taxable to the account holder or qualified charitable organization.

We encourage you to reach out to our team, so we may help you plan and protect your legacy.

About the Author: Jerome You is a Financial Planner for Acumen Wealth Advisors in Chattanooga, TN.  Jerome has passed the Cannon Trust School II exam (of a three-part series) to earn the Certified Trust and Financial Advisor (CTFA) designation offered by the American Bankers Association (ABA).

 

The opinions expressed in this commentary should not be considered as fact. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

eMoney is honored to have been selected as the Technology Provider winner for the Account Aggregation, Financial Planning and Specialized Planning Applications categories at the prestigious 2019 Wealth Management Industry Awards ceremony, held on September 12, 2019, in New York City. This awards program, now in its fifth year, is the only one that honors outstanding achievements by companies and organizations that support financial advisor success.

The “Technology Providers: Account Aggregation” award honors companies that enhance an advisor’s ability to efficiently and accurately aggregate client holdings. eMoney was selected for its API-based aggregation, which provides enterprises and advisors with more secure and reliable connections. In 2019, eMoney will transition 43% of accounts to an API – bringing the total number of aggregated accounts to more than 61%.

The “Technology Providers: Financial Planning” award honors companies that enhance advisors’ ability to produce, manage, and update client financial plans. eMoney offers more than 21 deep integrations with the industry’s leading software products. We are committed to building strategic partnerships and integrations that help clients increase efficiency, productivity, and success.

The “Technology Providers: Specialized Planning Applications” award honors companies that support specialized areas of the financial planning process such as estate planning, healthcare planning, student loan management, executive compensation analysis, tax planning, etc. Launched earlier this year, Foundational Planning provides a streamlined, interactive, and “right-sized planning” solution. With the addition of Foundational Planning, eMoney now offers full-spectrum planning—from entry to mid-level and complex—on a single, integrated platform. Advisors and their clients gain a seamless graduated planning experience that evolves as client planning needs change.

“We’re both honored and proud to have won in three different categories this year,” said Ed O’Brien, CEO at eMoney Advisor. “This recognition speaks to our commitment to pushing ourselves even further in our innovations and development, delivering high-quality products and solutions to the industry and working even harder to help people talk about money,” added O’Brien. “And we couldn’t do this without our incredibly talented team of innovators who make things happen – the right way every day at eMoney.”

Press Release issued September 16, 2019 by https://blog.emoneyadvisor.com/emoney-news/emoney-receives-multiple-wealth-management-industry-awards/

Leveraging financial planning strategies is a key benefit of working with Acumen Wealth Advisors.  As laws change, we work with clients to leverage new opportunities.  Roth conversions are one financial planning strategy Acumen is implementing for applicable clients.  In 2018 a new tax law took effect allowing for a greater capacity to recognize income at lower tax rates.

A traditional IRA is a tax-deferred account which grows tax free but is taxed upon withdrawal.  Based upon the new retirement plan-based legislation, The Secure Act, IRA owners who turn 70½ in 2020 are required to start taking Required Minimum Distributions (RMDs) at age 72.  The RMD is an amount based upon the life expectancy and account balance on December 31st of the previous year.  The issue Acumen saw arising from RMDs is, for some clients with large IRA account balances, the RMD amount was substantial enough to push them into a higher tax bracket.  This income sensitivity is particularly concerning when other sources of earned income, such as pension, social security, or substantial interest income, are included.

Unlike a traditional IRA, a Roth IRA account holder pays the taxes “up front” when a contribution is made.  The account then grows tax free.  There are no RMDs for the account holder and withdrawals are not taxed (since taxes have already been paid) nor do the withdrawals count towards earned income.*  Roth IRAs are widely utilized and recommended for individuals who anticipate their income or tax liability will be higher in the future.

A Roth conversion is accomplished by taking a portion (or all) of a traditional, tax-deferred IRA account balance and moving it into a tax-free Roth IRA.  Acumen’s financial planners work with clients to assess how much needs to be converted on an annual basis to effectively reduce future tax liability while staying in the lowest current tax bracket possible.  The Tax Cuts and Jobs Act of 2017 reduced the individual tax rates and effectively doubled the standard deduction, but these provisions are only temporary and will expire in 2026.  Acumen believes this time frame is a window of opportunity for optimal Roth conversion implementation.  Although Roth conversions will create a tax liability for the converted amount, Acumen believes it may be better to pay the taxes in today’s relatively low tax rate environment and then enjoy tax-free growth and withdrawals from a Roth IRA without having to worry about future tax rates.  We feel at this point, when it comes to taxes, “The devil you know is better than the devil you don’t.”

The effect of the 2017 tax cut can be seen with the annual federal deficit growing 60.31% from September of 2017 to September of 2019.  Future tax rates are unknown, but it is widely anticipated the government will have to take some spending reduction and/or revenue increasing action to combat this deficit – actions such as increasing tax rates.  The current tax brackets of 10%, 12%, 22%, 24%, 32%, 35%, and 37% are set to increase to 10%, 15%, 25%, 28%, 33%, 35%, 39.6%.  And, the standard deduction will effectively be halved when the current tax law sunsets in 2026.

Another reason Acumen sees value in Roth conversions is for beneficiaries of an IRA.  When the owner of a traditional IRA account passes, the account is inherited by the beneficiary(ies) listed on the account.  This beneficiary could be a surviving spouse who will become a single tax filer and, consequently, have a lower income threshold for higher tax rates.  The RMDs from an inherited IRA can also affect children who, in many cases, find themselves in their prime income earning years.  This situation can present a problem as the owner of the inherited IRA must start taking RMDs which adds to their existing income and presents the possibility of being pushed into a higher tax bracket.  This issue was not as unfavorable before the passage of The Secure Act in November of 2019 since the inherited IRA owner could use their life expectancy for RMD calculations, a provision, referred to as a “Stretch IRA”, resulting in a lower annual withdrawal amount.  The Secure Act has eliminated the “Stretch IRA” provision and now the entire account balance must be taken within ten years.

Once again, the Roth IRA shows its value from a tax standpoint as the owner of an Inherited Roth IRA is required to take RMDs but the withdrawals are tax free and do not count towards income.*  The benefit of inheriting a Roth IRA, as opposed to a traditional IRA, is attractive for individuals who wish to leave a tax efficient legacy.

* Withdrawals are not taxable as long as the account has been opened five years or the account owner is over age 59½.  First home purchase and college expense exceptions also apply.

We encourage you to reach out to our team, so we may help you plan and protect your legacy.

About the Author: Jerome You is a Financial Planner for Acumen Wealth Advisors in Chattanooga, TN.  Jerome has passed the Cannon Trust School II exam (of a three-part series) to earn the Certified Trust and Financial Advisor (CTFA) designation offered by the American Bankers Association (ABA).

 

The opinions expressed in this commentary should not be considered as fact.  Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities.  The information has been obtained from sources we believe to be reliable; however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.  It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser.  Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure.  Past performance is no guarantee of future returns.  Investing involves risk and possible loss of principal capital.  No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.

The Path2College 529 Plan, sponsored by the State of Georgia, is a tax-advantaged way for parents and other family members to save for college, offering both federal and state tax benefits. Contributions are not deductible on your federal tax return, but accumulated earnings are excluded from federal tax and may be withdrawn tax-free as long as the funds are used for qualified education expenses. Earnings are not taxed at the state level, either, and Georgia offers a generous deduction for contributions.

In fact, the Georgia state tax benefits for 529 plans just got better. The state tax deduction has been increased from $2,000 to $4,000 per year per beneficiary, for single taxpayers, and from $4,000 to $8,000 per year per beneficiary, for married couples filing jointly. Note that this increase takes effect in 2020 under Georgia HB 266, signed into law in May 2019.

Deadlines for Deductions

Deductible contributions may be made for a taxable year up until the federal deadline for IRA contributions. For example, you could make the deposit on April 14, 2021 and have the deduction apply to your 2020 return.

Rules on Withdrawals, Fund Limits

Tax-free withdrawals may be used for tuition, fees, certain room and board costs, books and supplies, as well as computers and related technology costs such as Internet access fees and printers. Up to $10,000 annually can be used toward K-12 school tuition per student from your 529 plan. Withdrawals used for other purposes may be subject to tax on the earnings, as well as a 10% penalty, so it is important to talk to your tax advisor before you decide to do anything else with the funds.

The maximum account balance per beneficiary for the Path2College 529 Plan is $235,000. Contributions beyond this amount are not permitted, but the fund can continue to accrue tax-free earnings. Also, there is no federal gift tax on contributions up to $15,000 per year for single filers and $30,000 for married filers.

Importantly, there are no income restrictions on either you, as the contributor, or on the beneficiaries of 529 plans. This flexibility means that these accounts should be considered as a key tax planning option for college funding for taxpayers at all income levels.

Original article can be found HERE.

Here are the need-to-know highlights on the SEC Reg BI rule.

On June 5, 2019, the Securities and Exchange Commission (SEC) officially voted in the Regulation Best Interest (Reg BI) rule to bring a new set of standards to broker-dealers. The rule – which will go into effect June of 2020 – aims to strengthen the guidelines previously outlined by the suitability rule.

The new rule is also an attempt at closing the regulatory gap between broker-dealers and Registered Investment Advisors (RIAs), who have long been held to a higher measure of client care with the fiduciary standard. Rather than recommending investments that are simply “suitable” for clients, RIAs are beholden to recommend the best possible option for the client’s situation regardless of their own interests (commissions or other incentives).

Here are some of the highlights from the official 771-page SEC document that broker-dealers need to know about the new Reg BI rule.

Suitable vs best interest

The suitability rule under which broker-dealers currently operate requires that recommended investments are suitable for a client based on their demographics, characteristics, goals, and level of acceptable risk. The issue is that broker-dealers are not necessarily required to present the best option for the client’s situation, instead just one that fits their needs in some way.

For example, consider that two investment options with similar risk are presented to a client: option A that has historically returned six percent and option B that has historically returned four percent. Say that option A carries a commission of one percent, but option B carries a commission of two percent. If both options A and B are suitable for a client, the broker is not required to present option A over option B and can recommend the one that pays a higher commission.

In addition to preventing broker-dealers from presenting options that favor their interests over that of their clients, the rule will ban firms from offering sales incentives such as free vacations or bonuses for selling certain products. Further, Reg BI restricts broker-dealers from using the title of ‘advisor’ if they are not dually registered as an investment advisor.

The SEC breaks down the Regulation Best Interest rule into four main components:

Form CRS

In addition to these concepts, the Reg BI rule calls for the required distribution of a new document titled “Form CRS” to clients at the start of the relationship. This document is meant to summarize information about a firm’s services, fees and costs, conflicts of interest, legal standard of conduct, and whether or not the firm and its financial professionals have disciplinary history.

In comparison to the former DOL fiduciary rule

Critics of the new rule say that although it is a step in the right direction, Reg BI is weak in comparison to the DOL fiduciary rule that was rescinded on July 20, 2018. One area of contrast was the fiduciary rule’s requirement of a signed best interest contract with clients that could allow for litigation and class action lawsuits. This contract would have bolstered the enforcement of the new standards but is not included in Reg BI.

Another critique is that there are now two sets of rules: a fiduciary rule for RIAs and Reg BI for broker-dealers. The fiduciary standard aimed to make a much larger portion of financial professionals – including financial advisors – legally obligated to act in the best interest of the client. Not only did this hope to clarify the rules that govern financial professionals but also make it easier for clients to understand. Many believe that even with the improvements made with Reg BI, the regulations have only become more complicated for consumers.

Though Reg BI has already been voted through, expect more news surrounding the ruling to appear before it goes into effect next June.

You may also read more about the fiduciary standard vs. suitability standard HERE on our website.

Jul 01, 2019     Article sponsored by Advicent HERE.

Congratulations to Acumen’s Jerome You for passing the Cannon Trust School I exam to earn the Certified Trust and Financial Advisor (CTFA) designation offered by the American Bankers Association (ABA)!  Jerome attended the week long training program at the University of Notre Dame in Indiana in July.  A CTFA candidate must have a minimum level of wealth management work experience and approved training programs.  This course begins a three-part series with the Cannon Trust School program and is designed to facilitate the planning, implementation and administration of complex trusts including gift and estate taxes, advanced generation skipping, fiduciary income tax, and split interest and charitable trusts.  Topics covered in Cannon Trust School I include: