Displaying items by tag: hnw


Most advisor attention as it regards Biden’s tax plan has been about increased capital gains taxes and the unwinding of the “step-up basis” in the inheritance of assets. However, there is another major risk and complication on the horizon. That has to do with state level inheritance laws and how they interact with Biden’s plan. The federal government has no formal inheritance tax, but rather an estate tax. States, by contrast, often have inheritance taxes. The big difference between the two is that the estate tax is levied on the estate itself, whereas inheritance taxes are levied on the beneficiaries. That means that each individual is subject to a different level of taxes based on their income.

FINSUM: To be clear, the implications of this are quite large for HNW individuals, as they could face much higher federal estate taxes in addition to high state level inheritance taxes.

Published in Wealth Management

Wealth and investment management are ever-changing, but a new generation of clientele is shifting that landscape even more quickly…see the full story on our partner Magnifi’s site

Published in Wealth Management
Wednesday, 28 April 2021 17:34

New Tax Change Could Be a Big Win for Clients


Ask any high earning northerner about the worst element of Trump’s tax cuts, and you will invariably here the same answer: the introduction of the SALT cap (state and local taxes). The puny cap sent effective tax rates spiking in higher tax states and helped propel a migration southward. Well, that mostly hated legislation might be headed for extinction as calls from lawmakers are growing louder to get rid of it. Interestingly, the push to get rid of it is not coming from Republicans, but Biden’s own party, since it disproportionately affects blue states with high taxes. According to CNBC, “More than 20 Democrats and nine Republicans have joined a bipartisan caucus that has pledged not to vote for any legislation that doesn’t include a repeal of the SALT cap”.

FINSUM: This has always been a pretty rough piece of legislation (logical as it may be), and it is easy to see that Biden may have to compromise on this.

Published in Wealth Management
Friday, 23 April 2021 15:32

Biden’s Big New Tax Announcement


Joe Biden jut rocked markets in a big way. Yesterday afternoon, Bloomberg reported that Biden was planning to increase the capital gains tax rate on the wealthiest Americans by double, or up to just under 40%. The same rate as income taxes. Market reversed very sharply, but have been strong today. The tax would only affect Americans earning over $1m per year, which is 0.3% of the population, but taken in conjunction with other proposals to change the basis for capital gains taxes as it concerns inheritance, this is another big step.

FINSUM: The full scale tax overhaul on the wealthy has begun in earnest. Inheritance taxes and now capital gains taxes look likely to soar, with the latter not only on the wealthy. Advisors need to be very mindful of these changes as they disproportionately affect those who employ financial advisors.

Published in Wealth Management
Thursday, 25 February 2021 17:41

A Big Change is Coming for the Muni Market

(New York)

The muni market is in a very interesting place. Despite the overall erosion of credit quality for municipalities since the pandemic began, demand for munis is at an all-time high and returns have been great. Yields are very low, but until very recently, they still offered a substantial benefit over Treasuries. All of this has coincided with a major change to the space: the infusion of institutional investors. For decades, the muni space has been dominated by HNW individuals and their advisors, but over the last couple years, institutional buying has been rising strongly. According to a study by an industry body “Over the last decade, customer purchases of fixed-rate, tax-exempt municipal securities of $100,000 or less decreased by 46%, the MSRB found. Meanwhile, institutional-sized purchases of over $1 million increased 46% in the same time period”. “Most of the large retail managers have moved clients from traditional, transactional, retail accounts into discretionary platforms like SMAs … The firm itself then makes the allocation decisions and is, therefore, less responsible for making sure that the client understands their investment decision”, said Matt Fabian, partner at Municipal Market Analytics.

FINSUM: This is actually good news for all involved—retail investors and advisors included (in a broad sense)—as it improves liquidity and tightens spreads.

Published in Bonds: Munis

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