Legacy Mapping: A Deeper Dive Into Our Newest Tool

>River Views: Sharing Our Perspective on the Market

As indicated in our previous article, estate planning can be complicated even for the professionals who specialize in it. We have developed a one-page visualization tool, called Legacy Mapping, designed to simplify the complex flow of all your assets in your estate plan.

With the Legacy Mapping tool, we can identify discrepancies between your intentions and what your plan is structured to accomplish. Through this lens, we can adjust your plan accordingly, providing you and your family with peace of mind about the future.

The process begins by taking a deep dive into your estate plan, focusing on the implications of taxes, control, equalization, and asset placement. We then take this information and lay it out as a comprehensive visual using “if/then” scenarios. From there, we make recommendations based on your goals and work with your attorney to implement those changes. We will revisit the map with you annually to make adjustments based on life changes, taxes, and changes in control. 

Legacy mapping is intended for clients with complicated estates typically involving multiple trusts and/or split/blended families. If you think you could benefit from this offering, please reach out to your advisor or client relations associate.

Election 2020: Stay the Course Despite Uncertainty

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Uncertainty is a reigning theme for investors during an election year, but how much do elections really impact the stock market and portfolio returns?

Should elections matter to the long-term investor? The short answer is no. According to a report published by the Capital Group, “History shows that stocks have done well regardless of the makeup of Washington. Since 1933, there have been 42 years where one party has controlled the White House and both chambers of Congress at the same time. During such periods, stocks have averaged double-digit returns. This is nearly identical to the average gains in years when Congress was split between the two parties.” The same rings true for the party that holds the presidency. “Over the last 85 years, there have been seven Democratic and seven Republican administrations, and the general direction of the market has always been up,” according to the same report.  

While the historical facts indicate overall positive market performance reigns regardless of the election results, we recognize that some economic sectors will be impacted differently depending on which party is in control.

While polls are not perfect predictors of election outcomes, as we saw in 2016, they are good indicators of where the popular vote will land. As of our publish date, national polls show that Vice President Biden has a significant lead over President Trump. If this proves correct, we predict a turnover in the Presidential administration but the Senate and House will remain stable. In this scenario, we anticipate regulatory shifts with clear winners and losers by sector. We anticipate that utilities, certain verticals in healthcare, and information technology will benefit from these regulatory shifts; while other verticals in healthcare, financials, and energy will all be negatively impacted by this outcome.

Regardless of the election outcome, which may take weeks to determine, our mantra remains the same.  “Stay calm. Stay confident. Stay the course.” The market may initially act emotionally to any changes to the current structure, but it will course correct as the future outlook stabilizes.

We will continue to watch the market closely, examining the perceived sector winners and losers, and make any tweaks to portfolios as needed to best position you to withstand volatility. If you are concerned that your tolerance for risk and reward has shifted this year and you would like to change your investment strategy, please contact your advisor as soon as possible.

Want to Hear the River Wealth Perspective on the Market and Upcoming Election?

Please join us at www.uberconference.com/room/riverwealth or 717.251.1243; 03651 on October 29, 2020 from 11:30 a.m. to 12:30 p.m. EST to hear our thoughts about the market, the pandemic, the election, and what you can expect as an investor. Continuing education credits are not available for the webinar.

If you would like to participate, please email Alyssa Hitchcock at ahitchcock@riverwealthadvisors.com.

Just Because You Don’t Have to take an RMD in 2020, Doesn’t Mean You Can’t

As you know from previous communications, the CARES Act of 2020 waived the required minimum distributions (RMDs) for this year. The waiver applies to all traditional IRA RMDs, as well as Inherited IRAs, both traditional and Roth IRA, and company retirement plan accounts. While you are not required to take RMDs in 2020, you are still allowed to take distributions if you so choose. If you are currently writing qualified charitable distributions, please keep in mind they must clear your account before December 31 to be counted in the current year. To mitigate any issues, we recommend you send out all checks prior to December 15. Please contact your client relations associate if you would like to take an RMD prior to the end of the year.

Death and Taxes. Taxes and Death. Death Taxes?

Ever since Ben Franklin wrote about the certainty of death and taxes the relationship between the two has been inextricably intertwined. Therefore, it should be no surprise that the issue of the federal estate tax has become an increasingly important issue in this election cycle. Each side of the aisle has used this issue to rally support for their cause and by doing so, has created a fiery dialogue on how to best prepare one’s estate. While a review of how the federal estate tax has evolved in the past is by no means a measure of what we can expect in the future, gaining some historical perspective may hold the key to estate planning regardless of the winner of this election.

Until the 16th Amendment was passed in 1913, the federal estate tax existed as a crude “stamp tax” to fund military actions for the federal government. Whenever funds were necessary some version of an estate or inheritance tax would be levied and then repealed once the need was satisfied. Only after the 16th Amendment gave Congress the power to tax income “on whatever source derived” did the estate tax become an ongoing and sustainable tax. In 1916, the estate tax as we know it was born. From 1916 until 1997 the federal estate tax went relatively untouched except for the occasional inflationary changes to the variables used to calculate the tax. The first major change to the estate tax happened under the Clinton Administration where the emphasis of the change was aimed directly at what is commonly known as the “estate tax exemption” which at the time was $600,000 per person.

From 1997 until now, we have seen a new exemption almost every year and one of those years, there was a full repeal of the federal estate tax. To list all the changes would take multiple pages, so here are the broad brushstrokes:

  • 1997 - The Taxpayer Relief Act of 1997 was signed into law by President Bill Clinton

    • Called for increases in estate tax exemption from $600,000 in 1997 to eventually $1,000,000 in 2006

  • 2001 - Economic Growth and Tax Relief Reconciliation Act of 2001 is passed

    • President George Bush signed this into law and it raised the gradual estate tax exemption of the Clinton Administration from $675,000 to $1,000,000 by 2002

    • This plan called for more increases than just inflation - $1,500,000 by 2003 | $2,000,000 by 2004   

  • 2010 - Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act signed into law by President Barack Obama

    • Allowed for $5,000,000 of estate exemptions 

    • Up from 2009’s already raised estate exemptions of $3,500,000

    • This was meant to expire in 2012

  • 2013 - Instead of expiring, Congress passed the American Taxpayer Relief Act (ATRA) signed by President Obama in January 2013

  • 2017 – President Donald Trump signs the Tax Cuts and Jobs Act (TCJA) into law

    • Taking the exemption from $5,490,000 in 2016 to $11,180,000 in 2017

    • 2017’s number of about $11 million has remained consistent to today

  • 2025 is the expiration for the TCJA and if nothing changes, estate exemptions will revert to the pre-Trump Administration levels of about $5,000,000

While the increase of the exemption from $600,000 in 1997 to over $11.58MM per person in 2020 seems to be the headline here, it is not. Of equal importance during this timeframe was the introduction of “portability” in the 2010 legislation listed above. Portability radically changed how married couples shared in the unused portion of each other’s federal estate tax exemption. As a result of portability, a married couple would have to have assets north of $23MM today to have to be concerned with the federal estate tax.

Each of these changes to the federal estate tax has sent clients back to their attorney’s offices to review their already carefully laid-out estate plans. Unfortunately, this experience has led many to become disenfranchised with the process of reviewing an estate plan as often as the law changes because of its expense and complexity. As a result, with all of the changes that have occurred in the past 20 years and all that is being proposed in the 2020 election, clients are coming to us to ask what they should do. Our recommendation: allow us to work with you to create a “Legacy Map.” A Legacy Map is a flow chart that takes your existing estate planning documents (often hundreds of pages) and plots them graphically on one page. By charting even the most complex estate plan on one page, we are able to quickly show clients how their plan could be effected by proposed changes. Additionally, creating a Legacy Map allows us to graphically depict “what if” scenarios so that clients can understand what modifications to their estate plan might mean to their big picture.

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In Case You Missed It: Charles Schwab Acquires TD Ameritrade

On October 6, 2020, Charles Schwab completed their acquisition of TD Ameritrade. It is important to note that it will be business as usual and there will be no impact to you in terms of service. The two organizations will remain separate custodians until account conversion is complete, which is expected to take 18 and 36 months. Schwab does have plans to adopt some of TD’s tools and educational resources, so we will notify you as new offerings and updates are rolled out.  

Q3 Portfolio Statements and Bills Have Been Posted

If you recently switched from receiving your statements by mail to viewing them on your secure portal, please remember to check your account to review your portfolio’s performance in the third quarter as well as your bill.

If you have issues accessing your portal, please contact our office at 717.888.9830 for support, or email Andrew O’Gorman directly at aogorman@riverwealthadvisors.com.

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*Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements.

IMPORTANT DISCLOSURE INFORMATION: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by River Wealth Advisors LLC [“River Wealth”]), or any non-investment-related content, made reference to directly or indirectly in this commentary, will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from River Wealth. Please remember to contact River Wealth in writing if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or modify any reasonable restrictions to our investment advisory services. River Wealth is neither a law firm nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of River Wealth’s current written disclosure brochure discussing our advisory services and fees continues to remain available upon request or at RiverWealthAdvisors.com.