Changes in the Federal Funds Rate cascade to all corners of finance from credit card rates auto financing mortgages and other rate-sensitive loans to the fixed income (bond markets These changes can also impact many estate planning strategies Changes in interest rates also impact many estate planning strategies First rate increases are directly reflected in the Applicable Federal Rates (AFRs…, *Source https//leimbergcom/Free-Resources/Key-Rates-Valuation/Section-7520-Rate-History While rates are still historically high now they will most likely trend lower With that in mind it is important to know what estate planning strategies work best when rates are high and which ones work best when rates are low , Estate planning strategies that benefit from higher interest rates, Charitable Remainder Annuity Trust, A Charitable Remainder Annuity trust (CRAT is a “split-interest” trust in which the non-charitable beneficiary receives an annuity for a term of years or for life (or two people can have a joint and survivor annuity for life and the remainder goes to a named charity In this case higher 7520 rates will result in a, greater, charitable deduction assuming the same annuity payment to the family Alternatively lower 7520 rates can result in a greater annuity payment to the family assuming the same charitable deduction The only caveat is that Treasury regulations require a minimum of 10% of the initial trust value must go to the charity for a CRAT to be valid The IRS has also ruled that a CRAT is not valid if there is a…, Qualified Personal Residence Trust , The other strategy that benefits from higher interest rates is the Qualified Personal Residence Trust (QPRT The QPRT is a split-interest trust used to transfer a residence or vacation home to children or other family members at a discounted value for gift tax purposes The grantor(s transfer the home to the trust and retain the right to use/occupy the home for a period of years At the end of the…,  , Estate planning strategies that benefit from lower interest rates, Charitable Lead Annuity Trust , A Charitable Lead Annuity Trust (CLAT is split-interest trust that works in the opposite manner of the CRAT described above With this strategy the annuity payments for a term of years are made to a charity and the remainder is usually paid to family members The grantor is entitled to a charitable deduction for the present value of the future annuity payments to charity When the 7520 rate is low…, Intra-family loans, Intra-family loans work best in a lower interest rate environment The AFR rate determines the minimum amount of interest that must be charged on such loans This technique includes loans to family members to finance major purchases to start a business or meet other financial obligations These loans can also be used to shift assets tax-free from a senior family member to a junior family member The…, Installment sales, An installment sale to an Intentionally Defective Grantor Trust (IDGT also works best when interest rates are low This strategy involves an individual (the grantor who “sells” property to a grantor trust created by her in exchange for a promissory note The goal is that the property sold to the trust will have a total return greater than the interest rate on the loan so that the net return after…, Grantor Retained Annuity Trust, Similar to the sale to an IDGT strategy a Grantor Retained Annuity Trust (GRAT will also perform better when interest rates are low The GRAT is another type of split-interest trust in which the trust’s grantor transfers assets to the GRAT and the GRAT pays back to the grantor a fixed annuity for a term of years After that term is up the remainder interest then stays in trust or is paid out to the…,  , Final thoughts, If you have a choice of strategy consider the benefits of a CRAT or a QPRT now while rates are still relatively high (as of the date of this publication When rates eventually trend down you can maximize your tax savings using intra-family loans a sale to an IDGT or a transfer to a GRAT or CLAT That said one should be careful not to let the “interest tail” wag the dog Waiting for rates to change…

The Tax Cuts and Jobs Act went into effect on January 1 2018 Since then there has been significant discussion about these tax changes and how they will affect individuals and families Below we revisit some of the key aspects of the new tax law, Federal income tax brackets, While the tax rates changed there still are seven federal income tax brackets As Federal income taxes are calculated on a marginal basis (where a different rate is applied to each bracket of income many families may have a lower tax liability For others changes in the tax law may increase their tax liability  In addition to changes in tax rates many changes were made to both the standard…, Standard deduction and personal exemptions, When calculating their income taxes individuals and families can use the standard deduction (a flat dollar amount available to all taxpayers or they can itemize their deductions (where specific expenses are deducted up to certain limits The new tax law nearly doubles the standard deduction to $12000 for single filers and $24000 for filers who are married and file jointly In addition all personal…, Itemized deductions, Deduction of interest paid on a new mortgage is limited to $750000 of debt down from $1000000 No deduction is allowed for interest paid on home equity debt if obtained for debt consolidation The deduction for state and local taxes is limited to $10000 per year This includes property taxes state income taxes and sales taxes, Child tax credit, The child tax credit increased from $1000 to $2000, Alimony, Alimony is no longer deductible for the payor and is no longer taxable income for the recipient, W-4 tax withholding, Given these tax law changes you may want to review your W-4 so that you may avoid unanticipated tax obligations You should especially consider reviewing your W-4 if you are someone who previously itemized their deductions or if you prefer a smaller tax refund – these changes will likely affect you the most (A quick reminder on W-4 forms the higher the number of allowances you claim on your W-4…, Next steps, We understand that many of our clients’ financial plans are closely integrated with their tax planning Based on the significant changes that went into effect this year now might be a good time to meet with your wealth advisor and your tax professional so that we can all work together to discuss how these tax changes may impact your financial and tax planning strategy going forward

Asset allocation is one of the most critical decisions in building and preserving wealth particularly as it relates to retirement and estate planning The way investments are allocated across different asset classes not only determines the growth and security of retirement savings but also impacts how your wealth can be transferred to future generations Importantly asset allocation is not a static…, The role of asset allocation in retirement planning, Retirement planning requires a careful balance between growth and preservation In the early stages of wealth accumulation investors generally favor growth-oriented equities that may be volatile over the short term but have a stronger return potential over the long run However as retirement approaches the focus shifts toward preserving capital and generating income A well-structured asset…, Early career (20s–40s Growth phase, In your 20s and 30s retirement can seem like a distant concern But the decisions you make now — how much risk to take how aggressively to invest — will shape your future financial security During this phase individuals have the advantage of a long investment horizon allowing for a higher tolerance for volatility A growth-focused portfolio may include a high equity allocation (80–90% diversified…, Mid-career to pre-retirement (50s–60s Transition phase, As individuals approach retirement asset allocation often shifts toward a more balanced structure to mitigate volatility A gradual increase in fixed income holdings such as investment-grade bonds or municipal bonds can help stabilize returns Additionally exposure to income-generating assets like dividend-paying stocks and real estate investment trusts (REITs can provide diversification and steady…, Retirement (65+ Preservation and income phase, At this stage capital preservation and predictable income become paramount as you enter retirement A well-diversified portfolio might include treasuries laddered bond portfolios and structured income vehicles Income-generating assets such as blue chip dividend-paying stocks and real estate can add further income with the potential to provide some appreciation Maintaining a cash reserve covering…, Tax and estate planning considerations, While an appropriate asset allocation plan is imperative for achieving financial success in retirement using tax-efficient accounts can lower your tax bill by meaningfully impacting the ending value of your investments For example a Roth IRA allows your investments to grow tax free as any income or capital gains received from investments in a Roth IRA account will not be taxed by the Federal…, Summary, Managing the allocation of your assets is a dynamic and sophisticated strategy essential for retirement security and estate planning By thoughtfully adjusting investments over time individuals can optimize returns manage risks and ensure a steady income throughout retirement A well-crafted allocation strategy is not just about accumulating assets — it is about sustaining financial independence…

When it comes to meeting goals and staying on budget and on track to attain your financial objectives financial planning is critical Everyone has unique circumstances that must be considered when creating a comprehensive plan and members of the LGBTQ community may have additional factors to consider when it comes to planning , Although the 2015 Supreme Court ruling that legalized marriage for same-sex couples eased planning in some ways challenges remain An Experian survey found that 62 percent of LGBTQ respondents said their gender identity or sexual orientation caused them to experience financial challenges 1 Some of those financial challenges may include income disparity high cost of living family planning and…, Cash flow planning, Cash flow planning is a crucial component of a financial plan and there are numerous challenges faced for our LGBTQ clientele   , Income disparity, —Members of the LGBTQ community are more likely to be earning less than their heterosexual peers Two-female-headed households for instance are on average less likely to generate as much income as different-sex households or two-male-headed households according to Statista 2, Cost of living, —LGBTQ individuals and their families want to live in areas where they are supported and surrounded by other members of their community and allies As a result they tend to live in urban high-cost areas  Potentially less income and a higher cost of living dictates a well-thought-out budget and savings plan, Family planning and health care, —Same-sex couples and LGBTQ individuals who want to have children need to prepare for the various costs associated with their family planning options The costs of surrogacy fertility treatments adoption and other family planning alternatives can cost upwards of $100000 3  An advisor can help coordinate with a tax advisor to strategize on tax benefits that may be available  In addition to family…, Retirement, —While planning for the short-term (housing family planning health care etc it is also necessary to keep longer-term goals and objectives in mind while continuing to save and prepare for retirement  Regardless of orientation couples should continually coordinate with their advisors to understand how to best allocate funds to continue to save for retirement while ensuring they can create the…, Investments that align with your values, Aside from cash flow and budgeting considerations LGBTQ members may want to create an investment plan that focuses on investing in companies that closely align with their values Alternatively they may want to stay away from investments in companies that are not supportive of their community This is a key consideration for advisors and their clients to incorporate into the financial plan and…, Estate planning, The 2015 Supreme Court ruling provided immense progress on the financial and legal rights to same-sex couples Legal documents drafted prior to 2015 may need to be revisited and new legal documents such as trusts need to reflect the wishes of the individuals Protecting partners and children requires couples update their estate plans to ensure that there is a plan in place in the event of death or…, Finding the right advisor, Most people who partner with a wealth advisor have come to the realization that wealth planning is rarely a DIY endeavor and that the partnership with a professional can make all the difference in the quality of their lives Planning and preparation are key to creating a well-thought financial plan that can address your concerns and help set you and your family on a trajectory to meet both short-…, Published January 2025, 1 https//wwwinvestopediacom/how-to-find-an-lgbtq-friendly-financial-planner-5186139 2 https//financeyahoocom/news/choose-lgbtq-inclusive-financial-professional-211957060html 3  https//wwwforbescom/sites/brianthompson1/2019/06/16/5-ways-lgbtq-financial-planning-is-different/sh=5e719f437a39 https//wwwbarronscom/advisor/articles/gay-families-financial-planning-challenges-51626990118tesla=y  

by Keith Gustafson CFA and Christopher M ONeill PhD CFA CFP, ®, FRM, ®, ChFC, ®, Executive summary, Financial assets in general perform very poorly in high inflation environments with negative inflation-adjusted (real returns being the norm  Among fixed income assets Treasury Inflation Protected Securities (TIPS do a decent job of mitigating the negative effects of inflation which may or may not translate into positive real returns In terms of fixed income the optimal inflation-hedging strategy…