Your Unbiased Advisor: Wealthy hide assets in their tax-FREE foundations

New ways the wealthy avoid taxes that we have to pay for them

The Trump tax breaks did not reduce the amount the well off can deduct from their taxes. The rich get richer. We have to make up the loss of govt revenue since the rich use the courts, police, military, roads, airports, etc. They can deduct the amount they give their own charitable foundation and have the foundation buy the things they like to have. If they like old cars, old bicycles, old antiques, art of any type, they have their foundation charge it. They can control when they let others see their stuff too. There are a growing number of private tax-exempt exhibition spaces that use this model. As the founder, they can deduct the full market value of any art, cash and stocks they ‘donate,’ even when the museums are just a quick stroll from their living room. “I think these types of deals do not follow the intent, even if they follow the letter, of the law,” said Rebecca Wilkins, senior counsel on federal tax policy at the Institute on Taxation and Economic Policy. Robert Storr, dean of the Yale School of Art, worries that some collectors are exploiting a legal loophole without fulfilling a broader mission of education or research. It is unlikely that the IRS will get tough since its boss uses his foundation in this manner—his foundation buys his own portraits to put in his own businesses. Private foundations may be the biggest scams ever. US is home to many tax havens like this.

Avoid paying wealthy people’s taxes: https://www.amazon.com/Trump-Tax-Shelter-Avoid-taxes/dp/1985448300

Why do we pay tax on Social Security Benefits?

Taxpayers who receive income besides SS benefits may have noticed that they must add some of their income from SS to their taxable income on line 20b of Form1040 or 14b of Form 1040a. For those working and receiving benefits, up to 85% of the benefits may be taxable income. Why do we pay tax on our benefits since we paid for the benefits (FICA tax) all our working lives? This is the progressive income tax. Those who have more income in retirement pay tax on more of their SS benefits. If we wish to reduce the tax on our income we have to reduce our taxable income. We can do this starting before or after retirement by funding a tax-FREE trust account at any financial institution. We can also convert IRA money to this account at the firm where we have our IRAs. We can convert any part of our IRAs as well as contribute if we are still working. So whether working or retired, we can make our long-term savings and investments into income that we no longer pay tax on. Tax-FREE income means we lower the amount of taxable SS benefits. When we must begin withdrawing our pension, 401k and IRA money, converting it to tax-FREE income is one of the ways we can use our withdrawals after age 70 (RMD) if we don’t need it for expenses.

Check 17 ways to use your RMD: https://www.amazon.com/What-your-RMD-much-spend/dp/1718946716

Are you subject to quarterly estimated income tax payments?

If you are both retired and receive RMD, pension, SS benefits, part-time work earnings, or any other income, you may have to pay what you may owe the IRS each quarter during the year. For example, your required RMD is $12,000, your pension, SS benefits and $15,000 non-employee job have no federal and state income taxes withheld for the IRS. You must either have one or more of them withhold tax or you have to send in the money with Form 1040-ES. The IRS likes the payments in 4 equal measures. If you receive your income all in one period—RMD, pension and part time pay all come in December, you will need to ask for the waiver of penalty on Form 2210 with Schedule AI on your return. The most common solution is to have one of the payers withhold and send it each month or quarter.

Plan your retirement spending wisely: https://www.amazon.com/Your-Retirement-Spending-Plan-enough/dp/1461084016

SCAMS: Beware illegal unregistered securities scheme

Brokerage firm LPL was caught selling illegal unregistered securities and not supervising brokers for years. The Securities Act of 1933 requires that investors receive valid information about the securities they are sold and that sellers don’t mislead investors about them. This is accomplished by the registration of all but govt securities sold by the firm. Various tricks are used to offer these investments for sale. The firm may have registered a version of the security but not the one you buy. Remember the 2007-8 mortgage backed security scandal in which the packages of MBS were put together with little information about the sub-prime loans inside them. Or consider the Master Limited Partnerships units being sold by many firms. It is not always clear what is being sold: tax benefits, timeframe and rights of the limited partners are obscure. Statements can be altered to make securities look legit. Don’t accept vague promises or values.

Lesson: don’t assume your broker is offering you a legal deal if 1) the deal is great—above the market returns; 2) the firm or broker has a record on BrokerCheck; or 3) you don’t verify your money went to place your broker claims. In this case, you can confirm the registration at https://www.sec.gov/edgar.shtml. Unfortunately, the industry has little oversight of the supervision of their brokers. Investors must file for arbitration when they suspect they are mislead or defrauded. The firm’s culture is all about making money--caveat emptor and white collar crime is NOT a priority for Sessions and Trump.

Check all transactions: https://www.amazon.com/Pimps-Wall-Street-money-middlemen/dp/151525254X

Your broker wants commissions upped with the ‘Fiduciary Rule’ dead

Merrill announced it may bring back commissions to gouge out seniors’ retirement money with complicated annuities and other ‘packaged’ products. The reason Obama instituted the fiduciary rule for salespeople was that unwary customers were being cheated out of $17 billions. The products are complicated for a reason—to protect the brokerage firms and the manufacturers. The regulators have more complaints about annuities than almost any other product. The Rule is grounded in the procedures used by trust companies as they administer trusts: do what is best for the customer NOT for the seller. Thus we had a better chance of learning the downside to products and the sellers’ conflicts of interest. The most recent violations: FifthThird was caught ‘twisting’-- exchanging an annuity they already had commission from for a new one with new commissions. They claimed the new one had benefits it did not have. A small fine with ‘no admission of guilt’ means they can commit fraud “misstatement” “mislead” again and no one goes to jail. Simple is best.

Use the best products for YOU: https://www.amazon.com/Fiduciary-Rule-BEST-dont-anymore/dp/1530980275

New study shows our losses from trading, fees, taxes vs index fund

After 25 years of study, Research Affiliates has found that taxes are still the largest drag on investment returns. Arnott’s research found that the tax and fee burdens of active and factor funds destroys their ability to beat their benchmarks. Cost matters. In the period from Jan. 1, 2008, to Dec. 31, 2017, active funds outperformed their benchmarks by an average of 0.7 percent gross of fees, but lost ground to underperform by 0.4 percent net of fees, underperform by 1.5 percent after internal taxes before liquidation, and underperform by 1.9 percent after capital gains taxes post-liquidation. The internal tax expenses caused by the turnover of active mutual funds still weighs on investor portfolios. Smart beta funds, on the other hand, outperformed their indexes from 2008 to 2017 by an average of 1.2 percent gross of fees and 0.6 percent net of fees, but underperformed by 0.1 percent after taxes pre-liquidation, and by 1 percent after taxes post-liquidation. Pay less; keep more.

Simple is best: https://www.amazon.com/Vanguards-Top-Ten-mutual-funds/dp/150073909X

Buffett credits ‘compounding’ for his huge successes

Buffett’s company, really a mutual fund, has returned 19% a year earnings because his assets compound earnings year after year with little trading. His firm has owned stock in Coke, American Express, Bank

America

, Wells Fargo, and others for a long time. Some are worth 20 times what he paid for them. His firm owns GEICO, KraftHeinz, BNSF and others. Compounding is the name of how business grows when you plough profits back into the business. Coke is now sold in almost every village in the world. Patience is hard to come by these days but it can answer our investment questions. Millionaires increased their wealth by over 10% in 2017 from an improving global economy and strong stock market performance. It was patience not working 10% more hours.

Make Warren Buffett your advisor: https://www.amazon.com/Warren-Buffett-Your-Investment-Advisor/dp/1518690963

Unhappy with your auto insurance?
Maybe you are not alone. JD Power asked customers how they felt. Certain states have preferences for sure. Progressive has saturated the TV with cute commercials but their ratings are average. Most regions have a local favorite, beating the national brands. California: Ameriprise
Central: Shelter
Florida: MetLife
Mid-Atlantic: Erie Insurance
New England: Amica Mutual
New York: New York Central Mutual
North Central: Auto-Owners Insurance
Northwest: PEMCO Insurance
Southeast: Farm Bureau Insurance—Tennessee
Southwest: CSAA Insurance Group
Texas: Texas Farm Bureau

If you are shopping for lowest cost, remember to ask for the discounts that fit your situation. Sometimes ‘bundling’ auto and home is MORE expensive. Bundle umbrella liability with auto cover to save. Shopping for auto cover every 2-4 years makes sense because your needs and the insurers’ needs change. However, in old neighborhoods, home insurers reward longevity—no claims for years.

Check each discount: https://www.amazon.com/Vehicle-Insurance-Beware-Double-Coverage/dp/1480027634

Get your grandchild started

The combined wealth of millionaires worldwide topped $70 trillion for the first time in 2017, according to Capgemini’s World Wealth Report 2018. The report attributed the rise in wealth (an increase of 10.6 percent over 2016) to an improving global economy and strong stock market performance. The number of millionaires also grew 10 percent, up 1.6 million to 18.1 million. The

United States

continues to be home to the most millionaires, with 5.4 million, up 10 percent from 2016. That’s followed by

Japan

Germany

and

China

. Those top four markets account for 61 percent of the world’s high-net-worth individuals, USA Today reports.

https://www.amazon.com/Give-your-Grandchild-1000000-Lifetime/dp/1456433105

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Make

~~America~~

, “The Don” Great Again