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Biden’s Tax Proposal: Door Closing on Trusts

  So, Biden has a new tax bill that he’s proposed, and one of the provisions of the tax bill is to aggressively shut down Grantor Trusts. Most people have no idea what Grantor Trusts are. But should this happen, your estate tax bill could be increased significantly. The proposed tax law as written eliminates the future use of Grantor Trusts that are not already established and signed. It also severely limits the use of irrevocable life insurance trusts and other discounts. There is a small window to wrap your planning that is built into law as long as we can get these Grantor Trusts in place before the bill is signed. So who does this impact? We’ve got three categories of investors. Category one, less than $12 million in net worth married, or six million single. That’s most people, right? They’re not affected by this. That doesn’t make any…

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The One Thing You Can Safely Do Now Ahead of Biden’s New Tax Bill

  The backdoor Roth. It’s a great technique for getting after tax dollars into a Roth IRA if you don’t otherwise qualify. That deal might be a goner by the end of the year. What can you do? Is there anything that’s risk-free, meaning even if they don’t pass the bill as it stands – it’s no harm, no foul. Well, there is, and we’ll talk about it. So, there’s something called a Roth two-step, we call it that, also the backdoor Roth and the way the mechanics work because you make a deposit of after-tax dollars into a traditional IRA. You don’t get a deduction and you move those dollars shortly thereafter into a Roth. In the early years, we weren’t sure how the IRS would like this, but they never challenged it and eventually came up with a ruling, saying, yes, this is legal. It’s been quite the…

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Has the Need for Quantitative Easing Passed?

Back in March 2020 massive cash infusions saved the economy from what could have been a deflationary spiral, the worst-case scenario at that point in time. Now it’s late 2021. Deflation is no longer the risk. Is it time to taper the infusions? Back in March 2020, we had what was an extraordinary bipartisan response to the COVID-19 pandemic. Everything was collapsing, the lockdowns were causing a complete shutdown of the economy. This was great action. It was stunning to me, frankly, how complete, comprehensive, and fast it happened. Clearly, both parties had learned from 2008: do it now, do it quick. But now we’re at 5% plus inflation. In fact, some sectors, the economy double digit inflation. At the same time we have supply chain shortages. Is just printing money still the best course of action? You know, in late July, the Federal Open Market Committee, FOMC announced that…

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2% Mortgages!

  I never thought I’d see it, but 2% for mortgages? Hi, my name is Paul Carroll. I’m the CEO and founder of Avion Wealth, a boutique wealth management firm here in South Texas. So I’ve got a resource and I’m not a paid mortgage broker, I have no financial interest in this, who told me yesterday that they’re offering 2% mortgages for conforming loans in excess of $250,000 and 2.59% for jumbos. A little bit more information, this is a 15-year fixed rate. But what I discovered when I actually refinanced my condo recently, is these drops are so significant that if you’re over 3% now, you may find that your monthly payment does not increase very significantly, while shaving up to 15 years off the maturity of your mortgage. So it’s quite a deal. If you’d like more information, you’re one of my clients, go ahead and call…

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Tax Deadline – What to Know for Next Year and Biden’s Taxes

We're coming up on June 15th - tax deadline after all the extensions for Texas; was May 15th if you're not in the state of Texas. What do we we expect next year? There's a lot of talk about Biden 2020, 2021. Where are we going to talk about? Obviously if you're not ready for your taxes, June the 15th, you already are aware, I'm sure, that you can extend all the way to October 15th. So what's coming up for 2021, 2022? First and foremost tax changes will be next year, not this year. So this is the year for making planning changes. Some of the plans that are in the Biden proposal: one is increase the top marginal tax rate to 39.6% from 37% for those married, filing jointly, over $509,000. Clearly for most Americans, this isn't going to make any difference whatsoever. And it's really just a...
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How Does Inflation Affect Your Long Term Plan?

Inflation in April was 4.2%. It's as high as it's been in a long time. How does inflation impact your plan? So everybody’s concerned about stock rally, stock corrections, how's that going to affect my future? Nobody really thinks too hard about inflation. I mean, there's been a lot of concern lately, but how does inflation impact your plan? First, when we look at inflation, when we look at 4.2 as a headline figure, we do need to remember what was going on a year ago - last April. Last April was an extraordinary environment; borderline deflationary. In fact, the concern of the time was will this turn into a deflationary spiral? So we've got to look at the base rate before we go any further. And the base rate is based off in this case, what was going on a year ago, in April, 2020 - right after COVID...
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The Capital Gains Conundrum

NOTE: This video was recorded prior to President Joe Biden's proposal to double the Capital Gains tax on individuals earning over $1,000,000 per year. Our view is unchanged.   With proposals to eliminate the capital gains tax for people earning over $400,000 a year, it leaves us with a conundrum. Should we deliberately be taking long-term capital gains at this point in time? Taxes are easy to manage, yet difficult to avoid. Typically strategies involve some combination of rescheduling strategies, such as: Roth conversions, tax-loss harvesting, holding onto gains so they're long-term, deferring gains indefinitely, qualified charitable distributions from an IRA, donor advised funds, charitable remainder trusts, and even more advanced strategies such as GRATs, trusts, investing in opportunity zones. And of course rebalancing at the household level instead of the account level can reduce turnover and reduce taxes. But in most of these examples we're managing taxes, not avoiding...
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A Focus on the New Threat of Inflation

$1.9 trillion in economic stimulus on top of $2.9 trillion in 2020. Will almost $5 trillion of economic stimulus - printing money - reignite inflation, and if so, what can we do about that? When I came to the United States in the Fall of 1979, with $200, inflation in the United Kingdom was 13.4%. Down from a high of 24% in 1975. Things weren't much better here, though. In fact, in 1980 inflation hit 13.5%. Now, 13.5% can chew up two hundred dollars pretty darn fast. Paul Volcker, who was put in charge of the Federal Reserve by Jimmy Carter and retained, in his wisdom, by Ronald Reagan when he was elected, broke the back of inflation. He did it in the 1980s through significant interest rate hikes. He took the Fed Funds Rate up to 20% in June of 1981. Prime rate of 21.5%. Can you imagine a...
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Donating Appreciated Bitcoin, Stocks and other Assets

Bitcoin's above $50,000, the S&P 500 is above $3,800. There's a lot of hurting out there with COVID. Is there a way that you can give back and also skip the taxes on some of these outrageous capital gains? So with all that's going on with COVID out there right now, there's a lot of pain and suffering, and a lot of people are very generous. They're giving back. Yet it's amazing how many people are giving cash while sitting on significant capital gains. Especially those of you who have Bitcoin at $50,000. I don't know when that party is going to end, but if you want to do a lot of good with that stock - with that coin, I should say - you can donate appreciated assets, not pay the capital gains on those assets and still deduct the value of the appreciated assets on your tax return....
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It’s Tax Season Again

Tax time is just around the corner. Here's a couple of pointers that may help mitigate the cost and difficulty of preparing your taxes this year. We've got a lot of different clients with a lot of different desires when it comes to how best to file their taxes. Some clients, every single document, as soon as they get it, they send it to their CPA. Something to keep in mind is when the CPA opens up that envelope, it's going to hack the clock and probably most CPAs have a minimum of 15 minutes, so you can start seeing where we're going here. Bundle the documents. You may send one bundle late January, another bundle late February, and another bundle late March. But bundle the documents because the less envelopes that CPA opens, the less it's going cost you. The second challenge we have is that the IRS requires...
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