This article by investment expert Jeff Christenson was originally published in this month's issue of WORTH magazine. It sheds light on how the economy and depressed tax revenue threaten the value of Muni Bonds, what many consider to be the safest part of their portfolio. A must read for advisors, investors and CPAs. - Ike
As State Budgets Troubles Worsen, What’s Next for Muni’s?
A new crisis, that has not yet been addressed, exists within state and municipal
budgets. According to the Center on Budget and Policy Priorities in Washington, DC, an unprecedented level of state fiscal problems have been brought on by the worst decline in tax receipts in decades and these revenue declines show no signs of letting up.
The current recession is expected to be more severe than the last one, causing state fiscal problems to deepen and last longer than previous recessions. At least 48 states are addressing budget shortfalls for fiscal year 2010 totaling $168 billion and an unusual number of these states are still struggling to adopt a budget for fiscal year 2010, two months after the July 1st start date.
These fiscal problems are expected to continue into fiscal year 2011 and likely beyond. At least 36 states are anticipating significant deficits for fiscal year 2011, and these shortfalls are estimated at an additional $180 billion. Combine the shortfalls for the 2010 budget and those estimated for 2011, and the estimated total is at least $350 billion.
Unemployment, which peaked after the last recession at 6.3%, has already exceeded 10%, and many economists expect it to continue to rise. This continued rise in unemployment would further reduce state income tax receipts, thereby significantly increasing demand for Medicaid and other state-provided services. Also, sales tax receipts have fallen more severely than during the previous recession due to a reduction in the consumer’s access to sufficient lines of credit. This reduction in state revenue has forced states to implement a combination of spending cuts, withdrawals from reserves, and use of federal stimulus dollars. When combined with falling property tax receipts due to rising residential and commercial delinquencies and defaults, state and municipal revenues may continue to decline for some time.
Although we see a high level of risk in the municipal bond markets currently, with equity markets rallying, municipal bonds trading at premiums, and more cash moving off of the sidelines and into the markets each day, market conditions may stay positive through year-end or early next year before the sentiment reverses.
Investors who cannot afford to lose their current unrealized gains from the recent rally should be cautious and mindful of the increased risk to capital and strongly consider moving out of municipal bonds to protect capital.
During last year’s financial crisis, municipal bond prices fell by an average of 20%. The current rally has led to a recovery in pricing, with many municipal bonds again trading at premiums. This recovery in pricing is concerning, given the increasing budget shortfalls and the most extensive expense cuts by states and municipalities in history. Given the relatively low yield of most municipal bonds, the ratio of risk to reward seems out of balance. In fact, this may be one of the greatest selling opportunities in history.
Link to the article in WORTH: http://worth.com/index.php/advice?id=168&view=single
Disclaimer:
The views are those of Jeff Christenson and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Past performance does not guarantee future results.
Securities and Advisory Services are offered through Multi-Financial Securities Corporation, member FINRA, SIPC. Christenson Wealth Management is not affiliated with Multi-Financial Securities Corporation.
Showing posts with label high net worth. Show all posts
Showing posts with label high net worth. Show all posts
Monday, January 18, 2010
Wednesday, August 12, 2009
THE ROLE OF "SECRECY" IN ASSET PROTECTION
The Excerpts and Links below emphasize yet another reason that the
best Asset Protection plans are:
1. Tax Neutral;
2. Involve paying and reporting taxable income from all sources;
3. Are drafted by a professional with experience in such issues;
4. AND DON'T RELY ON SECRECY
I tell our clients this:
Secrecy is hiding something and “hoping” no one finds it. Hope is not a plan as we have learned since the last election. Secrecy based plans rely purely on that hope of secrecy and your willingness to perjure yourself before the courts.
Have a real plan that is tax neutral and which you CAN disclose without fear.
The Cost Of Secrecy
By Barbara T. Kaplan
On February 18, something happened that should be taken as a wake-up call by investors with secret foreign bank accounts: UBS AG signed a deferred prosecution agreement with the U.S. Department of Justice that resulted in the names and private Swiss account records of 300 U.S. taxpayers being released to the IRS. A second agreement announced this month is expected to result in UBS turning over thousands of more names.
SEE THE WHOLE STORY HERE: http://tinyurl.com/lt8kc3
STORY #2
U.S., Swiss nail deal on secret bank accounts The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy.
http://www.msnbc.msn.com/id/32386100/ns/business-world_business/from/ET
STORY#3
Days of Secret Swiss Bank Accounts May Be Numbered
http://www.cnbc.com/id/32389493
best Asset Protection plans are:
1. Tax Neutral;
2. Involve paying and reporting taxable income from all sources;
3. Are drafted by a professional with experience in such issues;
4. AND DON'T RELY ON SECRECY
I tell our clients this:
Secrecy is hiding something and “hoping” no one finds it. Hope is not a plan as we have learned since the last election. Secrecy based plans rely purely on that hope of secrecy and your willingness to perjure yourself before the courts.
Have a real plan that is tax neutral and which you CAN disclose without fear.
The Cost Of Secrecy
By Barbara T. Kaplan
On February 18, something happened that should be taken as a wake-up call by investors with secret foreign bank accounts: UBS AG signed a deferred prosecution agreement with the U.S. Department of Justice that resulted in the names and private Swiss account records of 300 U.S. taxpayers being released to the IRS. A second agreement announced this month is expected to result in UBS turning over thousands of more names.
SEE THE WHOLE STORY HERE: http://tinyurl.com/lt8kc3
STORY #2
U.S., Swiss nail deal on secret bank accounts The Swiss and U.S. governments announced a deal Wednesday to settle American demands for the identities of suspected tax dodgers, despite Switzerland's vaunted bank secrecy.
http://www.msnbc.msn.com/id/32386100/ns/business-world_business/from/ET
STORY#3
Days of Secret Swiss Bank Accounts May Be Numbered
http://www.cnbc.com/id/32389493
Liability Insurance and Why the Wealthy are Under-Insured
The excerpt and link below are from a great article on liability insurance and why so many affluent people are under-insured and exposed. I write on this topic myself extensively and I warn clients like this:
Buy as much liability insurance as you can afford, assume it won't work, apply or be sufficient and have a solid back-up plan. If for no other reason I want to see the insurance there to catch the bullet on the legal defense fees, which on their own can be devastating.
Ike
“Liability”—the responsibility for injury, death or damages to another—is a word that sends chills down people’s spines. Anyone who owns a home, drives a vehicle, operates a business or engages in any number of normal pursuits faces liability exposure.
If one is proved liable for an accident, the consequences can be devastating financially unless you are properly protected. Wealthy individuals face a disproportionate amount of exposure because they often own multiple homes and automobiles, investment properties, private aircraft and yachts.
Wealth management professionals are getting better at including property and casualty specialists in their practices to address such liability exposure, yet statistics show that many high-net-worth individuals still carry low liability coverage in their personal insurance. Why do successful people do this when it obviously puts their wealth at risk?
SEE THE ENTIRE ARTICLE HERE: http://tinyurl.com/mrcef3
Buy as much liability insurance as you can afford, assume it won't work, apply or be sufficient and have a solid back-up plan. If for no other reason I want to see the insurance there to catch the bullet on the legal defense fees, which on their own can be devastating.
Ike
“Liability”—the responsibility for injury, death or damages to another—is a word that sends chills down people’s spines. Anyone who owns a home, drives a vehicle, operates a business or engages in any number of normal pursuits faces liability exposure.
If one is proved liable for an accident, the consequences can be devastating financially unless you are properly protected. Wealthy individuals face a disproportionate amount of exposure because they often own multiple homes and automobiles, investment properties, private aircraft and yachts.
Wealth management professionals are getting better at including property and casualty specialists in their practices to address such liability exposure, yet statistics show that many high-net-worth individuals still carry low liability coverage in their personal insurance. Why do successful people do this when it obviously puts their wealth at risk?
SEE THE ENTIRE ARTICLE HERE: http://tinyurl.com/mrcef3
Monday, August 10, 2009
Interesting VIDEO interview with Publisher of WORTH Magazine.
I was recently featured by WORTH magazine as one of their "Leading Wealth and Legal Advisors", I am one of only 3 in Arizona and 24 in the U.S. This is an interview with the Publisher Patrick Williams about the magazine and how it picked and vetted us to be part of the group and who gets the magazine and why.http://tinyurl.com/kw69bv
Tuesday, July 28, 2009
UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST
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We have many questions on how Asset Protection Trusts work and how you and your money are protected in international or "off-shore" jurisdictions. My friend Doug Lodmell created this great piece for our many clients and advisor & attorney partners that explains the basics.
UNDERSTANDING THE CHECKS AND BALANCES OF THE ASSET PROTECTION TRUST
By Douglass S. Lodmell, J.D., LL.M.
Since Asset Protection ultimately relies on removing the assets from both the U.S. jurisdiction, and the control of the clients, a very good question would be: How can a client be sure that the new foreign Trustee doesn’t run away with the money should we ever need to use the Trust? To answer this we need to look at the intricacies of how a well-drafted Asset Protection Trust creates internal and external ‘checks and balances.’
To begin, let’s look at how the plan ‘controls’ the money:
1) We create a legal structure which requires the approval and consent of various parties who act as checks and balances on the assets, and
2) We create a physical tracking mechanism directly with the independent client chosen bank, which holds the money, so that the client is always aware of where the money is.
The Asset Protection Trust has 4 primary roles:
1) The Settlors (the clients)
2) The Trustee
3) The Protector
4) The Beneficiaries
The legal control of the assets is done through a 2 party approval mechanism. This is kind of like requiring 2 signatures on a check. The Trustee is responsible for the management of the assets and has legal title. However, unless the Trustee is the client, they do not have physical possession of the money, which is held at an independent and unrelated bank.
In order for the Trustee to actually do anything with the money, they then must also have the consent of The Protector. This would include things like wiring the money to another bank or even to another account with a different name, or making any changes whatsoever in the physical location of the money
The role of Protector is just that, to protect the assets of the Trust for the benefit of the Beneficiaries. As such the Protector has 2 primary jobs: 1) to approve of the actions of the Trustee, and 2) to remove the Trustee if the Trustee is not acting in the best interests of the Beneficiaries. This is what ensures that the Trustee doesn’t run off with the money.
So who keeps an eye on the Protector? This is where the loop closes back to the only location in which the clients can have 100% security – themselves. The Settlors (clients) have the power to remove and replace the Protector for any reason they choose to at any time. The only exception is if a U.S. court is demanding that they do so to appoint the court or a court representative as Protector, in which case that particular order is ignored.
The only other possible loophole that could endanger the money is if both the Trustee and the Protector conspired together to defraud the Trust. This is highly unlikely in and of itself due to the fact that the Trustee is a large Trust Company and has their own internal checks and balances as well as the fiduciary duty and liability to the Trust, and the fact that the Protector is personally chosen directly by the client and has the same fiduciary duty. Nevertheless, the plan has one final check that ensures that the client themselves always have full knowledge of where the money is, and where it is going to.
This final check is called a “client acknowledgment” procedure. The bank, typically a large private Swiss bank, chosen by the client, will have a hold period prior to the execution of any orders to withdraw funds, or move money from the Trust account. This procedure would require the bank to have a personal confirmation that the Beneficiaries (also the clients) have direct knowledge of the proposed transfer.
While the Beneficiaries are not in “control” of the money directly, since the bank must have a direct personal verification that the Beneficiaries are aware of the transfer, if a proposed transfer is not approved, the bank will be so informed, by the clients themselves. The order would then be delayed for a sufficient period of time for the Settlors to appoint a new Protector, who will appoint a new Trustee.
As you might imagine, the net effect is that it is virtually impossible to make any move with Trust assets without the client’s direct knowledge and consent. This combined with the fact that any serious Asset Protection Plan is going to use only the most stable and reputable institutions to fill any fiduciary role makes having your assets offshore safer than the local bank down the street by far.
The difference is that the bank down the street is in the jurisdiction of the court at the other end of the street. And right in the middle is the all-too familiar lawyers office, which is where all the trouble began in the first place.
Since Asset Protection ultimately relies on removing the assets from both the U.S. jurisdiction, and the control of the clients, a very good question would be: How can a client be sure that the new foreign Trustee doesn’t run away with the money should we ever need to use the Trust? To answer this we need to look at the intricacies of how a well-drafted Asset Protection Trust creates internal and external ‘checks and balances.’
To begin, let’s look at how the plan ‘controls’ the money:
1) We create a legal structure which requires the approval and consent of various parties who act as checks and balances on the assets, and
2) We create a physical tracking mechanism directly with the independent client chosen bank, which holds the money, so that the client is always aware of where the money is.
The Asset Protection Trust has 4 primary roles:
1) The Settlors (the clients)
2) The Trustee
3) The Protector
4) The Beneficiaries
The legal control of the assets is done through a 2 party approval mechanism. This is kind of like requiring 2 signatures on a check. The Trustee is responsible for the management of the assets and has legal title. However, unless the Trustee is the client, they do not have physical possession of the money, which is held at an independent and unrelated bank.
In order for the Trustee to actually do anything with the money, they then must also have the consent of The Protector. This would include things like wiring the money to another bank or even to another account with a different name, or making any changes whatsoever in the physical location of the money
The role of Protector is just that, to protect the assets of the Trust for the benefit of the Beneficiaries. As such the Protector has 2 primary jobs: 1) to approve of the actions of the Trustee, and 2) to remove the Trustee if the Trustee is not acting in the best interests of the Beneficiaries. This is what ensures that the Trustee doesn’t run off with the money.
So who keeps an eye on the Protector? This is where the loop closes back to the only location in which the clients can have 100% security – themselves. The Settlors (clients) have the power to remove and replace the Protector for any reason they choose to at any time. The only exception is if a U.S. court is demanding that they do so to appoint the court or a court representative as Protector, in which case that particular order is ignored.
The only other possible loophole that could endanger the money is if both the Trustee and the Protector conspired together to defraud the Trust. This is highly unlikely in and of itself due to the fact that the Trustee is a large Trust Company and has their own internal checks and balances as well as the fiduciary duty and liability to the Trust, and the fact that the Protector is personally chosen directly by the client and has the same fiduciary duty. Nevertheless, the plan has one final check that ensures that the client themselves always have full knowledge of where the money is, and where it is going to.
This final check is called a “client acknowledgment” procedure. The bank, typically a large private Swiss bank, chosen by the client, will have a hold period prior to the execution of any orders to withdraw funds, or move money from the Trust account. This procedure would require the bank to have a personal confirmation that the Beneficiaries (also the clients) have direct knowledge of the proposed transfer.
While the Beneficiaries are not in “control” of the money directly, since the bank must have a direct personal verification that the Beneficiaries are aware of the transfer, if a proposed transfer is not approved, the bank will be so informed, by the clients themselves. The order would then be delayed for a sufficient period of time for the Settlors to appoint a new Protector, who will appoint a new Trustee.
As you might imagine, the net effect is that it is virtually impossible to make any move with Trust assets without the client’s direct knowledge and consent. This combined with the fact that any serious Asset Protection Plan is going to use only the most stable and reputable institutions to fill any fiduciary role makes having your assets offshore safer than the local bank down the street by far.
The difference is that the bank down the street is in the jurisdiction of the court at the other end of the street. And right in the middle is the all-too familiar lawyers office, which is where all the trouble began in the first place.
Friday, June 12, 2009
IKE DEVJI and JEFF CHRISTENSON featured in WORTH Magazine
SEE THE WORTH FEATURE HERE: http://worth.com/index.php/advice?id=5&view=singleArizona advisors to the Affluent Jeff Christenson and Ike Devji selected as WORTH Magazine national “Leading Wealth & Legal Advisors”
Phoenix, AZ - JUNE 2009
Jeff Christenson, a Phoenix money manager and President of Christenson Wealth Management and Asset Protection Attorney Ike Devji, Executive V.P. of the Wealthy 100, Of-Counsel with the law firm of Lodmell & Lodmell have been selected by WORTH magazine as part of the Leading Wealth & Legal Advisor Program, a vetted venue for top wealth and legal advisors nationwide. This section is designed to introduce some of the country’s leading wealth advisors and attorneys to Worth readers and provide sound guidance on how to maximize advisor relationships. Christenson and Devji will contribute professional columns for the re-launched magazine which has been designed as the essential guide book for the ultra affluent throughout the year.
“Given what’s happened in the market since October, high net worth families are making tough decisions about their investment and legal advisors and the quality of advice they’re receiving,” said WORTH Publisher Patrick Williams. “Giving investors sound information about leading wealth and legal advisors Like Ike and Jeff will help them make a more informed choice when selecting an advisor or adding to their team.”
Devji, who helps protect billions of dollars for clients internationally and who ran one the largest Asset Protection only law firms in the country, agrees, “We find that our client’s needs are increasingly sophisticated and complex as their net worth grows and their business and personal interests and exposures diversify. We often work together to find and refine solutions for each other’s clients and that’s what makes us unique, the team approach and the best of class bench we have built to serve our clients as needed on an a-la-carte basis. That’s what our clients like about us and that’s what Patrick Williams and WORTH found unique about what we do”. Devji has quietly long been the go-to resource for some of Arizona’s wealthiest residents who are interested in proactively protecting their wealth both domestically and offshore.
WORTH has undergone a complete re-invention in the past few months with an aim to enlighten, inspire and serve a select group of high net worth individuals with an avid interest in the intelligent stewardship of their personal wealth. Featuring a contemporary design and compact format (7.875 inches X 10.5 inches) and printed on paper typically reserved for books, the magazine is geared to be an elegant, practical and portable resource for dynamic CEOs, entrepreneurs and investors.
Christenson and Devji, although in different fields, often work together to meet the varied and sophisticated needs of their high net worth clients both in Arizona and across the United States. “Our clients are leaders in every imaginable industry; medicine, real-estate, executives, professional athletes and entertainers and even others in our own businesses”, said Christenson, a 15 year veteran of the financial services industry. “What they all have in common is that they have spent a great deal of time and effort becoming successful and turn to us help them stay that way”.
The duo look forward to being part of the distinguished WORTH community and continuing the work they are known for and which their clients see as more essential than ever.
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