Alabama Tax Credit Could Lead to Even Greater Savings For Those With Alternative Minimum Tax (AMT)

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By Jessica Smith, CFP®, CLU®, CPWA®
NAPFA-Registered Financial Advisor

An AL.com contributor called the Alabama Accountability Tax Act of 2013 the “most radical education reform in decades”.  Similar legislation had only been passed in 16 other states at the time the Alabama Accountability Act passed in February 2013.1 It was developed with the intent to allow flexibility in meeting children’s educational needs, improve overall education performance, encourage innovation in meeting the needs of school systems and provide financial assistance through income tax credits.2 Since it was passed, there has been a great deal of controversy over the Act, which lead to a lawsuit over the constitutionality of the document. On March 2nd, the Alabama Supreme Court upheld the Act, so it is important to know how you may benefit from it.

The Act opens the door for Alabama residents to make donations to a Scholarship Granting Organization (SGO). Scholarship Granting Organizations are 501(c)3 (charitable) organizations that are created with the purpose of granting scholarships to eligible students at failing public schools so they may transfer to a private school.  The scholarships are provided to students who qualify based on family income requirements. All taxpayers who make a donation to a SGO qualify for a state tax credit of 50% of their state income taxes, up to $7500. C corporations also qualify for a 50% credit, but there is not a maximum limit on the amount of the credit. In addition, taxpayers can claim the donation as a charitable deduction on their federal return. For some, this is just a zero-sum game. The taxpayer receives a credit from the state, which lowers the state tax deduction by the same amount of the federal charitable deduction taken. However, for those who pay Alternative Minimum Tax (AMT), it actually results in additional savings because state taxes are disallowed for the AMT calculation, while charitable contributions are not.

The Alabama Accountability Act outlines a process for making SGO donations and claiming the tax credit. The state has earmarked $25M for these credits on a first come, first serve basis. Please let us know if you are interested in learning more about this opportunity or about how to make a donation and claim a credit. This is not something you want to plan on waiting until the end of the year for if you are interested.

*In full disclosure, Jessica Smith serves on the board of a local Scholarship Granting Organization.

1 McClendon, Robert. (March 1, 2013) “Alabama Accountability Act FAQ, a guide to the most radical education reform in decades.” Retrieved April 24, 2015 from AL.com: http://blog.al.com/wire/2013/03/alabama_accountability_act_faq.html.

2 Alabama Accountability Act of 2013 (HB 84, 2013)

Jessica Smith is the director of financial planning at Longview Financial Advisors, Inc.  She is a CERTIFIED FINANCIAL PLANNER® practitioner with extensive experience and expertise in insurance and retirement planning.  Visit “Our Team” to learn more about her and other team members at Longview. Jessica can be reached via e-mail at jessica@longviewfa.com.

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 Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post 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 newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Posted in Tax

Introducing Jase Braxton Johnson!

We are happy to announce the birth of Jase Braxton Johnson to Wes and Lori. Jase was born on March 9th at 2:14 PM, weighing 8 pounds 5 ounces. Jase’s brothers Josiah and Jaxon love having another brother around. Congratulations, Wes and Lori!

Family Pic (2) (1024x681)Wes, Jaxon, new addition Jase, Josiah, and Lori

 

Investing for Humans

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By Jeffrey Cedarholm, CFP®, ChFC®, CLU®

Chief Investment Officer

Back in 2000, David Swensen, the long tenured chief investment officer of the Yale University Endowment wrote a book entitled “Pioneering Portfolio Management.” The subtitle was “An Unconventional Approach to Institutional Investment” and honestly, it was not only very unconventional, but it was also very successful.  Swensen’s methodology was and still is to use the Endowment’s large size to attract the very best students and employees to work with him, and let them then attract literally the very best investment managers from around the globe.  He doesn’t have these managers invest in traditional stocks and bonds (he handles that in-house), but he has them invest 70-80% of the Endowment’s funds into illiquid investments such as farmland, timber, venture capital, private equity and various hedge funds.  Now defining liquid investments as those you can get “most” of your money back quickly, say within a day or two, illiquid investments would then be those that are contractually tied up for months, or even years, with little hope getting funds back quickly regardless of the nature of global investment markets.  Because Yale’s Endowment has a time horizon of 80 – 100 years, has 20-30% liquidity, and  investment redemptions of staggered terms, this approach worked well from 1985 through 2007.

Swensen’s investment returns were so good during this period of time that most large university endowments at least tried to replicate his methods.  And because his book was so clear as to his methodology, even my peer group tried to emulate his success to various degrees by investing some of our clients’ funds in a similar fashion.  But it didn’t quite work.  Over time, we discovered that there were three major differences between what Dr. Swensen was doing and what we were trying to accomplish.  First, few of us had the inherent talent of David Swensen, and even his own peer group struggled to keep him in sight.  Second, he was using investment vehicles where the most talented managers really make a positive difference.  But last, the difference in his investment horizon of 80 – 100 years is radically different from dealing with human clients where 35 years would be considered lengthy.  During the 2008 crisis, Yale, Harvard and many other well-known Endowments had problems funding normal college obligations, primarily because the bulk of their funds were illiquid.  Our clients too had problems during this time, but getting money out of the market was not one them.

Since that time six years ago, many companies have introduced liquid fund versions of many of the strategies Swensen continues to use, although it is still hard to wrap farmland up into a fund.  With stock markets around the world close to all-time highs and bond markets being extremely expensive because of record low interest rates, these liquid strategies are becoming more appropriate for those of us with investment horizons of less than 100 years.  The liquidity of these newly packaged alternative investments allows capital allocators like Longview the ability to grow and protect our client portfolios in a much broader and richer fashion.  We all need liquidity for purchasing our basic needs.  And those of us who invest will always need liquidity for down payments on a home, for children and grandchildren, for college educations and especially for funding retirement.  As these newly packaged, liquid versions of investments continue to improve, it is our hope that the process of helping clients accomplish their goals will also continue to improve.

Jeffrey Cedarholm is the Chief Investment Officer at Longview Financial Advisors, Inc.  He is a CERTIFIED FINANCIAL PLANNER™ practitioner with a passion for investment and wealth management. Jeff can be reached via e-mail at jeff@longviewfa.com.

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 Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post 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 newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Squirrel!

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 By Jeff Jones, MS
Financial Planner 

I’m guilty. I start my day off with a mental, and sometimes a written, list of things I need or want to accomplish. Some days, I get sidetracked by checking my email, a phone call, a hallway conversation. I stop to answer a text about today’s soccer game. I pick up a periodical to read an article that caught my attention.  On and on and on…The next thing I know, it’s the lunch hour and my list hasn’t been touched.

Good intentions. Bad implementation.

And so it goes with our financial life. We mean to complete our wills, update our insurance, rollover that 401(k), and on and on and on. We convince ourselves that we’ll get it done…eventually, but here we are and our list is still sitting there waiting for action.

Author Seth Godin says it like this:

The next thing you do today will be the most important thing on your agenda, because, after all, you’re doing it next.

Well, perhaps it will be the most urgent thing. Or the easiest.

In fact, the most important thing probably isn’t even on your agenda.

What is so important that you can’t afford to put it off one more day? Sure, it might be something financially-related such as updating your will. [You do have a basic will in place, don’t you?!] Or maybe it’s playing kitchen with your daughter, calling your mother, preparing for an upcoming presentation.

On a side note, the title references Dug the talking dog from Disney Pixar’s Up. Here’s a clip for reference. Cracks me up every time.

Jeff Jones is a part of the planning team at Longview Financial Advisors in Huntsville, Alabama.  He is a graduate from the University of Alabama with a Masters in Financial Planning as well as a candidate for CFP Board certification.   Visit “Our Team” to learn more about him and other team members at Longview. Jeff can be reached via e-mail at jjones@longviewfa.com


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 Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post 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 newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

 

 

Back to the Planning!

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By Andrew Gipner, MS, CFP®
NAPFA Registered Financial Advisor 

Happy New Year!

So with it being 2015, I had some major goals this year. Not to brag too much but based on the conversations I’ve had with the infamous Dr. Emmett Brown and his partner in crime, Marty McFly, I have successfully saved for a goal to not only have a hover conversion to my car, but also purchase an auto-adjusting/auto-drying jacket. Marty also mentioned something about the Cubs winning the World Series this year – I’ll believe that when I see it.

Wait, hold on there! Are you telling me that something has changed in the space-time continuum? Makes sense. While the Cubs are in the conversation to be a great team in 2015, I would say they are at least a couple years away from being in the World Series.

Great Scott! What about my goals?!?

As you can see with my fictional conundrum here, not only am I taking the movie Back to the Future Part II a little too serious but also something has changed with my plan. I’m here to say that’s just fine. Things that we can and cannot control sometimes re-route the roadmap that is our financial plan. Essentially, that’s the purpose of an ongoing financial plan – whether it’s a desire to travel more after completing a preliminary plan, or even a disruption in the space-time continuum.

Last year at Longview, we changed something about the way we think in terms of ongoing financial planning. We moved from a financial planning software that is cash- flow based to one that is goals-based.  Jargon aside, the final results of our new and updated plans will be focused more on the likelihood you are able to achieve those goals you set out for as opposed to how much in assets you have remaining at the end of your life. This by no means takes away the importance of cash-flow; it’s still the backbone of any good financial plan.  

“But Andrew, I don’t really know what my goals are right now!”

I have heard that from a few clients, and that’s OK, too. Again, this is where the ongoing financial planning thrives and is an ideal opportunity to explore the possibilities through various scenarios. While the plan still begins by having a firm understanding of the nuances of your situation (e.g. – How much are you spending? How much are you saving? Is your insurance coverage sufficient?), the plan can then move toward a number of “what if” questions that leads us right to the solution. That solution in itself can be the goals you determine after seeing the updated plan.

So is this a paradigm shift in terms of planning? Sure, maybe a little. But even if you don’t know all of your goals today, we know that there is a plan in place that allows us to include a few of those “trips to Europe” or “gifting to my favorite charity” and seeing what’s possible.  

And as always, we will continue to review the plan at least once a year and complete updates to the plan periodically.

OK, all done. Cue the Huey Lewis song with lyrics narrating this blog post.

Have a great 2015! 

Andrew Gipner is a part of the planning team at Longview Financial Advisors in Huntsville, Alabama.  He is a graduate from the University of Alabama with a Masters in Financial Planning. Andrew is a  CERTIFIED FINANCIAL PLANNER(TM) Professional as well as  the Membership Director of NAPFA Genesis,  a sub-group of the National Association of Personal Financial Advisors (NAPFA), dedicated to the professional growth and development of financial planners age 33 and younger. Visit “Our Team” to learn more about him and other team members at Longview. Andrew can be reached via e-mail at andrew@longviewfa.com.

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 Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post 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 newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.