Category: Blog

Most broad asset categories have produced positive returns thus far in 2021, with the exception of high-quality bonds that suffered amid a rise in interest rates at the start of the year. Real assets, including energy-related investments and commodities, have been among the top-performers. Within equities, US large cap stocks have continued to provide market leadership while emerging markets stocks have lagged. Against this backdrop, fully invested portfolios have generally produced solid absolute performance results on a year-to-date basis.

Volatility has picked up over the last few weeks as financial markets express anxiety over the future path of monetary policy and the rapidly spreading omicron variant. In his testimony to the Senate Banking Committee on November 30, Federal Reserve Chair Jay Powell finally retired the use of “transitory” to describe inflation and signaled the Fed is considering a faster end to its program of economic stimulus.

In our view, valuations are generally rich while macro uncertainty is high. Therefore, proper diversification remains as important as ever. While there remains a wide range of potential outcomes, our base case assumption is that the economic recovery is likely to continue, though growth may have peaked for the cycle. And the odds of a recession seem relatively low given the strength of consumer balance sheets. However, uncertainty about inflation and the monetary policy response remain key risks. Inflation rates are likely to decline in 2022 due to base effects, but supply-side pressures are likely to keep inflation elevated for some time.

In portfolio strategy, we continue to target an underweight position to core/investment grade fixed income given historically low yields. Within equities, we remain underweight to US stocks given stretched valuations but fully invested in more reasonably priced international and emerging markets stocks. We are targeting an overweight position to “real assets” like commodities and energy-related stocks given the risk of stickier inflation and attractive valuations.

Please see the attached presentation that provides our assessment of the market backdrop and shares our views on portfolio strategy going forward.

With the likelihood of rising income taxes, families with generational wealth comprised of investable assets are seeking efficient techniques to reduce ongoing income taxes with respect to the earnings generated by such assets.  Recent tax law changes have boosted the opportunity to use private placement life insurance (PPLI) to locate investment assets in a tax-free bucket.

Click Here to read our white paper on this.

(Charlotte, NC) Colony Family Offices® is pleased to announce Kristin Lewis as the newest member of our team.

Kristin brings valuable experience to Colony, having served affluent families across the Southeast.  Kristin brings a comprehensive understanding of the specific needs of multi-generational families.

Kristin has over 18 years of experience providing specialized counseling to affluent clients in a variety of financial planning areas, including cash flow / retirement planning, stock options and employee benefits, insurance, investments, income taxation and transfer taxation. After beginning her career as a Tax Consultant at Deloitte, she was a Vice President and Senior Financial Planner with Wachovia Wealth Management.  For over 5 years, Kristin also coordinated and taught the Estate Planning module of the CFP® Financial Planning Education Program for Queens University of Charlotte.  Prior to joining Colony, she spent 10 years as a Partner and Director of Financial Planning at Queens Oak Advisors.

Kristin’s unique skill set will enhance firm initiatives and the services we make available to our clients, including:

• Coordinating and promoting business development efforts with outside centers of influence such as attorneys, accountants, insurance professionals and other trusted advisers,
• Assisting families through major life transitions (i.e., the sale of a business, business succession for the family-owned enterprise, the death of matriarch/patriarch, and financial education of younger family members),
• Design and implementation of appropriate investment allocation strategies consistent with the client’s overall tax, estate and financial planning goals and objectives, and
• Enhanced recordkeeping that includes tax and “accountant ready” reports for families with complex family holding structures such as LLCs, corporations and trusts.

Colony Family Offices is pleased to announce that it is a Bronze Sponsor of the 2019 Southeast Regional Meeting of The American College of Trust and Estate Counsel (ACTEC). The conference will be held November 7-10, 2019 at The Westin Poinsett.

Established in 1949, The American College of Trust and Estate Counsel (ACTEC) is a national organization of approximately 2,500 lawyers, peer-elected to membership by demonstrating the highest level of integrity, commitment to the profession, competence and experience as a trust and estate counselor. The members, “Fellows,” are the best and brightest in trust and estate practice, with decades experience representing and advising families. ACTEC offers technical comments about the law and its effective administration but does not take positions on matters of policy or political objectives.

Please click here to read the full press release.

 

Colony Family Offices is pleased to announce that it will be a Gold Sponsor of the 41st Annual Duke University Estate Planning Conference. The conference will be held October 10-11, 2019 at the Duke University School of Law.

This two day conference consists of a series of lecture sessions designed to examine in detail current developments in the estate and gift tax field; strengthen the practitioner’s knowledge and application of estate planning techniques to a multitude of diverse and complex problems; and to provide a forum for the discussion of important estate planning problems and their solutions.

Please click here to read the full press release.

The attached summary provides a refresher on the Generation Skipping Tax (“GST”) tax rules and highlights often overlooked filing requirements when a trust either terminates or makes a non-terminating distribution to a skip person.

The GST tax consequences of outright gifts to a skip person is fairly straight forward and no tax is due as long as the amount of the gift does not exceed the donor’s GST exemption. In contrast, gifts in trust require a thorough analysis of the GST automatic allocation rules enacted in 2001 to ensure that a taxpayer’s exemption is allocated in the most tax-advantageous manner. Unfortunately, there are several situations where reliance on the GST automatic allocation rules can lead to undesirable results. To the extent that GST exemption is not allocated automatically or affirmatively, a GST tax could be triggered later when skip persons ultimately receive distributions or are the only beneficiaries of such trust.

Forms 709, 706 GS(D), 706 GS(D-1) and 706 GS(T) are due on the 15th day of the fourth month following the year the transfer, termination or distribution occurs (normally April 15th for calendar year taxpayers, or October 15th upon extension). Transfers at death are reported on Form 706, which is due nine months after death plus extensions. The IRS is generally permitted to challenge a trust’s GST inclusion ratio and assess GST tax and penalties until the later of: (i) the expiration of the statute of limitations for filing Forms 706 GS(T), 706 GS(D-1), or 706 GS(D) as a result of a taxable termination or distribution, or (ii) upon the expiration of the statute of limitations period applicable to the grantor/decedent’s Form 706 Estate Tax Return.

Given the complexity of the GST tax rules, we recommend that a taxpayer make a conscious decision with respect to any gifts in trust with an affirmative allocation of GST exemption and not rely on the GST automatic allocation rules. We also recommend that a Trustee consider the statute of limitations with respect to the GST inclusion ratio of a trust. Depending on historical gifts and tax filings, the Trustee may want to consider making a distribution to a skip person soon after the grantor’s death and file the respective tax filings to run the statute of limitations with respect to the GST inclusion ratio of such trust.

Please click here to learn more.

Despite a few bouts of volatility, risk assets are broadly higher thus far in 2019. Yet, bond yields have plunged, signaling a weak economic outlook and expectations of further central bank easing. To be sure, the global expansion has decelerated and become more uneven—but our base case macro assumption does not call for a further, significant deterioration in growth or an outright contraction. Central banks’ dovish pivot and China’s fiscal stimulus should help stabilize growth and extend the current cycle. However, we see a high degree of uncertainty and a wide range of plausible economic outcomes. At the same time, asset valuations across most categories are somewhat above historical levels.

Read our Investment Commentary

We hope that you find this information helpful.  Please don’t hesitate to contact us if you have questions or would like to discuss further.

Colony Family Offices is pleased to announce that it will be a Silver Sponsor of the 40th Annual Estate Planning & Fiduciary Law Program. The conference will be held July 25-27, 2019 at Kiawah Island, SC.

The North Carolina Bar presents this advanced-level CLE program to experienced attorneys, accountants, trust officers, and other professionals from North Carolina and beyond. The annual program covers significant estate planning, estate administration, tax issues, and other relevant topics.

Since its founding in 2013, Colony has been an advocate of collaborative relationships with our family’s attorneys, accountants, and other professional advisors. We believe open dialogue and a diversity of opinion can help identify the best solution for our mutual clients. Collaborating with Colony gives professional advisors access to a highly skilled and experienced team of financial professionals.

Please click here to read the full announcement.

Colony Trust Company is pleased to announce that it will be a sponsor of the South Carolina Bar’s 2019 Al Todd Estate Planning Workshop (www.scbar.org). The conference is held July 12-13, 2019 at Kiawah Island, SC.

The South Carolina Bar presents this advanced-level CLE program biennially to experienced estate planners and tax attorneys across the state.

Please click here to read the full announcement.

We want to provide an update regarding year-end planning within your taxable investment accounts.  As noted in our previous communications regarding the recent market backdrop, 2018 has been a period of increased volatility coupled with mixed performance.  We understand that experiencing these fluctuations can be unsettling, however, these conditions potentially present a silver lining during an otherwise less than desirable investment environment.

We have been and will continue reviewing portfolios for opportunities to employ a strategy known as “tax loss harvesting.”  This strategy enables an investor to recognize a loss for income tax purposes by selling a security and simultaneously purchasing a similar security to maintain market exposure.  While there are imposed limitations established by the Internal Revenue Service on how this loss can be applied, this can serve as a valuable tool for reducing your taxable burden.  Additionally, any losses that exceed current year gains can be carried forward to offset any capital gains realized in future years.

We’ve also been actively monitoring mutual fund capital gains distributions, which generally take place around the end of the calendar year.  These distributions vary in size from fund to fund, based primarily on portfolio turnover, and are passed through in the form of short-term and/or long-term gains.  This creates the potential for a substantial taxable event to the shareholder, and we’re continuously reviewing the sizes of the distributions relative to the individual investments so that we can possibly navigate around any gains that would exceed unrealized gains within each position.  While a majority of our managers have stated their expected 2018 distributions to be nominal, there have been instances that warranted action to avoid exposure to an undesirable tax consequence.

We are regularly reminded that successful investing requires an ability to live with a good bit of uncertainty.  This reinforces the importance of focusing on the things we can control, such as

1. using a thoughtful, risk-based approach to portfolio design,
2. reducing manager fees and expenses, and
3. minimizing tax consequences.

As such, we’ll continue to be proactive and use available tools and strategies as we monitor and assess ongoing market actions.  If you have any questions, please don’t hesitate to reach out.  We thank you for your continued trust and allowing us to serve your family.