Archive for January, 2017

IRS Scammers

Although many phone scammers have been caught, there are still many out there. Here is the scam:

The victim gets a telephone call from someone claiming to be from the IRS. The caller states the victim owes money and will be fined or sued if he does not pay immediately. The caller demands payment through a credit card, debit card or wire transfer.

There have been over 15,000 people that paid into this scam. Many have been older people. Make sure all family and friends know about this.

Keep this in mind:

• The IRS has a legal procedure they must follow.
• The IRS sends all notices of payment due by mail (sometimes certified).
• The agency does NOT initiate telephone calls demanding immediate payment by credit cards, debits cards or wire transfer.
• If you are called, hang up. If you are concerned you may owe money call the IRS directly at (800) 829-1040 (try to save the scammers phone number from your caller ID and report it).


“How do I report a scam” is the most frequent Google search.

1. For scams by shady contractors and front door solicitors, contact local police and your state attorney general or district attorney.

2. For identity theft, abusive debt collectors and most types of fraud, contact the Federal Trade Commission at, or, call 877-3824537. You should also file with state’s attorney general and local law enforcement.

3. To report unsolicited sales calls you need to start by registering your number(s) on the National Do Not Call Registry (, 888-382-1222).

Calls from legitimate charities, survey firms, debt collectors and political parties are not covered.

4. For complaints about shady business practices and financial products including loans, bank services, credit reporting, ID theft, debt collection and payment cards, contact Consumer Financial Protection Bureau (, 855-411-2372).

For credit, debit or bank issued ATM cards that are used fraudulently, lost or stolen, contact the issuer.

5. For internet based scams contact the Internet Crime Complaint Center (

6. For scams distributed by U.S. mail such as chain letters and “sweepstakes winnings” or mail theft reach out to the Postal Inspection Service ( 877-876-2455).

Your Legal Documents

If you become incapacitated, who will be deputized with giving directions? For individual accounts, this responsibility often falls to the agent named under your durable power of attorney.

Some provisions to consider:
Gifts. Does the document authorize the agent to make gifts? If you are not supporting other family members and do not face an estate tax, is such a provision warranted? Too often the gift provision is boilerplated and has little relevance to your circumstances.

Investments. Many power of attorney documents do not make mention of investments beyond a general authorization to conduct banking or securities transactions. If you have existing holdings or unique investments, will the general investment directions permit those to be continued?

Many Agents try to continue whatever investment plan you might already have been pursuing. But unless the power of attorney document permits such a path, the agent might be held to the standards of a prudent investor with appropriate diversification.

A will – or in many instances a “pour-over will” that pours assets into a trust created during your lifetime – provides for the disposition of assets upon your death. In many instances, the bequests are made into trust for various beneficiaries.

Standards. What investment standard does the document require? You should review these provisions ahead of time, as the document may hold some odd standards that might conflict with the investment policy pursued by you, or that might be inappropriate for an heir. Does the investment provision permit the present plan?

If a beneficiary has a particular need, be certain that the investment provisions permit it to be addressed. Too often, lawyers draft these provisions relying on standard clauses, without know what investment approaches you actually wants.

Taxes. Consider the tax consequences of any trusts created upon your death. Which states might tax them? Is there sufficient flexibility to change trustees or take other steps to diminish or avoid state taxes?

Strategies. A common estate planning strategy upon the death of a spouse is to fund a bypass or credit shelter trust. The remaining assets would pass to a trust qualifying for the estate tax marital deduction.


It is common for individuals to create irrevocable trusts that are taxed to the client for income tax purposes (grantor trust).

Perhaps most of these should include a swap power so that you, the grantor can return appreciated assets to the estate in exchange for cash. That maintains the same estate tax benefits but facilitates bringing appreciated assets into your estate to provide for an increase in income tax basis upon your death.

If this power is missing, it is suggested that you review with the attorney whether it can be added through a decanting (that is, a merger) of the trust. Without a swap power, maximization of the net of income tax returns for the family can be hindered.

Many irrevocable trust will include an annual demand, or Crummey power. This provision has the trustee give notice to the beneficiaries when gifts are made to the trust, so that they can qualify for the annual gift exclusion.

Even if you will not face an estate tax, it is necessary to meet these criteria to avoid having to file a gift tax return.

It’s common for individuals to hold investment assets in LLCs and family limited partnerships (FLP). Such entities can provide management, control, asset protection and other benefits.
While most, if not all, trusts include some type of investment provisions, typical LLC and FLP forms may not.

But many LLCs don’t have a manager. Instead, decisions are made by the members.



Roth IRA/401(k)?

Income tax rates, established under the 16th amendment in 1913, move like a pendulum in a clock. The movement is extreme at each end from ultra high top rates (94% in 1945) to low top rates (24% in 1929). Over all the years the average top rate has been 58% (this does not include state, city or local taxes). At the end of 2016 the top rate is 39.6% plus the 3.8% Obamacare surcharge for a grand total of 43.4% at the federal level. The new Trump administration is proposing 3 rates of 12% – 25% and a top rate of 33%. Think long term in your life. If these lower rates do take place then over time a “regression to the mean” states that rates have to rise in the future (during your retirement years).

One of our goals, at Founders Group, is for each client to have 80% – 100% of their retirement income to be TAX FREE for life. It takes time and planning. It cannot be done at the last minute.

My question to you ……… wouldn’t it make sense to sock money away in tax free investments when rates are low, today, and then harvest the money when tax rates are higher in your retirement years??? There are a few fantastic vehicles to accumulate money for tax free retirement income. For the “do-it-yourself” crowd there are Roth IRAs or Roth 401(k) plans. The problem with both is there are so many strings attached (how much you can contribute, when you can take monies out, etc). Here is some information on Roth’s:

You can take money out of your Roth IRA anytime you want. However, you need to be careful how much you withdraw or you may get stuck with a penalty. In order to make “qualified distributions” in retirement, you must be at least 59 ½ years old, and at least five years must have passed since you first began contributing.

You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason, but you’ll be penalized for withdrawing any investment earnings before age 59 1/2, unless it’s for a qualifying reason. Money that was converted into a Roth IRA cannot be taken out penalty-free until at least five years after conversion.

Not sure whether the money will be counted as contributions or earnings? Well, the IRS view withdrawals from a Roth IRA in the following order: your contributions, money converted from traditional IRAs and finally, investment earnings. For example, let’s say your IRA has $100,000 in it, $50,000 of which are contributions and $50,000 of which are investment earnings. If you withdraw $60,000, the IRS will consider $50,000 of that to be contributions and $10,000 to be earnings. So any penalty would apply only to the $10,000.

There are more sophisticated vehicles that magnify a Roth program and make Roth’s look like child’s play. These programs have been around since 1913 and require education and guidance by a professional adviser.