Allen Financial advisors and wealth managers Abraham Dugal and Sarah Ruef-Lindquist, JD, CTFA, were speakers for a session at the Maine Land Trust Network’s day-long Land Conservation Conference held earlier this spring in Topsham at the Middle School.
Dugal and Ruef-Lindquist spoke about issues surrounding how to grow endowments through planned giving, when donors seek to provide long-term support through gifts that can be more complex than cash or marketable securities.
Land trust staff and board members gather annually for the opportunity to network, share organizational best-practices and learn from experts in fields that include conservation, land preservation, marketing and finance. It is produced by the Maine Coast Heritage Trust.
Sarah Ruef-Lindquist, JD, CTFA
Dugal and Ruef-Lindquist spoke about the policy foundations and recognition practices they view as necessary to have fiscally-sound and successful planned giving programs. Their backgrounds – hers as an attorney, financial and philanthropic advisor, trust officer; his as an investment manager and both as board members – contribute to their unique perspectives as advisors and fiduciaries and how they approach potential gifts through clients’ estate and financial planning.
Given the unprecedented intergenerational transfer of wealth taking place in the United States, and the projections for gifts to non-profit organizations during the next 30 to 40 years in the trillions of dollars, organizations are well-served to pay greater attention to this area of resource development to build their long-term financial sustainability.
Allen Financial advisor and wealth manager Sarah Ruef-Lindquist, JD, CTFA, was the featured speaker at the June monthly meeting of the Mount Desert Island Nonprofit Alliance at the Garland Farm. MDINA members work collaboratively to address operational issues and coordinate event schedules for the many Mount Desert Island non-profit organizations.
Participant groups who were represented at the meeting included the Schoodic Institute, Friends of Acadia, Seal Cove Auto Museum, MDI Hospital, Abbe Museum and Jessup Memorial Library.
After a brief tour and background presentation from Garland Farm personnel, Ruef-Lindquist spoke about the policy foundations, recognition practices and outreach necessary to have fiscally-sound and successful planned giving programs and endowment funds. Members submitted questions in advance of the meeting ranging from how to begin a planned giving program to how to begin a conversation with a donor about planned giving.
Given the unprecedented intergenerational transfer of wealth taking place in the United States, and the projections for gifts to non-profit organizations during the next 30 to 40 years in the trillions of dollars, organizations would be well-served to pay greater attention to this area of resource development to build their long-term financial sustainability, Ruef-Lindquist said. It is an area in which she has worked as a consultant, philanthropic advisor or trust officer for more than 20 years.
Several years ago there was a lot in the news about a fiduciary rule that was going to change how advisors worked; the imposition of a fiduciary standard of behavior meant that advisors would have to make decisions and recommendations for their clients in their clients’ best interests, and not their own.
Sarah Ruef-Lindquist, JD, CTFA
Otherwise, advisors could charge commissions and earn fees on investments and other financial products that were perhaps questionably in their client’s best interests, but were definitely in the advisor’s best interests.
‘Fiduciary’ means essentially making decisions based on the best interests of someone beside yourself. While this isn’t a foreign concept to most people, it is not necessarily human nature. After all, survival instincts naturally tend toward self-preservation, not altruism. However, as advisors, we are in the unique position of helping others with decisions that require not only objectivity to understand available options, but professionalism and expertise to advise and recommend the best course of action for a particular individual’s circumstances.
Even though the fiduciary rule was not ultimately enacted as part of the regulatory scheme for financial advisors, some of us have always made it our practice to only make recommendations in our clients’ best interests. It is easier to do that when your income is not based on commissions from sales. Fee only planners are compensated solely by the client with neither the advisor nor any related party receiving compensation that is contingent on the purchase or sale of a financial product. Fees are usually paid through the investment management of one or more portfolios based on a percentage of their value, or in some cases for consulting work done on an hourly basis.
A question to ask yourself if you have a financial advisor would be are they acting in a fiduciary capacity for you?
There are many ways to be well. Most people consider wellness to include physical health and well-being. Some would also consider emotional, financial and spiritual wellness as worthy of their attention, and devote time and resources to addressing issues to promote those types of wellness.
Sarah Ruef-Lindquist, JD, CTFA
For many investors, this approach aligns with their desire to support business that are “doing good” in the world either in terms of what social or environmental issues they are addressing, and perhaps in terms of how they govern themselves and treat the employees within their companies.
In recent years, greater emphasis has been placed on the intersection of financial wellness and emotional or spiritual wellness. The world of investing has begun to focus attention on ways in which capital can be invested to support businesses that are promoting social or environmental welfare, and/or govern themselves in a way that promotes diversity and inclusion of those historically marginalized in corporate leadership, either by virtue of gender, race or other suspect criteria.
What has come to be known as Socially Responsible Investing (SRI) or Environmental Social Governance investing (ESG) involves using criteria like environmental, social, governance and employment practices to choose what investments will be held in a portfolio. According to Commonwealth Financial Network’s website:
Sometimes referred to as environmental, social, and corporate governance (ESG) investing, Socially Responsible (SRI) is a broad-based strategy in which corporate responsibility and societal concerns are factored into investment decisions. In short, an SRI strategy seeks to maximize both financial return and social good.
Companies that deal in tobacco, gambling, fossil fuels, weapons, or involve child labor, employee discrimination, or lack board diversity are the kinds that get attention in SRI/ESG screening. Mutual funds will screen out companies that don’t measure up in those areas.
This has broad appeal for many investors, but for some time there have been concerns that one could sacrifice market performance for social benefit. For example, removing fossil fuel stock from a portfolio could exclude some of the top performing companies during certain market periods. That is a difficult choice to make. Over time, the index that measures the performance of mutual funds that screen for SRI companies has shown that the gap has narrowed significantly between the general mutual and exchange-traded fund world and SRI-screened funds.
According to a US News and World Reports June 7, 2018 blog post entitled Socially Responsible Investing Delivers:
Research and performance history imply that socially responsible investors receive superior absolute returns and risk-adjusted performance, while also addressing sustainability concerns. Dollars invested in sustainable and socially responsible strategies provide companies with better ESG metrics easier access to capital, which reduces the cost of equity and supports higher stock prices.
So when you’re thinking about your own wellness, consider whether a more socially responsible approach to investing makes sense for you. Would knowing that your investments were supporting companies working to improve the environment, or address social causes, or include women and minorities in executive leadership add value to your experience as an investor? As with all investment choices, you should consult with your financial advisors before making any changes to your portfolio or investment strategy.
Socially responsible investing involves the exclusion of certain securities for nonfinancial reasons. This may result in the investor forgoing some market opportunities that may have been available to those not subject to such criteria. There is no guarantee that any investment goal will be met.
Allen Financial of Camden advisors and wealth managers Abraham Dugal and Sarah Ruef-Lindquist, JD, CTFA, were the featured speakers for United Midcoast Charities at Allen’s offices in Camden in early February. They spoke about issues surrounding how to grow endowments through planned giving, when donors seek to provide long-term support through gifts that can be more complex than cash or marketable securities.
Participant groups at the presentation included Trekkers, Wayfinder Schools, Watershed School, Waldo CAP, Belfast Soup Kitchen, Speaking Place, Pen Bay YMCA, Ripple Initiative, Rockland District Nursing Association, Ecology Learning Center, Knox County Homeless Coalition, Window Dressers, AIO, Big Brothers Big Sisters, and Coastal Children’s Museum.
Dugal and Ruef-Lindquist spoke about the policy foundations and recognition practices they view as necessary to have fiscally-sound and successful planned giving programs. Their backgrounds – hers as an attorney, financial and philanthropic advisor, trust officer – his as an investment manager – and both as board members contribute to their unique perspectives as advisors and fiduciaries and how they approach potential gifts through clients’ estate and financial planning.
Given the unprecedented intergenerational transfer of wealth taking place in the United States, and the projections for gifts to non-profit organizations during the next 30 to 40 years in the trillions of dollars, organizations are well-served to pay greater attention to this area of resource development to build their long-term financial sustainability.
The Financial Advisors of Allen and Insurance Financial are Registered Representatives and Investment Adviser Representatives with/and offer securities and advisory services through Commonwealth Financial Network, Member FINRA/SIPC, a Registered Investment Adviser. Allen Insurance and Financial, 31 Chestnut Street, Camden, ME 04843. 207-236-8376.
The news has been full of stories about the fallout from the federal government furlough while congress and the administration iron out a budget for 2019.
Sarah Ruef-Lindquist, JD, CTFA
Federal employees missing two paychecks as of this writing have reported that are not able to take a planned vacation, close on a house purchase or car, pay rent or mortgage, buy heating fuel or food, attend a loved one’s funeral, and the list goes on and on.
For people living paycheck to paycheck, life can become difficult very quickly with just one missed paycheck. Their plight reminds us all of advice someone may have given us as we were getting our financial lives started: “Always have 3 to 6 months of living expenses set aside, just in case!” but yet how many of us do?
You don’t need to be a federal employee to face this kind of interruption in your income. A lay-off, illness that keeps us from working, illness of a loved-one who needs our care are situations that can all prevent us from getting a pay-check and put our financial lives in jeopardy. If you are injured on the job, even worker’s compensation will usually only pay a percentage of your regular income. How would you make up the difference?
For those who are age 59 ½ or older, there is the option of dipping into retirement funds and paying any resulting income tax without an early withdrawal penalty, although we would always prefer to see those funds left alone that are in “qualified accounts” that are tax deferred. But for the rest of us, it would mean seeking deferral of loan or rent payments, forbearance from creditors, borrowing, and likely a significant curtailing of our lifestyle.
But it’s not too late to start saving for that possibility. Make a point of putting at least 5 or 10% of each paycheck into a savings account, and if this can be done by your payroll service automatically, all the better. Once you get into the habit, you will find the account will grow and when you prepare your tax return each year, you can revisit whether those funds should remain in your “reserve” or if some may go into retirement funds and grow tax-free. And of course, paying off your credit cards every month is a good habit, too. An interruption in income will be much less painful if you can cover bills until your income resumes again.
As always, consult your financial and tax advisors before making any decisions concerning your investments or financial plans to be sure they fit within your overall, long-term financial and estate planning goals.
The elimination of most pension plans, also known as “defined benefit” plans over the past 40 years has meant most working people must exercise some discipline to save for their own retirement and/or participate in plans like the 401(k), often an employer-sponsored plan, also known as defined contribution plans.
According to the US Department of Labor, between 1975 and 2014, the number of defined benefit (more commonly called pension ) plans in the private sector fell by 57% while the number of defined contribution plans increased by 208%. Limitations on what people can contribute annually to those plans has been static for five years. The amount of money people could contribute to their retirement plans with pre-tax dollars as of 2018 has not increased since 2013. However, the IRS has recently announced new limits on retirement plan contributions beginning in 2019.
If you haven’t in past years, make 2019 the year you max out your contributions limits, saving more than before, and plan for your retirement future.
We will review the changes by types of plans:
IRAs: For those under age 50, $6,000 may be contributed to an IRA, and for those 50 and older a $1,000 catch-up amount is also allowed for a total of $7,000.
ROTH IRA contributions are phased out at higher levels, too. For single and head of household taxpayers, the amount is phased out between $122,000 – $137,000 of Adjusted Gross Income
(AGI). For married filing jointly the phase-out range is $193,000 to $203,000.
SIMPLE Plan contribution limits will be $13,000 with an additional $3,000 catch-up for those 50 and older.
401(k), 403(b) and most 457 Plans will have contribution limits of $19,000, with an additional $6,000 catch-up for those 50 and older.
2019 Retirement Plan
Types Amount of 2019 Limit
Age 50+ catch-up
IRA
$ 6,000
$1,000
SIMPLE IRA
$ 13,000
$3,000
401(k), 403(b) and 457 Plans
$ 19,000
$6,000
Defined Benefit Plan 415(b)(1)(A)
$225,000
Defined Contrib. 415(c)(1)(A)
$ 56,000
ROTH PHASE-OUT Single
ROTH PHASE-OUT Married Filing Jointly
Over the past weeks, my colleagues and I have been having many conversations with our clients who are investors. Yes, the stock market performance has been recently negative – 2018 could be flat compared to 2017, which was a post-recession ‘banner year’. Many are wondering whether they will lose more value in their portfolios, be flat, or just see a slower rate of growth in the coming months and years as compared to the impressive run-up that began almost 10 years ago and lasted through early 2018. Many got accustomed to double-digit returns, even if income was not what it had been before the 2008/2009 Great Recession.
Even more surprised, however, have been the investors whose portfolios are more modestly allocated in the stock market, and have generally between 60 and 80 percent in the ‘fixed income’ area of mostly bonds and bond funds. What those investors expected is that the majority of their portfolios would be insulated from a market downturn. What they did not expect is that as interest rates rise, the value of their existing bonds and bond funds would go down, at least on paper. When bond rates rise, the value of existing bonds with lower yields goes down.
Of course, holding a bond until maturity, while you collect the income it pays through yield, generally means you will recover your investment, plus the interest paid over time. However, it requires patience to wait for those maturities to occur, and in the meantime, your statement shows a lower value of those bonds, until you are able to redeploy their proceeds into higher yielding, and higher valued, bonds.
What these investors feel is the reduction – at least on paper – of the value of their fixed income assets, as well as the loss in value (or lack of growth) of their smaller allocation of stocks. The combination comes as a bit of a surprise to those who otherwise consider themselves (at least relative to those with higher stock allocations) conservative investors.
What’s an investor to do? The best advice might be “as little as possible, for as long as possible.” In other words, if you don’t need those funds in the short term, wait for those bonds to mature and allow your portfolio to redeploy their proceeds into higher yields and values. Don’t overlook that the bonds are producing some yield in the meantime, while you’re waiting for them to mature. Eventually, the fixed-income portion of the portfolio should recover its value and while it does, pay yields for income while you wait.
As always, consult your financial and tax advisors before making any decisions concerning your investments or financial plans to be sure they fit within your overall, long-term financial and estate planning goals.
In June 2018, the Chronicle of Philanthropy, in an article by Megan O’Neil, predicted a $16.3 billion drop in charitable giving due to the tax laws enacted in late 2017. That prediction was echoed throughout the news media, sending chills down the spines of executive and development directors in the non-profit sector.
Nine out of 10 wealthy households gave to charity in 2017, according to the 2018 Study of US High Net Worth Philanthropy conducted in partnership with the Indiana University Lilly Family School of Philanthropy by US Trust/Bank of America Private Wealth Management, released October 24, 2018. (link for reference, new window) The average amount given to charity by these households was slightly more than $29,000, an increase of 15% over 2015.
The biennial report is in its seventh edition since the series began in 2006.
There has been much concern expressed about the impact on philanthropy of the 2017 tax law changes, specifically a predicted negative impact on charitable donations because of the increase in the standard deduction to $12,000 per person and reduced reliance on itemized deductions.
However, as we’ve opined previously about the degree to which tax benefits drive charitable give, the fear among this demographic cohort is likely unfounded. The vast majority of wealthy households expect to maintain (84 percent) or increase (4 percent) the amount they give to charity in 2018 under the new federal tax law passed late in 2017.
Receiving tax benefits is generally not a prime motivation for giving. Just 17% of those surveyed said this was always a motivation, and 51% indicated it sometimes did…which means for 49% it doesn’t and for the 51 % who indicated it did sometimes, that would imply that for 51% it doesn’t always.
The important take-away here is that for high net worth individuals, those often making the largest charitable gifts, charitable intent motivates their giving more than any tax benefit, which is good news in an era of decreasing tax benefit.
What we’ve discussed above is charitable support to operating or annual budgets of organizations that would often appear on an itemized income tax return of the donor. These gifts are often given from income, as contrasted with gifts from wealth, which are often deemed “planned gifts” through estates.
Indeed, even the elimination of estate taxes would cause only 5% of HNW individuals to reduce their planned giving according to the US Trust Study of the Philanthropic Conversation, examining the perspective that advisors have compared to their HNW clients on charitable giving. (link for reference, PDF, new window)
This study, released earlier in 2018 done in conjunction with The Philanthropic Initiative, also found that just 42% of high net worth individuals would reduce their charitable giving if income tax benefit was removed.
The sampling for the study was of approximately 1,600 households with net income of over $200,000 and/or assets of $1M or more, not including principal residence.
So perhaps this is some “good news” that organizations from which to gain hope for our society, as philanthropy continues to address some of the critical issues of our time through the work of the non-profit sector.
As always, consult your financial and tax advisors before making any significant gifts or changes to your financial plans to be sure they fit within your overall, long-term financial and estate planning goals.
Allen Insurance and Financial hosted a lunch & learn for the Maine Planned Giving Council on Tuesday, Oct. 23. The topic was “Exploring Key Elementary of Successful Planned Giving Programs,” and the presenters were Sarah Ruef-Lindquist, JD, CTFA, of Allen Financial and David Warren of Maine Coast Heritage Trust.
Pictured, from left: David Warren, Emily Peckham, Points North Institute; Michael Rayder, Avesta Housing; Katie Spencer White of Boothbay Region Community Resource Council and Sarah Ruef-Lindquist, Allen Financial.
