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Fall 2021 Tax Proposals

As the Tax Cuts and Jobs Act of 2017 (TCJA) sunset provisions (generally 12/31/2025) get closer every day, many tax and fiscal issues remain uncertain. Today, it appears that tax legislation may be in the offing once again. In fact, President Biden’s infrastructure plan includes a 28% corporate tax rate among other corporate and individual tax increases. In addition, Senator Sanders (I-VT) has introduced legislation to make the estate tax progressive, as we have seen proposed earlier in 2021. Further, Senator Van Hollen (D-MD) and others have set forth proposals to substantially eliminate or reduce the stepped-up basis rules applicable at an individual’s death.

To complicate matters, on September 13, 2021 another set of legislative tax proposals was released by House Ways and Means** Committee Chair Richard Neal (D-MA). No doubt, the ultimate make-up of the tax laws will depend on the direction taken by our nation’s leadership (including President Biden and Congress), either by their ability or inability to agree on tax and fiscal legislation.

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Proposed New Estate and Income Tax

As the country moves forward from the effects of the Coronavirus and the 2020 elections, it is time to consider potential key tax law changes that may affect you in 2021 and beyond. Given the 2020 election results and the Tax Cuts and Jobs Act of 2017 (TCJA) sunset provisions (generally 12/31/2025) getting closer every year, many tax and fiscal issues remain uncertain. Today, it appears that tax legislation may be in the offing. In fact, President Biden’s infrastructure plan includes a 28% corporate tax rate among other corporate tax increases. In addition, Senator Sanders (I-VT) has introduced legislation to make the estate tax progressive, more on this later. No doubt, the ultimate make-up of the tax laws will depend on the direction taken by our nation’s leadership (including President Biden and Congress), either by their ability or inability to agree on tax and fiscal legislation.

The outlook for higher income, estate, gift and generation-skipping taxes

With a new President and Congress in 2021, there are many variables and hurdles to overcome regarding any legislation (including tax legislation). In general, as of today, nothing has changed regarding income, estate, gift, generation-skipping transfer, payroll, etc., taxes. When debating budgetary issues, Congress must address projected deficits, anticipated increases in infrastructure spending, projected increases in defense spending, proposed tax increases, funding Social Security and SSDI, funding Medicare, etc. These "new" or additional expenditures, combined with the more than $27 trillion of current National debt, should reinforce the need for you and your family to build absolute and significant flexibility into financial and estate planning scenarios. More importantly, you and your family should have a renewed focus on providing income and protecting family wealth for current and future generations.

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Cryptocurrency from an Investment Stewardship Perspective


In 2017, a relatively new “investment” called cryptocurrency garnered a tremendous amount of media attention, most notably Bitcoin. While Bitcoin lost media interest at the end of 2017, it is now back in the spotlight since climbing in value. The intention of this review is not to issue a forecast of cryptocurrency, but rather briefly examine what it is and what it is not.

Let’s talk about Bitcoin

Bitcoins are a cryptocurrency. A cryptocurrency is a decentralized digital currency intended to facilitate monetary transactions without an intermediary. Bitcoins, unlike real coins, do not exist in physical form. Instead, they are intangible digital “coins,” also known as a store of value. This type of cryptocurrency may be desirable to those who wish to complete monetary transactions anonymously.

Who started Bitcoin and who backs it?

The origin of Bitcoin occurred when a research paper was posted to a website in 2009. It was attributed to a person or persons under the name of Satoshi Nakamoto. While there has been much speculation, Satoshi Nakamoto has never come forward or been accurately identified.

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Talking Taxes

Brought to you by Brian R. Smith conjunction with Lincoln Financial Advisors a registered investment advisor*

Historically, many people don’t think about taxes until they’re facing the April 15 deadline. But it's always beneficial to think about tax planning all year long.

One of the best ways to save on income taxes is to max out your 401(k) contributions. You can contribute up to $19,500 into your 401(k) in 2020 and if you are age 50 or over, you can make an additional “catch-up” contribution of $6,500. But this is just the beginning. Throughout the year, you should also review with your financial planner the “nuts-and-bolts” things that can impact taxes: estimated tax payments, the sale of a residence, distributions from qualified plans or IRAs, as examples.

In addition, reviewing your estate plan with your financial advisor throughout the year may help reveal some additional tax-reduction strategies appropriate to your situation.

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Yours, Mine, and Ours: Estate Planning for Today’s Blended Family

Brought to you by Brian R. Smith in conjunction with Lincoln Financial Advisors

In a “traditional” estate plan, each spouse provides for his or her assets (or most of the assets) to pass to the surviving spouse, with the understanding that those assets will go to their children at the surviving spouse’s death. This estate planning approach may work well when the spouses have only been married once — to each other — and the only children involved are the ones they have together.

But it can spell disaster if your family is one of the many today that doesn’t fit this traditional definition. For couples with children from prior marriages, a better approach is to sort out what’s “yours, mine, and ours” and plan accordingly so neither your spouse nor your children are unintentionally disinherited. Think carefully and objectively about potential conflicts, future needs, and human nature. The following strategies may help in your planning.

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Do Retirees Need a New Investment Strategy?

Brought to you by Brain R. Smith in conjunction with Lincoln Financial Advisors, a registered investment advisor*

First growth, then income. If you’re like most investors, you want to achieve growth while you’re working and income after you retire. But that doesn’t necessarily make it smart to change your investment strategy when you retire by shifting your portfolio completely out of stocks into less volatile, “income” investments like bonds and cash equivalents.

The Tax Bite

As a rule, stocks are riskier and more volatile than other types of investments. Therefore, investor's might decide, as some retirees do, to sell your stocks and reinvest in less risky securities in order to protect the gains they have achieved. But, unless the stocks sold are in an individual retirement account or other tax-deferred retirement account, that move won’t preserve all of the accumulated gains. When stock is sold, investors lose part of those gains to capital gains tax.

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Understanding Employee Stock Options: ISOs & NSOs

Many successful companies know the importance of rewarding and retaining key employees. One tool your employer may use is to offer stock options.

Stock options give you the opportunity to profit directly from your contribution to the success of your company. This is often reflected in the increased price and market value of the company’s stock.

Two common types granted to employees are Incentive Stock Options (ISOs) and Non-Qualified Stock Options (NSOs).

How ISOs work

ISOs are mainly awarded to top executives or other key employees the employer wants to attract, incentivize, and/or retain. For these employees, it can represent a large portion of your overall compensation.

ISOs granted by your employer give you the right to purchase shares of the company’s stock at a set time and predetermined purchase price. Depending on the structure of the plan, if you exercise the options, satisfy certain requirements, then you can receive favorable capital gains treatment.

The term to exercise an option may be no more than ten years from the adoption of the stock option plan or approval by shareholders, whichever is earlier. Additionally, options must be exercised while you’re employed or within three months following employment termination.

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A family farm is much more than land and crops. It is the history, heritage and future of a family.

Sadly, one of the biggest (and most common) mistakes a family farm can make is failing to make an adequate transition plan for the next generation, or the next CEO. Passing on the family farm to the next generation ensures the legacy lives on. Creating a plan for the future long before its necessary will help ensure a successful transition. Essentially, a family farm needs to be run just like a corporation with strategic direction and policy. Even if a child or family member plans to take over, business still needs to come first, which means planning and successful communication.

It can be difficult for the owner of or CEO of a farm to let go of their role, and often will stick around long past retirement age, or be resistant to transition. If the farm has a board of advisors in their management plan, transitioning the outgoing leader into a Board Chairman capacity has numerous benefits. Not only does it create a meaningful role within the farm aside from retirement, it allows the new leadership to benefit from the wisdom of the last leader.

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Using Charitable Trusts in Your Retirement Planning

Land “rich” and cash “poor.” That describes Jim and Angela in a nutshell. While they actually live quite comfortably on their professional incomes, they are getting closer to retirement age and are looking for ways to supplement the income they expect from their employers’ retirement plans.

By far the largest asset they own is a tract of unimproved real estate that Angela received from her parents. Part of her family’s former farm, the property is located in a prime new development area, which has made its value increase over the past few years. But the land provides no current income.

What Can They Do?

Angela could sell the land to a developer now or at retirement and invest the proceeds in income-producing investments. Either way, she and Jim would lose a substantial portion of the property’s appreciation to capital gains tax.

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Analyzing the Flows in Your Financial Plan

by Brian Smith

For most investors—even those with significant wealth—a secure financial future doesn’t simply happen. Instead, it must be carefully crafted to help meet your most important goals and leave nothing to chance. Of course, the future is unpredictable and your own personal situation changes over time. That makes it all the more challenging to answer the most crucial of financial questions: Are you on track towards achieving your financial objectives?

As an investor looking to make the smartest possible decisions about your money, you need a comprehensive understanding of your current financial situation and a reliable roadmap of where you’re headed. The key lies in an important but often overlooked component of the financial planning process called cash-flow planning.

In short, cash-flow planning helps you determine if you’ll accomplish your goals and live the life you desire. It can give you the knowledge to better control your financial destiny. At a basic level, cash-flow planning is the process of analyzing your annual income sources, such as salary and investment income, against your annual income uses, such as debt, living expenses and taxes—in short, “money in” versus “money out.”

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Are Your Assets Really Diversified?

You've heard the old investment adage, "Don't put all your eggs in one basket." It's good advice. A diversified portfolio should be at the core of any well-planned investment strategy. While a worthy goal at any age, it's especially desirable as your net worth grows over the years.

The basic purpose of diversification is to reduce your portfolio risk and volatility. It's primarily a defensive type of investment policy. Depending on your investment goals and tolerance for risk, your strategy may emphasize one type of investment over another. But overall, your portfolio should be diversified. That's because no single type of investment performs under all economic conditions. A diversified portfolio is capable of weathering varying economic cycles and improving the trade-off between risk of loss and potential return. Of course, diversification cannot entirely eliminate the risk of investment losses or cannot guarantee a profitable investment return. Diversification can lower the risk of a portfolio.

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How Can I Discuss Finances with My Parents?

Managing an Inheritance

by Brian Smith

An inheritance in the form of cash, real property, jewelry or stocks can enrich your life in many ways. Oftentimes, bequests from an estate are intended to help move the heir forward financially, or to keep a prized possession within the family. To fully realize the value of an inheritance, consider how the assets affect your overall financial plan.Last Will and Testament

The key to successfully managing any inheritance is to plan before you act. Certain types of inheritances may require you to make some decisions right away, but it’s crucial to be conservative in your actions and allow yourself some time to grieve. Then, work with financial advisors to maximize the value of your inheritance and decide whether to keep it, share it, invest it or liquidate it. Your options depend on your personal and financial circumstances, long-term goals and the type of inheritance involved.

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Financial Planning for a Family Farm

by Megan Spain

Family farms are a quintessential piece of the American landscape both past and present. However, the family farm is at great risk of disappearing. Half of all the farmland in the US is owned by farmers over the age of 55, and there aren’t enough new farmers entering the field.¹Family Farm

Often these family farm properties are swept up by commercial agricultural operations at the time of sale further endangering small farms. The business of running a profitable farm is more complex than ever, especially for new farmers.

I believe that now, more than ever, there is a growing demand for financial planners who are well versed in the business of running a farm. A financial advisor can help family farms navigate changing and complex tax laws, manage and increase personal wealth and retirement savings, as well as protect the legacy of the farm with estate planning.

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