EisnerAmper Blog

Personal Wealth Advisors: The Longview

Players, Teams and Philanthropy: Points to Ponder

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Waxman_EvanFebruary 19, 2015
By Evan Waxman, CPA, PFS

EisnerAmper recently helped sponsor the 2nd Annual Super Bowl Workshop, produced by All Sports United, in Scottsdale, Arizona.  The concept of philanthropy and the world of sports is an important one and some of the key observations from the conference follow below.

Our program featured an outlook on the Arizona philanthropic community with representatives from the Arizona Diamondbacks, Fiesta Bowl, and Arizona Coyotes speaking about philanthropic activities for each organization.  The key finding was that most of these organizations allowed or encouraged athletes to participate in the decision-making processes relevant to philanthropic giving. This was a logical step insofar as athletes have many different causes and organizations; the teams are wise to try to align themselves to promote the athletes’ involvement and consideration.

The program also featured a session on using technology for fundraising. An example is an application that can be used to support an athlete’s charitable support with giving driven by  that player’s statistics. Another innovative application drives social media auctions;  another technology is designed to improve reach and get athletes into the community so fans can be more in tune with athletes’ efforts at outreach.

Some additional observations of value to others considering athlete-based charitable giving programs:

  • Recruiting board members is problematic. It is likely more productive when athletes approach foundations on their own accord and with their own pre-disposed levels of commitment.
  • Micro fundraising is now common. Raffles and online auction initiatives are popular and lead to increased visibility with very small administrative costs.
  • Communications such as news releases can be useful but not every athlete or donor wants to be included due to privacy concerns. Care is needed with all such communications programs. Social media is here to stay – become proficient. Video always attracts more attention.
  • Listen to your audience. If your charity is not getting responses, look closely at your fundamentals, and pay attention to statistics. If your outbound emails are getting bounces, it is imperative to stop sending them, clean the lists or look elsewhere.  If emails are not getting opened then look carefully at your topic lines and change or test new ones. Details matter.
  • Commitment is key – stay the course.  Accountability is important –is there someone in charge and are results measured?  Priorities are important, as are motivations and setting goals.
  • Start with desire but always listen to who you are serving. This can improve organization.
  • Look for ways to develop athlete mentorship. An example is a proposed Athlete Philanthropy Training Camp, where select civic-minded players act as group leaders in discussions on what philanthropy is, how to give back, how to make the best impact.

Observations on the Greek Election and the European Central Bank – Part Three

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January 28, 2015

Speiss_TimBy Timothy Speiss, CPA

German Chancellor Angela Merkel has insisted that Greece abides by existing eurozone austerity measures and reforms designed to "foster Greece's continued economic recovery".

"That also means Greece sticking to its previous commitments," said Mrs. Merkel's spokesman.

Berlin also fears that the victory for Syriza will signal the beginning of a populist revolt across Europe and victories for parties such as France's far-right Front National.

"I am delighted at this massive democratic blow the Greek people have delivered to the EU," said Marine Le Pen, the leader of the Front National party. "This is the moment euro-austerity and the constraints imposed to save the euro go on trial."

The International Monetary Fund (IMF) has issued a statement pledging its continued financial support for Greece. In the statement, IMF managing director Christine Lagarde said:

We stand ready to continue supporting Greece, and look forward to discussions with the new government.

However, David Cameron has conspicuously failed to congratulate Alexis Tsipras on his election as the new radical Left leader of Greece because of fears that he will “increase economic uncertainty across Europe”.

“What the Greek election will also show is that there are some warning signs in the global economy, including in the eurozone, less rapid growth from the developing economies. These point to the importance of sticking to our economic plan which we are delivering,” he said.

Downing Street is concerned that Mr. Tsipras could become a rallying figure for opposition to the economic reforms that Britain, the International Monetary Fund and Germany believe are necessary to turnaround the eurozone.

Mr. Cameron and Angela Merkel fear that France, Italy and other south European countries will use the Greek result as an argument to water down or dodge austerity and eurozone spending rules, tipping the fragile global economy into recession.

“Spending more on public finances is not proven to be driving growth in Greece or indeed in other European countries so it needs to continue to deal with its deficit and it needs to meet its international commitments,” said a Downing Street spokesman.

For more information, please see Part One or Part Two.

Observations on the Greek Election and the European Central Bank – Part Two

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January 28, 2015

Speiss_TimBy Timothy Speiss, CPA

Less than a week after the ECB announced an expanded asset purchase program, the Syriza anti-austerity party won the Greek election on Sunday January 25, 2015 led by Alexis Tspiras who would be the next prime minister. The Syriza party is staunchly anti-bailout, and as a result the election rattled equity markets and triggered a loss of nearly 4 percent on the Athens Stock Exchange as well as elsewhere in Europe.

As cited by The Telegraph and other EU news outlets, Mr. Tsipras has promised to renegotiate Greece's massive bailout agreements, but has promised not to take any unilateral action against lenders from other eurozone countries. The Syriza party also vows to fight the European Commission, the IMF, and the European Central Bank and force them to forgive some Greek debt and allow the country to enact a program of stimulus spending, among other reforms. According to certain commentators, the only leverage Greece has is to threaten to exit the euro, an act that would surely cause a banking crisis and a severe recession—at least in the short term—in Greece without doing much broader damage to the eurozone economy. The newly elected representatives in Greece will surely be blamed for such an action, and polls indicate that despite Greece’s economic troubles, a majority of citizens want to remain in the euro.

Markets are shrugging off the news because they still view the chances of Greece leaving the Euro as remote. “The new government will find that the Troika (the EC, IMF, and ECB) plans to play hardball,” says Tom Elliott, International Investment Strategist at deVere Group. Elliott argues that Greece has little leverage in its negotiations with its debt holders. It has a 4.5 billion (euro) bond maturing in March and two similarly large payments due in July and August, which it won’t be able to pay without aid from Europe. While its debt holders might be willing to extend the maturity on these debts or lower interest rates, the Troika won’t budge on debt forgiveness out of fear that it would encourage other debtor nations to ask for similar concessions. “This was a huge landslide, a larger win than pretty much anybody expected,” says Ian Bremmer, president of the Eurasia Group. “And this party has taken one of the most directly anti-German, anti-European positions you could take, not just economically but politically.”

The anti-EU sentiment isn’t just a product of the depression-like conditions that Greek citizens have been enduring. In Spain, where elections at the end of 2015 will have huge implications for the future of the eurozone, another anti-bailout party, Podemos, has been gaining support. In France, polls indicate that the far-right eurosceptic Marie La Pen would win the first round of the 2017 French Presidential elections if they were held today. Even Germany, the stalwart of the status-quo, has an ascendant anti-euro party, called Alternatives for Germany, which recently won big gains in state elections.

So, while Greece’s election results will not likely to be a catalyst for a sudden breakup of the Euro, they can be viewed as yet another in a series of events that suggest that the union is failing. Sunday’s elections offered another example of the “disintegration and fragmentation of Europe as an effective source of government,” Bremmer says.

The one thing that could project the EU back toward greater unity and a renewed sense of common purpose is economic growth. But even in the wake of the announcement of stimulus measures from the ECB, there isn’t a great deal of good economic news to report in Europe. The European Union estimates that the eurozone economy expanded at a very low 0.8% last year and will only grow by just 1.1% this year. With widespread unemployment in countries like Spain, Greece, and Portugal, and a banking system that remains undercapitalized, there’s little reason to believe that the European economy is going to improve enough in the coming months such that mainstream parties can stem their losses at the polls.

Observations then for U.S. investors and business to consider is that while the markets might be stable presently due to the massive bond-buying program the ECB announced on January 22, the long view for the EU looks more uncertain than it did two weeks ago – and with regard to capital market growth, foreign investments in businesses, the stability of interest rates and currency, additional risk of governmental regulation, and sovereign debt levels.

For more information on this topic, please see Part One  or Part Three.

Observations on the Greek Election and the European Central Bank – Part One

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January 28, 2015

Speiss_TimBy Timothy Speiss, CPA           

Since January 22, 2015 when Mario Draghi, President of the European Central Bank (ECB), announced an expanded asset purchase program, there has been growing sentiment (as cited by the Wall Street Journal and other commentators) that it is more certain the U.S. Federal Reserve will move to increase interest rates late in the 2015 second quarter, or third quarter. To be considered then by U.S. investors and businesses, the rational for an increase in interest rates by the Federal Reserve could be inferred as undertaken as a mechanism in support of restoring EU (and global) growth.

However also to be considered, is that if the dollar continues to surge in light of the ECB action the Federal Reserve may delay a rate increase, also in support of the EU (and global) economy. Many commentators are also of the view that when considering interest rate increases the Federal Reserve will also review U.S. inflation and equity markets performance, and the movement of foreign currencies; these factors as well should be observed by U.S. investors and businesses.  

What was driving the ECB’s January 22 announcement?

 First the ECB has decided to launch an expanded asset purchase program for asset-backed securities and covered bonds. Under this expanded program the combined monthly purchases of public and private sector securities will amount to 60 billion euros. To attain this objective, the program is intended to be carried out until end-September 2016 and will be conducted until the ECB sees a sustained adjustment in the path of inflation which is consistent with the ECB’s aim of achieving inflation rates below, but close to, 2% over the medium term.

In March 2015 the Eurosystem will start to purchase euro-denominated investment-grade securities issued by euro area governments, agencies and European institutions in the secondary market. Second, the ECB Governing Council decided to change the pricing of the remaining targeted longer-term refinancing operations.

Regarding additional asset purchases, the Governing Council will retain control over all the design features of the program and the ECB will coordinate the purchases, thereby safeguarding the singleness of the Eurosystem’s monetary policy. With regard to the sharing of hypothetical losses, the Governing Council decided that purchases of securities of European institutions (about 12% of the additional purchases) will be subject to loss sharing. The rest of the NCBs’ additional asset purchases will not be subject to loss sharing. The ECB will hold 8% of the additional asset purchases; this implies that 20% of the additional asset purchases will be subject to a regime of risk sharing.

The ECB monetary policy decision on additional asset purchases was taken to counter two unfavorable developments.

 First, inflation dynamics have continued to be weaker than expected. Second, while ECB monetary policy measures adopted in 2014 resulted in a material improvement in terms of financial market prices, it was insufficient to adequately address heightened risks of a too-prolonged period of low inflation. Thus, the additional measures now adopted are necessary to achieve the ECB’s price stability objective, as interest rates have reached undesirable levels, and help inflation levels to grow to a 2% target rate.


Additional detailed information on the expanded ECB asset purchase program is forthcoming (Part 2, Part 3), as well as observations and considerations as a result of the Greece elections on January 25, 2015.

The Longview: 2015 Outlook

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January 21, 2015

Clients of EisnerAmper Personal Wealth Advisors face the challenge and opportunity of both preserving and growing wealth. They weigh the elements of risk against potential for reward, and focus to ensure   wealth strategies are built and goals are established – with both being adjusted  over time.

Clearly stated goals are the hallmarks of implementing successful wealth strategies. We believe that when setting goals, it is always worthwhile to examine the economic and geopolitical factors which exert significant influence over wealth-related decision making.   As we look back at 2014 and ahead into 2015, the following are the primary concerns.

From a macro-economic perspective, a number of events captured share-of-mind in 2014 and will most likely continue to impact planning in 2015: the proxy war in the Ukraine, the wide-ranging impact of the decline in oil prices, the buoyancy and volatility of the equity markets, global interest rates at almost zero over an extended period of time, an improving American economic performance, and a Republican House and Senate.

Looking closer:

  • 2014 was a year of increased global equity volatility largely arising from changes in U.S. monetary policy, geopolitical events, and election year changes in America’s political and social views regarding the economy. Abroad, uncertainty in Russia and the conflict in Ukraine contributed to a 14.5% fall in the German stock market. Brent crude collapsed nearly 40% in 2014 and at the beginning of the year was hovering around $40 per barrel.
    The decrease in the Brent benchmark price could continue into late 2015 Q2. Oil supplies are likely to grow this year, with the US shale oil industry still increasing production. Result – lower energy costs could help grow energy dependent industries and increase profits while significant savings at the pump potentially increases discretionary consumer spending. A further result – destabilization in Latin American and Middle Eastern oil producing nations with all the attendant consequences.
  • There is still room for growth in the U.S. labor force which could cause the Federal Reserve to defer an increase in interest rates beyond late Q2 and Q3.  The U.K. is witnessing rapid economic growth, however, with a productivity challenge leaving little capacity in the economy. Result – logically, a modest acceleration in U.S. growth in the year ahead, with low interest rates and increasing labor environment, and rising (and still-low) interest rates, should help corporate earnings and resultant equity valuations. The countervailing force, of course, is the possibility of the EU slipping back into recession.

Drilling down further:

  • Globally, persistent jobless growth, which refers to the phenomenon in which economies exiting recessions demonstrate economic growth while merely maintaining – or, in some cases, decreasing – their level of employment, remains a real concern.
  • Income disparity – In the U.S., in 2013 the top 1% of families received nearly 22.5% of income, while the bottom 90% share was below 50% – a level not seen since 1928. In many developed and developing countries, the poorest half of the population controls less than 10% of wealth.  
  • Demographics – Are we in the U.S. an aging population? Changing demographics and hiring pool statistics tell the tale: In the U.S., Gen Y (age 17 to 31) comprises 39% of the work force; Gen X (age 32 to 47) represent 23%, while Baby Boomers (age 48 to 66) are at 38%. The fertility rate of the total U.S. population is 1.9 children per woman; the population age 65 and older is expected to more than double between 2012 and 206.     

Our Flat World:

  • The rise of economic competition among countries is a global trend. 
  • Striving to increase labor migration is a growing, global concern even while developed, underdeveloped, and emerging economies are integrated on an unprecedented level; where goods, services, knowledge, information and people, naturally flow from one part of the world to another to the other.
  • In the Middle East and North Africa, the workforce has grown at the fastest annual rate in the world (2.7% in the past 10 years); however, youth unemployment is also the highest, at around 25% of the population.
    • In South Africa, education and skills development is the biggest challenge; projections show that soon the region will be home to 50% of the world’s illiterate population. 
  • In Latin America, business leaders perceive lack of trust between corporations is biggest threat to growth.
  • In Asia, geopolitical tension has been centered upon the South China Sea and on maritime disputes among China and Vietnam and Japan and the Philippines, due to long-standing territorial and border disputes. The North Korean dilemma persists.

The certainty is that U.S. and global economic and geopolitical forces will always create obstacles to growth and open new doors to development. The best response to these enduring realities is sound planning; a resistance to changing one’s wealth strategy in a panic or just for the sake of changing; understanding market fundamentals and being alert to those outliers that can churn even the most placid of waters.  The twin goals of wealth preservation and growth depend to a large degree on how well you think through and implement a game plan designed by and for your personal and unique situation.

Blogging from Heckerling – The Devil is in the Details

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January 15, 2015

Talibi_Barbara newBy Barbara Taibi, CPA, PFS

The 49th annual Heckerling Institute on Estate Planning convened in Orlando, Florida this past January. Heckerling is the largest and most prestigious estate planning conference in the country. This year's Institute drew more than 3,000 attendees.

Several EisnerAmper professionals attended the Institute and reported on "hot" topics being discussed. The following is a summary of some of the discussions:

A Primer on Basis of Property
Estate Planning Post ATRA
Planning with Portability
Digital Assets of a Decedent
Transferring Wealth to Younger Family Members
The Devil is in the Details

Continuing with our reports from the Heckerling Institute on Estate Planning, January 2015

 M. Reed Moore of McDermott Will & Emory LLP led a very informative discussion on the importance of “Adequate Disclosure” as it pertains to gift tax returns. Final regulations on this matter were issued on 12/3/1999.  Adequate disclosure is extremely important because if the IRS determines that the standards of the regulations have not been met, no statute of limitation applies.  The gift return is open for audit until corrected.  You can imagine the serious consequences if this incomplete gift tax return is found upon audit of the donor’s estate and significant tax is now owed by the estate or beneficiaries.

To assure adequate disclosure on a gift tax return, the transfer needs to be reported in a way that the IRS can determine the nature of the gift and basis for the value reported.  The speaker stated the following 5 elements are required to achieve adequate disclosure:

  1. A description of the transferred property and any consideration received by the recipient
  2. The name of and the relationship between the transformer and transferee
  3. Any property transferred in trust must also report the trust ID#, and either a description of the trust terms or a copy of the trust
  4.  A “Qualified Appraisal” if required under the Treasury Regulations or, if not required, a detailed description of the method used to determine FMV.
  5. A statement describing any position taken on the gift returns that is contrary to any proposed, temporary or final regulations published at time of gift.

Corrective measures should be taken as soon as a possible lack of adequate disclosure is discovered.  If it is determined that an amended return is required, it is again very important to know that the IRS has specific regulations on the information that must be provided.  You need to be sure these requirements are met or all your good efforts won’t fix anything. As we have always been told – “do it right the first time.”

For more content stemming from the 2015 Heckerling Institute on Estate Planning, please click here.

Blogging from Heckerling – Digital Assets of a Decedent

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January 14, 2015

Arrigo_MarieBy Marie Arrigo, CPA

Continuing with our reports from the Heckerling Institute on Estate Planning, January 2015

Suzanne Brown Walsh of Murtha Cullina discussed digital assets of a decedent. Although there is no universal definition of digital assets, it has generally come to mean electronic records which are accessed by tangible devices, such as a computer, smartphone, tablet or a server. Many individuals own online gaming pieces, photos, digital music, client lists, financial institution accounts, business records, frequent flyer and rewards programs, social media accounts, and more. There are 30 million Facebook accounts that belong to dead people. Some service providers have explicit policies on what will happen when an individual dies, but most do not. Digital assets are generally governed by contracts known as Terms of Service Agreements ("TOSAs") which control the relationship between the account holder and the custodian, and include terms of use, end-user license agreements and privacy policies. Many of these TOSAs do not authorize fiduciaries to have access to the decedent's digital assets.

Fiduciaries need to access digital assets in order to prevent identify theft. Fiduciaries are obligated to preserve the assets of the estate they are managing. When an individual is unable to continue to monitor his/her online accounts, it becomes much easier for criminals to hack these accounts, open new credit cards, apply for jobs, obtain identification cards, etc. Thus, a fiduciary needs to monitor and protect these accounts as part of his/her fiduciary responsibilities. Further, the fiduciary must marshall and collect assets, and this is becoming increasingly impossible to do in today's internet environment.

State laws criminalizing unauthorized access to computers and data, as evidenced by the Federal and State Computer Fraud and Abuse Acts, often prevent fiduciaries from accessing decedents' accounts, Further, federal privacy law and TOSAs also impede the fiduciary's access to digital assets. The fact that a fiduciary is authorized by the owner or state law to use a computer or to act for an account user is not an absolute bar to prosecution, as he/she may be violating the TOSA. TOSAs are frequently silent as to fiduciary access or postmortem options, or they may simply prohibit postmortem transfer altogether.

The Uniform Fiduciary Access to Digital Assets Act ("UFADAA") was drafted by a committee appointed by the Uniform Law Commission for the purposes of creating a uniform act to vest fiduciaries with the authority to access, manage, and distribute digital assets. UFADAA aims to resolve many of these impediments to fiduciary access, so that they can carry out their duties. UFADAA is ready for consideration and enactment by states.

In the interim, estate planners can ask their clients to inventory their online accounts and passwords. Also, documents should provide for authorization of the fiduciary to access and terminate such accounts.

For more content stemming from the 2015 Heckerling Institute on Estate Planning, please click here.

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