July 2011
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July 2011

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The FJY quarterly newsletter for July, 2011 featuring articles on Estate Tax Planning and The Emerging Leaders Institute.

The FJY quarterly newsletter for July, 2011 featuring articles on Estate Tax Planning and The Emerging Leaders Institute.

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  • 1. Volume 5, Number 3Quarterly Newsletter July 2011QUARTER IN REVIEW by returning 2.9% in the second quarter. High quality fixed income ASSET CLASS PERFORMANCE: Q2 2011By: Jon P. Yankee, MBA, CFP ® & also performed well, returning 2.29%,Clint D. McCalla despite the significant head winds faced by both the United States andIt is inevitable that we face a withering Europe in addressing debt concerns. U.S. Fixed Income 2.29%volley of screaming headlines from the (Barclay Capital Aggregate Bond Index) Within traditional equities, internationalmedia after the daily ups and downs outperformed domestic, although International Fixed Income 1.45%experienced over the last quarter. both had relatively flat returns for the (JP Morgan GBI ex-US (Hedged) Index)With “news” stories meant to draw quarter. Commodities were the bigreaders and sell advertising, individual U.S. Equities, Large 0.10% underperformer, down 6.73% for theinvestors are tempted by much of the (S&P) 500 Index) quarter.media to fret over that which shouldbe soundly planned and considered. U.S. Equities, Small -1.61% As of this writing, U.S. equity mar- (Russell 2000 Index)As fiduciaries, we at FJY aim to edu- kets continue to demonstrate a highcate our clients to ignore much of this sensitivity to economic data as they International Equities, Large 0.33%daily “noise” and rhetoric that is written (MSCI EAFE Index) are released, continuing much of theby those who have little concern foryour financial future. volatility witnessed over the last three International Equities, Small 1.99% months. As mentioned above, those (S&P/Citigroup EPAC Ext. Mkt. Index) with a short-term perspective haveThe last quarter continued to prove Real Estate Investment Trusts (REITs) 2.90% dominated the discussion, overshad- (NAREIT Equity Index)the value in having a well-diversified owing the more optimistic long-termportfolio of multiple asset classes. Real Commodities/Natural Resources -6.73% outlook for the world economy.estate, as measured by the FTSE NA- (DJ UBS Commodities Index) Continued Pg. 4REIT Index, led all of our asset classesGINNIE AT A GLANCE annually and was so impressed with FJY that I knew I wanted to do my internship here.By: Ginnie F. Baker I was born and raised in Lubbock, TX andI have the privilege of being one of Fox, Joss earned my Bachelor of Business Adminis-& Yankee’s Summer Associates this year. This tration Degree from the Rawls College ofis a position that I really desired, especially Business at Texas Tech University. I knewafter talking to one of last year’s summer after taking a financial planning course, as anassociates, Josh Blair, and meeting with Jon undergraduate student, that financial planningYankee. I am currently a graduate student at was the career path I wanted to pursue. I feelTexas Tech University in Lubbock, TX, work- the profession will give me the opportunity toing towards my Master’s Degree in Personal help people manage their finances while alsoFinancial Planning and will graduate in May building relationships with clients. This goal2012. I had the chance to talk with Jon at led to me enrolling in the Graduate Financialthe Opportunity Days career fair that the TTU Planning program.Financial Planning Department puts on In my spare time, I enjoy spending time with my friends and family, as well as baking, Congratulations Continued Pg. 4 QUICK PLANNING QUESTION: FJY WILL BE LAUNCHING A NEW RESOURCES SECTION ON OUR WEBSITE SOON, AND WE WOULD LOVE TO HEAR FROM YOU ABOUT ANY TRAVEL RELATED RESOURCES, TIPS OR EXPERIENCES. PLEASE EMAIL THEM TO LJC@FJYFINANCIAL.COM BY 9/1/2011.
  • 2. JUST WHEN YOU THOUGHT IT which, among other things, introduced new estate tax legislation, thereby preventing Gift Taxes: The lifetime gift exemption (theWAS SAFE TO ENGAGE IN the whiplash effect of reversion back to a amount of taxable gifts individuals can make $1,000,000 exemption. before gift taxes are due) is $5,000,000. ESTATE TAX PLANNINGBy: Dan Vaughn, Esq The good news? The estate tax, generation- Generation-Skipping Transfer (GST) Taxes: skipping transfer tax and lifetime gift exemp- The GST exemption (the amount an indi- tions were unified at $5,000,000, married vidual can gift during lifetime or leave upon“Round-and-round she goes – where she couples can now more easily utilize both of death to beneficiaries beyond the generationstops, nobody knows!” Some people their exemptions, and the estate tax rate is immediately below them, thereby eliminat-feel like the estate tax system is more like a reduced to 35%. ing exposure to taxation in the intermediatecarnival game of chance than a predictable generation(s)) is $5,000,000.landscape that can be planned around these The bad news? These rules are only in placedays, and with the way the rules have shifted for two years and are scheduled to expire if 2. What Might 2013 Bring?:recently, it is hard to blame them. a longer-term solution is not implemented by December 31, 2012. Does that sound Given how politically charged estate taxAs the clock counted down to the end of familiar? In essence, the “solution” imple- legislation has become recently, and that2010, the nation faced great uncertainty with mented by Congress at the end of 2010 was 2012 is a presidential election year, it is hardrespect to the future of the estate tax system. another band-aid which bought us two more to predict the future of the estate tax system.In 2001, Congress enacted the Economic years until we will hold our collective breath That said, there are a few options to con-Growth and Tax Relief Reconciliation Act yet again to see where the rules will end up. sider:(EGTRRA), which increased the federal Before we stress about what 2013 may bring a. Congress may extend the existingestate tax exemption from $675,000 in 2001 however, let’s take a look at the rules that ap- rules, along with the $5,000,000 exemptionsto $3,500,000 in 2009, and resulted in total ply in 2011 and 2012. and portability, thereby preserving the statusrepeal of estate taxes in 2010. However, quo.the harsh reality was that EGTRRA would 1. Transfer Tax Rules in 2011-2012: b. Congress may implement replace-expire and estate taxes would return with a ment rules with a new exemption/rate system$1,000,000 exemption in 2011, if Congress Like all tax provisions, the details of the 2010 altogether. For example, the Democrats maydid not either affirmatively extend (or make legislation are complicated. The highlights of angle for the $3,500,000 exemption theypermanent) the repeal or replace EGTRRA the system in effect for 2011 and 2012 are as pushed for last year.before the end of 2010. In the wake of the follows: c. Congress may do nothing, allowingNovember, 2010 elections, the bifurcated the 2010 legislation to expire and the estatepower in the Senate and House, the Demo- Estate Taxes: Three of the biggest develop- tax to return with a $1,000,000 exemptioncrats seeking a $3,500,000 exemption and ments appear in the estate tax area: and no portability in 2013.Republicans pushing for $5,000,000, hope a. The estate tax exemption is in-for resolution seemed dim at best as Decem- creased to $5,000,000. 3. How Does This Picture Affect Existingber began last year. As a result, the finan- b. A new rule, called “portability” Planning Arrangements?:cial and estate planning industries braced of estate tax exemptions, permits a surviv-themselves and their clients for the seem- ing spouse to utilize any unused estate tax Beyond 2012, the estate tax exemption mayingly impending expiration of EGTRRA and exemption of his/her decedent spouse. As be as high as $5,000,000 (as adjusted forthe return of estate taxes with a $1,000,000 long as portability is elected on a timely-filed inflation) and as low as $1,000,000. In ad-exemption in 2011. estate tax return following the first death, dition, married couples may not need to do a married couple can leverage use of their anything to ensure use of both exemptions (ifMiraculously, a surprising “compromise” of- collective $10,000,000 exemption amount portability is retained), or they may need tofered by the Senate Democrats and President even if they did not specifically preserve the engage in formal planning to avoid wastingObama himself, laid the groundwork for an decedent’s exemption on the first death. an exemption on the first death (if portabilityeleventh-hour solution. On December 17, c. The estate tax rate is reduced to is not retained). With that spread of poten-2010, President Obama signed into law the 35%. This rate is significantly lower than the tial outcomes, now is an opportune time to“Tax Relief, Unemployment Insurance Reau- 45%-55% levels seen during the past 10 reevaluate planning arrangements to identifythorization, and Job Creation Act of 2010,” years. Continued Pg. 4
  • 3. THE EMERGING LEADERS tional media (newspapers, magazines, radio stations, and television stations) and social WHAT IS THE CFP®? By: Lisa CraffordINSTITUTE PROGRAM media. We focused on three main items: 1) Gearing efforts towards the Hispanic volun-By: Tess Downing, MBA, CFP® In recent newsletters we have featured teer base; 2) Integrating existing social media articles regarding Tom Saunders, our CRA,I recently graduated from the Emerging tools; 3) Creating and continuing develop- passing the CFP® exam, and Tess Down-Leaders Institute (ELI), Class of 2011, at the ment of a media and corporate contacts list ing, our Associate Financial Advisor, earningLeadership Fairfax Institute (LFI). LFI is a that will be beneficial to Fairfax CASA in the her CFP® designation. The CFP® mark is annonprofit corporation that strives to develop future. important identifier in our profession. It helpsleaders in Northern Virginia while emphasiz- consumers identify Financial Advisors whoing the importance of community awareness are committed to competent and ethicaland involvement. ELI is a unique group of behavior when giving advice.employees and entrepreneurs who all striveto become leaders in their respective fields The CFP® designation identifies those indi-and have a desire to better their communi- viduals who have met the rigorous experi-ties. I had the wonderful opportunity of ence and ethical requirements of the CFPbeing selected to participate with 35 other Board, have successfully completed financialmotivated and enthusiastic young profes- planning coursework and have passed thesionals. The participants were from a variety CFP® Certification Examination coveringof fields including business, government and the following areas: the financial planningnonprofit organizations. process, risk management, investments, tax planning and management, retirement andThe ELI program was an intense and chal- Tess & Jonathan Downing and employee benefits, and estate planning.lenging experience. I have spent the last Lisa & Ian Crafford at the Future CFP® certificants also agree to meet ongo-ten months participating in monthly classdays focused on strategic planning, conflict Fund Gala in May ing continuing education requirements and to uphold CFP Board’s Code of Ethics andresolution and negotiation, and communi- Professional Responsibility, Rules of Conduct Overall, our involvement and commit-cation and presentation skills. I was also and Financial Planning Practice Standards. ment to our project did result in increasedpaired with a personal mentor who was able awareness of the Fairfax CASA program; ourto help me focus on real-world leadership CFP Board is a nonprofit certification organi- team received much more in return. The ELItechniques and challenges. Not only did I zation with a mission to benefit the public by program has taught me the value of leader-learn from several of the top leaders in Fairfax granting the CFP® certification and upholding ship skills, and the importance of fosteringCounty, I also gained a true hands-on experi- it as the recognized standard of excellence relationships. When we are able to combineence in community service. for personal financial planning. CFP Board our time, resources, and energy, great things are sure to happen! I am grateful to FJY for owns the certification marks CFP®, CERTI-I was on a six-person team, which worked FIED FINANCIAL PLANNER™ and federally giving me the chance to participate in thiswith a selected nonprofit for ten months. My registered CFP (with flame design) in the U.S., program which I would highly recommendteam was given the opportunity to work with which it awards to individuals who success- to anyone looking to further their knowledgeFairfax Court Appointed Special Advocates fully complete initial and ongoing certifica- of Northern Virginia.(CASA). Fairfax CASA recruits and trains tion requirements. CFP Board currently au-citizen volunteers to advocate for the best thorizes more than 61,000 individuals to use In the coming quarterly newsletters, FJYinterests of abused and neglected children these marks in the United States. For more will begin to feature nonprofit communitywho are under the court’s protection in Fair- about CFP Board, visit www.CFP.net. organizations and groups. We would lovefax County. The juvenile court relies heavily to hear how our clients are involved in theon the work of CASA volunteers and requests community and giving back. Please sendthat Fairfax CASA assign a volunteer to every your feedback or ideas to info@fjyfinancial.case of abuse and neglect before the Court. com. If you would like to know more about Fairfax CASA or other nonprofits in Northern Virginia, please feel free to contact me.Our mission was to help increase awarenessof Fairfax CASA through the use of conven-
  • 4. that we improve our services and advice to QUARTER IN REVIEW, CONT you. We will continue to pursue opportuni- ties that allow us to better meet our clients’ Despite Greek insolvency, civil unrest in the needs as a measure of our commitment to Middle East and North Africa, natural disasters your financial future, and our responsibility 1925 Isaac Newton Square in Japan and the U.S., and latent job growth as fiduciaries. Finally we want to recognize Suite 400 in the US, the world economy continues to Tess Downing for completing the three Reston, Virginia 20190 recover, albeit slowly. year experience requirement for the CFP® designation, the final hurdle in a very difficult 1.703.889.1111 phone Concerns over U.S. default have grown as the process. Congratulations, Tess, we are proud 1.877.395.7795 toll free deadline for raising the debt ceiling draws near, of our newest CFP® professional. 1.866.366.9233 fax though this has become significantly less prob- able as the details of an agreement have slowly ESTATE TAX PLANNING CONT taken shape over the last few weeks. A notablewww.fjyfinancial.com number of large domestic companies continue steps available to take advantage of histori- cally high exemption levels and minimize to maintain large cash reserves built over the last future estate tax exposure. three years. U.S. companies have thus far opted to push for productivity gains with existing For continued coverage on devel- employees coupled with efficiencies garnered opments related to the estate tax system, through investments in technology. This strategy stay tuned to future newsletters. Until then, is reflected in the high level of persistent unem- enjoy the current estate tax exemption envi- ployment in the US.GINNIE AT A GLANCE CONT ronment while it lasts! The varied performance of the different asset Dan Vaughn, Esq is Principal of Vaughn, Fincher &watching baseball and college football, classes during the second quarter reflects an in- Sotelo, PC located in Vienna and Leesburg VA. VFS fo-and traveling. I attend First United Meth- cuses on Estate Planning, Estate Administration, Fiduciary crease in volatility in the second quarter. As weodist Church in Lubbock. Services, and Business Sucession. He can be reached at mentioned in our previous newsletter, this was (703) 506-1810. generally anticipated, as the Federal ReserveI am currently a member of FPA (Financial Board discontinued its large scale monetary FJY ADVISORSPlanning Association), the Texas Tech Per- stimulus (QE2) with the hope that the economicsonal Financial Planning Association, Delta engine may now be able to sustain itself. Vola- & STAFFSigma Pi, a co-ed Business Fraternity, and tility is the very reason that FJY recommendsthis past spring I was a volunteer income a well diversified portfolio of non-correlatingtax preparer with VITA (Volunteer Income asset classes. This investment philosophy takesTax Assistance). advantage of the volatility within markets, and MARJORIE L. FOX SR. FINANCIAL ADVISOR enables investors to minimize much of theWhen Jon called and offered me the sum-mer associate position, I was very eager “noise” that daily movements bring. DANIEL D. JOSS SR. FINANCIAL ADVISORand excited to move to the Washington,DC Metro area. In the two months that I In our efforts to continue to be as current as JON P YANKEE . possible regarding investment theory and finan- SR. FINANCIAL ADVISORhave been working for the FJY team, I have cial planning concepts, FJY advisors partici-gained a great deal of valuable knowledge pated in several professional events last quarter. LAURIE A. BELEWand experience that enhances what I have FINANCIAL ADVISOR In May, Tess Downing attended the Futureslearned through my coursework at school.I am very much enjoying my time in the Portfolio Fund Advisor Conference in Chicago, TESS L. DOWNINGarea and am excited for what the rest of which further reinforced our commitment to this ASSOCIATE FINANCIAL ADVISOR asset class and the vital role managed futuresthe summer holds, along with the oppor- play as a portfolio component. THOMAS N. SAUNDERS, JR.tunity to meet many of you along the way! CLIENT RELATIONSHIP ASSOCIATE In early June, FJY participated in an office LISA J. CRAFFORD exchange with TGS Financial, a planning firm OFFICE MANAGER in the Philadelphia area, as a way of evaluating SALLY M. YANKEE our processes and services, compared to those ADMINISTRATIVE ASSISTANT of our peers. It is through such engagementsPlease remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the futureperformance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter, will be profitable, equal any corresponding indicatedhistorical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinionsor positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investmentadvice from Fox, Joss & Yankee, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available forreview upon request.Historical performance results for investment indices and/or categories have been provided for general comparison purposes only, and generally do not reflect the deduction of transactionand/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performanceresults. It should not be assumed that your account holdings correspond directly to any comparative indices.