1. A Planning & Investment Case Study Probate to Distribution
2. The Challenges Upon the death of a client, the complexities of the estate often fall on the CPA. The CPA is the most trusted advisor to the client and the beneficiaries will look for coordinated help from him/her. Many beneficiaries have no understanding of the process of probate through distribution. They may not know all about the assets that the deceased held. They may not be educated on planning & investments. The sudden inheritance can be very overwhelming. Common Questions What attorney will handle legal issues? How do I organize all of the inherited assets? What is the executor’s role? What is the trustee’s role? Who handles the investment portfolio during this process? What happens to individual planning when the estate is closed? Should any assets be disclaimed? Should investment assets be liquidated during probate? How do I handle Qualified money? How do I handle Roth accounts?
7. David’s business has recently gone under, he has drained his personal assets, and the inheritance is the only money he will have
8. As a result, he will need income immediatelyDavid is the Executor of the estate All Non-Qualified investment assets are in Long Term Munis
9. Goals of the Client David wants to retire immediately. He would like to maintain his current lifestyle and also travel. They have an autistic son and provide support for him. They have 3 other children that they would eventually like to help by gifting. They would like to be moderately conservative with their inheritance. David needs us to handle the splitting of the assets to each sister and coordinate with their advisors.
10. Known Problems Lack of education on investments Low interest rate environment Understanding interest rate risk Height of the Bond Market Needs substantial income
21. Buy order determinationCredit rating analysis Coupon analysis Original issue discount analysis Bid offer analysis Review by bond term Review by state Review by type Review by purpose (what do they do) Interest rate risk analysis Analysis
22. Complete Audit of Account upon Receipt Determination of which equities to buy and hold. Determination of which bonds to buy and hold. Second review of cost basis inputting. Ongoing trade compliance.
23. Summary of Case Process of case We agreed to handle all assets until probate finished and then split all and ACAT to their advisors Summarized all of our trading for the clients and CPAs Wrote financial plan for David We designed an income portfolio
25. Overview At Shulman DeMeo Asset Management LLC, we offer sophisticated Institutional and Private Clients actively managed investment strategies across Fixed Income, Value Equities, and Alternative Investments. Our goal as a firm is to build diversified, income oriented portfolios representing various strategies and asset classes. Consistent superior performance based mostly on income like dividends and interest or a combination of both, will likely result in expected capital appreciation. The reality facing today’s client is an ever increasing need for greater cash flow. Unfortunately, this clashes with the lower yields typical of many traditional income oriented investments. We bring a consultative approach to understanding the unique needs and goals of our clients. We strive to develop a true partnership with our clients so we can offer the best solutions to meet their long term investment goals.
27. High Yield Closed-End Equity Funds The primary investment objective of this category is to provide a high level of current income and gains from net index option premiums. The secondary investment objective is to seek capital appreciation. Generally, managed assets in this diversified equity portfolio will seek to substantially replicate price movements of the S&P 500 index and the NASDAQ 100 stock index respectively. There will be an index option strategy of selling S&P 500 and NASDAQ index call options to moderate the volatility of returns relative to an all equity portfolio. The highlights of this investment portfolio are as follows: Attractive quarterly distributions. Capital appreciation, consistent with an index option strategy. A measure of downside protection in rapidly declining markets. Tax advantage income from an index option strategy and equity dividend. Symbols: JLA, JPG, JPZ, JSN, DPD, DPO, QQQX
28. High Yield Preferred Equity Funds This portfolios primary investment objective will be to achieve high current income consistent with capital preservation. The funds secondary objective is to enhance portfolio value. Generally, approximately 80% of assets in this portfolio will consist of preferred securities and up to 20% of net assets will include debt securities. These debt securities will include convertible debt securities and convertible preferred securities. Generally, most securities in this portfolio are of investment grade quality (BBB/Baa or better). In addition, leverage is generally used. Highlights of this portfolio are as follows: High current income potential consistent with capital preservation. Additional potential diversification. Enhanced capital preservation. Symbols:BDV, BTZ, DNP, BDJ, JPS
29. Master Limited Partnerships A Master Limited Partnership is a limited partnership that is publically traded on a securities exchange. It often combines the tax benefits of a limited partnership with the liquidity of a publically traded security. Master Limited Partnerships are limited by United States Tax code to only apply to enterprises that engage in certain business, mostly pertaining to the use of natural resources such as petroleum and natural gas extraction and transportation. Some real estate enterprises also qualify as Master Limited Partnerships. Generally, Master Limited Partnerships pay their investors through quarterly required distributions. Because there are stringent payment provisions on Master Limited Partnerships, the vast majority of Master Limited Partnerships are pipeline businesses which earn very stable income from the transportation of energy. Because Master Limited Partnerships are partnerships, they avoid corporate tax both on a state and federal basis. This is the primary benefit of a MLP. MLP’s generally file K1s, allowing the limited partner to take a pro-rated share of depreciation, thus reducing the tax liability on the income. Master Limited Partnerships are recommended for clients seeking high current income with tax benefits. Symbols: ARLP, CPNO, EEP, EPD, ETP, KMP, NRGY, NS, OKS, PAA, SXL, MMP, BWP, LINE, BPL
30. Real Estate Investment Trusts Real Estate Investment Trusts are securities that sell like any other equity on major exchanges and invest in real estate directly either through properties or mortgages. REIT’s receive special tax considerations and typically offer investors high yields as well as liquidity. Equity REIT’s generally invest in and own properties. They are thereby responsible for the equity or value of their real estate holdings. Revenues generally come from the properties they rent. Mortgages REIT’s deal primarily in the ownership of property mortgages. Their revenues are generated primarily by the interest they earn on the mortgage loans. Hybrid REIT’s combine the strategy of Equity REIT’s and Mortgage REIT’s. Investing in REIT’s is a liquid, dividend paying means of participating in the real estate market. Symbols: AMB, BPO, BRE, BXP, CLI, CPT, EQR, ESS, HCN, HCP, HIW, NHP, PLD, UDR, WRE, RWR, CWH, JCE
31. High Yield Corporate Closed-End Funds Corporate High Yield funds seek to provide shareholders with high current income by investing primarily in a diversified pool of fixed income securities that are rated in the lower rating categories of the established rating services (Ba or lower by Moody’s investor services). In addition, they can be unrated securities of compatible quality. Generally these funds will also contain leverage. Symbols:BHK, HYT, PTY, DHF, KHI
32. Government Closed-End Funds The primary purpose of this portfolio is to provide shareholders with current income and gains. This category will seek to achieve it’s investment objective by investing primarily in a portfolio of US government securities and US government agency securities, including US government mortgage backed securities. These securities attempt to pay interest in order to generate current income, and by employing a strategy of writing call options of individual or baskets of US government securities, US government agency securities, or other debt securities held by the fund in an attempt to generate gains from option premiums. These funds are generally 25% – 35% leveraged, and have and effective duration of 2.5 – 3.0 years. Income distributions are paid monthly. Symbols:EGF
