Bruce Starks, CPA, CFP® – Page 43

CFP® Certificants – Strong Growth in 2019

The results are in. According to CFP Board’s January 15, 2020, report entitled CFP BOARD REPORTS STRONG GROWTH IN 2019, the Board summarized the results of key diversity programs as follows: “The Certified Financial Planner Board of Standards finished the year [2019] with very strong numbers, reflecting the results of CFP Board initiatives as well…

Interest Rate Risk in a Bond

Course: Investment PlanningLesson 10: Fixed Income Securities Analysis Student Question: I’m not clear why holders of long-term bonds are subject to interest rate risk. If a 20-year bond is purchased at par with a coupon rate of 6.25% ($62.50/year), it seems to me that the investor would still receive $62.50 a year regardless of interest rate changes. What am I missing? Michael…

Reprieve from the Student Loan Debt Warden: Student Loans in Default Can Look to 529 Plans

Good to Know 5.2 Million The number of student loans in default in early 2019 according to the Ascent’s Student Loan Debt Statistics for 2019 That’s the bad news. The good news is that there may be a way out for students with balances remaining in their 529 Qualified Tuition Program. Before the SECURE Act, distributions…

Ownership of Property in a Trust

Course: Estate PlanningLesson 3: Understanding Trusts and Trust Documents Student Question: Perhaps a slightly mundane question, but here we go: It had been my understanding that property in a trust was held and owned by the trust itself, as a separate legal entity. However, several times in this course there has been reference to the trustee having ownership of the property. Is there…

SECURE Act: Good News and Bad News for Retirement Planning

The long-awaited bipartisan SECURE Act (the Act) was finally approved by the House on December 17, 2019, after a seemingly interminable process that began in March 2019. The Senate approved the measure at the speed of light (at least by legislative standards) on December 19. President Trump signed the measure into law the next day,…

Unused Premiums in Term Insurance

Course: Insurance Planning Lesson 12: Types of Life Insurance Student Question: Could you help clarify the term “unused premiums” as it relates to term life insurance? I guess I don’t see how you could have a premium not used in term life. Thanks! Michael Instructor Response: Michael, Assume you pay $6,000 in annual prepaid premiums on January 1, 2020, for coverage for…

Annual Background Checks of CFP® Certificants

CFP Board’s December 17, 2019, Independent Task Force Report Apparently, there’s a new Sheriff in town. As a result of a recent task force analysis, CFP Board will now conduct annual background checks on CFP® Certificants. An overview of the Board’s report follows: Overview On July 30, 2019, the Board of Directors of CFP Board (“The Board”)…

Distributable Net Income Application

Course: Estate Planning Lesson 9: Income Taxation of Trusts and Estates Student Question: Hi Bruce When a Trust has an income accumulation year, must the Trust pay taxes on that accumulation of DNI in the year of accumulation? If so, why do that – why would a Trust hold income at the confiscatory Trust income tax rates? If not, how many years can a…

Good to Know: Dangerous Mistakes In Retirement – Wrong Spend Down Strategies Slows Portfolio Growth

Good to Know Savvy financial advisors know that prudence in taking retirement distributions is balancing income tax efficiency in the current year against long-term retirement portfolio growth. While each client may present unique needs, a discussion starter to the question “where should I take my distributions from?” follows: First – Take the full amount of…

Percentage of Completion Method

Course: Income Tax Planning Lesson 10: Recognition of Expenses, Losses, and Deductions Student Question: Question 5 (below) did not make sense to me. I started out by breaking down by year – 400,000/2,100,000*3,000,000 and so forth, but did not arrive at the correct answer. So then I tried adding up 3 year – 400+650+700/2100000*3,000,000. That…