Articles for August 2016

The Trump & Clinton Tax Plans

How do they differ?

tax money
Seemingly every presidential candidate offers a plan for tax reform. You can add Donald Trump and Hillary Clinton to that long list. Here is a look at their plans, and the key reforms to federal tax law that might result if they were enacted.

Donald Trump revised his tax plan this summer. The latest plan put forth by Trump and his advisors contains the key features of the one introduced last year.

Under Trump’s plan, the standard deduction would rise. It would rise from the current level of $6,300 to $25,000 for single filers. Joint filers could claim a $50,000 standard deduction. (The GOP plan proposes respective standard deductions of $12,000 and $24,000.) Instead of seven federal income tax rates, there would just be three – 12%, 25%, and 33%. (In his original tax reform blueprint, the rates were 10%, 20%, and 25%.)1

The estate tax would vanish entirely under Trump’s plan. Taxes on capital gains and dividends would top out at 20%.2,3

Trump wants to reduce the corporate tax rate from 35% to 15%. The new lower rate would apply to partnerships, LLCs, and S corps as well as C corps. (With a proposed corporate tax ceiling of 15% and a proposed individual tax ceiling of 33%, some economists have wondered if a Trump presidency might generate a wave of individuals incorporating themselves.) Full expensing would also be allowed for business investments under Trump’s plan.1

Notably, Trump’s reforms would do away with the deferral of taxes on foreign profits. As it stands now, corporate taxes on foreign profits are deferred until overseas affiliates repatriate them. It can take years for those inbound dividends to arrive. The Trump plan would tax domestic and foreign profits on the same current-year basis.1

Trump has also publicly spoken of greater tax relief for families raising children. This would likely not be an expansion of the Child and Dependent Care Credit, but something new – either a deduction, a credit, or an exclusion. Given the high standard deductions that would be offered if Trump’s tax plan becomes law, higher-income households might be most interested in such an expanded child care deduction. If the Trump plan applies a child care deduction to payroll taxes rather than income taxes, many lower-income households could, theoretically, claim it. Less payroll tax revenue would mean less revenue for some key government programs.1

Hillary Clinton’s tax plan would lower some taxes & raise others. As the non-partisan Tax Policy Center has noted, only around 5% of Americans would see any real change to their taxes under the Clinton reforms – but the richest Americans would pay higher income taxes under her plan. Clinton’s corporate tax reforms would encourage firms to do more business in America, while her estate tax reforms could prompt changes in wealth transfer planning for some families.2,3

High-earning households could see marginal rates rise. Under Clinton’s plan, taxpayers with adjusted gross incomes greater than $5 million would pay a 4% surtax, effectively setting their marginal tax rate at 43.6%. Anyone earning more than $1 million would face an effective tax rate of 30%. Investors would have to buy and hold for longer intervals to take advantage of long-term capital gains tax rates. The current long-term rate of 20% would only apply if an investor owned an investment for six years; in preceding years, it would be incrementally higher.2,3,4

The federal estate tax would also rise to 45% through Clinton’s reforms. The current $5.45 million individual exemption would be reduced to $3.5 million ($7 million for married couples).2

Clinton’s plan would adjust corporate taxation. U.S. firms would find it harder to make tax inversions, whereby they merge with an overseas competitor and move their headquarters to another country to exploit that nation’s lower corporate tax rate. Earnings stripping – in which U.S. affiliates of multinational corporations “strip” profits from their stateside taxable income and send them to overseas parent companies in pursuit of tax savings – would cease. Companies would also face limits on deducting interest payments on their debt. While she has talked of a tax on the biggest financial institutions, Clinton has also expressed a desire to make the process of estimating, filing, and paying taxes less involved for small business owners.2,3

Like Trump, Clinton wants tax relief for families. She wants a new kind of tax credit for child care; the details have yet to emerge at this writing.2

These plans have one destination.
That is Congress, and there is no telling how many or how few of these reforms may become law if Clinton or Trump are elected.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.
1 – taxanalysts.org/tax-analysts-blog/trump-s-tax-plan-version-20/2016/08/12/194511 [8/12/16]
2 – nytimes.com/2016/08/13/upshot/how-hillary-clinton-and-donald-trump-differ-on-taxes.html [8/13/16]
3 – cbsnews.com/news/hillary-clinton-donald-trump-taxes-presidential-campaign-2016/ [8/3/16]
4 – fool.com/investing/2016/06/19/how-would-hillary-clinton-change-your-taxes.aspx [6/19/16]

The TPP Controversy

Will the Trans-Pacific Partnership ever be ratified? Should it be?

The Trans-Pacific Partnership is back in the news. A new wave of controversy surrounds this huge trade deal, which has been agreed to, in principle, by 12 nations, but not yet ratified. Its adherents say that it would boost U.S. economic growth. Its detractors say that it would destroy more U.S. manufacturing jobs and doesn’t go far enough to halt environmental abuse.1

Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam have all committed to joining the TPP. These 12 countries generate about 40% of the world’s economic growth and about a third of global commerce. At least six of these nations must ratify the TPP in order for it to operate, and two of those six nations must be Japan and the United States. Therein lies the obstacle. Lawmakers in both Japan and the U.S. will certainly debate the merits of the agreement on the way to a 2017 vote, and there is a real possibility the deal could be struck down.1

What does the TPP aim to achieve? It would lower taxes on imports and exports – and get rid of them altogether in some instances. It would require other nations to adopt U.S. copyright terms on intellectual property (life of the creator + 70 years), counterattacking the flow of bootleg copies of movies, TV shows, and music plaguing entertainment firms.1

While the TPP does seek to remedy issues involving worker rights, climate change, overfishing, and the illegal killing and sale of exotic animals, it also gives private companies the opportunity to sue foreign governments. A privately held firm based in one TPP nation could, potentially, sue a government of another TPP nation if it felt that nation’s environmental laws had hurt its profits or caused it financial losses.1

The Obama administration has championed the TPP for years. After President Obama leaves office, it may be that his successor will not support it at all.

Donald Trump has called it a “terrible deal” that would constitute a “death blow” for the U.S. manufacturing sector. Hillary Clinton – who at first supported the TPP when she was Secretary of State – no longer supports the pact.1

Detractors of NAFTA see NAFTA all over again in the TPP. Unions, including the AFL-CIO, see the deal siphoning away U.S. jobs overseas. Environmental groups, like the Sierra Club, say it isn’t green enough. Advocates for online freedom and global health care have voiced their disapproval with TPP regulations. There is strong opposition to the TPP in our Congress and in Japan’s legislature.1

What does China think of the TPP? It has stayed on the sidelines during the agreement’s evolution. China already has free trade pacts in place with most TPP member nations, so it doesn’t really need to become a TPP member.1

In fact, the TPP can be considered a retort to China’s own long-planned, multilateral trade deal, the Regional Comprehensive Economic Partnership (RCEP). If enacted, the RCEP would position China as the economic kingpin in a free trade alliance of many Asian nations. The U.S. has not been invited to join the RCEP.1,2

Is the TPP doomed? The odds of its passage in Congress may be lengthening. “Fast track” legislation intended to usher in that passage fell through earlier this year. Approval in the waning months of the Obama administration appears to be a longshot. This summer, Democrats nearly attached language opposing the TPP to their 2016 presidential campaign platform, and Republicans approved a platform statement opposing votes on major trade deals “in a Lame Duck Congress.” It appears it may be “now or never” for the TPP, and, after 2016, there is a real chance this long-envisioned trade pact may never get off the ground.3

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.
1 – kqed.org/lowdown/2016/07/29/the-trans-pacific-partnership-explained/ [7/29/16]
2 – bloomberg.com/view/articles/2016-07-29/the-tpp-isn-t-just-a-free-trade-deal [7/29/16]
3 – tinyurl.com/jb7nd55 [7/29/16]

Filial Responsibility Laws

Could you be required to provide financial support to your parents?

Imagine your parents outliving their money. A terrible thought, right? Should this occur, there will be one of two outcomes. Either your parents will move in with you (or someone else), or your parents will become indigent.

Hopefully, your parents have saved, invested, and managed their money well enough to avoid such a plight, whether they live together or separately. If either or both of your parents do end up in such dire financial straits, the burden of rescuing them could fall on your shoulders. That is because 29 states have filial responsibility laws.1,2

Imagine drawing down your retirement savings to pay for nursing home care. Thanks to these obscure, but enforceable, state laws, this scenario is not unimaginable.

Nursing homes may turn to these statutes to demand payment of eldercare bills. These laws can be challenged in court, but sons and daughters may have little recourse. In 2012, the Superior Court of Pennsylvania upheld a lower court ruling requiring a man to pay off a $93,000 long-term care bill owed by his mother to a nursing home. In August 2015, the same state court upheld a ruling that a man had to pay his mother $400 a month in filial support.1,2

In the future, will assisted living facilities and nursing homes cleverly exploit such laws (and legal precedents) to file claims or lawsuits against the children of patients? Baby boomers, Gen Xers, and millennials may face that risk.

Some filial laws do offer loopholes. In Pennsylvania, for example, children cannot be held legally responsible under the state filial law if their parent abandoned them for a decade or longer during their childhood or if the parent’s immediate family is incapable of paying the debt.2

How easily can a nursing home saddle you with your mom or dad’s eldercare bill? Not that easily. In order to cite filial responsibility laws, the nursing home or assisted living facility usually has to provide proof that the resident cannot pay the cost of care.3

That hurdle may not deter eldercare providers as baby boomers enter their sixties, seventies, and eighties. Providers may be forced to explore every possible avenue to collect the payments that will keep them in business.

Will Medicaid pay for eldercare if a parent runs out of money? It often will. If the applicant is already eligible for Medicaid prior to requesting coverage, that coverage can be retroactive up to three months from its starting date.3

Medicaid does have its potential downside. By law, state Medicaid programs must try to collect reimbursement for coverage of eldercare costs after a Medicaid recipient passes away. While the value of a car and a home have no effect on someone’s eligibility for Medicaid, that home and car can be claimed by the state as it seeks to recoup its costs. An estate is usually spared from this effort if the deceased person leaves behind a surviving spouse, children under 21, or disabled or blind children of any age. Property held in a trust should also be exempt.3

If you & your parent(s) jointly own assets or accounts, that could be a problem. As an example, say you and your parent jointly own a townhome. If you attempt to sell it after your parent’s death while the state is trying to recoup Medicaid costs, the state may place a lien on it. You will have to give up some of the sale proceeds to settle the lien.3

Here is a “what if” worth considering: if your parents become destitute, how much financial responsibility will you be willing to assume on their behalf? Given the presence of filial laws and the possibility of Medicaid liens, you may end up more involved in their financial affairs or estate than you expect.

For the record, filial laws remain in place in Alaska, Arkansas, California, Connecticut, Delaware, Georgia, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Montana, Nevada, New Hampshire, New Jersey, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Virginia, West Virginia, and Puerto Rico.3

Mike Moffitt may be reached at 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.
1 – tinyurl.com/zmg9w5d [6/5/16]
2 – triblive.com/news/valleynewsdispatch/9757033-74/law-nursing-support [3/19/16]
3 – nerdwallet.com/blog/banking/broke-parents-medical-debts/ [7/2/15]

Protecting Your Parents From Elder Financial Abuse

How to help your family avoid scams and other fraud.

We are becoming more familiar with the notion of financial abuse targeting elders – scams and other exploitation targeting the savings of people aged 60 and older – but many may think, “it won’t happen to my family” or “my relative is too smart to be taken in by this.”

These assumptions are only wishful thinking; this sort of fraud is on the rise, so it’s important to talk to your loved ones about what to look for, and how they can protect their finances.

More common than you think. The U.S. Department of Justice’s Elder Justice Initiative offers a sobering statistic: in the United States alone, multiple studies have found that, every year, 3-5% of seniors endures financial abuse by family members. This form of exploitation is, typically, one of the top two most frequently reported means of elder abuse.1

Talk about money. It can be uncomfortable to talk with family about financial issues, but this is often the best first step toward guarding against financial abuse. Find out the information you would already need to know in the event of a sudden calamity. Questions to ask include: where is the important paperwork kept – i.e. bills, deeds, and wills? Who are the professionals they work with – accountants, lawyers, and those who assist with financial matters?2

It’s also important for you to have a clear idea in what sorts of accounts and investments your parents or loved ones keep their money. You will also want to have a conversation about when and under what circumstances they would like for you to step in and handle their finances for them.2

Trouble takes many forms. Not all financial trouble that elders experience is necessarily a sign of abuse, but having open and clear communication can be a great help. Look for unpaid bills piling up, creditor notices, and suspicious activity on their bank accounts.2

There are a number of scams out there that target the elderly, in particular, and many of them come via telephone calls. There are scammers who pose as officials from a sweepstakes, lottery, or some other contest claiming that your parent or loved one is in line to receive a prize. Others will pretend to be from the Internal Revenue Service and threaten legal action over some long-forgotten overdue balance. The real IRS only sends notices via regular mail, of course, but that can be easily forgotten when dealing with a wily and confrontational con artist.2

Talk about these scams with your parents or loved ones. Make sure that they understand that they shouldn’t give out Medicare or Social Security numbers, and always be absolutely certain before signing anything, particularly legal documents, contracts, and anything to do with making an investment. For the latter, if you don’t already know the people who handle your financial matters for your parents or loved ones, suggest that a meeting be arranged and, if necessary, that they be instructed to work with you under certain circumstances.2

Stay informed. There are a number of resources to keep you and your parents or loved ones aware of fraud, both in terms of new scams and even instances of elder financial abuse in your area. StopFraud.gov offers a number of resources and tips for identifying and reporting the financial exploitation of elders. The AARP website features a Fraud Watch program and offers and interactive national fraud map that can look at specific reports and alerts from law enforcement.2,3,4

With careful planning and communication, you can make a real effort to protect your parents and other elders in your family from an embarrassing and costly set of circumstances.

Mike Moffitt may be reached at ph# 641-782-5577 or email: mikem@cfgiowa.com
Website: www.cfgiowa.com

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

Michael Moffitt is a Registered Representative with and Securities are offered through LPL Financial, Member FINRA/SIPC. Investments advice offered through Advantage Investment Management (AIM), a registered investment advisor. Cornerstone Financial Group and AIM are separate entities from LPL Financial.

Citations.
1 – justice.gov/elderjustice/research/prevalence-and-diversity.html [7/14/16]
2 – nbcnews.com/business/retirement/worried-about-elder-financial-abuse-how-protect-your-parents-n559151 [4/20/16]
3 – stopfraud.gov/protect.html [7/14/16]
4 – action.aarp.org/site/SPageNavigator/FraudMap.html [7/14/16]