Archive for February, 2010

For 2010 QDROs have a special option for Roth conversions! QDRO stands for a Qualified Domestic Relations Order and is an order in which an alternate payee is recognized to receive all or a portion of the benefits payable of a related party’s retirement plan. An alternate payee is any of the following: a spouse, former spouse, child or a dependent of the participant. QDRO usually form from a divorce or soon to be divorce.
This year many questions regarding the special option for Roth roll over and QDRO relationship are being asked to financial planners and divorce attorneys, especially. The answer to the question is that for payments from a plan during 2010 that are rolled over to a Roth IRA, the taxable amount will be split over the two years of 2011 and 2012 unless elected to all be taxed in 2010. So if getting a divorce this year – you are in luck!

2010 is a very exciting new year for Alberty Financial Planning Services, Inc. We are providing the same objective fee-only, advice-only services with quite a few new faces and expertise.

We are thrilled to introduce and welcome our new members of the Alberty Financial Planning Services Team.

First, I would like to welcome Leanne Morse to the team as the Vice President of Operations. Leanne brings a strong accounting background, an MBA and a great deal of experience from Chrysler and UGA. Leanne’s positive attitude and work ethic is a tremendous asset to AFPS and we are delighted to welcome her to the team.

I would also like to introduce and welcome our new Professional Implementation Resource team members:

Investment Team:

 Matt McKiney, a financial advisor with Edward Jones in Watkinsville, Georgia.
 Matthew J. Riedemann managing director and real estate portfolio manager for Ashford Capital Partners, Inc in Atlanta, Georgia.

Estate Attorney:

 Jim Spratt owner of The Bowden Spratt Law Firm, P.C. in Atlanta, Georgia.

CPAs:

 Jim Polk managing member of The James Polk Company in Atlanta, Georgia.
 Alesia Burch, managing partner of Burch, Crooms and Company LLP in Hartwell, Georgia.
 Karen Crooms, partner of Burch, Crooms and Company LLP in Hartwell, Georgia.

Insurance

 Denise Willoughby account executive with Rutherfoord in Atlanta, Georgia.
 David L Romero, GBA with Rutherfoord-Benefits in Charlotte, NC.

We are honored to have the opportunity to work with the professionals on our implementation resource team. Our IR team members are professionals who have proven to be at the top of their field. Please visit http://www.albertyfinancial.com/about-us/implementation-resources/ to view our entire Implementation Resource Team and their contact information.

Last but not least, I would like to welcome our interns to the team for the Spring 2010 semester. Jeff Rosengarten and Kelley Mundrick are both very talented students from the University of Georgia. You will hear from them often on our twitter page and our blog posts.

We are looking forward to a prosperous New Year in 2010 as we continue to provide our clients with top notch, comprehensive, and objective financial planning advice.

Do you remember when you were a kid and played musical chairs? We walked (or ran) around a set of chairs, waiting for the music to stop. When it did, we pounced on the closest chair. After a terrific year in the stock market, investors are now asking: Is the music over?

I always have believed that markets and stocks go up or down based on earnings and the expectation of those earnings. Back in mid-2008, Wall Street analysts were forecasting record profits for the 500 largest companies (Standard & Poor’s 500) for 2008 and a continuation into 2009. Instead, we started seeing profits start to evaporate in the summer of 2008 and then go into a total collapse in the fall of 2008. Beginning in August 2009, I started noticing that analysts were actually increasing their earnings estimates. First, it was on a monthly basis. Then, beginning this fall, analysts started nudging their estimates higher on a weekly basis, even as the market climbed higher and continued to confound the skeptics.

So where are we now? As I have discussed in earlier issues of this newsletter, analysts slowly have been raising their profit outlook for companies, and they presently stand at $77.79 for 2010 and $94.51 for 2011. As of this writing, the S&P was selling at 1136, meaning the market is valued at 14.6 times 2010 estimates and around 12 times 2011 estimates. This is good news; I like to see stocks trading at 12 to 15 times earnings.

A recent report from the 12 Federal Reserve Districts also held some glimmers of good news. In most districts, consumer holiday spending was up slightly, auto sales were steady or slightly better, and home sales were up, especially for lower-end homes.

On the flip side, there are still many uncertainties. First, employment is still very weak, although there are signs that it is starting to stabilize. Also, according to the Federal Reserve Board October 2009 Senior Loan Officer Opinion Survey, domestic banks have indicated “that they continue to tighten standards and terms on all major types of loans to businesses and households.” We have the potential risk of a policy mistake by our relatively new administration. We still are awash in excess capacity in all different types of industries, and commercial rents are still falling in the face of huge oversupply. Finally, the Obama fiscal stimulus plan is expected to have its peak effect on GDP and jobs around the middle of the year.

So where do we really stand? Are we going to be left without a chair when the music stops?

One thing that is certain is that the financial services business has become much more complex since I got into it in 1985. For one thing, finances are global now. For example, when Dubai, a remote city-state in the Middle East, announced it had run out of money this fall, the shock waves were felt around the world. Secondly, the federal government has chosen to or has been forced to, depending on your point of view, inject itself aggressively into the economy. This probably means more regulation, and definitely means that politics has become an economic factor. Finally, the industry itself has become more complicated. There are lots more financial advisers working with lots more platforms and offering lots more options.

Perhaps the best way to deal with the complexity is to focus on the simple. In the end, good companies are going to make more money for their investors than bad companies will. I have always believed in finding strong, quality companies that pay a dividend. I continue to think that this is the approach that is most likely to succeed, no matter what economic and political environment prevails.

There are no guarantees, of course-the last few years have reminded us of that. But by focusing on the stocks of successful, innovative, well-capitalized companies, we increase our chances of finding a seat in our game of musical chairs.

Garry K. Schaefer
Atlanta, Georgia
January 20, 2010

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It is a common misconception when a loved one is living but terminally ill that transferring assets to the heirs is an efficient way to avoid probate and estate taxes. Unfortunately, simple mistake can generate significant tax bills. And this is particularly true at this time of uncertainty regarding the estate tax law.

Obviously family dynamics are the primary consideration, but there can also be financial ramifications associated with asset transfers. Transferring an asset to heirs while one is alive can pass on the owner’s cost basis (original cost of the asset including adjustments) instead of receiving the stepped up basis (current value of the asset) at the time of death. For the heirs who received the original cost basis, a significant capital gains tax might be due. For those who received the stepped up basis, the capital gains tax could be zero.

Last year the tax law was very straightforward. The treatment of cost basis and the estate tax exemption limits were spelled out in the tax code. In 2010 there is a great deal of ambiguity about these issues. Currently the federal estate tax is fully repealed and the carry over basis rule applies (with some provisions to protect smaller estates and spouses). The impact of the carry over basis could be quite painful and costly as heirs try to piece together the cost basis of very old and highly appreciated assets.

In the meantime, there is a great deal of speculation that the estate tax will be reinstated retroactively making it a critical year for seeking advice regarding your wealth distribution strategies.