Academic journal article Journal of Accountancy

PFP Q&A: Planning for Change: Experts Discuss Implications of Tax Law Changes, New Standards, and the Retirement of the Baby Boomer Generation

Academic journal article Journal of Accountancy

PFP Q&A: Planning for Change: Experts Discuss Implications of Tax Law Changes, New Standards, and the Retirement of the Baby Boomer Generation

Article excerpt

With the Baby Boomer generation hitting retirement age, personal financial planning has become an increasingly important service for many accounting firms. But practitioners are dealing with plenty of changes, including the implementation of new tax laws and the landmark rollout of new standards.

The JofA assembled a team of industry insiders for a round-table discussion of the important issues affecting CPAs who advise individual clients in retirement, tax, estate, risk management, and/or investment planning at such an important time. The following is an edited transcript of their discussion.

Participating in the round table were:

* Clark M. Blackman II, CPA/PFS, CFA, CFP, president and CEO of Alpha Wealth Strategies.

* Bob Keebler, CPA, MST, AEP, a partner with Keebler & Associates LLP.

* Sid Kess, CPA, J.D., LL.M., of counsel at Kostelanetz & Fink LLP.

* Steve Levey, CPA/PFS, senior principal and CEO at GHP Horwath and senior principal of GHP Investment Advisors Inc.

* Scott Sprinkle, CPA/PFS, CGMA, CFP, a managing member at Sprinkle & Associates LLC and Sprinkle Financial Consultants LLC.

* Susan Tillery, CPA/PFS, CFP, president and CEO of Paraklete Financial Inc.

What do you think the most important issues are for personal financial planners today?

Kess: I would say that the tax provisions enacted in the American Taxpayer Relief Act of 2012 affecting high-income taxpayers, as well as the provisions of the Patient Protection and Affordable Care Act that became effective in 2013, provide unique opportunities for financial planners. These new provisions impact everyone, not just the financial planner. In addition, the changes in the field of estate planning are also extremely important in the way they impact the high-income taxpayer.

Keebler: I think the biggest two challenges are learning the new 3.8% net investment income tax ... and secondly, there are four dimensions to our income tax Code now: the traditional income tax, the alternative minimum tax, the 3.8% surtax, and the additional 39.6% tax bracket and greater capital gain tax if you're over the higher threshold. And [the challenge is] to develop a 10or 20-year plan for most taxpayers to smooth out that income and try to avoid these additional taxes. So those are the two toughest challenges, and then the third thing is to create new tax-efficient investing strategies.

Blackman: I think a couple of things continue to get a lot of press and discussion: This whole active-versus-passive investing question, and which is the most appropriate way to go, if there is a most appropriate way to go. And using alternative investments and hedge funds as a way to mitigate risk continues to be a hot topic in the area of investment decision-making.

Tillery: The higher income tax rates are going to affect many of our clients. Quite a few have been surprised to hear how much they will be impacted. I think it will be important to explain to each client how the higher rates will affect their tax liability and begin planning now to reduce the impact on their 2013 tax returns.

Sprinkle: On the investment side, you're going to see a big push for clients that are seeking more wealth planners versus investment advisers. The tax situation is going to become so important when you're looking at the investments, and how do I allocate assets between my tax-deferred accounts versus taxable accounts? How do I deal with capital gains? We have some clients who are contemplating large asset or stock sale transactions, and they are looking at using different instruments, like charitable trusts, to defer and spread taxes on assets to stretch the gains or to shelter them and use charitable deductions, while at the same time generating income streams that provide a significantly higher yield than what is available in today's fixed-income market.

Kess: The interesting thing is a lot of these issues affect people who are not just calling themselves financial planners. …

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