Individual Wealth Management

Wealth Management is a refined approach to integrating all aspects of your financial life.

At the Feliciano Financial Group, our mission is to make professional financial advice and investment services accessible to everyone. We believe in putting our clients first, by explaining complex financial topics in easy-to-understand language and helping those in need.

We bring together an integrated team of knowledgeable professionals to help you build, manage, preserve and transition your wealth. This team provides strategies to address your unique financial situation and pursue your needs.

Attending a seminar, reading books on personal finance, casual discussion of money management or using computer software can help understand the process. But consider putting together a 1,000-piece puzzle without the cover picture to guide you. That’s what it’s like for individuals with no financial plan or goals. The complex process of balancing portfolio management, retirement planning, estate planning, and tax planning is what makes wealth planning so crucial.

We Follow a Simple Three Step Process:

  1. Consult: First, we listen. Our personal planning process always starts with a conversation. We want to know what’s important to you. It comes down to knowing which questions to ask, and most importantly, actively listening to you as you answer our questions. Throughout this process we capture objective data (legal documents, financial statements, tax returns, etc.) and discuss your goals, dreams and aspirations. Only after we understand the concrete and intrinsic elements of what makes up your financial world can we begin a thorough analysis.
  2. Evaluate: Together, we’ll develop your personal financial strategy using The Feliciano Financial Blueprint. After reviewing your priorities and a detailed analysis of your current and future finances, we present our recommendations in an actionable, written plan. Your plan is presented so that you and your family will clearly understand your present situation, and your short- and long-term objectives. The plan will serve as our shared reference to take actions and implement strategies that will help move you toward your final destination in a meaningful way.
  3. Implement: After the planning process is complete and we’ve delivered your financial action plan, we move to our final step: Implementation. It’s here that our recommendations are put into place. When necessary, this includes initiation of product strategies and involvement of advisors to create, change or update documents. Clearly, this step is the most meaningful in the process, because it is the real payoff to a transparent and concise effort to make your life everything it can and should be.

Once Implementation is complete, we monitor your plan on an ongoing basis. As the markets, economy and your life changes, we’ll adjust your plan accordingly. Life and the markets may fluctuate, but we’ll remain focused on helping you achieve your financial goals.

Sales Person or Financial Planner

A product salesperson (insurance and securities) who is compensated entirely by the commissions on purchases, or a qualified financial advisor who may charge a fee for the time required to prepare any analysis and develop a report for your consideration.

There is certainly nothing wrong with a salesperson receiving commission on purchases. That is how people are generally compensated in the financial product area. After all, if you purchase a Certificate of Deposit at a local bank, you don’t for a minute believe that the tellers and officers are working for free. Their compensation is derived from the difference (you could call it a commission) between what the bank earns on its investments and what is credited to your account.

However, working with a financial advisor before making a purchase is more likely to leave you feeling informed and confident about a product without the pressure to buy, simply for the commission.

A qualified financial advisor can separate the advice stage from the actual purchase. What are the qualifications that you should look for in such a person? How do you go about finding and selecting a person who can help chart your path through the financial dilemmas?

The person you select should have:

  • Sufficient experience guiding personal financial affairs
  • Professional education, both initial and ongoing
  • Standing in recognized financial associations
  • Adherence to the developed professional standards
  • A commitment to client service and objectives
  • The capacity to help you fulfill your current and future needs
  • Sufficient staff, facilities and computer equipment
  • Ability to provide comprehensive analysis and ongoing services
  • An ethical posture
  • An ability to communicate effectively

Of all the requirements listed above, perhaps the most important is the capacity to communicate with you, to clarify your attitudes and to help you understand all the ramifications of the alternatives.

Financial Advisor Qualifications

Several professional designations, degrees or memberships indicate that the financial advisor has met educational, experience and ethical qualifications. The following (selected from a list of 80 designations, 72 associations) list is presented for your benefit – not as an endorsement, or in any order of ranking or preference:

CFP – Certified Financial Planner
Completed an educational program, passed certifying exams, meets continuing education requirements and licensed by the CFP Board of Standards.

RFC – Registered Financial Consultant
The RFC professional financial planning designation is awarded to those who meet requirements of education, examination, experience, licenses, a clear record of business conduct, significant annual continuing education, business integrity and adherence to the RFC Code of Ethics.

ChFC – Chartered Financial Consultant
A ChFC has completed an educational program, passed certifying exams and meets experience, ethical and continuing education requirements.

CEP – Certified Estate Planner
A professional designation awarded by the National Institute of Certified Estate Planners to persons completing a comprehensive program of advanced study. The NICEP offers a six-day intensive curriculum, separated into two three-day sessions, each followed by a comprehensive exam. Graduates agree to a standard of ethical performance and continuing education.

CFA – Chartered Financial Analyst
Has completed exams on securities and portfolio management and meets reference and experience requirements.

RIA – Registered Investment Advisor
Not a professional designation. A Registered Investment Advisor is a person or firm that has filed with the Securities Exchange Commission and adheres to certain disclosure requirements. This qualification is necessary for the rendering of investment advice.

CLU – Chartered Life Underwriter
Has completed examinations covering the application of life and health insurance in filling needs for survivor income, estate planning, business continuation and employee benefits.

RHU – Registered Health Underwriter
Has qualifications and experience with disability and medical insurance.

CPA – Certified Public Accountant
Has met educational qualifications, passed examinations and met experience qualifications in the area of public accounting. A few CPAs have also taken additional financial planning study and are Accredited Personal Financial Specialists.

FPA – Financial Planning Association
A professional membership organization. A key mission of the FPA is to promote the value of financial planning to the public and to serve as a voice to the financial planning profession.

IARFC – International Association of Registered Financial Consultants
Professional membership group of the Registered Financial Consultants (RFC). Formed to foster public confidence in the financial planning profession.

Even if we as individuals were to remain the same, the financial world around us changes so frequently that constant monitoring is a necessary part of the planning process. The political, tax, legislative and economic changes increase in frequency.

The on-going review and reporting also holds the planning firm accountable to you the client. Quarterly reviews also ensure that any necessary adjustments are made before it is too late.

Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit of protects against loss. Neither Lion Street Financial, LLC, nor its registered representatives, offer tax or legal advice.

Asset Protection

For professionals, business owners, and high net worth individuals, the danger in leaving assets unprotected is at an all-time high. Although as assortment of speakers refers to array of “bulletproof” strategies, to protect valuable assets, the truth is no such program exists. The best method for protecting assets may lie in a solid wealth management program with a reputable financial planning group.

Tax-Advantage Investments

The only money you will ever have to spend, lose or invest is what the government allows you to keep. Many taxpayers do not understand that they do have a choice as to whether they will pay a small or large amount of income tax. Why pay the IRS investable funds you are allowed to keep?

Tax advantaged investments are not “loopholes” in the Tax Law that the IRS is out to plug up. They are not immoral, as some would have you believe. A common fallacy is to confuse tax evasion with tax avoidance. Tax evasion is illegal and punishable. Tax avoidance, on the other hand, is legal and is encouraged by the lawmakers. The United States Congress promotes the shifting of funds from the taxable sectors of the economy to areas of public need or good by passing laws which create tax deferred; tax sheltered and even tax free investments.

Many, ignorant of the nature of the tax advantaged investments, would have you believe that you are “robbing” the economy of tax dollars by not giving your taxes to the government to spend in their great wisdom. Such advocates are ignorant of the fact that tax-advantaged investments are put into housing, energy, food, strategic metals, research and development, medical needs and transportation.

Rather than being filtered through bureaucratic mazes to the economy, these otherwise diverted tax dollars are being applied directly to where the need lies – creating new jobs, expanding industry and adding to the growth of the country. The famous jurist, Judge Learned Hand, remarked that, “There is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible.”

In another famous quote, Judge Hand wrote: “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes” Helvering v. Gregory, 69 F.2d 809, 810-11 (2d Cir. 1934).

However, understanding that tax advantaged investments can be and often are risky should be a prerequisite to becoming involved in them. Although there is the possibility of “hitting it rich” with such endeavors, many have and many will continue to chance the loss of their investment. Yet when compared with the alternative, a 100% chance of loss when paying tax, such investments can look quite attractive. After all, which investment will offer the greater possibility of providing you income in your golden years or at any other time?

The taxpayer also needs to remember that Congress has passed tax incentives because such investments are risky. Tax advantages are provided to encourage investing in high-risk areas that provide for the social good of the country.

Being involved with a tax advantage investment requires a proper frame of mind. It is your sleep that will be lost if you are uncomfortable with such an investment. Such investments are complex – particularly with the ever-changing tax laws. Working with a knowledgeable financial planner will help you avoid many of the pitfalls and help you keep more of your hard-earned dollars from taking a one-way trip to the IRS.

Carefully constructed asset protection strategies that are fully implemented early, before any hint of trouble, are much more likely to succeed, and can save you hundreds of thousands, or even millions of dollars. Asset protection has become a significant issue as our lives become increasingly litigious. Both individuals and businesses are at risk of sometimes frivolous claims, so more and more people are ensuring that their assets are well protected. Asset protection strategies generally concentrate on separating assets from risks.

Here are some of our recommendations to consider:

  • Permanent Life Insurance
  • Liability Umbrella Policies
  • Limited Liability Company
  • Family Limited Partnerships
  • Asset Protection Trusts

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice as individual situations will vary. Federal tax laws are complex and subject to change. Neither Lion Street Financial, LLC, nor its registered representatives, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Asset protection plans should be developed and implemented well before problems arise. Due to the fraudulent transfer laws, asset transfers that occur close in proximity to the filing of a lawsuit or bankruptcy can be interpreted by the court as a fraudulent transfer. Proper structuring of these assets is imperative please seek proper legal and tax advice prior to engaging in re-titling/structuring of any assets. Please note that laws are subject to change and can have an impact on your asset protection strategy.

Cash Flow Management

Every successful business relies on a financial system to carefully control income and expenses.

A business must have a system to know its present financial status, and more important, to plan for its future financial moves. A corporation cannot place a $40,000 inventory order unless its controller knows next month’s receipts will cover the order.

Your personal financial situation is comparable to that of a business. Both have concerns for profit, income and expenses, and spending decisions affected by anticipated circumstances. Consequently, personal cash flow management is designed to handle your financial situation like a business, and you will function as the controller.

A System, Not a Budget

Cash Flow Management is a system, not a budget. It allows you to see your financial situation from a long-term, systematic viewpoint. You will see how one move, such as a periodic tax payment, can affect your disbursements for several months prior to, and following, the actual payment. Budgets are too immediate in scope to allow you to relate a March income to a July expense.

It is essential for you to begin a systematic savings and investment program to accomplish financial and retirement goals. Every successful business relies upon a system to control income and disbursements. Your personal financial situation is comparable to that of a business, and is no less important!

Most people have not saved as much as they would have wished. The reason is not that they did not intend to save, but they did not have a system. Lacking a system makes it very easy to be distracted by the many opportunities to spend earnings.

Your financial needs and desires present unique situations, and your system must be flexible enough to accommodate whatever you require. Tailor it to fit yourself and your family; do not rely on what your neighbor does.

While your friends or neighbors might be managing cash flow to save for a European vacation, you may need to direct cash flow towards current tuition for a degree. Your system should be flexible, but also disciplined enough to guide and point you in the right direction.

If your cash flow system becomes a hindrance, do not abandon it; redesign it. With sensitive shaping to your needs, it will allow financial freedom rather than acting as a financial barrier.

A Personal Cash Flow Management System, if used consistently, can be of great value in helping to gain control of your personal financial situation. It will ensure that there is always cash available to pay bills as they come due. It will also help you save more money in a systematic way.

Time is your greatest ally. The more time you have, the less money you will need to save and invest. The less time you have, the more money it will take. Procrastination is a deadly enemy of your goal to retire with financial dignity.

The Importance of Goals

A cash flow plan functions best if it reflects your goals, whether long-term or short-term. The purchase of a pleasure boat in three years or the decision to remodel your basement next winter should influence your cash flow plans.

The goals that you have already set will help you shape your personal version of this system. Refer to them often.

As you achieve some short-term goals, or begin to see significant progress towards long term-goals, your enthusiasm for this process will increase – and that will make the system even more effective for you.

Establishing Your System

What should your system contain? There are four factors that will help you establish control over money:

  • INCOME/EXPENSE: Identify and isolate income and disbursements (referred to as expense). You will consider whether income is gross, or net (the amount you actually have available).
  • CATEGORY: Define the kinds of income you receive and the kinds of expense you incur. Categorize them according to the fixed or flexible nature of the item.
  • TIME: Your system should be based on a monthly structure. You should quantify your income and expense within a 12-month format.
  • AMOUNT: Income and expenses are expressed in dollars.

Once you have qualified all financial transactions, you will be well on the way to controlling your cash flow, rather than letting it control you.

Periodic Fixed Expenses

Many people have lost control over cash flow because they have no system to handle periodic known expenses of a substantial nature. Good examples of this type of expense might be a large real estate tax bill of $1,500 due every March, a life insurance premium of $840 due in November, or an IRA deposit of $2,000 which must be made by April 15th.

What people frequently do is remember the bill a month before it is due and start scrimping, but it is too late! So, what happens then? In the ensuing months, they start running behind on bills or they simply do not make the planned payment at all. Interest charges are then added, and their attitude starts to decline.

The solution is to schedule these larger payments and start saving for them on a monthly basis. For example, for a small additional amount, an automatic bank deduction can be made regularly to cover the $840 life insurance premium.

The $1,500 tax bill is due again in 10 months. Why not set $150 aside into a special savings or credit union account? Then when it comes due, you will have the money. Afterwards, you can reduce the monthly savings amount to $125 since you will have 12 months to accumulate the next payment.

If the IRA $2,000 deposit is due again in eight months, put aside $250 each month until then. After it has been paid, the amount to set aside is only $166. Furthermore, you will be earning interest on these escrow funds, rather than paying interest as a result of poor money management.

Initial savings ($150 + $250) $400 monthly; thereafter only ($125 + $166) $291.

Save Regularly and Systematically

It is important to assign a portion of each paycheck for your savings and investment program. Consider it an obligation just as important as any other monthly obligation.

In addition to saving a portion of monthly income, we strongly urge that any money saved by tax planning each year be invested the following year. This will give you an additional source of investment funds as well as a means of reducing income tax liability on a regular basis.

Charitable Tax Deductions

Congress has long recognized the need for public support of charitable religious organizations and has provided favorable tax treatment for gifts to organizations that the Internal Revenue Service determines to be qualified charities.

Lifetime gifts to qualified charities are completely free of the federal gift tax without limit. Testamentary gifts are also deductible without limit in the computation of the federal estate (and state death) tax. Gifts of money and other property, within specified limitations (discussed below), are considered tax deductible for federal income tax purposes.

An income tax charitable deduction is allowed for charitable contributions made within a taxable year, subject to limitations based upon whether the donee (recipient) is a 50% or 30% charity, whether the donor is an individual or corporation, and what type of property is contributed.

The 50% charities generally include churches, educational institutions, hospitals, governmental units, organizations receiving substantial support from governmental units or the general public, and certain private foundations.

The 30% charities include other organizations (mostly private foundations), described in IRC Section 170(c), that do not qualify as 50% charities.

Individual Donors

50% Charitable Organization
Total deductions are limited to 50% of the donor’s adjusted gross income for the year of the gift, with 5-year carryover for unused deductions. Gifts of trust income to a 50% charity are also deductible up to 30% of AGI with a 5-year carryover.

To a 30% Charitable Organization
Total deductions are limited to 30% of the donor’s adjusted gross income for the year of the gift, with a 5-year carryover.

Ceilings on Charitable Deductions – Corporate Donors

To a 50% Charitable Organization
Deduction is limited to 10% of the corporation’s taxable income with a 5-year carryover.

To a 30% Charitable Organization
Deduction is limited to 10% of the corporation’s taxable income with a 5-year carryover.

Gift & Tax Limitations Based Upon Type of Property


To a 50% Charitable Organization
Amount of the cash that is contributed by the donor.

To a 30% Charitable Organization
Amount of the cash that is contributed by the donor.

Ordinary Income Property

To a 50% Charitable Organization
Property that produces any gain other than long term capital gain if sold at fair market value. The 50% of adjusted gross income ceiling applies. Examples include inventory of a business owner, a work of art in the hands of the artist who created it and tangible property that has been depreciated.

To a 30% Charitable Organization
Cost. 30% of adjusted gross income ceiling applies.

Long Term Capital Gain Property

To a 50% Charitable Organization
Fair market value, not to exceed 30% of donor’s adjusted gross income with a 5-year carryover. Donors of long term capital gain property can qualify for 50%-of-AGI ceiling by electing to reduce contribution deduction by 100% of the gain in the property.

To a 30% Charitable Organization
Fair market value, not to exceed 20% of donor’s adjusted gross income with a 5-year carryover. Reduce fair market value by 100% of long term capital gain element if the donee is a private foundation and the donated property is not publicly held stock for which market quotations are readily available.

Tangible Personal Property Donate to a Charity

When tangible property is donated to a charity, it is treated differently when the property is unrelated. For example, art works donated to an art institute or museum are “related”, but when given to a symphony that might sell them, this would be “unrelated” property. Jewelry would be unrelated, unless it was placed in an historical display, etc.

Personal property gifted to a 50% Charitable Organization
Fair market value for related gifts, not to exceed 30% of donor’s adjusted gross income with a 5-year carryover. Donors of long term capital gain property can qualify for 50%-of-AGI ceiling by electing to reduce contribution deduction by 100% of the gain in the property.

For unrelated use property, the deduction is generally limited to the donor’s adjusted basis.

Gifted to a 30% Charitable Organization
Limited to the donors adjusted basis.

Appraisal Requirements

Qualified appraisals generally are required for non-cash gifts valued at more than $5,000 and closely held stock worth more than $10,000. No appraisal is required for gifts of publicly traded securities. The appraisal should be attached to IRS Form 8283. Form 8283 must be filed as substantiation and explanation for all non-cash gifts in excess of $500, even if no appraisal is required.


Charitable contributions of $250 or more (whether in cash or property) must be substantiated by a contemporaneous written acknowledgment of the contribution supplied by the charitable organization. Substantiation is not required if certain information is reported on a return filed by the charitable organization. In 2001, the IRS released guidance reminding donors of the substantiation requirements for claiming income tax charitable deductions for donations to charities providing disaster relief in the wake of the September 11, 2001 terrorist attacks.

The American Jobs Creation Act of 2004 provided strict new rules for charitable donations of patents and intellectual property and tightened rules for donations of used motor vehicles.

Source: Tax Facts, National Underwriter Company
Although this information has been gathered firm sources believed to be reliable, it cannot be guaranteed and the accuracy of the information should be independently verifies. Federal tax laws are complex and subject to change. As with all matters of tax and legal nature, you should consult with your tax and legal counsel for advice. Feliciano Financial Group and Lion Street Financial, LLC do not offer tax or legal advice.

College Panning

Achieving your financial goals requires a coordinated, integrated approach. Peace of mind is achieved from knowing that you have planned well. The sooner you start education fund planning the better, since education costs are rising rapidly and aid sources are diminishing.

Plan to Pay for Large Expenses

As the cost of a college education continues to skyrocket – even outpacing the annual inflation rate – planning is critical if you want to have the required funds available.  Whether you use the funds to finance a child’s education or for some other purpose, there are a few ways you can reduce your family’s tax bill.

Shifting income to a child to take advantage of the lower tax rates is one way to build your family’s wealth.  Special income tax rules apply to children under age 14, so you will need to plan carefully.

Watch Out for the “Kiddie” Tax

Children under age 18 pay tax at their parents’ highest bracket on the portion of their unearned income (for example, interest and dividends) that exceeds $1,700 (in 2007).  There are still some effective ways around this potential stumbling block:

  • Take Advantage of Lower Rates
    Even if your child’s income is not earned, the first $850 is tax free, and the tax rate on the next $850 of income is taxed at the child’s rate.
  • Choose Growth Instead of Income
    You can avoid the Kiddie tax if your child invests in growth stocks or growth mutual funds that pay low dividends.  As long as they are held until after the child turns 18, the capital gain is taxed at the child’s rate, not yours.
  • Consider Municipal Bonds
    Interest on these securities is federally tax exempt to owners of any age.  However, they generally do not offer an opportunity for growth with reasonable chance for earning more than the inflation rate.  Ownership of individual bonds may require coupon clipping, and there is the inconvenience of timing sales or redemptions.  Furthermore, bond income is relatively low.

Put Your Child to Work

If you own an unincorporated family business, hire your child.  The salary is a deductible business expense, and if your child is under age 18, you do not have to pay FICA tax on the amount.  The tax rate of the child at 10 or 15% is sure to be less than your own or the business’s.

This concept is called tax leverage – removing income taxed at a higher rate and causing it to be taxed at a low rate.

Use the Gift of Tax Exclusion

You can give up to $12,000 (2007) annually to any number of individuals without creating a gift tax liability.  If the gift is from you and your spouse – regardless of whose funds are used to make the gift – you can give up to $24,000 to each individual.

You should definitely consider a gift program if your children are 18 or older because their unearned income is not subject to the Kiddie tax.  Here are some other ideas about how you can make the most of your gifts:

  • Give your children property that is likely to appreciate in value.  Both the current value and any future appreciation would be removed from your estate.
  • If you plan to sell appreciated property, give it to a child age 18 or older.  The gain on the sale will then be taxed at the child’s lower rate.

Consider a Trust to Hold Gifts

If you are reluctant to make direct gifts to your children, you can still take advantage of the gift tax exclusion.  A qualified minor’s trust provides tax benefits and, at the same time, restricts your children’s access to the funds.

Grandchildren’s Education

If your grandchildren are in college, pay their tuition directly.  You remove the amount of the tuition from your estate, and you still have the flexibility to give each of them an additional $12,000 (2007) per year without gift tax consequences.

Paying for College

Start saving now to ensure that you will be able to pay for all or a share of your children’s education.

Today’s average annual cost for a 4 year, public college exceeds $12,000 while that of a private college averages more than $27,000 (college board average costs for 2007-2008) and those figures will probably grow at a faster rate than inflation.

One of the best calculators can be found on the web at  This calculator lets you choose:  tuition and expenses in today’s dollars; years of college; years until college; savings to date; amount you can save monthly; your savings interest rate; the expected inflation rate; your federal tax rate and your state tax rate.

For example, you’ll find that if your student’s college of choice costs $5,000 per year today, and you plan 4 years of college to start 10 years from now, you have no starting funds but you plan on saving $100 per month and realize 6% interest on the savings, and inflation, federal tax and state tax rates are 3%, 25% and 6% respectively, then:

Given inflation of 3.0%, the yearly cost of college in 10 years will be $6,747, the total cost over the 4 year period will be $28,243, and the total amount you’ll need to have saved when you start is $23,169.

Your current savings plan will provide $14,797. To accumulate $23,169 in 10 years you’ll need to:

  • Increase the amount you invest now to $5,565, or
  • Increase the monthly amount you invest to $146.
  • Earn a rate of return of 15.45%.

Pay Certain Expenses Directly

If you would like to make annual gifts to a child of more than $12,000, you may still be able to do so without negative gift tax consequences.  Tuition payments made directly to an educational institution do not count toward the $12,000 annual limit.

However, this exception does not apply to amounts paid for room and board or books.  Furthermore, if you pay the student instead of the school, none of the amount qualifies under this special rule, even if the money is used for tuition.

The same exclusion applies to payments made directly to providers of medical services – including medical insurance premiums.  If the expense is reimbursed by insurance, it does not qualify.

Withdrawals from Life Insurance

Older life insurance policies required that you surrender a life insurance policy, or make a loan, which would require that you make a non-deductible interest payment.

However, the newer form of life insurance, universal variable life, may contain a withdrawal privilege.  This enables you to make a tax-free withdrawal from the policy.  The amount that is withdrawn will no longer earn interest, but you will not have to pay any.  However, this advance is taken into consideration if the policy is surrendered.

For this reason, many people are now using variable universal life insurance as a funding vehicle for education.

Disqualification for Aid Programs

You should be aware that money in the name of a child, whether it was earned and saved, received from a relative or the result of an investment gain, may reduce aid qualification.  The formula mandated by Congress, and used by most schools (generally referred to as the Congressional Aid Formula) penalizes those students who have money.  This might prompt you to use life insurance or an annuity as the education investment, since these do not count negatively in the congressional formula.

Sources:  Tax Facts 2007, National Underwriter Company
Financial Planning Consultants, Inc.

Investment Planning

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Are you paying more than you should?
How smart tax strategies can affect your portfolio.

Because of today’s highly progressive Federal income tax structure, tax planning can be a meaningful way to increase your discretionary income.

Many of our expenses are fixed (i.e. food costs, mortgage or rent payments, insurance premiums, utilities, etc.) and can be adjusted only slightly.

On the other hand, the amount of tax you pay is very flexible and can often be reduced. Tax saving techniques can be broken down into four major groups:

  • Tax elimination
  • Tax reduction
  • Tax deferral
  • Tax shifting

Techniques that result in lowered taxable income, or in economic benefits that are not taxable, are perhaps the most desirable because they avoid taxes altogether.

In addition to the tax reducing incentives some investments produce, investments should also be analyzed from the standpoint of hedging inflation through conservation and appreciation of capital.

There are, of course, many investment vehicles ranging from high risk tax shelters to low risk bonds. The suggestions and recommendations in this section of a financial plan are normally tailored to fit your particular situation taking into account what best suits your needs, emotions, and risk tolerance.

Developing an Investment Portfolio

One of the most difficult tasks that individuals, and the financial advisors who advise them, face is choosing investments with characteristics that will help the individual meet his or her near and long term goals. While there are many courses that teach portfolio design, none can teach instinct and common sense. These two elements are frequently important factors in developing an investment strategy.

It is generally felt that there are five basic asset categories in an investment portfolio. These are:

  • Liquid Assets (Cash and Equivalents)
  • Fixed Income (Bonds)
  • Equities (Stocks)
  • Real Estate (residential and investment property)
  • Precious Metals and other tangible investments

Before allocating funds to each of these investment categories, it will be necessary to look first at the balance of the existing portfolio. Then, the actual percentage allocated to each category will depend on the person and his or her circumstances.

In assessing an individual’s circumstances, it is necessary to keep in mind certain asset characteristics. Assets are generally held for one of two reasons: personal use or production of current or future income. Since assets held for personal use are a matter of individual discretion, the focus is on those assets held for the production of current income or for potential appreciation.

The asset characteristics to remember are:

  • Taxability upon deposit, on income and at withdrawal
  • Level of Risk
  • Growth and inflation protection
  • Yield
  • Liquidity

Each of the asset categories listed earlier can be evaluated according to these characteristics in order to decide what role each should play in the final investment portfolio.

Because there is no single investment that possesses all of the above characteristics, a balanced investment portfolio will include a number of investment vehicles that together will contribute the needed characteristics. By spreading capital over many investments, an investor may be able to reduce the overall risk of the portfolio. Investment capital should be spread proportionally over several different investments and among several vehicles within an asset category. The result will hopefully be a portfolio that produces the sought-after investment results and helps the individual to achieve his or her goals and objectives.

A related decision that must be made is how a particular asset will be held. Stocks for example can be held individually or by investing in a mutual fund. Individually held stocks can be managed by the investor or by a professional portfolio manager. Real estate can be in the form of a limited partnership or individual properties. Many of these decisions depend on the degree of management and control the investor wishes to have.

Similar options are available for bonds, commodities and precious metals. Sometimes the choice of investment vehicle will depend on the amount of funds available.

Coordination with Retirement Plans

Many investors have over time developed substantial amounts of retirement assets. In developing an investment portfolio, these assets must be an integral part of the overall design. Current assets and retirement assets need to be considered together.

Sometimes assets that are considered suitable for the overall portfolio are better if held in a retirement vehicle.

When considering real estate limited partnerships, many investors object to their long term, illiquid nature. Given the long term nature of retirement plans, however, holding the asset in an IRA might overcome the illiquidity hurdle. An individual with 10 or more years to retirement could afford to hold the partnership for the period necessary to get the full economic benefits.

Investing involves risk, includes the loss of principal. No investment strategy can guarantee a profit or protects against loss. Any fixed income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. An issuer may default on payment of the principal or interest of a bond. Bonds are also subject to other types of risks such as call, credit, liquidity, interest rate, and general market risks.

Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication (including any attachments) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any tax-related matter.  Please contact us if you wish to have formal written advice on this matter.

Asset Allocation does not guarantee a profit or protect against a loss in a declining market.  It is a method used to help manage investment risk.

Private Family Foundations

A number of years ago, Vance Packard wrote a best selling book called “The Hidden Persuaders.” The book explored at length the reasons (usually subliminal) people buy certain products including, among other things, life insurance.

In the book, Packard quotes from a presentation by Edward Weiss entitled “Hidden Attitudes Toward Life Insurance.” Weiss was reporting on an in-depth study made by a number of psychologists assigned to study the question: “Why do people buy life insurance?”

One of the strongest appeals prompting a person to buy life insurance, the study found, is that it offers to the buyer, “The prospect of immortality through the perpetuation of his or her influence. It is not the prospect of physical death that is inconceivable – rather it is the prospect of obliteration.” People apparently cannot tolerate the thought of no longer being present – obliteration.

Charitable Application

Although Weiss’s observations pertain to the motivation for the purchase of life insurance, they have equal application for those who desire to perpetuate their influence through the use of charitable bequests or endowments. This is a method to which people increasingly turn to satisfy this “fierce desire to achieve immortality,” and to maintain one’s influence after death. This should not be interpreted as an indictment, but merely a natural human desire. It is rather nice to recognize that successful people want to leave behind something significant other than their progeny.

Certainly, paying large amounts in estate taxes does not satisfy one’s yearning for immortality. After all, have you ever heard of anyone being honored and acclaimed for the amount he or she paid in the form of estate taxes? The establishment of one’s own Private Family Foundations is one way of subsiding this urge for immortality.

Historical Perspective

We are all familiar with the large foundations set up by the Rockefellers, the Fords, the Carnegies, the Duponts and the Kennedys. Not many of us are in that league, however. So, what are the options available to the rest of us? For one thing, to set up one’s own private foundation not only calls for the amassing of a vast amount of wealth, but it can be a most costly proposition, both to set up and to administer on an ongoing basis. In addition, whereas donations made directly to qualified charities may generate income tax deductions of up to 50% of adjusted gross income in the first year, contributions to a private foundation permit deductions only up to 30% of adjusted gross income. On top of that, private foundations are subject to excise taxes on certain investments, plus a whole host of restrictions for the primary benefactor and family. A Private Family Foundations has some serious drawbacks. However, there exists an even better way of achieving these same objectives, without the costs and restrictions.

The Public / Private Solution

Although one may find a number of alternatives to the Private Family Foundations, perhaps the simplest and most cost effective way is to tie-in with a public community foundation. In this manner, you can to a large extent have your own “private foundation” under the larger community foundation umbrella.

The Tax Act of 1969 made the regulations of Private Family Foundations so burdensome that some 50,000 of them closed down. Many realigned themselves with a public community foundation, and not just because of the 50% versus 30% deductibility advantage. There are other advantages as well. For example, any unused deductions involving a gift to a community foundation may be carried forward for five years. Because it is considered a “non-public” charity, a gift to a Private Family Foundations may be carried forward and subject to the 30% limitation and there is a risk that not all the deduction may be claimed.

Family Direction

Under a “Donor Advised Fund” option available in most public community foundations, one can actually achieve greater benefits than with a private foundation, with significantly greater cost effectiveness. Through a local community foundation, for example, you may create such an account in your own or your family’s name, thus enjoying all the emotional and psychological benefits of a Private Family Foundations. To satisfy IRS requirements, you cannot control the Donor Advised Fund or its investments. You may make some recommendations as to disbursements, however, that the community foundation will usually honor.

After your death, other family members may continue to advise with regard to the disbursements. The community foundation provides the administration for such an account on an ongoing basis. While there may be no such thing as true immortality, setting up a Donor Advised Fund option through a community foundation could be the next best thing.

Although the information has been gathered from sources believed to be reliable, it cannot be guaranteed. Federal tax laws are complex and subject to change. This information is not intended to be a substitute for specific individualized tax or legal advice. Neither Feliciano Financial Group, nor Lion Street Financial, LLC, offer tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

Professional Specialties

As a professional, you need a specialist approach to help you manage your finances.

You’ve worked hard to reach your place in your profession. And with the demands of your profession comes unique financial  requirements.

That’s why Feliciano Financial works with various professionals to help them protect, grow and pass on their wealth.

With our Holistic Planning Approach, you can rely on an entire team of expert advisors to guide you through nearly every aspect of your finances.

If you fit into any of these special categories:

  • Athlete
  • Attorney
  • Dentist
  • Firefighter
  • Law Enforcement
  • Physician
  • Teacher
  • Veteran
  • Woman
Tax Planning

Tax planning and financial planning are closely related to each other because of the significant impact that taxes have upon your finances. Any investment made more attractive by the timing of the profit or the way it is taxed is a tax incentive investment.

Tax incentive investments are based on specific provisions. The tax law provisions enacted by Congress encourage investment capital to flow directly into the basic areas of our economy such as housing, petroleum, manufacturing and agriculture. In one sense, “tax incentive” means investing in vital industries in a way that permits you, rather than the companies you invest with, to keep the tax benefits, while retaining your opportunities for significant profits. As in the above quote by Judge Learned Hand, formerly of the New York Supreme Court, there is nothing illegal or immoral about tax incentive investments.

There are many forms of tax incentive investments. Municipal bonds and unit investment trusts provide tax-free income. Annuities, life insurance policies, IRAs, Keoghs and pensions, as well as oil and gas drilling, equipment leasing, research and development in various forms provide tax reduction through income tax deferral of taxation on the appreciation until the asset is liquidated.

Although an investor can structure an individual transaction, tax shelters are often structured as partnerships. There are two types of partnerships: a limited partnership and a general partnership. In a partnership, the value of the investment will be a blend between tax advantages and investment advantages depending on the objectives of the partnership.

Planning for Retirement

A secure, comfortable retirement is every worker’s dream. And now because we’re living longer, healthier lives, we can expect to spend more time in retirement than our parents and grandparents did. Achieving the dream of a secure, comfortable retirement is much easier when you plan your finances.

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Wealth Planning

5 Reason to Consider Wealth Planning

1. Managing Your Finances

It has been our experience that many busy people, no matter how well educated or financially sophisticated, don’t have the time or inclination to effectively manage their own financial affairs.

To prepare a financial plan with the same attention to detail as that of a professional advisor would just take too much time away from your personal life, occupation, business or civic responsibilities.

If your financial situation is being monitored by a financial advisor, you can be assured that your “financial house” is in order. Your time and attention can be focused on effective management of your business and pursuing your personal interests.

2. Creating a Comprehensive Plan to Help Achieve Your Financial Objectives

Many people have several advisors who provide advice only within their own area of expertise. For example, the broker may be an expert picking stocks and bonds, but without access to information concerning your total financial situation may not be able to provide the proper advice with respect to how to register those assets for estate planning purposes.

Your accountant may be doing an excellent job of tax preparation, but may not be able to help you re-position assets to reduce the following year’s taxes.

A professional financial advisor is certainly not intended to replace any of your existing advisors. However, by evaluating your total financial situation, they can coordinate strategies that do not interfere with any of your stated goals and objectives. By focusing on the whole, rather than on a part, this advisor can make recommendations that are consistent with your long-term financial strategy.

3. Monitoring Your Implementation

A financial plan that is not implemented becomes merely an educational experience. Your stated goals and objectives can never be met without putting the plan into action. Follow-through is critical!

A financial advisor will ensure that all phases of your plan are properly implemented by your selected agents, not only in terms of the types and categories of investments, but with respect to estate, tax, and retirement planning. All areas of risk assessment are important. Any area if overlooked could wipe out the rewards of years of work and saving.

4. Reviewing Frequently to Remain on Schedule

Your planning is a dynamic process and should be reviewed on a continuing basis to verify that your goals are being met and that you are remaining on your financial schedule. Since “nothing is as constant as change itself” your goals, attitudes toward financial risks and family circumstances will change.

Even if we as individuals were to remain the same, the financial world around us changes so frequently that constant monitoring is a necessary part of the planning process. The political, tax, legislative and economic changes increase in frequency.

The on-going review and reporting also holds the planning firm accountable to you—the client. Quarterly reviews also ensure that any necessary adjustments are made before it is too late.

5.Financial Confidence

Many people have expressed the sentiment that the planning process has made them much more comfortable with their financial situations—their financial questions and concerns have been resolved.

Dealing with a financial advisor will give you the confidence of knowing that your financial situations are being handled by a full-time professional who is dedicated to your financial needs and who is in constant pursuit of your goals.

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