May 2015


In our continuing effort to better serve our clients, we undertook the process of updating our website with the help of our marketing company, The Marketing Department Worldwide, West Chester, PA.  Our improved website is now live and we hope that you will find it more user friendly.

Why when you have an existing working website would you want to go through the time consuming process of updating? Here are some of the reasons as to why we decided to undertake this process.

  • Update the look of the website for aesthetic purposes – stay up to date with current design trends.
  • While Web applications serve personal needs and business functions almost in every area, the responsiveness and performance of Web applications is the key factor to their success.   Older designed websites may not have a way for users to easily generate content on their website, such as blog articles or FAQ’s.
  • Update the code and technology that powers the site. Older sites may contain flash (which google cannot read) or other types of outdated coding that makes it difficult for search engines to read.
  • Improve navigation (better user experience).

All of the above upgrades increase your Search Engine Optimization (SEO), and helps your business to be found online when people are searching. Our website is a representation of who we are and we want our visitors to have a beneficial experience.

Former New York City Mayor Ed Koch used to ask “How’m I doing?” In order to learn how our new website is doing I would appreciate your taking a few minutes to visit Should you have any comments, please email them to Your insights are valuable to our ability to continue to improve the website with you in mind. Thank you.

I hope you had an enjoyable Memorial Day weekend!

With best wishes,

Ira Brower

Inheritance Protection Plans

Thoughtful planning may create a lasting legacy.

Those who have built wealth during a lifetime of hard work are rightfully concerned about how best to use that wealth for family financial security.  As has been noted often, the wealthy want their heirs to have enough to be able to do anything, but not so much that they don’t have to do something. Now more than ever, a family fortune is something to be protected and nurtured.
What is the answer?  How can wealth be conserved and deployed on a long-term basis for the benefit of heirs?  Trusts could be the answer, for many families.
Trust planning comes immediately to mind when planning for a surviving spouse or an heir who is a minor. With a trust one gets professional investment management guided by fiduciary principles.  But what about when the children are fully grown, established in their careers and financially mature, in their 30s or even 40s?  Even then, trust-based planning will be an excellent idea for many affluent families.

Trust advantages

Among the key benefits that can be built into a trust-based wealth management plan:
            Professional investment managementA significant securities portfolio is a wonderful thing to have, but it requires serious care and attention, especially when economic growth is weak; interest rates are low; and taxes are uncertain. How can adequate income be provided to beneficiaries without putting capital at risk?  What is the best balance between stocks and bonds?
            Creditor protection. One of the most frequent questions that we hear is, “How can I keep my money and property out of the hands of my son-in-law (or, sometimes, my daughter-in-law)?” answer: Use a trust to own and manage the property, and give your heir the beneficial interest in the trust instead of the property.  A carefully designed trust plan can protect assets in divorce proceedings, as well as protect from improvident financial decisions by inexperienced beneficiaries.
            Future flexibility. Parents typically have a fuzzy definition for treating their children “equally.” As each child is unique, his or her needs may need financial support that is out of proportion to that of siblings.  By utilizing a trust for wealth management, one may give a trustee a similar level of discretion, permitting “equal treatment” on something other than gross dollar terms.  The trust document may identify the goals of the trust and provide standards for measuring how well the goals are being met for each of the beneficiaries.
We specialize in trusteeship and estate settlement. We are advocates for trust-based wealth management planning.  If you would like a “second opinion” about your estate planning, if you have questions about how trusts work and whether a trust might be right for you, we’re the ones you should turn to.  We’ll be happy to tell you more.

Trusts for children

Support trust For an adult child who needs a permanent source of financial support, with the trust principal protected from the claims of creditors, a support trust may provide a solution.  The beneficiary’s interest is limited to just so much of the income as is needed for his or her support, education and maintenance.
Discretionary trust The trustee has sole discretion over what to do with the income and principal, just as the grantor does before the trust is created.  The beneficiary has no interest in the trust that can be pledged or transferred.  When there are multiple beneficiaries, the trustee may weigh the needs of each in deciding how much trust income to distribute or reinvest, when to make principal distributions, and who should receive them.  The trust document often will include guidelines on such matters.
Gift-to-minors trust. For young children, contributions of up to $14,000 per year to this sort of trust will avoid gift taxes. Assets may be used for any purpose, including education funding, and will be counted as the child’s assets for financial aid purposes.  The assets of a gifts-to-minors trust must be made fully available to the child when he or she reaches age 21.  However, the child may be given the option of leaving the assets in further trust.

Excess IRA Contributions

In 2007 Michael and Christina Wu sold their home and each deposited $200,000 in an IRA to shelter the proceeds from further taxation.  IRAs are a good deal for taxpayers, but they aren’t that good.  The normal contribution limits for IRAs and Roth IRAs in 2015 is $5,500, plus an extra $1,000 “catch-up” contribution for those 50 and older.  One may “roll” money into an IRA from an employer’s qualified plan, such as a 401(k) plan, or from another IRA.  There is no dollar limit on such rollovers.  But there is no provision for rolling the proceeds of a home sale into an IRA.  Michael and Christina had each made an excess IRA contribution, which is subject to a 6% excise tax every year until they withdraw the excess from the IRA.
Despite the fact that the U.S. savings rate is generally thought to be too low, the problem of excess IRA contributions is rather large.  The Treasury Inspector General for Tax Administration (TIGTA) reported in March that 57,484 taxpayers without eligible compensation potentially made $125 million in the 2011 tax year.  That implies $7.5 million owed in excise taxes.
Some of the overfunding of IRAs appears deliberate.  TIGTA reported 2,585 cases of IRAs for children under age 10—IRA contributions are not allowed unless an individual has earned income.  So a contribution for a child actor is fine, but a contribution by a parent to give a child a head start on retirement is not.
Other funding errors may be inadvertent.  For example, taxpayers must take a required minimum distribution (RMD) every year once they reach age 70 ½ or pay a penalty tax.  Let’s say that someone in this position rolls the IRA from one financial institution into another before taking an RMD for the year.  That transfer is treated as a distribution, so the amount of the RMD also will be an excess contribution to the new IRA.  The penalty applies even if the RMD is taken later in the year.
One final note.  Contributions to traditional IRAs are not allowed for taxpayers who reach age 70 ½, even if they have earned income.  Therefore, any contribution by someone that age and up is an excess contribution.  Contributions to Roth IRAs are allowed at any age, provided the taxpayer has earned income.

Playing the Audit Lottery

Although government spending in general seems to be on an inevitable upward track, the funding for the IRS has been reduced in recent years.  The reduction stems in part from a Congressional belief that some IRS resources have been wasted in the past and, in part, by frustration over a lack of cooperation by the IRS with Congressional investigations into political bias at the agency.
Whatever the reason, the fact is that the head count at the IRS is down about 13,000 from its high water mark.  That has made it harder for taxpayers to get through to the IRS with their questions.  It also has meant a reduction in the number of audits that the IRS conducts.
In 2010 about 1.11% of all tax returns were audited, according to the IRS Data Book.  By 2014 just 0.83% were audited.  However, the decline in audit coverage was not spread evenly among all income categories, as shown in the table below.

What were the odds of an audit in 2014 (individual income tax)?

Adjusted gross income Percentage of returns Percentage audited in 2014 Percentage audited in 2010
No adjusted gross income 1.83 5.26 3.19
$1 under $25,000 39.08 0.93 1.18
$25,000 under $50,000 23.32 0.54 0.73
$50,000 under $75,000 13.12 0.53 0.78
$75,000 under $100,000 8.33 0.52 0.64
$100,000 under $200,000 10.70 0.65 0.71
$200,000 under $500,000 2.87 1.75 1.92
$500,000 under $1,000,000 0.48 3.62 3.37
$1,000,000 under $5,000,000 0.24 6.21 6.67
$5,000,000 under $10,000,000 0.02 10.53 11.55
$10,000,000 or more 0.01 16.22 18.38

Source: IRS Data Books for 2014 and 2010; M.A. Co.

If you reported no adjusted gross income, your chances of being audited shot up 60% from 2010 to 2014.  The $500,000 to $1,000,000 group also experienced an increased audit rate.  All other income levels had declining coverage rates, ranging from down 32% for the $50,000 to $75,000 bracket to down 8.4% for the $100,000 to $200,000 group.
The higher your income, the greater your chances of being audited are.  That’s where the money is.  Additional taxes of $33 billion were assessed through audits, of which $3 billion came from individual returns with $1 million or more of positive income.

Leave a reply

Your email address will not be published. Required fields are marked *