Strategies to Strengthen the Accountant/Attorney Team

advisory teamCasey Stengel once said, “Finding good players is easy. Getting them to play as a team is another story.” In my 30 years of practice, I have found that to be true for the client/advisor team too, since the advisors are, understandably, focused on their own jobs, their own responsibilities, and they all have their own relationships and methods of communication with the client.

However, the client and the client’s team of advisors are best-served if the advisors work well together. The client would receive consistent, more integrated advice and communication, and the advisors could potentially generate more work from that client and from their deepened relationships with each other.

Based on my experience working with accountants in many client situations, the most successful accountant/attorney client teams have these five essential characteristics:

  1. Trust and respect. Each advisor has unique skills and expertise and should be respected for his/her contribution to the common effort. When problems do occur, the client’s best interests are best served if concerns or mistakes can be raised and addressed openly and honestly without posturing and finger-pointing. Most families start with one key advisor who has “grown up” with them. That advisor has been there through difficult financial times, during family crises, and may even have been the first person that a troubled family member turned to for help. The value of the legacy advisor is that he is trusted by all and has a proven history of acting in the family’s best interest, not his own. One can’t put a price tag on that level of trust and loyalty.
     
    That does not mean, however, that the trusted advisor can or should continue to play all of his historical roles. When it becomes necessary to bring in specialized professionals, transitioning to other advisors does not have to be awkward. When the trusted advisor is assured of his continued importance, role, and compensation, the pathway to transition can be easy.
  2.  

  3. Open communication and conversation. Advisors must feel comfortable enough with each other (and have the client’s permission) to openly communicate ideas and strategies. They also need to be able to speak freely and to share their insight with the team. For example, the accountant may know that the son of the family business owner client is having financial difficulties, and that the client is concerned about a possible divorce – important information for the estate planner and/or corporate lawyer. Over the years I have seen many problems occur when families block that contact – either because they don’t want to pay to have the advisors speak to each other or because they don’t want the team to have full comprehension of what is going on. Sometimes the problems are significant; sometimes they remain dormant because the issues are not brought forward; and sometimes the problems are just missed opportunities. And missed opportunities can cost as much as mistakes.
  4.  

  5. Keen understanding of their respective roles. The key to a successful collaboration is to leave your respective egos at the door. Each advisor brings something different to the table, so it’s important to understand what role each team member plays. If someone on the team is a “weak link,” that will eventually become clear. If that person happens to be the longtime trusted family advisor, do not move to replace him or her. A strong and effective team will shore up any weaknesses and find a way to get results. Over time, that advisor’s role may diminish (but not evaporate), and other advisors can be brought in. Building and maintaining an effective advisory team is an ongoing process, not a static snapshot.
  6.  

  7. Billing the client. Communicating as a team and acting together in the client’s best interest certainly sounds like a good idea – in theory. But in reality, how will the client feel about all that communication once the bill arrives? That is why the team and the client must first agree on a billing process. When the team of advisors has a comfortable working relationship, they will learn that some conversations will occur whether or not a bill is paid. Another option I have seen is to create a standard monthly or quarterly billing arrangement that is not based on time, but instead takes into account any and all cross communication.
  8.  

  9. Importance of reciprocity in client referrals. Advisors who are fee-based are paid for the time they put into an engagement. Part of creating an effective advisory team is understanding that the more the team works together, the more they learn from each other, the stronger their relationships become, and the better their clients are served. When advisors work together on several key client relationships there is also more tolerance for unbilled communications, as they know that they are making a profit on the totality of their experiences and the collective results – and that those engagements will ultimately lead to additional business.
     
    Trust, respect, open communications, and reciprocity are the hallmarks of good teamwork, and client advisor teams that include these characteristics will likely find success. As James Cash Penney once said, “The best teamwork comes from men who are working independently toward one goal in unison.”

 

Patricia Anninois a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, Filed Under: Financial Planning Tips Tagged With:

Family Business Magazine Reviews “It’s More Than Money – Protect Your Legacy”

Its More Than Money CoverI am pleased to announce that the January/February issue of Family Business Magazine (http://familybusinessmagazine.com/) includes a wonderful review of my latest book, “It’s More Than Money – Protect Your Legacy”.

Written by Barbara Spector, it indicates, “The book also presents advice on risk mitigation, including strategies for protecting the family’s reputation on social media, questions to consider when deciding whether to make gifts to heirs, and the advantages of prenuptial agreements. In addition, the book offers information on achieving philanthropic goals.”

She really got the essence of exactly why I wrote the book. Click here to read the entire review!

What You Need to Know Before Donating Art

By Daniel Grant

Your Name on a Plaque Is Nice, but It Might Cost You More Than You Think

For investors thinking about donating art, the most important thing to know is this: It isn’t as simple as…donating scales image, appraised valueart.

The benefits of a donation are clear. The owners may have a fondness for a particular museum or university they have in mind as a recipient, for instance. And the ego gratification is powerful.

“There’s a legacy involved,” says Ralph Lerner, founder of Art World Advisors, which helps collectors determine what to do with their art. “You get your name on a plaque on the wall. You can take your grandchildren to the museum to show them the plaque.”

But ego aside, donors have a lot of factors to consider before making a decision. Among them: Selling may bring them far more money than they can save with a tax break for their donation. If they donate, the tax break varies depending on who the donation goes to and what the recipient does with it. And the recipient may have very different ideas from the donor’s about how the art will be displayed.

Running the Numbers

First, investors need to be aware of the difference, for their finances, between selling and donating. Peter Jason Riley, a certified public accountant in Newburyport, Mass., ran the numbers for a hypothetical U.S. taxpayer with an adjusted gross income of $500,000 who owns a painting appraised at $100,000 that she had purchased for $20,000.

What happens if she donates the painting? For donations of art, owners generally can claim a federal tax deduction of up to 30% of their adjusted gross income each year, making the limit in this case $150,000. So donating the painting to a qualifying museum would permit this owner a deduction in the current tax year of $100,000, assuming she hasn’t made other art donations totaling more than $50,000. (If donations in a given year exceed the limit for deductions, the overage can be deducted in following years, up to five if necessary, with the 30% limit applying each year.)

That means the tax benefit this year for the donor in this case would be $41,118, according to Mr. Riley.

If the painting was sold for the appraised value of $100,000, assuming a typical 15% sales commission to an auction house or art gallery, the seller would owe $31,372 in capital-gains tax, resulting in a net profit of $53,628, Mr. Riley says.

So the owner would end up $12,510 better off by selling than by donating. That doesn’t take into account the cost of an appraisal—typically $1,000 to $3,000—which isn’t always necessary for a sale but would be required in this case before the artwork was donated. The Internal Revenue Service requires an appraisal for donations of property over $20,000.

Selling won’t always be better financially. For one thing, selling might net far less than the appraised value of a piece of art. But this is an exercise owners should work through to get a sense of what they might be sacrificing by donating.

How Much of a Deduction?

Art owners also should be aware that their tax break for a donation will depend on several factors. In some cases, donors can claim a tax deduction based on the appraised value of the art. But in others the deduction is based on the price the donor paid for the art, which can be much lower than the appraised value.

One factor: The donor’s deduction can only be based on the appraised value of the art if the recipient qualifies as a public tax-exempt organization. If the recipient is a private tax-exempt organization, the deduction is based on the price the donor paid.

A public tax-exempt organization is one that receives at least one-third of its support from the general public; museums, universities and other schools, hospitals and churches are among the institutions that generally qualify. A private tax-exempt organization doesn’t rely on funding from the public. The Ford Foundation is one prominent example, and there are many private foundations funded by wealthy individuals.

But that’s not the only distinction the IRS makes. A deduction can’t be based on the appraised value of the art unless the donation is related to the recipient’s mission. Few recipients except museums are likely to pass that test. For donations to recipients that fail that test, the deduction is based on what the donor paid for the art.

Donations that clear both those hurdles face another one. If the recipient sells the art within three years, the amount deductible by the donor reverts to the purchase price instead of the appraised value—potentially leaving the donor with a bill for back taxes.

One other tax-related issue for those who deduct the appraised value of a donation: The IRS subjects appraisals to review by its Art Advisory Panel, which is composed of art dealers and museum curators. And the panel often makes substantial adjustments to appraisals.

Taxpayers may be subject to substantial penalties if the IRS finds that the donated items are significantly overvalued, so it’s imperative that the appraiser has a legitimate basis for arriving at a valuation, such as comparable sales.

Donation Negotiations

Finally, it isn’t only the IRS that can take some of the fun out of a donation. Recipients can be prickly about how the art will be displayed—or even if it will be at all.

In this case, though, donors have some leverage. Art experts encourage donors to negotiate the terms for their gifts before turning over the art. For instance, the donor might demand that the art be on display for at least three months every three years—or on permanent display.

Or in the case of multiple works being donated, owners might demand that the art be given a special exhibition and be written up in a catalog, and that the pieces must be kept together and none of them can be sold. A donor can also demand perks like free lifetime membership at the highest level for family members.

If a potential recipient balks at a donor’s terms, the owner can look for a more pliable recipient. But donors who have their hearts set on the most prominent institutions as recipients should expect less flexibility.

“I encourage people to donate to universities and smaller museums,” says Susan Brundage, director of appraisal services at the Art Dealers Association of America. “They are thrilled to get something that might be seen as minor by the Met or the Modern or the Whitney. Those larger museums will only put most donations in their basements, never to see the light of day.”

And no plaque for the grandchildren to see.

Source: WSJ.com – Mr. Grant is a writer living in Amherst, Mass. He can be reached at reports@wsj.com.

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

The Way-Early ‘529’ Gift

Grandparents Can Start a College-Savings Plan Before a Baby Is Born

By Peter S. Green

Photo illustration by John Weber

So you just threw your daughter a big wedding. Now comes the not-so-obvious next step: setting up “529” plans for estate planning, estate planning tips,the future grandchildren.

If that seems like rushing things, think again. With the average four-year price of a private college nearing $165,000 and rising 3.7% a year, anxious families are looking at lots of strategies for helping future grandchildren get a college education. One strategy is to open a 529 college-savings plan and have it start growing years before the future student is even born.

After all, anyone can start a 529, which is funded with after-tax income; the fund’s earnings and principal will be untaxed as long as the money goes to expenses that qualify as higher education. It makes particular sense for older parents with adult children to open a 529, as it helps get the savings ball rolling early. Moreover, if they later transfer ownership of the account to their grown children, both generations can benefit from some gift-tax exemptions.

Benefit Keeps on Giving

Jim Holtzman of Legend Financial Advisors in Pittsburgh explains: If a future grandparent starts a 529 whose beneficiary is the future parent, the grandparent can contribute tax-free up to $70,000—five years’ worth of contributions at $14,000 a year—or up to $140,000 for two grandparents. When an infant arrives with his or her own Social Security number, the parents—or the grandparents who still own the account—can designate the newborn as the beneficiary. Such transfers will likely avoid taxes, though they will eat into the donor’s lifetime gift allowance of $5.34 million.

In addition to increasing the amount of giving both sets of parents can do without owing gift tax, this can help wealthier grandparents reduce their estate below taxable level, particularly in states such as New York and Pennsylvania, where state estate-tax exemptions are far lower than the 2014 federal level, also $5.34 million.

Grandparents and parents can be tempted to maintain ownership of the account to help keep Junior on the straight and narrow. “The advantage of using a 529 is that the account-owner retains control, so when the kid graduates from high school, she’s not going to buy a Harley,” says Nancy Farmer, chief executive of the Tuition Plan Consortium, a group of 277 colleges in 39 states that lets parents (and grandparents) prepay tuition.

But if grandparents hang on to a 529 account, it can hurt a student’s eligibility for aid. Distributions from a parent-owned or custodial 529 reduce federal financial aid by just over 5% of the distributed amount. But distributions from a grandparent-owned 529 can reduce eligibility by half the distributed amount, says Mark Kantrowitz, publisher of Edvisors.com, a website advising on funding college education.

And while grandparents’ assets aren’t considered in aid decisions by state schools, they do figure in some private-college aid grants, says Maura Griffin, a principal of Blue Spark Capital Advisors in New York.

Five Years Ahead?

When is the right time for prospective grandparents to act? Right now, says Cameron Casey, an estate-planning lawyer with Ropes & Grey in Boston. Waiting until a grandchild is born to start a 529 for them can mean years of lost earnings potential.

A 529 plan started with the maximum $14,000 initial gift, five years before a child is born, funded with $500 every month and earning interest at 3% compounded monthly, would yield $226,784 by the child’s 18th birthday. The same plan started at birth would yield $167,336.

Of course, the future is unpredictable. If a future grandparent thinks he or she may not live to see a grandchild’s birth, a will can provide for an executor or trustee to carry out 529 plans using assets in a revocable trust.

For grandparents concerned about what to do if the grandchild doesn’t go to college or has sudden medical needs, a special trust might be a better vehicle, says Ms. Casey, as it will allow more flexibility. Using a 529’s funds for something besides higher education will trigger a 10% penalty and make the earnings taxable.

If no grandchild ever arrives, it can be possible to reassign the account to a close relative without owing taxes or penalty.

Source: WSJ.com   http://online.wsj.com/articles/grandparents-can-make-early-529-gifts-1415048467

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Getting to Win/Win: Strategies to Strengthen the Accountant/Attorney Team

Casey Stengel once said, “Finding good players is easy. Getting them to play as a team is another story.” In my financial information, advisory team, effective advisory team30 years of practice, I have found that to be true for the client/advisor team too, since the advisors are, understandably, focused on their own jobs, their own responsibilities, and they all have their own relationships and methods of communication with the client.

However, the client and the client’s team of advisors are best served if the advisors work well together. The client would receive consistent, more integrated advice and communication, and the advisors could potentially generate more work from that client and from their deepened relationships with each other.

Based on my experience working with accountants in many client situations, the most successful accountant/attorney client teams have these five essential characteristics:

1. Trust and respect. Each advisor has unique skills and expertise and should be respected for his/her contribution to the common effort. When problems do occur, the client’s best interests are best served if concerns or mistakes can be raised and addressed openly and honestly without posturing and finger-pointing. Most families start with one key advisor who has “grown up” with them. That advisor has been there through difficult financial times, during family crises, and may even have been the first person that a troubled family member turned to for help. The value of the legacy advisor is that he is trusted by all and has a proven history of acting in the family’s best interest, not his own. One can’t put a price tag on that level of trust and loyalty.
 
That does not mean, however, that the trusted advisor can or should continue to play all of his historical roles. When it becomes necessary to bring in specialized professionals, transitioning to other advisors does not have to be awkward. When the trusted advisor is assured of his continued importance, role, and compensation, the pathway to transition can be easy.
 
2. Open communication and conversation. Advisors must feel comfortable enough with each other (and have the client’s permission) to openly communicate ideas and strategies. They also need to be able to speak freely and to share their insight with the team. For example, the accountant may know that the son of the family business owner client is having financial difficulties, and that the client is concerned about a possible divorce – important information for the estate planner and/or corporate lawyer. Over the years I have seen many problems occur when families block that contact – either because they don’t want to pay to have the advisors speak to each other or because they don’t want the team to have full comprehension of what is going on. Sometimes the problems are significant; sometimes they remain dormant because the issues are not brought forward; and sometimes the problems are just missed opportunities. And missed opportunities can cost as much as mistakes.
 
3. Keen understanding of their respective roles. The key to a successful collaboration is to leave your respective egos at the door. Each advisor brings something different to the table, so it’s important to understand what role each team member plays. If someone on the team is a “weak link,” that will eventually become clear. If that person happens to be the longtime trusted family advisor, do not move to replace him or her. A strong and effective team will shore up any weaknesses and find a way to get results. Over time, that advisor’s role may diminish (but not evaporate), and other advisors can be brought in. Building and maintaining an effective advisory team is an ongoing process, not a static snapshot.

 
4. Billing the client. Communicating as a team and acting together in the client’s best interest certainly sounds like a good idea – in theory. But in reality, how will the client feel about all that communication once the bill arrives? That is why the team and the client must first agree on a billing process. When the team of advisors has a comfortable working relationship, they will learn that some conversations will occur whether or not a bill is paid. Another option I have seen is to create a standard monthly or quarterly billing arrangement that is not based on time, but instead takes into account any and all cross communication.
 
5. Importance of reciprocity in client referrals. Advisors who are fee-based are paid for the time they put into an engagement. Part of creating an effective advisory team is understanding that the more the team works together, the more they learn from each other, the stronger their relationships become, and the better their clients are served. When advisors work together on several key client relationships there is also more tolerance for unbilled communications, as they know that they are making a profit on the totality of their experiences and the collective results – and that those engagements will ultimately lead to additional business.
 
Trust, respect, open communications, and reciprocity are the hallmarks of good teamwork, and client advisor teams that include these characteristics will likely find success. As James Cash Penney once said, “The best teamwork comes from men who are working independently toward one goal in unison.”

Teaching Your Children About Wealth

Families are using limited liability companies to transfer assets between generations.

By Liz Moyer

Do you need a family limited liability company, like Bill Gates? Reuters family investment, Image of Bill Gates

Wealthy families are increasingly turning to family limited liability companies to minimize taxes and transfer assets between generations.

The strategy helps provide hands-on investment education for the younger generation without forcing older family members to cede control and offers other benefits.

Advisers to high-net-worth families say the LLC arrangement is gaining popularity as older generations in North America prepare to transfer an estimated $30 trillion in assets to heirs in the coming decades, according to the consulting firm Accenture.

The growing interest among the wealthy in education and financial literacy since the financial crisis has made LLCs more popular, says Linda Beerman, head of wealth strategies at Atlantic Trust, Canadian Imperial Bank of Commerce’s CM -2.13% U.S. wealth-management arm, which has $24 billion under management and manages family LLCs for some of its clients.

Typically, an older-generation member—who acts as the managing partner—forms an LLC to create a family investment pool using assets such as commercial property, vacant land, a family business or an investment portfolio. The managing partner can make gifts of limited-partnership interests directly to other family members, such as children and grandchildren, or to their trusts. In some cases, family members can buy shares in the LLC.
The managing partner retains control of the assets, but the limited partners get to observe how investment decisions are made and, in some cases, help establish the investment mission.

The assets inside the LLC are protected from creditors, including divorcing spouses, which has made them popular with families that own their own businesses, lawyers said.

“It’s seen by the kids as graduating into the family,” Ms. Beerman says. “It gives them a sense of ownership.”

The booming markets of the past few years have made them popular for another reason, experts say. Because the limited shares in an LLC are minority interests, the value of the assets that are transferred into the LLC can be discounted from their fair-market value for tax purposes.

Such discounts typically range from 15% to 25%, and can go as high as 30%. For example, consider an asset with a $1 million fair-market value. Inside an LLC, that asset would be less valuable because multiple owners have minority stakes but no control. If it was valued at 25% below its fair-market value, its taxable value would be $750,000.

Rising markets have motivated families to lock in those lower valuations, says Richard Baum, a partner at accounting firm Anchin Block & Anchin in New York. That way, he says, “you can pass wealth to the next generation using the lowest possible value.”

One famous example of a family LLC is Bill Gates’s Cascade Investment LLC, which is based in Kirkland, Wash., and manages a portion of the Gates family money.

There are some drawbacks, estate lawyers and advisers say. To avoid scrutiny by the Internal Revenue Service, a family LLC needs to serve a legitimate business purpose.

That can include managing commercial property or a family’s investment portfolio, but not other holdings, such as a vacation home that is used by the family. The LLC interest holders must meet regularly, maintain current state filings and keep detailed records of income, expenses, contributions and distributions.

Families can use an LLC to buy and hold stakes in exclusive investments such as timberland or private-equity funds. Conversely, a family with its own business can set up an LLC to diversify its investments. The LLC also could be set up to forbid family members from selling their stakes unless everyone agrees or require a certain percentage of shareholders to agree to investment decisions.

In some cases, families are setting up these companies to pool their assets so they can qualify for the most exclusive private-banking services at firms such as J.P. Morgan Chase, JPM -0.27% Goldman Sachs Group GS -0.58% and UBS, UBS -0.54% says Jonathan Forster, a lawyer at Greenberg Traurig in McLean, Va., who has set up family limited liability companies for clients with at least $30 million of assets.

“People are using these structures more because they are using more sophisticated investments,” Mr. Forster says. “They’re not just buying stocks and bonds. They’re buying commercial real estate or private company stakes.”
Source: The Wall Street Journal – wsj.com Write to Liz Moyer at liz.moyer@wsj.com

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon

By GRAHAM BOWLEY and PATRICIA COHEN APRIL 12, 2014

Francis Bacon’s “Three Studies of Lucian Freud,” one of the most expensive works ever sold at tax break, portland museum, schnitzer museum, hspace=auction, was lent to the Portland Art Museum. Credit Leah Nash for The New York Times

EUGENE, Ore. — The Jordan Schnitzer Museum of Art, tucked into a quiet corner of a college campus here in the hills of the Pacific Northwest, is hardly the epicenter of the art world. Yet major collectors, fresh from buying a Warhol or a Basquiat or another masterpiece in New York, routinely choose this small, elegant redbrick building at the University of Oregon to first exhibit their latest trophy.

The museum’s intimacy and scholarship are likely to play some role in their choice. But a primary lure for the collectors is often something more prosaic: a tax break.

Collectors who buy art in one state but live in another can owe thousands, tens of thousands, even millions of dollars in state “use taxes”: taxes often incurred when someone ships an out-of-state purchase home. But if they lend the recently purchased work first to museums like the Schnitzer, located in a handful of tax-friendly states, the transaction is often tax-free.

Beyond the benefit to museums, this lucrative, little-known tax maneuver has produced a startling pipeline of art moving across the United States as collectors cleverly — and legally — exploit the tax codes.

Dozens of important works have come to the Schnitzer in recent years, largely because of the tax break, museum officials believe — so many that the museum has a program called “Masterworks on Loan”; the featured works are housed in a second-floor gallery.

Similar loans — which rarely extend beyond a few months — also flow into other museums in Oregon, and occasionally New Hampshire and Delaware, all states that have neither a sales nor a use tax.
The Portland Art Museum, for example, has a long history of receiving art loans from collectors, including, most recently, Francis Bacon’s triptych “Three Studies of Lucian Freud,” one of the most expensive paintings ever sold at auction.

Portland officials say collectors lend art for a variety of reasons, not just for the tax break. But only a few weeks after the painting sold for a stunning $142 million last fall at Christie’s in New York, it landed, to the surprise of many, in the Portland museum, where it drew large crowds for 15 weeks.

By shipping the painting first to Oregon, instead of her home in Las Vegas, the new owner, Elaine Wynn, may be eligible to avoid as much as $11 million in Nevada use taxes, though it is not clear whether she intends to take advantage of the break.

Collectors typically learn of this strategy only through savvy lawyers, dealers and auction specialists. But within the circle of people who know of the practice, it generates debate between those who appreciate how it fosters public access to art and those who suggest that such access comes at too high a price to unwitting taxpayers.

For example, do taxpayers in, say, California even understand that they have given up millions of dollars in tax revenue over the years to, in effect, underwrite the display of paintings in other states?

“Some states are going to become aware of this and realize what potential revenue they are missing under the current laws,” said Steven Thomas, a lawyer in Los Angeles who advises art collectors on tax matters.

Supporters defend the practice as an important way to ensure public access to significant art before it disappears into private collections. Robert Storr, the dean of the Yale School of Art, described it as a “great resource” for museums. At the Schnitzer, a teaching museum, curators and members of the faculty use the loans in their programs.

“The two museums, the Portland Art Museum and the Jordan Schnitzer Museum of Art, are the beneficiaries of getting amazing works of art that they would not get,” said Jordan Schnitzer, a businessman and collector who donated millions of dollars to the Eugene museum that bears his name and served on the board of the Portland museum.

But critics of the practice also question whether museums curry favor with possible donors by accepting loans, and they complain that works are sometimes exhibited without the context or curatorial judgment that museums traditionally provide. A recent visit to the Portland museum found some lent works exhibited haphazardly: a Cubist work from the 1950s, for example, placed amid American art from the 1980s.

“It is an amazing opportunity for these smaller cities to show these works,” said Mack McFarland, a curator at the Pacific Northwest College of Art, in Portland. “But one does have to wonder, doing a cost-benefit analysis on a more global scale, whether or not the tax break for these wealthy collectors is worth it.”

States employ use taxes to compensate for residents who avoid sales taxes by shopping in another state. The tax rate is generally the same as the sales tax, and people are supposed to calculate what they owe on items bought out of state, then pay that amount as part of their tax filings.

Art collectors who seek to avoid the tax typically offer a recently purchased work to a museum in one of five states — New Hampshire, Oregon, Alaska, Montana and Delaware — that do not have a use tax so that the loan does not incur a tax.

As long as the painting stays at the museum for an extended period, typically more than three months, before being shipped home, the practice in several states where collectors live, like California, is to regard the exhibition as a first “use” of the item and waive any tax. The result is a tax-free transaction.

The Hallie Ford Museum of Art at Willamette University in Salem, Ore.; the Delaware Art Museum in Wilmington; and the Hood Museum of Art at Dartmouth College in Hanover, N.H., are among other institutions where collectors have lent art because of tax considerations.

The tax strategy is 100 percent legal, experts say, as long as all stages of the museum transfer are handled correctly.

Schnitzer officials said that many California collectors had taken advantage of the tax provision. “We are on their way home,” said Jill Hartz, the executive director of the museum.

California explicitly outlines a “first use” exemption in its tax code. It says that property, whether a couch or a Caravaggio, that is first “used” out of state for more than 90 days does not incur the tax.

Jill Hartz of the Jordan Schnitzer Museum of Art in Eugene, Ore., said art loans have aided its educational mission. (It is unclear if the owners of the works shown lent them for the tax considerations.) Credit Leah Nash for The New York Times

Experts said that for many years it was known in art circles as the “Norton Simon rule,” because Mr. Simon, an industrialist who died in 1993, was one of the first art collectors to make ample use of it with loans to several museums like the Portland Art Museum.

States have no reliable calculus to measure what sort of tax revenue is being lost. But in a recent example, a California collector is eligible to save at least $390,000 by employing the tactic.

The collector bought a painting, “Ribs Ribs,” by Jean-Michel Basquiat, at auction in New York last year for $5.2 million. Since the painting was being shipped out of state, the new owner was not liable for the New York sales tax.

But the buyer would still have owed use taxes in California (which range from 7.5 percent to 10 percent of a sale price), had the work been sent directly there. Instead, the Basquiat went to the Schnitzer, a detour that meant that the collector was eligible for the first-use exemption, according to the dealer involved in the transaction.

“It is one thing if you are buying a pair of shoes or pots and pans,” said Anne-Marie Rhodes, a Loyola University Chicago law professor, “but in these times, when regular taxpayers have it so difficult, to have such an easy way to avoid the use tax is hard to justify.”

Collectors who live in states that don’t recognize a first-use exemption are out of luck. New York, for example, typically imposes a use tax — 8.875 percent in Manhattan — on art brought into the state by a resident, even if it is first publicly displayed elsewhere.

Collectors, of course, routinely lend to museums for reasons that have nothing to do with a tax break. They want to educate the public, perhaps, or seek advice on conserving a work.

Andrew Teufel, a San Francisco private investor and collector who has lent many works without any tax consideration, said he lent one work, a Kay Sage painting now at the Schnitzer, that will qualify for the tax break. But he said he primarily lends art to enrich others, as well as to bolster its provenance and value.

“The tax preference is the icing on the cake,” he said.

Jerry Kohl, a California businessman, took the tax break when he lent a Warhol to the Schnitzer two years ago. But he said he would have made the loan even without any tax consideration. Still, he said, he thinks the tax code should be tightened.

“The provision should require owners to lend a work out at least every five years instead of just once,” he said.

In Portland, the use of the tax break took off in the 1990s, when the museum’s executive director was John E. Buchanan Jr., according to his widow, Lucy Buchanan. She said he built relationships with West Coast collectors whose loans helped the museum raise its profile.

In those years, questions arose about the sudden arrivals of unannounced loans, which were disruptive to the museum, said Kristy Edmunds, a former curator there who is now the executive and artistic director of the Center for the Art of Performance at the University of California, Los Angeles.
“Crates would land on the loading deck,” she said, “and everyone would be calling up, ‘What is in this shipment?’ ”

Current Portland museum officials said they did not promote the tax break. But they acknowledged that they had had to initiate a policy to deal with unsolicited offers for short-term loans that says that they must be approved by the director, and others, to ensure that the art meets the museum’s standards.

Ms. Wynn, the ex-wife of the casino magnate Steve Wynn, declined to respond to requests to detail her tax plans for the Bacon triptych, which was on display in Portland until last week. Museum officials said that they knew nothing about them.

They said the triptych came to the museum because the museum’s chief curator, Bruce Guenther, reached out to the owner shortly after the sale. (Museum officials have not identified the owner of the triptych, but art world sources have named Ms. Wynn.)

The museum said that tax considerations were not part of the discussions and that the owner had been impressed by the museum’s commitment to display the work prominently.

Brian Ferriso, the Portland Art Museum’s director, said his institution insisted in most cases that a work of art be lent for at least 120 days, not 90, to give it greater public exposure but also to avoid any appearance that its program exists purely to fit the prerequisites of the California tax provision.

“We want to be seen as an institution that is putting art on the wall in a transparent fashion,” he said.

Robin Pogrebin and Carol Vogel contributed reporting from New York.
A version of this article appears in print on April 13, 2014, on page A1 of the New York edition with the headline: Buyers Find Tax Break on Art: Let It Hang Awhile in Oregon. Order Reprints|Today’s Paper|Subscribe

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Strategies to Strengthen the Accountant/Attorney Team

Peter Brown, BeatlesCasey Stengel once said, “Finding good players is easy. Getting them to play as a team is another story.” In my 30 years of practice, I have found that to be true for the client/advisor team too, since the advisors are, understandably, focused on their own jobs, their own responsibilities, and they all have their own relationships and methods of communication with the client.

However, the client and the client’s team of advisors are best-served if the advisors work well together. The client would receive consistent, more integrated advice and communication, and the advisors could potentially generate more work from that client and from their deepened relationships with each other.

Based on my experience working with accountants in many client situations, the most successful accountant/attorney client teams have these five essential characteristics:

  1. Trust and respect. Each advisor has unique skills and expertise and should be respected for his/her contribution to the common effort. When problems do occur, the client’s best interests are best served if concerns or mistakes can be raised and addressed openly and honestly without posturing and finger-pointing. Most families start with one key advisor who has “grown up” with them. That advisor has been there through difficult financial times, during family crises, and may even have been the first person that a troubled family member turned to for help. The value of the legacy advisor is that he is trusted by all and has a proven history of acting in the family’s best interest, not his own. One can’t put a price tag on that level of trust and loyalty.
     
    That does not mean, however, that the trusted advisor can or should continue to play all of his historical roles. When it becomes necessary to bring in specialized professionals, transitioning to other advisors does not have to be awkward. When the trusted advisor is assured of his continued importance, role, and compensation, the pathway to transition can be easy.
  2.  

  3. Open communication and conversation. Advisors must feel comfortable enough with each other (and have the client’s permission) to openly communicate ideas and strategies. They also need to be able to speak freely and to share their insight with the team. For example, the accountant may know that the son of the family business owner client is having financial difficulties, and that the client is concerned about a possible divorce – important information for the estate planner and/or corporate lawyer. Over the years I have seen many problems occur when families block that contact – either because they don’t want to pay to have the advisors speak to each other or because they don’t want the team to have full comprehension of what is going on. Sometimes the problems are significant; sometimes they remain dormant because the issues are not brought forward; and sometimes the problems are just missed opportunities. And missed opportunities can cost as much as mistakes.
  4.  

  5. Keen understanding of their respective roles. The key to a successful collaboration is to leave your respective egos at the door. Each advisor brings something different to the table, so it’s important to understand what role each team member plays. If someone on the team is a “weak link,” that will eventually become clear. If that person happens to be the longtime trusted family advisor, do not move to replace him or her. A strong and effective team will shore up any weaknesses and find a way to get results. Over time, that advisor’s role may diminish (but not evaporate), and other advisors can be brought in. Building and maintaining an effective advisory team is an ongoing process, not a static snapshot.
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  7. Billing the client. Communicating as a team and acting together in the client’s best interest certainly sounds like a good idea – in theory. But in reality, how will the client feel about all that communication once the bill arrives? That is why the team and the client must first agree on a billing process. When the team of advisors has a comfortable working relationship, they will learn that some conversations will occur whether or not a bill is paid. Another option I have seen is to create a standard monthly or quarterly billing arrangement that is not based on time, but instead takes into account any and all cross communication.
  8.  

  9. Importance of reciprocity in client referrals. Advisors who are fee-based are paid for the time they put into an engagement. Part of creating an effective advisory team is understanding that the more the team works together, the more they learn from each other, the stronger their relationships become, and the better their clients are served. When advisors work together on several key client relationships there is also more tolerance for unbilled communications, as they know that they are making a profit on the totality of their experiences and the collective results – and that those engagements will ultimately lead to additional business.

 
Trust, respect, open communications, and reciprocity are the hallmarks of good teamwork, and client advisor teams that include these characteristics will likely find success. As James Cash Penney once said, “The best teamwork comes from men who are working independently toward one goal in unison.”

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning. She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about. Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime. To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

Patricia Annino’s Latest Book – “It’s More Than Money” Released

Front CoverIs each generation of your family aware of the “family brand” – the foundational values you want them all to share? Have you discussed the objectives – in business or philanthropy or investments or family activities – that will translate those values into a family plan?  Do you have the enabling structure (legal estate and business planning documents,  financial investments and the team of advisors) in place to carry out the plan?

Most families cannot answer “yes” to all these questions.

Directed at the “Captain of the ship” the head of the family, but written in a way that is accessible to all interested family members,  It’s More Than Money: Protect Your Legacy explains how to:

* Focus on what your values are,

* Align those values with your goals,

* Work with your team of advisors to put in place the legal documents and financial framework that will…

* Protect you, your family, your charities and your legacy.

It’s More Than Money: Protect Your Legacy is both a how-to-do- it blueprint and a handbook designed to provoke family discussion, understanding and unity.

To get your copy visit:  http://www.amazon.com/Its-More-Than-Money-Protect/dp/1494847396/ref=sr_1_1?ie=UTF8&qid=1397140464&sr=8-1&keywords=patricia+annino

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released her new book, “It’s More Than Money, Protect Your Legacy” available at Amazon.com.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

 

 

 

 

 

 

 

Is it Reasonable to Expect Alimony for Your Eggs?

The September 7th New York Times has an op-ed piece by Sarah Elizabeth Richards, author of “Motherhood Rescheduled: The New Frontier of Egg Freezing and the Women Who Tried It”.

In that op-ed piece Ms. Richards discusses the case of a 38 year old woman who is asking her soon to be ex-husband of 8 years to pay $20,000 to cover the cost of her egg freezing procedure, medication costs and several years of egg storage on the grounds that when theyalimony, alimony after divorce got married they started with the expectation they would start a family and now she may not have that chance much longer.

The couple had been unsuccessful in fertility treatments and as part of her legal case she is arguing that since fertility treatments were part of the marriage, they should be considered part of the marital lifestyle, which should be maintained as long as possible post-divorce.

The lawyer representing the woman is quoted in the article as saying that he hopes the case settles out of court. Should this go to court it would be a case of first impression in the country and we will all be watching what happens.

Read the entire article here: http://www.nytimes.com/2013/09/07/opinion/alimony-for-your-eggs.html?_r=0

Source:  www.nytimes.com

 

Patricia Annino is a sought after speaker and nationally recognized authority on women and estate planning.  She educates and empowers women to value themselves and their contributions in order to ACCOMPLISH GREAT THINGS in the world – and in so doing PROTECT THEMSELVES, those they love, and the organizations they care about.  Annino recently released an updated version of her successful book, Women and Money: A Practical Guide to Estate Planning to include recent changes in the laws that govern how we protect our assets during and beyond our lifetime.  To download Annino’s FREE eBook, Estate Planning 101 visit, http://www.patriciaannino.com.

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