2020 virtual wealth management forum...forum october 15, 2020 economic and market outlook brandon a....

2020 VIRTUALWEALTH MANAGEMENT

FORUM

October 15, 2020

ECONOMIC ANDMARKET OUTLOOK

Brandon A. Zureick, CFAPORTFOLIO MANAGER, DIRECTOR, PRINCIPAL

Charles E. Rinehart, CFA, CAIA PORTFOLIO MANAGER, MANAGING DIRECTOR, PRINCIPAL

-12.9%

-11.6%

-2.5%

-4.4%

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

1932(Great Depression)

1946(WW II)

2009(Financial Crisis)

2020Forecast

REAL GDP Year Over Year Percent

2 02 0 RE CE SSI O N I N CO N TE XT

SOURCE: BLOOMBERG

0

100

200

300

400

500

600

700

800

INITIAL JOBLESS CLAIMS (000'S)

SOURCE: BLOOMBERG

UN PRE CE DE N TE D JO B LO SS


0

1000

2000

3000

4000

5000

6000

7000

8000


SOURCE: BLOOMBERG

UN PRE CE DE N TE D JO B LO SS


2000

2200

2400

2600

2800

3000

3200

3400

3600

12/31/2019 1/31/2020 2/29/2020 3/31/2020 4/30/2020 5/31/2020 6/30/2020 7/31/2020 8/31/2020

S&P 500

-34%1 month

+61%5 months

A V O L A T I L E Y E A R F O R T H E M A R K E T

SOURCE: FACTSET

SOURCE: TRANSPORTATION SECURITY ADMINISTRATION

E C O N O M I C R E O P E N I N G – A R E W E T H E R E Y E T ?

0

500

1,000

1,500

2,000

2,500

3,000

3/1/2020 4/1/2020 5/1/2020 6/1/2020 7/1/2020 8/1/2020 9/1/2020

DOMESTIC TSA CHECKPOINT ACTIVITY (000’s)

2020 2019

TH E M ARK E T I S H I STO RI CALLY CO N CE N TRATE D

SOURCE: FACTSET

TH E W H I TE H O USE DO E SN ’ T DRI VE TH E M ARK E T

GROWTH OF A DOLLAR INVESTED IN THE S&P 500January 1928 – September 2020

SOURCE: BLOOMBERG

OVERVIEW OF CONTRASTING

TAX PLANS

Anthony C. Kure, CFP® DIRECTOR OF NORTHEASTERN OHIO MARKET,

SENIOR PORTFOLIO MANAGER, PRINCIPAL

Mary P. Burns, Esq. VICE PRESIDENT OF ESTATE PLANNING,

TRUST COUNSEL, PRINCIPAL

BI DE N TAX PRO PO SALS VE RSUS CURRE N T LAW

Raising top tax bracket from 37% to 39.6% on income over $400,000

Capping itemized deductions at 28% of their value for high earners even with elimination of the SALT cap

Considering changes to 401(k) deduction to 26% capped maximum tax “credit”

Increase capital gains rate to ordinary income tax rate on income > $1,000,000 (39.6% + 3.8% = 43.4%). Currently 20% + 3.8% = 23.8%.

6.2% Social Security payroll tax at $400,000+ wages. Currently 6.2% on wages up to $137,700.

28%

%

Increase corporate tax rate to 28% with 15% minimum tax on large corporations. Currently 21% with no minimum tax.

Increase credit for child and dependents to $8,000, or $16,000 for two or more children (likely subject to income phaseouts). Currently $3,584 for one child, $5,920 for two children and $6,660 for three or more children (subject to income phaseouts).



Proposed elimination of the step-up in basis for inherited capital assets. Step-up in basis is currently allowed.

Federal estate tax exemption proposed to be lowered from $11.58 million (for 2020) back to pre-tax reform levels (around $5 million), which would subject more estates to the tax • NOTE: this is currently scheduled to occur at the

end of 2025

* Beginning in 2011, the Gift/Estate Tax Applicable Exclusion is portable between spouses, allowing the surviving spouse during lifetime, or the surviving spouse's estate, to apply the unused portion of a deceased spouse's Applicable Exclusion. As of 1/1/2026, the Exclusion returns to the 2017 Exclusion, adjusted for inflation (currently projected to be $6,400,000 in 2026).

YEAR GIFT TAX EXCLUSION HIGHEST GIFT/ESTATE TAX RATE

ESTATE TAX EXCLUSION

2013 $5,250,000*(indexed)

40%$5,250,000*

(indexed, minus Gift Tax Exclusion used)

2014 $5,340,000*(indexed)

40%$5,340,000*


2015 $5,430,000*(indexed)

40%$5,430,000*


2016 $5,450,000*(indexed)

40%$5,450,000*


2017 $5,490,000*(indexed)

40%$5,490,000*


2018 $11,180,000*(indexed)

40%$11,180,000*


2019 $11,400,000*(indexed)

40%$11,400,000*


2020 $11,580,000*(indexed)

40%$11,580,000*


ANNUAL GIFT TAX EXCLUSION

GIFTS 2019 2020

GIFTS PER PERSON $15,000 $15,000

JOINT GIFTS BY SPOUSE $30,000 $30,000

C U R R E N T F E D E R A L G I F T A N D E S T A T E T A X

YEAR END TAX PLANNING STRATEGIES

It’s critical to proactively plan before year-end as many provisions and strategies end on December 31, 2020.

Don’t Delay: even waiting until the last week of December might be too late to allow for processing, mail, etc.

TI M I N G I S K E Y

Whether or not the RMD was taken and taxable within 2020, is where tax planning discussion should start

CARES Act waived requirement for distributions for many (but not all) so could be fantastic tax planning year as “window” of low income in 2020

UNIQUE PLANNING OPPORTUNITIES IN 2020

Use this “low income” year to your advantage

Managing Capital Gains Income with Loss Harvesting

Re-Visit Roth Conversions

Qualified Charitable Distributions (QCD) still an option – even at 70½ and not 72

2 02 0 CARE S ACT PLAN N I N G STRATE G I E S RM D AG E

Max out retirement and Health Savings Account (if available)

Charity AGI limitations “loosened up”

Coronavirus-related distributions available

2 02 0 PLAN N I N G STRATE G I E S N O T RM D AG E

Many provisions but major changes include:• Taxpayers over 70½ can now deduct Traditional IRA

contributions with earned income, including spousal

• RMDs for Traditional IRAs now can start at age 72 for those who turn 70½ AFTER 12/31/2019

• 529 plan funds can now be used up to $10,000 (lifetime limit) to pay down student loans

The Big Change: Meaningful change to the rules around “Stretch IRA”

SE CURE ACT CO N SI DE RATI O N S

Prior to SECURE Act:Beneficiary of IRA could stretch IRA over lifetime• Continued deferral• Asset protection

SECURE Act:• Beneficiary of IRA must withdraw assets from IRA and

recognize income tax within 10 years

Planning Ideas

I N H E RI TE D I RA – TH E N & N O W

To retain benefits that inherited IRA provided, consider directing IRA assets to trust• Asset protection• Deferral of payments

E STATE PLAN N I N G W I TH I RA

To retain benefits that inherited IRA provided, consider directing IRA assets to trust• Asset protection• Deferral of payments

Charity• DAA permitted at death

E STATE PLAN N I N G W I TH I RA

JOHNSONINV.COM | 800.541.0170

TH AN K YO U!

Jason O. Jackman, CFAPresident, Chief Investment Officer, [email protected]

Mary P. Burns, Esq.Vice President of Estate Planning, Trust Counsel, [email protected]

Anthony C. Kure, CFP®Director of Northeastern Ohio Market, Senior Portfolio Manager, [email protected]

Charles E. Rinehart, CFA, CAIAPortfolio Manager, Managing Director, [email protected]

Brandon A. Zureick, CFAPortfolio Manager, Director, [email protected]

S P E A K E R C O N T A C T I N F O R M A T I O N :

Any expectations presented should not be taken as a guarantee or other assurance as to future results. Our opinions are a reflection of our best judgment at the time this presentation was created, and we disclaim any obligation to update or alter forward-looking statements as a result of new information, future events or otherwise. The material contained herein is based upon proprietary information and is provided purely for reference and as such is confidential and intended solely for those to whom it was provided by Johnson Investment Counsel.

Johnson Investment Counsel does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

2020 virtual wealth management forum...forum october 15, 2020 economic and market outlook brandon a....

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