When Estate Planning Becomes Basis Planning

Monday, December 22 at 10:35 AM
Category: Personal Finance

Old conventional wisdom: Minimize estate and/or inheritance taxes by making lifetime transfers and taking appropriate steps to reduce the taxable value of transfers. New conventional wisdom for many “smaller” estates: Avoid lifetime transfers, especially of appreciated assets, and maximize asset values at death.

Under the old tax regime, with a 40 percent federal estate tax and a 15 percent maximum capital gains tax for heirs, the tax-wise choice was pretty easy. Give assets away during life, even though the donor’s tax basis carries forward to the donee, because 15 percent of the taxable gain is going to be a much smaller tax bite than 40 percent of the gross value. Now, however, that calculus goes the other way. With a federal estate tax exemption of $5.34 million this year ($10.68 million for married couples), 99.8 percent of estates will no longer need to worry about paying any estate tax at all. In 2015, the exemption is now projected at $5.43 million. For estates below these thresholds, the tax benefit to zero in on is the step-up in basis* at death. Basis step-up is even more valuable now that the top tax rate on long-term capital gains is 20 percent, plus an additional 3.8 percent net investment income tax from the Affordable Care Act.

Example. Grandfather’s investment portfolio is worth $4 million, with a tax basis of $1 million. He plans to divide the portfolio among four grandchildren. If he makes a lifetime gift of the securities, and assuming that the basis is divided equally, each grandchild will have to plan for taxes on $750,000 worth of gains. If grandfather holds the assets until his death, the tax on the $3 million capital gain is forgiven at zero estate tax cost.

Not all assets received from a decedent get a basis step-up. Most importantly, income in respect of a decedent does not change basis. The most common examples are retirement plan assets and traditional IRAs. Accordingly, it may prove beneficial for an IRA to be converted to a Roth IRA before death. Similarly, the net unrealized appreciation in employer stock distributed from a qualified retirement plan does not get a basis step-up at the death of the participant.

Spousal transfers
There is a special rule for spousal transfers shortly before death, dating back to when the percentage and dollar limits on the marital deduction were eliminated. Apparently, Congress was worried about the possibility of transfers to dying spouses so as to obtain a basis step-up without having to pay an estate tax. Although the law is 33 years old, there have been no regulations, revenue rulings or revenue procedures explaining its application.

If an appreciated asset is given to a spouse, the spouse dies within a year, and the asset is reacquired by a surviving spouse, there is no basis step-up under this provision. The rarity of this sequence of events may account for the lack of IRS guidance.

Basis planning for married couples has been simplified somewhat by the advent of the portable federal estate tax exemption. If an entire estate passes to a surviving spouse outright, the unlimited marital deduction defers all federal estate tax. The survivor also inherits the unused federal estate tax exemption.

In order to secure the income tax benefits of basis step-ups, executors or personal representatives of estates will need to document very clearly the value of all assets at the date of the decedent’s death. Appraisals will be needed for nonmarketable assets. This should be done as soon as possible, rather than waiting until a later sale.

Note also that there is no statute of limitations for tax basis, so basis records must be kept indefinitely. If an inherited asset is sold 20 years after it is received, the donee will need to refer to those decades-old records to determine gain or loss.

Reprinted from Merrill and Anderson (November2014) © 2014 M.A. Co. All rights reserved

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education, Retirement

Scott Tennyson Named President of Arvest in Harrison, Ark.

Friday, December 19 at 05:20 AM
Category: Arvest Community News

We're excited for the 32 years of banking experience Scott Tennyson brings to his new role as the Arvest Bank market president in Harrison, Ark.

HARRISON, Ark. — Arvest Bank has hired Scott Tennyson as the new Harrison market president. Tom Dame, president of Arvest North Central Arkansas, made the announcement today. 

Tennyson has 32 years of successful banking experience across multiple industry divisions including marketing and mortgage along with retail, private and commercial banking. He also has extensive education in the industry. 

Dame said, “We are thrilled for Scott to join us at Arvest. He has deep banking and finance knowledge as well as passion and enthusiasm for the Harrison community. His experience in multiple areas of this industry will serve our associates and customers well.”

Previously, Tennyson served as the senior vice president for private banking at Bancorpsouth in Springfield. Prior to that, he was the city president and market manager for Regions Bank in Harrison. 

As a Harrison native, Tennyson has spent many years being very involved in the community. He is a past president of the Harrison Chamber of Commerce, past chairman of the Board of Trustees for North Arkansas College and past president of the Harrison Rotary Club.  

Tennyson graduated from Harding University with a bachelor's degree in business administration. He also graduated from the Graduate School of Community Bank Management at the University of Texas as well as America's Community Banks Commercial Lending School and Residential Lending School as well as attended the BAI Graduate School of Retail Banking.

Tennyson has been married to the former Sandra Trammell for 33 years. They have two sons, Eric (Little Rock) and Alex (Fayetteville.)

Tags: Arkansas, Associates, North Central Arkansas, Press Release

Regional Consumers Earnest About Saving

Thursday, December 18 at 09:00 AM
Category: Arvest News

Arvest released the third part of its Fall 2014 Arvest Consumer Sentiment Survey which looked at spending, savings and debt.

FAYETTEVILLE, Ark. – Consumers in Arkansas, Missouri and Oklahoma are saving at a higher rate, and about a fifth of them plan to increase their saving even further.

Those are among the more noticeable findings from the third phase of the Fall 2014 Arvest Consumer Sentiment Survey released today. This phase is the final piece of the survey, conducted in October, and focuses on consumers’ attitudes concerning spending, saving and debt.

Regional respondents’ saving rate increased from 11.6 percent in June’s survey to 12.1 percent in October. The change was bolstered primarily by Arkansas consumers, whose rate grew from 9.5 percent to 11.9 percent. The rate among Missourians remained at 11.7 percent, while Oklahomans’ rate took a slight dip, from 13.1 percent to 12.8 percent.

When it came to plans to increase saving over the next six months, meanwhile, 20 percent of those polled regionally said they plan to do just that. That compares to 17 percent in June. The biggest jumps were in Oklahoma (15 percent to 23 percent) and Missouri (15 percent to 21 percent), while the number of Arkansans planning to increase their savings rate fell from 23 percent to 18 percent.

“Saving when possible is generally a good idea, and we’re pleased to see that consumers across our footprint are doing that,” Arvest Marketing Director Jason Kincy said. “This round of results also shows that a good number of consumers are prepared to flex their purchasing power in the coming months, too. We’re always happy to help people prepare for their financial future, whether that means saving money or making the kinds of purchases that improve their quality of life.”

While 36 percent of regional respondents said they have made a major household purchase in the last six months – down from 39 percent in June – 24 percent of those polled plan to make such a purchase in the next six months. Major household purchases include items like furniture, televisions and refrigerators.

Respondents in Missouri (27 percent) led the way in that regard, followed by Arkansas (25 percent) and Oklahoma (22 percent). Of those in the region not planning to make a major purchase, 19 percent said they were waiting for the right time to buy.

The questions concerning consumers’ plan to make a major household purchase in the next six months and whether they’re waiting for the right time to buy are two of four new questions not included in the June survey due to incomplete data.

The other new questions asked if respondents planned to acquire credit – whether it is mortgage, home equity, auto loan, credit card or student loan – in the next six months, and if respondents anticipated difficulty acquiring credit. The categories with the highest expected credit acquisition were auto loan, credit card and student loans, with 4 percent each. Of those who planned to acquire any type of credit, only 5 percent expected difficulty.

The Arvest Consumer Sentiment Survey is conducted by the Center for Business and Economic Research in the Sam M. Walton School of Business at the University of Arkansas, which also evaluates the Arkansas data. The University of Oklahoma’s Public Opinion Learning Laboratory conducted 1,200 phone surveys.

The survey will be conducted twice a year, with the next survey expected to be completed in May 2015. With each study, the Consumer Sentiment Survey Index score will be released first, followed by a second release on consumer outlook including the Current Conditions Index and the Consumer Expectations Index, which are sub-indexes of the Consumer Sentiment Survey Index. The third release will focus on spending, savings and debt expectations.

Arvest Bank’s sponsorship of this survey, which follows the model of the national Survey of Consumers produced by the University of Michigan, is due to its desire to provide beneficial data for its customers and communities. The data provides a reading of how consumers are feeling about the economy in the states where the bank operates. Additionally, with future results, consumers, as well as the business community, will be able to see how sentiment is trending.

The Bureau of Economic Research at Missouri State University provides state analysis of the Missouri data. The Steven C. Agee Economic Research & Policy Institute, Meinders School of Business at Oklahoma City University, evaluates the data for Oklahoma.

Information about the survey and research partners, copies of this release, summary documents and print-ready logos can be found at www.arvestconsumersurvey.com.

About Our Research Partners

The Center for Business and Economic Research, Sam M. Walton School of Business at the University of Arkansas at Fayetteville provides excellence in applied economic and business research to federal, state and local government, as well as to businesses currently operating or those that desire to operate in the state of Arkansas. The center further works to improve the economic opportunities of all Arkansans by conducting policy research in the public interest.

The University of Oklahoma Public Opinion Learning Laboratory serves two functions: to provide a learning environment for the teaching of survey design, public opinion research and data analysis for the purpose of developing student capabilities to conduct academic and professional research and analysis; and to conduct research on public opinion, in order to foster knowledge about public affairs and to assist in the conduct of research on public policy of import to state and local governments, media organizations, other public and private entities, and the general public.

The Bureau of Economic Research, housed within the Economics Department at Missouri State University, serves as a clearinghouse for data and publications on economic conditions within the region, state and nation. The staff has a wide variety of experience and is able to provide consulting services, produce detailed GIS maps, economic and industry forecasts and other relevant reports.

The Meinders School of Business at Oklahoma City University, which includes the Steven C. Agee Economic Research & Policy Institute, offers a full range of undergraduate, graduate and professional development programs. MSB prepares graduate and undergraduate students to be socially responsible leaders in a global economy through teaching excellence and faculty scholarship in business practice and the disciplines. Faculty and students engage with the business community, local government and regulatory agencies as part of the teaching-learning process.

Tags: Arkansas, Debt, Missouri, Oklahoma, Press Release, Savings

Economic Outlook Event in Kansas City

Thursday, December 18 at 06:20 AM
Category: Arvest Community News

You’re invited to an Economic Outlook event on Jan. 20, 5-7 p.m. at the Arvest Bank Theatre at The Midland (1228 Main St., Kansas City, Mo.). The purpose of the event is to provide an update on the current state of the economy, as well as to give a glimpse into the future. This has become not only an informative event on the economy, but also a great networking event for those who attend.

A cocktail hour will be 5-6 p.m. with heavy hor d’oeuvres and a cash bar. Our very informative and very entertaining guest speaker, Clay Nickel, will speak 6-7 p.m.

The evening’s hosts from Arvest Asset Management include:

  • Mark Dunker, Location Manager
  • Carissa Froome, Regional Investment Officer
  • Erin Evans, Client Advisor

Guest Speaker: Clay Nickel, CPM®, Vice President, Portfolio Manager and Director of Investment Strategy
As Director of Investment Strategy, Clay is responsible for the development and oversight of the Investment Management Group (IMG) product line and serves as the main spokesman for IMG and the AAM portfolio management team with customers, prospects and advisors. Clay serves as IMG’s asset allocation specialist for both our IMG and Trust portfolios, and provides critical research support on mutual funds, ETFs and outside managers, as well as serving as an important resource for AAM’s Regional Investment Officers and Client Advisors. Clay is an integral member of AAM’s portfolio management team and overall money management effort.

Previously, Clay served as a Fixed Income Portfolio Manager for private and institutional clients of Arvest Asset Management and as the Lead Manager for the IMG Adaptive Portfolio Strategy. He continues to serve as Co-Lead Manager of the IMG Strategic Model Portfolios.

Prior to joining Arvest in 2010, Clay was a portfolio manager for a $4 billion community bank in the Midwest and managed a $300 million investment portfolio for high net worth individuals and institutions.

Clay is a graduate of Wichita State University. Additionally, he has completed Columbia University’s Academy of Certified Portfolio Management. Clay is also a member of the Chartered Financial Analyst Institute and the Kansas City Society of Chartered Financial Analysts.

R.S.V.P. online*  or by calling us at (913) 261-2265.

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Kansas City

Friday Financial Forum Dec. 19 in Bartlesville, Okla.

Thursday, December 18 at 05:15 AM
Category: Arvest Community News

Join us Friday, Dec. 19, at 10 a.m. for our Friday Financial Forum. We’ll meet in the Friday Forum Room at Arvest's Eastside Branch located at 4225 S.E. Adams Rd., Bartlesville, Okla. Every Friday we invite customers like you to attend our one-hour Financial Forum.

This week is our Annual Christmas Party with the Ad Lib Singers providing music. Chief Holland is bringing an update and pictures from last Saturday's "Santa" project, and the first annual Friday Financial Forum beautiful sweater contest will take place!

What you can expect at the event:
  • News: "The Scoop" about businesses coming, going and expanding in Bartlesville (Amelya Wilmott, Arvest Bank)
  • Information: Community leaders share topical, local and state information (Sen. John Ford and Rep. Earl Sears)
  • Updates: Arvest provides current economy and stock market trends (Josh Randolph, Arvest Bank)
  • Hilarious Anecdotes: Jim Bohnsack, Arvest Bank
We look forward to having you join us! There is no need to R.S.V.P.; just join us if you can! If you have any questions about the event, please contact Billie Roane at (918) 337-4358.
Tags: Bartlesville, Community Support, Oklahoma

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