Here are some case histories of our existing clients that illustrate the advantages of working with Day & Ennis.
Helping clients retire comfortably.
• We’ve helped our clients preserve their wealth in retirement. They needed withdrawal strategies to make sure they didn’t outlive their investments. In one case, a new client had been withdrawing money out of their IRA prior to age 72 and incurring income taxes. We did a cash flow analysis and revised his withdrawal rate from his taxable personal accounts. He saved about $7,000 per year and we were able to project his increased net worth over the long run.
• We helped clients decide when to sell major assets. They had second or third homes they wanted to sell to continue to live comfortably in retirement. Through cash flow projections, we determined the best time frame for these assets to be sold. The clients were then able to enjoy their homes for a number of years, knowing in advance when the best time to sell would arrive.
Creating ROTH accounts.
• How we’ve helped clients increase their retirement savings at a lower tax bracket. You’re required to start taking distributions at age 72 from a regular IRA, but until then you can increase your retirement savings at a lower tax bracket. We helped clients do this by making incremental conversions from a regular IRA account to a Roth account.
• We have also helped several clients who actually had negative taxable income in their prior year. They were ideal candidates for a Roth conversion, as it enabled them to use up tax deductions that would otherwise be lost. The conversion saved them thousands of dollars.
• Many clients have benefited from the right strategy to receive Social Security. We helped them analyze the pros and cons of various plans such as (1) filing at age 62 (2) filing at normal retirement age (3) filing and suspending when available (4) delaying until age 70. The clients were then able to meet with the Social Security Office knowing the proper terms to use and having already decided on the best option.
• A widow was able to receive her Social Security benefit under her deceased husband’s record. This client was not aware she was due a Social Security benefit under her deceased husband’s record. The advisor she had been dealing with had never raised this as an issue, although it would have shown up on her tax return. When she filed for benefits, she discovered that her name and Social Security records had never been updated when she got married over 30 years ago. We helped her receive thousands of dollars of benefits.
Helping Clients With Their Changing Finances Due to Death Or Divorce.
• We’ve often helped those who are dealing with the financial changes of divorce or death. These clients may have no experience in managing their financial lives. We work to understand every aspect of their financial situation and devise a comprehensive plan for them. Once this is completed, we can go on to help them make sound financial decisions.
• This may include evaluating life insurance policies. One of our clients had three life insurance policies owned by an Irrevocable Life Insurance Trust. The total death benefit was approximately $2.7 million. Because of the increase in the estate tax exemption, the client did not need $2.7 million of death benefit in an ILIT.
We advised them to surrender one policy with a high annual premium and convert another into an investment annuity with extremely low administrative fees. They reduced their cash outflow for premiums and avoided income tax at the trust level for the surrender of the taxable life insurance policy.
• We’ve helped clients cope financially in dealing with a terminal illness. A couple came to us after the husband was diagnosed with a terminal illness. He had managed the couple’s finances for 30 years and was concerned about what would happen to his wife after he passed away.
We created a comprehensive plan for the couple before the husband passed away, taking into account every aspect of their financial lives. We laid out exactly what their cash flow would look like, how we would manage the assets, and how the assets would transfer from husband to wife.
The couple were set at ease in knowing that we understood everything about their financial lives and would continue to take care of his wife’s finances. They said it saved them a great deal of worry during this very difficult time.
• We’ve helped clients simplify estate planning and sort through complicated wills. One client was the only “trusted” living descendant of her aunt. Her aunt was leaving her a working farm (cattle, horses, the whole works) in California. The aunt was in her final days and, with some reluctance, provided our client with her estate documents.
We reviewed them and pointed out that, although the aunt was gracious in her bequeath, she was not leaving any money to operate the farm. All her liquid assets were going to charity. When our client realized what that would do to her finances, she quickly scheduled a trip to California to explain the difficulty to her aunt. Realizing the difficulty, the aunt called her lawyer immediately and arranged to have $400,000 left to our client to manage the farm.
• We’ve clarified wills and trusts for people. We often prepare detailed flow-charts of how the wills are written. It’s not uncommon that, when they see their wills in graphical form, clients realize that they won’t deliver the results they envision and that changes need to be made. Solutions include better balancing of estate assets between spouses; holding assets as tenants in common instead of joint with rights-of-survivorship, and changes of beneficiaries on accounts.
• One client had left the bulk of his retirement accounts to his previous wife. When we pointed this out to him, he immediately changed the beneficiary to his current wife.
We’ve simplified charitable giving.
• We’ve been helpful to clients in planning their charitable giving strategy. We analyze the benefits for them of using donor advised funds, charitable remainder annuity trusts, donations directly from IRA accounts, donations of appreciated securities, or naming a charity as a beneficiary to an IRA account. Each of these can have significant tax benefits.
• The clients who saved money through Donor Advised Funds. A client received a one-time large income from an Initial Public Offering (IPO) in excess of $1 million, putting him in the highest tax bracket. In the past, he had made annual contributions of over $20,000 to his church. But in the year he realized this IPO income, we helped him set up a Donor Advised Fund at Charles Schwab. He set aside $200,000 to be used to fund future contributions to his church and other charities, providing him a large tax deduction.
• We’ve also saved clients the complications of sending designated contributions. Donor Advised funds can be set up at a Community Foundation. One of our clients had faced the headache of communicating with each of his charities to donate appreciated stock. We helped him set up a Donor Advised Fund at the Community Foundation which would be funded with the appreciated stock, releasing the funds to different charities each year.
• We’ve helped parents and grandparents set up parameters for their contributions to their offspring. Knowing that the recipients wouldn’t be able to access all the funds until they were more mature provided our clients peace of mind. To arrange this, we converted their UTMA (Universal Transfer to Minors Account) to a 2503(c) Trust. That meant the children or grandchildren would have access to the money for education or a new home or starting a business, but it would otherwise delay full access to the account until they were 30 or 35 years old.
The rewards of careful tax planning.
• The client who made a six-figure loan. One generous client had loaned money to an acquaintance for college and graduate school. The total of the loans was in the six-figure range, and the student was having significant difficulty repaying the loans.
We worked with our client and the student to arrive at an amount that the student might reasonably repay over a 20-year period. After re-structuring the loans, we then suggested that the client gift the note receivable to a local charity because the length of the loan would likely exceed the client’s normal life span. The client made the donation and took an immediate tax deduction for the fair market value of the gift. The client, the student and the charity were all pleased with the outcome.
Shielding clients from risk in investments.
• We’ve protected clients from “investment opportunities.” Clients often consult us on the merits of a particular investment. Here are several examples where our due-diligence saved them considerably:
• A client wanted to invest a significant amount in a local bank. The bank was already struggling during the post-2009 bank-restructuring period. The merits of the investment they were considering were questionable and we advised against it. The client substantially reduced their investment, which subsequently became worthless. They were glad they hadn’t invested more than they had.
• Another client was being solicited to invest in water-treatment technology which was supposedly state-of-the-art. The client was told that $9 billion had already been secured and that only $50,000 was needed to move the project forward. After reading the documents and evaluating the numerous red flags associated with the investment, we advised the client to invest nothing. It saved him what would have been a costly mistake.
• We’ve also performed due diligence on private equity and debt financings. Many clients have asked us to review possible private equity investments. We have reviewed private placement memorandums and performed on-site due diligence to help evaluate possible transactions. Here’s the story of one client who was glad we did:
• The client brought us a Private Placement Memorandum for a tech company that was starting up and locating in Atlanta. He had a friend who was the Chief Operating Officer for the company. We reviewed the Offering Memorandum and decided that we needed to do an on-site visit. We spent one day on site with the Chief Operating Officer and reviewed their facilities and operation.
We summarized a list of concerns regarding the investment. We told the client that he should not invest in this start-up company unless he was willing to lose 100% of his investment. Our advice prompted the client to reduce his initial investment in half. The start-up went bankrupt within a year. This client later joked about owning a $50,000 t-shirt that was given to him by the start-up company.
• The new clients who were paying too much for annuities. These were both inside and outside of tax-deferred accounts. After evaluating them, we assisted in rolling them over into low cost annuities that had fixed fees of only $240/year. For those clients with annuities in tax-deferred IRAs, we evaluate them and can if necessary help them surrender them.
We’ve helped clients make decisions about their insurance.
• The clients who didn’t need long term care insurance. And those who did. Long term care insurance is a necessity for many family situations, but not all of them. Through our contacts with insurance agents who represent multiple long term care insurance companies, we provided side-by-side comparisons of different policies. We discussed all the benefits of various packages and together decided which plan was best for them. For those clients with enough resources, we helped them realize they didn’t need this type of insurance.
• The daughters who needed help evaluating their father’s life insurance. They were named as beneficiaries, but the policy had not performed as originally illustrated and the internal costs kept rising each year because their father was in his late 80s. We reviewed the policy and worked with an independent agent to decide on the best course of action. The solution was to keep the policy in force and borrow money if necessary to pay the annual premium instead of letting the policy lapse.
Choosing the right profit-sharing plan saved a business money.
• We’ve helped a number of clients with small businesses and professional practices with 401(k) profit-haring plans. We worked with them to make side-by- side comparisons with other plans such as SEPs or SIMPLEs. When they were ready to act, we helped in selecting one of several 401(k) providers, depending on the client’s situation. These providers have very low cost fees and good selections of funds.
We’ve gone on to assist in educating employees and helping the trustees with a diversified selection of funds to offer on the 401(k) platform. In many cases, the tax benefit of the chosen plan has far exceeded the contribution that clients will have to make for employees.
The clients who seek banking advice.
• We’ve assisted many clients with home refinancing. We reviewed the proposals they received from numerous companies to help them select the best option.
• Making the right decision on car purchases. Is it better to pay cash, lease or obtain a loan? It’s a question we’ve been able to answer for a number of clients.
• Our projections have helped businesses obtain bank financing. A young dentist and his wife hired our firm for help in moving his dental practice. They had a negative net worth due to his student loan debt and a business loan he had used to purchase a small practice.
He had decided he needed to move his practice in order to grow. We prepared detailed calculations including projected revenue growth and expenses. Based on our calculations, the bank was able to lend the dentist enough money to purchase land and build a new office in a better location. We will continue to work closely with him during his career to help him achieve all his financial goals.
How can we help you?
Now that you’ve seen what we have done for other clients, you have a better idea how we can be of help to you. Please feel free to contact us for a free consultation.
Note: These stories illustrate how we have helped clients, but there is no guarantee that we can make similar recommendations in the future.