Meet Larry and Barbara
Age: 72 / 65
Occupation: Retired
Before retiring, Larry was a successful Real Estate Attorney and Partner at a top tier regional law firm. Barbara had a successful career in marketing but retired early to stay home and be a “full-time” mom. Larry retired 3 years ago. Their kids are now full-grown, supporting themselves and starting families of their own.
Currently, Larry and Barbara Have...
- Substantial assets in both retirement and non-retirement accounts
- A 20 year relationship with a stockbroker at a large wire-house firm
- Complex estate planning, tax planning, charitable giving and investment needs
- A significant portion of their investable assets in fixed income/bonds
But...
- They would like to continue to grow their wealth to support philanthropy and leave a legacy for their children and grandchildren.
- Although they have had a long relationship with their broker, he is not a fiduciary and they are concerned about high fee investments they own.
- With interest rates low, their portfolio isn’t generating the return they expect. Also, it may be subject to capital loss when interest rates move higher.
- They are worried that their current broker’s firm doesn’t offer innovative investments with less exposure to interest rate and economic cyclicality available at an RIA, like Sterneck Capital.
How Did We Help?
Sterneck Capital completed a no-cost, no-obligation, comprehensive review of Larry and Barbara’s assets and their legacy plan including insurance, will and trust and asset allocation.
and Mitigation
We were able to mitigate a large taxable gain the couple was exposed to. Sterneck introduced a recently created vehicle called an “opportunity zone.” Through this vehicle the couple will eventually be able to significantly reduce and defer their original capital gain and pay no tax on future capital gains from the opportunity zone investment.
Sourcing
We found that on the equity side, their broker had done a good job of allocating assets to low-cost passive ETF’s. However, in fixed income, which comprised over 65% of the couple’s portfolio, many of their bonds had matured in the last few years, and the proceeds had been reinvested at low yields. Their fixed-income portfolio was returning less than 3% per year. Sterneck was able to utilize several new strategies intended to provide substantially higher returns while still maintaining a conservative volatility and risk profile. Further, the new investments generated returns independent of the interest rate or the business cycle. By adding these diversifiers, we enhanced the risk-adjusted return projections of the whole portfolio.
In analyzing the couple’s insurance, we found that they had taken out several life insurance policies to cover potential estate taxes. However, these policies were no longer relevant since the estate tax exemption has been dramatically increased. We offered these policies to several life settlement brokers and not only eliminated the premiums but also got upfront cash for the policies. Larry and Barbara used the windfall to take their dream trip, a Bordeaux wine tour in France.
Larry and Barbara had a detailed and complex estate plan in place. We reviewed the plan to ensure it was up to date with their current needs and desires. We also had the plan reviewed by one of the members of our estate planning network. The attorney found that part of their plan had been obsoleted by the recently passed SECURE act and helped develop a new strategy for passing assets to their grandchildren.
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Case Study Clients are composite representations of actual clients. Case studies are intended to illustrate the range of services we provide but do not represent actual services provided to these fictional composites.