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THE EVOLUTION OF FINANCIAL INTELLIGENCE

HOW TECH WEALTH IS TRANSFORMING SAN FRANCISCO INTO ONE OF THE WORLD’S MOST POWERFUL FINANCIAL CENTERS

WALL STREET WEST

WORTH.COM

34VOLUME 24 | EDITION 01

WO34_Cover.indd 1 1/27/15 6:18 PM LEADING WEALTH ADVISOR | NEW YORK, NY PIONEER FINANCIAL AT NORTHWESTERN MUTUAL – PARK AVENUE

an assumed growth rate established by the occur, the entire value of the trust would Treasury department. The rate set forth by be included in the taxable estate. To reduce the Treasury is known as the “7520” rate. this mortality risk, many advisors recom- Should the total return on the assets placed mend shorter-term GRATs for elderly indi- into the trust outperform the 7520 rate, the viduals or those families who have health Is a grantor excess value passes to the next generation concerns. Jay Rivlin of McDermott Will & free of gift and estate taxes. Many tax pro- Emery LLP says: “Clients who have system- fessionals will refer to this as a successful atically utilized GRATs have transferred sig- retained annuity GRAT or a GRAT that’s “in the money.” nificant wealth over the years. It usually An individual may gift a substantial only takes one ‘winner’ to make a GRAT amount of wealth utilizing a GRAT, while program very worthwhile.” retaining an income interest for a specified GRATs remain a viable and effective tool trust right for you? period of time. Given the retained interest, for wealth-transfer planning. To effectively there’s a significant reduction and, in some examine whether a GRAT is right for your cases, elimination of any taxable gift. family, you should consider a sum of all the One can choose to also place assets such financial parts and consult a qualified advi- BY STEPHEN A. SCHWARTZ, CFP®, AEP®, PARTNER as marketable securities, private stock or a sor or tax professional for the implementa- portion of the family’s business into a GRAT. tion of such a plan. ●

GRATs remain a viable and effective tool for wealth-transfer planning. any financial and legal practitioners Mhave been advocating the usage of grantor retained annuity trusts (GRATs) for the past several years. Once this gift has been made, it’s irrevoca- Stephen A. Schwartz offers advisory services as This widely used estate-planning ble, meaning these assets are there for a representative of Northwestern Mutual Wealth strategy has gained in popularity as good or until the GRAT terminates and the Management Company (WMC), a limited purpose federal savings , and a wholly owned subsidiary of The assets pass to the designated beneficiaries. the U.S. economy has embarked on a Northwestern Mutual Life Company, Milwaukee, repressed interest-rate environment Generally speaking, assets that have the Wis. (NM). Northwestern Mutual is the fleet name for which has helped provide a boost to potential for greatest gain should be consid- NM, its subsidiaries and affiliates. Investments held with household net worth. ered. Upon gifting such an asset, the post- or managed by WMC are not insured by the FDIC, are The general overview of a GRAT can appreciation will be excluded from one’s not deposits or other obligations of, or guaranteed by WMC or its affiliates and are subject to investment risks, Left to right: be explained as follows: An individual, estate and passed on to the next generation Kevin R. Luchetta, including loss of the principal. Stephen A. Schwartz is Paul D. Tortorella, referred to as the “grantor,” creates an without incurring estate taxes. Investors an insurance agent of NM (life insurance, annuities and Stephen A. Schwartz irrevocable trust, transfers assets to it should also consider placing nonmarketable disability income insurance), and Northwestern Long James L. DiNardo and retains an annuity from the trust assets, such as a family business or private Term Care Insurance Company, a subsidiary of NM, and for a specified term. GRATs have a mini- stock, which can result in a valuation dis- a registered representative of Northwestern Mutual Investment Services, LLC (NMIS), an NM subsidiary, mum term of two years but can be lon- count due to lack of marketability. broker-dealer, investment advisor, member FINRA, SIPC. PIONEER FINANCIAL AT NORTHWESTERN 245 Park Avenue, Suite 1800, New York, NY 10167 646.459.6366 MUTUAL – PARK AVENUE ger in duration. To avoid a gift tax, the The GRAT technique does carry some Pioneer Financial is a marketing name used by a group of retained annuity is designed to equal risk. Should the grantor die prior to the ex- Northwestern Mutual representatives (not all of whom are the value of the assets transferred, piration of the term, the GRAT is deemed affiliated with WMC) including DiNardo (referred to as the “firm”), and is not a legal entity, partnership, investment TEAM COMPENSATION METHOD MINIMUM FEE FOR INITIAL MEETING based upon the term of the trust and to be unsuccessful. If this situation were to advisor, broker-dealer or affiliate of NM. The information Kevin R. Luchetta, CFP®, AEP®, Partner Asset-based fees and commissions None required contained in this article is not a solicitation to purchase or (investment and insurance products) Stephen A. Schwartz, CFP®, AEP®, Partner sell investments or securities. The views expressed herein MINIMUM NET WORTH REQUIREMENT ABOUT US are those of the author and may not necessarily reflect the James L. DiNardo, CLU®, ChFC®, CFP®, PRIMARY CUSTODIAN FOR $1 million views of Northwestern Mutual. Certified Financial Planner MSFS®, Partner INVESTOR ASSETS IONEER FINANCIAL AT NORTHWESTERN MUTUAL PROVIDES FINANCIAL Board of Standards, Inc. owns the certification marks Accounts held at Northwestern Mutual EMAIL Paul D. Tortorella, Partner CFP®, CERTIFIED FINANCIAL PLANNER ™ and federally Investment Services LLC, an introducing [email protected] SERVICES TO HIGH NET WORTH AND EMERGING HIGH NET WORTH registered CFP (with flame logo), which it awards to broker-dealer, member FINRA, SIPC. [email protected] FINANCIAL SERVICES EXPERIENCE INDIVIDUALS, FAMILIES AND BUSINESS ENTERPRISES. Pioneer Financial’s individuals who successfully complete initial and ongoing Accounts carried, and all transactions [email protected] P Kevin R. Luchetta, 18 years executed, cleared and settled through team of 20 associates/staff serve clients nationwide from their Park Avenue office certification requirements. Stephen A. Schwartz, 15 years Pershing, A BNY Mellon Company, WEBSITE James L. DiNardo, 15 years in New York City. Kevin R. Luchetta, Stephen A. Schwartz and James L. DiNardo are member FINRA, NYSE and SIPC. www.pioneer.financial wealth-management advisors and CERTIFIED FINANCIAL PLANNERTM practitioners. ASSETS UNDER MANAGEMENT PROFESSIONAL SERVICES PROVIDED The practice is focused on assisting clients through comprehensive financial $1+ billion Financial planning, investment advisory, risk management and money planning that includes asset management, retirement funding, risk management, management services estate preservation and distribution. ●

ILLUSTRATION BY KEVIN SPROULS WORTH.COM FEBRUARY-MARCH 2015 101 Kevin R. Luchetta, CFP®, AEP® Partner

Stephen A. Schwartz, CFP®, AEP® Partner

James L. DiNardo, CLU®, ChFC®, CFP®, MSFS® Partner

Paul D. Tortorella Partner

Pioneer Financial at Northwestern Mutual – Park Avenue 245 Park Avenue, Suite 1800 New York, NY 10167 Tel. 646.459.6366

[email protected] [email protected] [email protected] www.pioneer.financial

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THE EVOLUTION OF FINANCIAL INTELLIGENCE

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