Conversations - Fall 2003
Will the New Tax Law Impact Your Investment Program? by Diahann W. Lassus, CFP®, CPAEvery time the tax law changes, it provides a new reason to take a close look at overall investment programs. There is some tax savings for many individuals but not necessarily any reason to change the program. Here are the most important changes: reduction in long-term capital gains tax from 20% to 15% for taxes between 5/5/2003 and 1/1/2009; reduction in tax rate on qualified dividends to generally 15% (lower if tax rates are 10% or 15%) from 1/1/2003 to 12/31/2008. The major thing we need to focus on here is the limited timeframe. Note that these reductions in the tax rates expire or go away in a few years. This is important to remember when designing and managing LONG-TERM portfolios. It is a great opportunity to take profits on investments that you have held for a long time such as inherited stocks. For individuals with high percentage allocations in bonds, it may make sense to move some dollars from bonds to dividend-paying stocks or stock funds. If you own a business and have considered selling it, this might be a good time to follow through. Last but not least, it might be worth considering transferring appreciated assets to children (over age 13). Any gain on the sale of the transferred asset could be taxed at the lower 5% rate.
Disaster Recovery – Not Optional! by Clare E. Wherley, CPA, CFP® Most of us who have been around computers for any length of time have had that gut wrenching experience of losing a file! Either it was deleted accidentally, the whole computer just crashed, or, with embarrassment, we overwrote it. As soon as the catastrophe happens, we KNOW. And we kick ourselves for not having taken the steps to prevent such a situation. Usually, it only has to happen once, or at most, twice, and forever more we create copies or backups or print it all out so we don’t ever lose it and have to create it again. Take this experience and magnify it a hundred-fold. In business, the overwriting or accidental delete can happen at any time. BUT, in addition, there are more ominous threats. Some are as simple as a thunderstorm and loss of all electric power. Others are as overwhelming as the threat of a terrorist attack! Or a major fire! In any case, recovering files and maintaining operations in the midst of major disasters has become a normal business consideration and must be addressed on an ongoing basis. After September 11th, the Securities and Exchange Commission adopted a more insistent posture requiring that all financial advisors have a disaster recovery plan in place covering facilities, procedures, communications, and tools available in case of an emergency. Many businesses, including LWA, had begun addressing such concerns in the late 90’s in connection with Y2K. Remember the “Year 2000” fears? No one knew what would happen. Nothing did, THEN. And then we had September 11th. In the last year the SEC went one step further. In addition to having plans in place, the next logical step needed to be put into effect. TEST them! Test them? That’s right, and so we have. In July of this year the LWA tech team conducted what we called the technical recovery test. Early one morning we declared a major fire had occurred at 1 Academy Street taking out all of our servers. A few workstations were declared usable. The challenge was clear! Could the tech team recover the critical systems and data in a reasonable frame of time? Absolutely! In less than 5 hours the team had restored all critical systems and data at an off-site location. We had communicated with the insurance company, the bank and Charles Schwab (all of whom participated in the test)! We got computers with the last 3 generations of operating systems up and running using the internet and alternative email. And oh, by the way, the computers and the new server were all networked and communicating with each other. This was no small feat! October was an even better story. A non-technical test was conducted on the 10th. The focus was to determine what employees could accomplish from home if they needed to, what alternate forms of communication were viable, including cell phones and personal emails, and finally, which key employees were needed to travel to the workplace in spite of it all. For those of you who may not be aware, New Jersey, like many other states, is adopting a position of limited access to the highways in the case of a major disaster. Only those employees deemed “critical” will be allowed on the roads. The other important aspect of our non-technical test was that 4 clients participated! Playing roles from the demanding and impatient to the clueless and serene, we had requests for information, help in making decisions, money and advice. Everyone took their roles seriously and presented some absolutely marvelous test dialogue. The creativity was astounding! Honestly, we had 4 academy award performances and recognized them as such! Disaster recovery is serious business. The testing we’ve done so far has been very enlightening. We’ve discovered some simple oversights that are easily corrected. There have been other dilemmas that will require more thought and discussion for resolution. The bottom line is that we all have concluded that the plans and the tests are a good thing. It helps us do better every day and be ready for EVERY day. ENJOY THE FALL AND HAVE A SAFE AND HAPPY HOLIDAY SEASON. J |