November 2014 Insights Newsletter
CLIENT SPOTLIGHT: McKENZIE MONKS FOUNDATION
One brave little girl inspired her family, friends, and community to help kids cope with cancer throughout the course of her life. McKenzie Monks was born on September 16, 1998. She brought indescribable joy to her family. Her laughter, singing, and dancing filled their home with life, and her hugs filled their hearts. Just after she turned three years old, McKenzie was diagnosed with bi-lateral Wilms Tumor — cancer in both kidneys. This kind of diagnosis is daunting for adults to cope with, but McKenzie took each phase of her diagnosis and treatment with bravery unique to children. Her life was soon filled with 50 radiation treatments, 11 months of chemo treatments, 12 surgeries, and the brutal process of undergoing a bone marrow transplant. Little McKenzie never failed to smile, laugh, dance, and, most importantly, love during her 19 months of intensive treatment.
Six weeks before her fifth birthday, McKenzie left this life, but her legacy endures. As a testament to McKenzie’s courage and love, the Monks family founded the McKenzie Monks Foundation in 2004, one year after McKenzie’s passing. The McKenzie Monks Foundation began with one goal in mind — to help children and young people cope with cancer.
The Foundation began work on the Kenzie Kases Project. Through every treatment McKenzie brought with her a suitcase filled with toys, games, blankets, and other objects for comfort. These items helped keep her focused on the joy of life even during difficult and physically draining cancer treatments. “Kenzie Kases” are prepared by age and gender. They include a video player, movies, Game Boy, video games, toys, arts, games, and, most importantly, a blanket to provide comfort during difficult treatments. Each Kenzie Kase is delivered to a child undergoing cancer treatment. While these kids have big hearts and an incredible outlook on life, they also need the comfort and joy that the simple things in life bring. In ten years’ time 500 Kenzie Kases have been delivered to courageous kids living with cancer.
The Kenzie Kases Project is only one program of the McKenzie Monks Foundation; they also contribute in many other ways to better the lives of children undergoing cancer treatment. The Foundation has worked in partnership with Banner Hospitals and Phoenix Children’s Hospital to build facilities and rooms dedicated to the care of these special children. At Phoenix Children’s Hospital, the Kenzie Center is a world-class pediatric oncology center. The McKenzie Monks Foundation contributed a million dollars to the establishment of this center. The Foundation has also joined together with hospitals to bring joy through recreation and play to child cancer patients. These “Kenzie Korners” give kids the chance to just be kids and find respite from the pain of cancer treatment.
The McKenzie Monks Foundation has worked for ten years to bring joy to the lives of young people struggling against an insidious disease.
To learn more about the McKenzie Monks Foundation visit http://www.mckenziemonksfoundation.org.
MRA SELECTED AS SUCCESSOR FIRM FOR TETON WEALTH MANAGEMENT
Miller Russell Associates was recently selected by Teton Wealth Management, a Jackson Hole-based investment adviser, as the recommended investment adviser to service Teton Wealth Management’s clients as the firm closes its doors.
Teton Wealth Management’s President and Founder Richard Bloom recently announced his retirement. As Teton Wealth Management closes its doors, Miller Russell Associates has taken an active role in serving Bloom’s former clients.
“I have recommended Miller Russell Associates to my clients because like Teton Wealth Management, Miller Russell Associates is entirely focused on its clients,” said Bloom. “I have been entirely committed to our clients and their goals. Miller Russell Associates is set up to serve clients for generations to come. The firm has a sustainable partner and employee-ownership model that ensures long-term stability.”
Teton Wealth Management and Miller Russell Associates have worked together as partners and strategic allies for more than 15 years. Bloom originally engaged Miller Russell Associates as investment manager for the Teton Science Schools (TSS) endowment when he was CFO for the TSS 15 years ago. Miller Russell Associates still stewards the endowment today, and also currently services many other clients in Jackson Hole.
“We are proud to be selected as Teton Wealth Management’s recommended wealth investment advisory firm,” said Mark Feldman, CEO and managing partner of Miller Russell Associates. “We value our 15 year partnership with Rich and look forward to serving any of his clients who choose to work with us in the same exceptional manner to which the rest of our clients have become accustomed.”
LIABILITY INSURANCE: A KEY INGREDIENT TO A SUCCESSFUL FINANCIAL PLAN
Russell Bucklew, CFP®, J.D., Partner
For people who spend a lifetime accumulating assets through hard work and frugality, it would be devastating to have their wealth destroyed in seconds from an unexpected loss. A financial plan is not complete without addressing one’s exposure to liability from unforeseen events. For example, if a delivery man slips on your front door step, you could be held liable. The same can be said if you are involved in an auto accident, or if your child is accused of bullying through social media activity.
A recent study by ACE Private Risk Services of households with $5 million or more in investable assets points out that the statistical probability of being involved in a law suit has increased and the odds go up notably in challenging economic times. Moreover, the study also points out that 38% of those surveyed significantly underestimated their potential liability and cost of a lawsuit.
High-net-worth individuals have unique needs typically not met by standard insurance policies. Fortunately, resources and special programs are available to meet these needs. Specialized coverage, sometime referred to as “private client services,” offers complimentary proactive risk management. One example of a benefit of this type of insurance is wild fire defense, where a team of certified firefighting specialists are dispatched when wildfires threaten an insured’s home. Other examples of benefits include complimentary background checks for prospective household employees, hurricane protection units, and specialists to assist in the proper transit and installation of fine art. Many private client programs offer an annual review, where specialists will perform a risk assessment and provide consultation to help the insured prevent future losses. It’s a win-win proposition.
In addition to preventive risk management, private client programs offer other specialty programs to wealthy families where most mass-market programs do not. Assets such as jewelry, valuable collections of art, wine, firearms and antiques (typically “scheduled” items) have specific and unique considerations, and coverage is typically limited or excluded from standard policies. For example, most standard homeowner policies have limitations on jewelry. If jewelry is lost, rather than stolen, the mass-market policy holder may be out of luck, but a private client policy holder can be covered.
Other examples of specialty coverage include:
- Yachts and Aviation Coverage
- Kidnap and Ransom Protection
- Employment Practices Liability Insurance (EPLI) and Workers’ Compensation for private staff members
- Global Travel and Accident coverage, including medical evacuation
- Directors and Officers coverage for board participation
- Libel and Slander
- Additional Supplemental Defense coverage. Using your own attorney to shadow the insurance company’s defense counsel.
- Trustee Liability
EXCESS LIABILITY OR UMBRELLA COVERAGE
In most cases, it is advisable to consider an excess liability coverage in the form of an umbrella policy for coverage above the limits of standard policies.
Krista Tankersley is managing director at Crystal & Company. She leads their Private Client Services team in Dallas. Krista shared the following about excess liability coverage:
“An excess liability policy is utilized when a judgment from a lawsuit exceeds the underlying limits on your homeowners, automobile, and watercraft policies. In today’s litigious society, multi-million dollar judgments do occur. The maintenance of a personal excess liability policy is essential in a wealth preservation strategy as it protects your assets from liquidation should a judgment exceed the underlying liability limits on your homeowners, automobile and/or watercraft policies.
Although assets such as ATV’s, snowmobiles, or jet skis can usually be replaced without a huge expense, the liability associated with these recreational vehicles can be tremendous. Always maintain proper liability coverage on these toys and also assure they are included on the excess liability policy.
Crystal & Company has developed an anonymous and wonderful resource for clients and wealth advisors at www.whatsmyliability.com. This application allows one to discreetly determine an appropriate range of excess liability coverage based on the exposures and personal wealth of each family by answering 15 simple questions. Lifestyles are important when determining the proper amount of excess liability coverage. We would encourage each of you to use this helpful tool.”
Liability and excess coverage is very affordable. According to Christina Murphy, a Certified Insurance Counselor at Cragin and Pike, “$10 million of umbrella liability coverage for a high-net-worth individual with three homes, four cars, and three drivers might run as little as $1,300 per year.” In order to determine how much protection one needs, most professionals advise having higher limits. While there is no set method, one should consider purchasing coverage in an amount that will cover the sum of all real property, vehicles, other significant personal property, and average income for five years. The upper limit of coverage is often $100 million.
“If they don’t have enough insurance at the time of the loss, it’s going to eat up what they’ve placed in their portfolios,” says Christina.
Gaps in coverage can be minimized by partnering with a competent insurance professional and reviewing your policies with your professional annually. Understand the difference between full replacement cost and actual cash value, which is the depreciated value, when a loss occurs. If you created a trust or LLC for estate-planning purposes, be sure your personal policies are held in the name of the proper entity.
A careful review and analysis of liability insurance is an important ingredient of a successful financial plan. An awareness of types and amounts of liability coverage and the resources available to help prevent losses, along with a regular review by a competent insurance professional, could pay significant dividends. At Miller Russell Associates, we stand ready to help guide you through the financial planning process, including an insurance review and a referral to a competent insurance professional.
COULD YOU BE PAYING 50% OF YOUR INCOME IN TAXES SOON?
By: Matthew Walker, CPA, CGMA, Senior Client Associate
For several years one of the main topics of national discussion has been tax rates for the wealthiest Americans. It’s easy to find many different perspectives on this subject just by scanning the nightly news. At Miller Russell Associates what matters to us is how new regulations and legislation affect our clients.
In 2013, taxpayers faced a significant rise in tax rates due to the American Taxpayer Relief Act of 2012 and the Patient Protection and Affordable Care Act of 2010. The new top tax rate is 39.6%, with an added 3.8% added due to the new Medicare investment income surtax. Additionally, there were two deduction phase out provisions that have returned in 2013. Itemized deductions and personal exemptions will gradually phase out above $300,000 for couples, and over $250,000 for single filers. The more notable of the two is the return of the Pease limitation on itemized deductions. Though it is dubbed as a deduction phase out, the Pease limitation in reality is a surtax on income based on how it is calculated. The equation takes the amount of the taxpayers AGI over the $300,000 ($250,000 if single) and multiplies it by 3% for every dollar over the threshold. For most, the Pease limitation on itemized deductions results in about a 1% – 1.2% direct increase in effective tax rate.
Currently the top effective tax rate is made up of the following components:
- Federal income tax at 39.6%
- Surtax on investment income from the Affordable Care Act at 3.8%
- State income tax at 4.54%, if Arizona resident
- Itemized deduction add back of 1% – 1.2%
With a very simple equation, it becomes clear that high income taxpayers could pay taxes amounting to nearly 50% of their income not counting any potential self-employment taxes!
The ramifications of these changes and new taxes are enormous. Even with proper planning and
disclosure of the new law our clients have been surprised by the significant tax bite caused by the Affordable Care Act, particularly the 3.8% surtax.
In the next few years we expect more proposed legislation that primarily impacts high income taxpayers. We will continue to track these developments and inform our clients, at every opportunity.
It is more important than ever that taxpayers engage in proactive tax planning to help navigate and minimize the effects of these new legislations. Please feel free to contact a Miller Russell Associates team member to schedule your tax planning meeting today.
AROUND THE FIRM
This summer Miller Russell Associates was recognized for excellence in our industry. Nationally, the firm was ranked 25th on the Top 50 Fastest Growing Firms in the U.S. by Financial Advisor Magazine. This ranking is based on growth in assets under management between 2011 and 2013. We attribute our success and ranking to our client-focused approach to investment and wealth management. This is an exciting recognition of the work that our team members do daily for the benefit of Miller Russell Associates clients.
Miller Russell Associates has again been named on the list of CareerBuilder’s Top companies to Work For in Arizona, a list comprised of only 50 companies. The firm made the list in 2013 and again in 2014. As part of the recognition, representatives from each area of the firm’s practice attended a celebratory breakfast hosted by CareerBuilder. Jessica Cobb, Senior Client Administrator, attended the breakfast and penned a short description of the event:
“One thing particularly interesting to me were the statistics related to the feedback from the survey. Each company receiving an award obtained employee satisfaction results above 90%. The national average is only around 30% employee satisfaction. These statistics demonstrate why I am grateful for the working environment that Miller Russell Associates provides.”
Making a Difference
In July, the Miller Russell Associates team spent a few hours volunteering with Chicanos Por La Causa (CPLC), decorating and putting together activity bags for children and youth involved in CPLC programs. Throughout each year, the firm makes a point to spend time volunteering in the community and contributing to the greater good of the Phoenix metro area.
The firm continues to grow in size and talent by adding professionals of various backgrounds to the Miller Russell Associates team. Brock Ramaglia joined the Miller Russell Associates team in September as a Client Associate.
Brock grew up in Colorado and moved to Arizona in 2010. He graduated from the Masters of Taxation program at Arizona State University in May, 2013. Brock also holds a Bachelor of Science degree in and Accountancy, from the W.P. Carey School of Business at Arizona State University, where he graduated Cum Laude. In his spare time Brock plays golf, tennis, and participates in running events that raise money for charities.