For now, the economic and political climate looks favorable.  Our article, detailing an overview of our perspective on the economic, investment, tax, and estate planning issues of the New Year, is available on the web at ljpr.com/outlook.

In general, we are cautiously optimistic, and as the Outlook covers, we are revising our models to reflect what we see as a new phase of the cycle. Here’s a foreshadowing of what we expect:

• On Investing. The U.S. economy will continue to grow at a slightly faster pace, accompanied by improving investor sentiment. The Fed will taper slowly, and interest rates will rise. Don’t fight the Fed, so stay short-term and strategic. Europe continues to trend positive, but with risk. Asia, including Japan, will grow.  Emerging markets are relatively undervalued and are supported by massive global liquidity. The U.S. energy renaissance will continue to provide jobs, low energy prices, and a shift in U.S. energy dependence.
• On Financial Planning. 2014 financial plans should address future medical costs. We think inflation, a relative non-factor for the prior decade, will rear its head into future projections. Social Security maximization is an issue for retirees not in full collection, particularly couples. 2014 may be a good year to formalize financial plans. The next generation (i.e., children and grandchildren) should be introduced to wealth-preservation concepts.
• On Taxes. We feel the tax system will not have a major overhaul affecting 2014 taxes. The new complexities of Net Investment Income (NII), new brackets, and the phase-out of itemized deductions and exemptions will provide challenging tax planning for those with incomes of over $250,000. 401(k), 457 and 403(b) plans will remain the primary tax shelters for working people. Charitable deductions are still viable for tax reduction and offsets.  For retirees, ‘bracket topping’ or utilizing the lowest possible tax bracket, is a logical strategy.
• On Estate Planning. Estate plans that are over five years old, or families with situations that have changed, should be reviewed. Couples with taxable estates under $10.68 million may not need dual trusts, and may be able to accomplish their goals with a joint trust. Estate plans should be reviewed for correct beneficiary designations (primary and alternate) and proper funding (i.e., assets not in trust).  People with large IRAs with non-spouse beneficiaries should look into an IRA trust.

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By Leon LaBrecque, J.D. CPA, CFP, CFA

Leon C. LaBrecque, CFP, CFA, CPA, is an attorney and the managing partner and founder of LJPR, LLC, an independent wealth-management firm in Troy, Michigan, which manages $626 million in assets (as of 12/31/2013). He has specialized in servicing individuals, families, and small businesses in the areas of financial, estate, and tax planning for over 32 years. Email him at leon.labrecque@ljpr.com.