As Wealth Strategists, we’ve found that many of our conversations stem from three things: headlines, deadlines, and gossip. As an advisor, many of your wealth planning conversations with clients may touch on these topics as well.

In this quarterly article series, we’ll highlight recent headlines, timely deadlines, and relevant gossip to help you stay abreast of what’s new and trending in the wealth management space.

Headline: Financial exploitation hits Bravo network star

We recently wrote about how financial exploitation may impact one’s estate plan. Part of the urgency with this topic is the exponential growth we’ve seen in these types of scams, due in part to the evolution of artificial intelligence, which makes all of us more vulnerable to exploitation.

That vulnerability was on full display recently when Andy Cohen, of Bravo and The Real Housewives fame, was a guest on the Today Show. Cohen described in detail how he fell victim to scammers posing as representatives from his bank. The day after losing his debit card, he received an email that appeared to be from his bank’s fraud alert. He clicked on a link in the email, which prompted him to sign into his bank account, giving the imposters access to his account. This set off a series of calls with the imposters over the next 48 hours that led to even more information sharing and wire transfers being made from his account.

While the losses he incurred were not specified, Mr. Cohen commented that it was “enough that I’m on the Today Show talking about it!”

Advisor/client takeaway: In addition to economic loss, victims of financial exploitation can feel significant shame and embarrassment, which leads many to not report these crimes. Sharing these types of stories helps destigmatize the issue by showing that everyone is vulnerable and provides clients with valuable lessons on how to protect themselves.

Deadline: Beneficial ownership information filing for (some) business owners

The Corporate Transparency Act of 2019 (CTA) requires, for the first time, that certain U.S. and foreign business entities disclose information regarding their beneficial owners and persons who register or form them with the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). The final rule published by FinCEN, which implements the beneficial ownership information (BOI) reporting provisions of the CTA, took effect on January 1, 2024.¹

The deadline for companies created or registered before the effective date to file their BOI is January 1, 2025. Those companies created or registered on or after January 1, 2024, and before January 1, 2025, have 90 days to meet their reporting obligation.

The main question a business owner may ask is, “Am I a ‘reporting company’?”

Domestic reporting companies include any corporation, limited liability company (LLC), or other similar entity. Foreign reporting companies include any legal entity (corporation, LLC, or other similar entities) formed under the laws of a foreign country that is registered to do business in any state within the United States.

There are, however, 23 entity types that are exempt from reporting. For example, large operating companies that have an office in the U.S., employ 20+ full time employees, and have $5 million in gross receipts, are exempt. The full list of Exempt Entities can be found on the Federal Register website (31 C.F.R. § 1010.380©²).

Advisor/Client takeaway: Advisors should make clients who own businesses aware of this new requirement – and encourage them to seek legal counsel to determine whether it applies to them – to ensure compliance.

Update: On March 1, 2024, a U.S. District Court judge in Alabama ruled that, in the case presented, the CTA was unconstitutional. FinCEN is currently unable to enforce its requirements against only the plaintiffs in that case (members of National Small Business United). It is uncertain if the ruling in this case will apply more broadly, however, which throws the beneficial ownership reporting regime into limbo. Regardless, business owners should remain in close contact with their legal and financial advisors and be prepared to meet these requirements.

Gossip: Shohei Ohtani to the Florida Marlins?

Baseball fans know that the Japanese phenom Shohei Ohtani just signed with the Los Angeles Dodgers for $700 million over 10 years. What’s interesting about this contract is how it is structured: $680 million has been deferred to 2034, at which point it will be paid out in equal installments of $68 million over the course of 10 years.

In 2034, Mr. Ohtani will be 40 years old. Theoretically, he could move to Florida to play for the Marlins or Texas to play for the Rangers. As long as he relocates from California, he could earn his $68 million per year from the Dodgers – plus a new contract – and potentially be able to shield all of it from any state income tax.

How? A federal law enacted in 1995 prevents states from taxing nonresident “retirement income,” which can include deferred compensation. Specifically, looking at IRS Code 4 U.S. Code § 114, we see that:

(a) No State may impose an income tax on any retirement income of an individual who is not a resident or domiciliary of such State (as determined under the laws of such State) … (i) is part of a series of substantially equal periodic payments, (I) the life or life expectancy of the recipient or (II) a period of not less than 10 years.²

Advisor/client takeaway: While your clients may not be professional baseball players, this does serve as a good reminder that some clients may be able to utilize deferred compensation packages to their benefit. As with Mr. Ohtani, the client would need to have the compensation paid out per the stipulations above and be willing to take up residence in another state. As always, the advice of good legal and tax counsel is essential.

Whether your advisory clients are business owners, baseball fans, or older adults who may be vulnerable to financial exploitation, it’s important to stay informed of stories and developments that could prove relevant to their situation. We hope these topics serve as helpful starting points for your wealth planning conversations.

If you have questions on this or other wealth planning topics, feel free to reach out our Wealth Strategist Group or your Janus Henderson representative.

IMPORTANT INFORMATION

The information contained herein is for educational purposes only and should not be construed as financial, legal or tax advice. Circumstances may change over time so it may be appropriate to evaluate strategy with the assistance of a financial professional. Federal and state laws and regulations are complex and subject to change. Laws of a particular state or laws that may be applicable to a particular situation may have an impact on the applicability, accuracy, or completeness of the information provided. Janus Henderson does not have information related to and does not review or verify particular financial or tax situations, and is not liable for use of, or any position taken in reliance on, such information.

This material is for information purposes only. There is no guarantee that the information supplied is accurate, complete or timely, nor is there any warranty with regards to the results obtained from its use. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.