The Advisor, August 2022
The Advisor, August 2022

What’s New at GPW

We held our semi-annual Team Vision and Planning Meeting at the end of July, during which we reflected on the past six months and also discussed goals for our firm and our clients going forward. The partners reiterated our team vision and encouraged all team members to focus on the end game. It can be difficult to remember what is important when faced with day-to-day tasks, especially in a down market. But, as author Michael Hyatt said, “There’s nothing more satisfying than proceeding with confidence, knowing your team is aligned and passionate about the future because your vision is clear.” Your Gentry team is aligned and very passionate about the months and years to come. Check out our Staff Featurette at the end of the newsletter to see how we’ve reorganized our staff’s roles to better fulfill our firm’s vision for the future.

GoalVest Portfolio Update

The S&P 500 is down 13.5% year to date. Second quarter GDP came in at -0.9%, driven by lower inventory investment, lower government spending, and lower fixed investment. This marks the second consecutive quarter of declines in GDP growth. The consumer remains strong, which has been positive for our portfolio companies over the last month. More broadly though, economic indicators are mixed. Last week, PCE came in higher than expected at 6.8%.Inflation remains elevated after CPI came in at 9.1% for June.
We believe that while the year-on-year rate of CPI could begin to slow down in the not too distant future, the absolute rate of inflation is likely to remain well above the Fed’s target for the near future. As a result, we believe the Fed will continue to be fairly aggressive until they can bring inflation closer towards their target (especially ahead of the mid-term elections). We continue to believe that a balanced portfolio with a defensive tilt is prudent against the backdrop of rising interest rates, a slowing economy, and quantitative tightening. We continue to focus on optimizing risk-adjusted, inflation-adjusted returns, through sector diversification and structured products such as structured yield notes.

Special Needs Planning

Taking care of a family member with special needs often starts with determining how to fund their daily living expenses. Many individuals with special needs receive government benefits such as Medicaid or Supplement Security Income (SSI).These benefits are subject to eligibility testing that could reduce or eliminate them if the individual exceeds financial thresholds. Thus, creating financial savings that are protected is crucial. Let’s discuss three tools that are often used for special needs planning: ABLE accounts, pooled trusts, and special needs trusts.

Achieving a Better Life Experience (ABLE) accounts are a type of savings account designed for individuals with onset disabilities prior to age 26. ABLE accounts can be used to pay for Qualified Disability Expenses (QDE), including education, food, housing, transportation, legal fees, and employment training. The individual with special needs, along with their family, friends, or employer, can make direct after-tax contributions to this account. The 2022contribution limits are $16,000 and may be eligible for a state tax deduction. Unlike a traditional savings account, there is a limit on how much you can hold in an ABLE account and this amount varies depending upon the structure of the account and your state of residence. If an ABLE account exceeds $100,000, the beneficiary will not receive SSI benefits. However, the ABLE account does not impact any Medicaid eligibility rules.

Another option for securing financial resources is a pooled trust. As its name suggests, a pooled trust gathers multiple individuals’ accounts under one main trust that is managed by a nonprofit organization. The managing organization oversees the investment and disbursement of funds. Unlike an ABLE account, an individual can have multiple pooled trust accounts and make unlimited annual contributions. One drawback, though, is that there are additional fees paid to the managing organization since it is not the beneficiary (or their representative)managing the assets. Depending on how the pooled trust was established, a beneficiary may still receive government benefits with this account in place.

One of the most common planning tools is the special needs trust. This type of trust can be funded by the beneficiary or a third-party such as a family member. The key to determining if a special needs trust will affect the beneficiary’s Medicaid or SSI is whether the individual has any legal authority or direction over the trust, or any assets held within the trust. A special needs trust is often used to create a generational estate plan in the event that the primary earner for the beneficiary passes away. One point to keep in mind is that, if the trust is funded via a third-party, disbursements related to food and shelter may reduce SSI.

Please consult your legal and financial professionals before executing any advanced planning and be sure to reach out to us if you or a loved one would like to discuss special needs planning in more detail.