I have been getting up early and going out for a morning walk to clear my head and start the day invigorated. I am truly blessed to live by the ocean and this was my view this morning. I found this morning’s sunrise to be reflective of our sentiment. The clouds are still present but the sun is a strong force that is trying to break through. While we are in difficult times, brighter days are ahead.
As of right now, we are considered “essential workers” and Kate Saltonstall and I are coming in everyday with the rest of the staff working remote and getting together regularly on Zoom. We are very proud of our team and their commitment to helping our clients through these unprecedented times. We are also thankful to our clients for trusting our guidance in navigating these volatile times in the markets.
Monetary & Fiscal Support
There is a tremendous amount of monetary support from the Federal Reserve and U.S. Treasury including recent emergency measures to add money to the economy and create liquidity, including cutting short-term interest rates to 0% and stepping in to buy bonds, mortgages, and short-term debt. On the Federal stimulus side we’ve seen 3 Phases enacted thus far:
- Phase 3 - $2 trillion stimulus package with details to be released imminently
- Phase 2 - The Families First Act was signed into law to address the impact of the Coronavirus outbreak on families and the economy
- Phase 1 - provided $8.3 billion in vaccine research and development
Phase 3 - $2 Trillion Stimulus Package
As we write this Flash Report, details have not yet been released. We have early indications of the policies from Minority Leader Chuck Schumer. Here are some of the plans in the $2 trillion stimulus package, the largest in U.S. history:
- Direct payments of $1,200 to most individuals making up to $75,000 and $2,400 for couples making up to $150,000 (The amount decreases for individuals with incomes above $75,000, and payments cut off for those above $99,00)
- Expanded unemployment benefits that boost the maximum benefit by $600 per week and provides laid-off workers their full pay for four months
- $367 billion in loans for small businesses – loan forgiven if employers keep their employees on the payroll
- $150 billion for state and local governments
- $130 billion for hospitals
- $500 billion in loans for larger industries, including airlines
Phase 2 - Families First Act
- Expanded food assistance and unemployment benefits through supplemental appropriations for health programs
- Expanded unemployment benefits through larger federal grants to the states to process and pay claims
- Healthcare plans, including high deductible health plans, to provide for COVID-19 testing at no cost to the insured
- A requirement that employers with 500 or fewer employees and government employers provide 10 days of Emergency Paid Sick Leave to full-time employees
- Employers with 500 or fewer employees and government employers must provide up to 12 weeks of job-protected Emergency Family and Medical Leave
- Self-employed individuals and “gig” workers are eligible to get the benefits in the form of a refundable tax credit
- The Act funds the Paid Sick Leave and Paid Family and Medical Leave for employers (including tax-exempt employers) through a refundable credit against payroll taxes
IRS Extensions and “All things Taxes”
The IRS announced that individual taxpayers may delay paying 2019 Federal income taxes that would have been due on April 15. The new due date is July 15, 2020. The due date for Federal estimated tax payments that would have been due on April 15 for 2020 is also postponed to July 15. However, as of today the June 15th estimated tax payments have not been extended. Making your IRA contributions for 2019 have also been extended to the new filing date.
This delay applies to taxes due of up to $1 million. Corporations may also delay paying taxes of up to $10 million. Many states, including Massachusetts, have not yet announced a similar extension to the 4/15 deadline. Be sure to check in with your tax preparer.
Estate Planning Concepts
For those of us in the financial planning arena, we are constantly searching for a silver lining. Depressed values provide unique gifting opportunities, if you are so inclined. If your circumstances warrant this can be a great time to consider some of the planning techniques outlined below:
- Low interest rates loans: With much lower Applicable Federal Interest Rates (AFR), there is an opportunity to make low-interest loans to family members or trusts, or to refinance existing loans that have higher interest rates..
- Gifting: Gifting assets low in value today can be advantageous if the assets recover and exceed their value in the future. With the current estate exemption at $11.58M per person, now may be a good time to use up some of the exemption before it is set to sunset on January 1, 2026 (or earlier depending on federal elections).
- GRATs: For a Grantor Retained Annuity Trust, the grantor transfers assets to an irrevocable trust and receives an annuity payment each year for the term of the trust. The goal is to “zero out” the annuity, so that the entire investment and the imputed interest is paid out by the end of the term. Once the term ends, the balance is passed to the remainder beneficiaries free of gift tax. The lower the imputed interest rate, the less growth is needed to pass the “hurdle” of the initial investment to be able to transfer a balance to the remainder beneficiaries. The IRS rate for April is 1.2%.
Staying Fit and Healthy
Social distancing notwithstanding, many of us have found our fitness routines disrupted. This is a great time to hit the restart button on your fitness routine. We have assembled a short list of online classes:
- Planet Fitness: Offering free daily live-streamed at-home workouts at 7 p.m. ET on its Facebook page.
- Barry's Bootcamp: Offering live 20-minute workouts twice daily on Instagram @barrys
- Corepower Yoga: Free on-demand yoga and sculpting videos on the Corepower Yoga website.
- Peloton: Try the Peloton app at home for free for 90 days — no bike needed!
- YMCA: Choose from tons of workout videos including yoga, bootcamp, and barre with these on-demand workout videos.
Do not hesitate to contact us if you have any questions or concerns. We are here to listen to you and be a steady hand when needed.
The Sandy Cove Advisors Team
Coronavirus Resources: We find this John Hopkins website tracking cases to be very helpful
Unemployment Benefits in Stimulus Package: The coronavirus unemployment insurance plan, explained