Happy (Almost) Spring, Clients and Friends!

We hope that you and your family are enjoying a good start to the new year despite the bitter cold that has gripped much of the country in recent weeks. By now, many of you have already filed your 2024 tax returns or are in the process of gathering information and data to do so. While taxes are still top of mind, it’s a good time to time to start thinking about tax strategies for the year ahead.

As part of our commitment to continually help you move closer to your definition of a life well lived, we’re happy to provide our comprehensive Return on Life Wealth Partners 2024-2025 Tax Planning Guide and at-a-glance 2025 Federal Tax Rates Guide. Both of these complimentary guides can be downloaded at the links provided below. Keep in mind that our team includes an experienced Certified Public Accountant (CPA) and an IRS-licensed Enrolled Agent to assist you in implementing tax-smart strategies aligned with your long-term goals.

We also have some exciting news to share about our team, including introducing our newest member, Brad Scarbrough, who joined us in January as Director of Marketing & Business Development, and several awards recently bestowed on our team and individual team members. You’ll also want to check out our calendar of upcoming events and plan to join us for some of the events we’ll be hosting or sponsoring in 2025.

Finally, don’t miss our Market & Economic Update where we provide insights on the market’s response to the first weeks of the Trump administration and our thoughts on the potential impact of policy changes on the global markets and economy.

As you and your family continue to pursue your Return on Life^®, we encourage you to reach out to your dedicated team whenever you have questions or when circumstances in your life change. If you need additional help or someone you know needs our advice, remember, we’re only a phone call away at 440.740.0130.

What's In It for You?

At-a-glance guide to your 1st Quarter 2025 Frank Talk newsletter:

News & Events

• Team Updates and Awards & Recognition
  • Bradley S. Scarbrough joins the team as Director of Marketing & Business Development
  • Return on Life Wealth Partners named a Forbes Best-in-State Wealth Management Team for 2nd consecutive year
  • Cynthia Yang and Chelsea Hussey named among Forbes Best-in-State Women Wealth Advisors
  • Frank Fantozzi named a Northeast Ohio Smart 50 Honoree

• Upcoming Events
  
  • Market Noise Live Webinar – April 10th
  • Private Directors Association – May 7th
  • Smart Business Dealmakers Conference – June 12th
• Recent Events 
  • Blue Vault Alts Summit – March 10th
  • Private Directors Association – February 19th

Resources

• NEW! 2025 Federal Tax Rates At-a-Glance
• 2024-2025 Tax Planning Guide
• Complimentary Second Opinion Service
• Visit Our Blog and Podcast and Join Us on Social Media

Market & Economic Update

News & Events

Team Updates and Awards & Recognition

ROL Welcomes Bradley S. Scarbrough, Director of Marketing & Business Development

Join us in welcoming Bradley S. Scarbrough, MBA, as Director of Marketing & Business Development to our team. With more than 20 years of experience in marketing, finance, and business development, Brad will play a pivotal role in shaping the firm’s future growth through the development and implementation of strategic initiatives intended to advance our business goals.

Prior to joining Return on Life^® Wealth Partners, Brad held a number of senior management and executive positions, including Vice President of Digital Sales at iHeartMedia, where his responsibilities included securing new business, leading digital marketing and sales efforts, building integrated campaigns, and developing key performance indicators. He has also successfully managed and led revenue-generating marketing and sales efforts for regional and national companies, including ZeroSum.AI, Credit Acceptance, Neo Marketing, Allstate, and Advance Digital/Advance Publications. Brad holds a Bachelor of Arts in Finance from the University of Phoenix and a Master of Business Administration, Data Analytics, from Southern Indiana University.

Return On Life^® Wealth Partners Named a Forbes Best-In-State Wealth Management Team for 2nd Consecutive Year

We’re pleased to announce that our team has been named to the annual Forbes list of Best-in-State Wealth Management Teams for 2025. Ranking 89 out of 179 for the state of Ohio, this marks the second consecutive year the team has received this prestigious honor. Frank Fantozzi, CPA, MST, PFS, CDFA, AIF^®, CEPA and  Cynthia Yang, CFA^®, CAIA^®, CIPM, will attend the 2025 Forbes/ SHOOK Top Teams Summit in Miami Beach, Florida in March.

The Forbes Best-in-State Wealth Management Teams ranking was developed by SHOOK Research and is based on in-person, virtual and telephone due diligence meetings and a ranking algorithm that includes: a measure of each team’s best practices, client retention, industry experience, review of compliance records, firm nominations; and quantitative criteria, including: assets under management and revenue generated for their firms. Investment performance is not a criterion because client objectives and risk tolerances vary, and advisors rarely have audited performance reports.

Cynthia Yang and Chelsea Hussey Recognized as Forbes Best-In-State Top Women Wealth Advisors for 2025

Wealth advisors Cynthia Yang, CFA^®, CAIA^®, CIPM and Chelsea Hussey CLU^®, ChFC^®, CFP^® were named to the annual Forbes | SHOOK list of Best-in-State Top Women Wealth Advisors for 2025. According to Forbes | SHOOK, the ninth annual ranking features just over 2,400 women with proven track records who manage cumulative assets of roughly $3.6 trillion.

Ranked 59 out of 74 in Ohio, this marks the fourth consecutive year that Cynthia has been named to the prestigious list and the first time for Chelsea, who is listed at 58 out of 74. The annual list is compiled by Forbes with insights from SHOOK Research. Advisors are selected based on quantitative and qualitative data, and are assessed on a variety of criteria, including in-person interviews, years of experience, compliance records and assets under management.

Frank Fantozzi Named a Northeast Ohio Smart 50 Honoree

Frank Fantozzi, CPA, MST, PFS, CDFA, AIF^®, CEPA was named among Northeast Ohio’s top executives for 2024. The Smart Business Northeast Ohio Smart 50 Awards recognize the top executives of the 50 smartest companies in the Northeast Ohio region for their ability to effectively build and lead successful organizations. 

All 50 winners were honored at a special celebration in November 2024 at The Embassy Suites – Cleveland Rockside and were featured in a special editorial report in the November 2024 edition of Smart Business Magazine. Smart 50 honorees must be a top executive of an organization with a physical office in the Northeast Ohio region. Out of 75 nominations received; 50 awards were granted. Fantozzi was previously selected as an honoree in 2019.

Upcoming Events

Market Noise Live Webinar: Market Update – Join Us On April 10^th!

Plan to join us via Zoom on Thursday,  April 10, 2025 from 11 am – 12 pm for our Market Noise Live Webinar: Market Update. Your host, Frank Fantozzi, and wealth advisors Cynthia Yang, CFA^®, CAIA^®, CIPM and Chelsea Hussey, CLU^®, ChFC^®, CFP^® will share insights on the drivers of recent market and economic activity, including how AI and policy changes are influencing the markets and what this could mean for your business and personal investment planning. Learn about steps your Return on Life Wealth Partners team is taking to help manage portfolio risk and position client portfolios for long-term success. Watch your email for the invitation with the registration link.

Private Directors Association Business Succession Panel Discussion – May 7th

Frank will participate in a panel discussion on Succession Planning for Family-Owned Businesses at a Private Directors Association - Cleveland Chapter event on May 7, 2025. Frank, a Certified Exit Planning Advisor (CEPA^®), is one of three speakers who will share knowledge and perspectives on succession planning for family-owned businesses. The event will be held at Vitamix company headquarters in North Olmstead, Ohio. Loree Connors, the former CFO and a member of the family-owned business, will host the event. Connors currently serves as the liaison between Vitamix owners and the company.

Smart Business Dealmakers Conference/Cleveland – June 12^th

The Smart Business Dealmaker’s Conference will take place on June 12, 2025 at Hotel Cleveland. Return on Life Wealth Partners is an event sponsor, and Frank is a member of the host committee once again for this year’s middle-market dealmakers conference.

The 17^th Annual Cleveland Economic Summit

We will be hosting our 17th Annual Cleveland Economic Summit in early fall. Watch for more information including the date and location in the months ahead. 

Stay tuned for information on these upcoming events…

• Smart Business - Family Business Conference & Awards (September)
• Market Noise Live! webinar (October)

Recent Events

Blue Vault Alts Summit – March 10th

Wealth Advisor, Cynthia Yang, CFA^®, CAIA^®, CIPM, was a featured speaker for a panel discussion on Empowering Women Investors with Alternative Investments at the Blue Vault Alts Summit on March 10, 2025 in Frisco, Texas.

The Blue Vault Alts Summit is an annual conference that seeks to help wealth advisors differentiate and grow their businesses with alternative investments. Blue Vault provides industry insights, data, trends, and tools to help wealth advisors stay informed about the alternative investment strategies that may be appropriate for their clients and practice growth.

Private Directors Association ESOP Panel Discussion – February 19th

Bringing deep experience in retirement and exit planning strategies for business owners, Frank moderated a five-person panel discussion on Key Governance Considerations in Forming an ESOP Owned Company for the Private Directors Association – Cleveland Chapter. The event took place on February 19^th at Great Lakes Brewing in Cleveland, Ohio.

Resources

2025 Tax Guides

Our complimentary tax guides are valuable tools for referencing information about tax and capital gains rates, retirement plan contributions, charitable giving strategies, tax-loss harvesting, and more. Download one or both guides now:

• 2025 Federal Tax Rates At-a-Glance Guide – Your guide to 2025 Federal Tax Rates is now available! This at-a-glance guide makes it easy to quickly find the information you need from federal income tax brackets and rates to capital gains and qualified dividend rates, contribution limits for retirement plans, annual gift and estate tax exclusion amounts, and more. View or download your complimentary 2025 Federal Tax Rates guide now!

• 2024-25 Comprehensive Tax Planning Guide – The Return on Life^® Wealth Partners 2024-2025 Tax Planning Guide is your comprehensive guide to key tax provisions and deadlines that can help you reap the full benefits of collaboration with your qualified tax advisor throughout the year. The guide also includes helpful information on key changes under the SECURE 2.0 Act that will be helpful for your ongoing tax planning. View or download your 2024-2025 Tax Planning Guide.

Refer a Friend or Family Member for a No-Obligation Second Opinion

Our Second Opinion Service makes it easy to refer friends, family members, colleagues, or  business associates for a no-obligation second opinion. A second opinion provides the people you care about with an opportunity to benefit from the same expertise and guidance that you have come to expect as a valued client.

In many cases, a second opinion will simply provide confirmation, and the confidence that those you care about are on track to fulfill their values and achieve their goals with their current financial provider or strategy. However, if needed, we are happy to suggest ways in which we can help, including recommending another provider if we are not a good fit for their needs. Either way, following a Discovery Meeting and Investment Plan Meeting with our experienced team, they will receive a Total Client Profile and a Personalized Financial Assessment of their current situation. Contact us at 440.740.0130 to learn more.

Don’t Miss Out on the Topics that Are Important to You: Visit Our Getting Frank Blog and Frank Wealth Insights Podcast

Be sure to check out our latest Getting Frank Blog and Frank Wealth Insights podcast for information on timely topics impacting your finances and investments.  You can also access our latest blog posts and podcasts by connecting with us on social media at LinkedIn, Facebook, X (formerly Twitter) and YouTube.

Market & Economic Update

*Source: https://www.lpl.com/research/weekly-market-commentary/earnings-season-recap-strong-growth-big-upside-now-what.html

Earnings Season Recap: Strong Growth, Big Upside, Now What?

Fourth quarter earnings season is nearly complete, and it has been a good one. S&P 500 companies grew profits more than 18% year over year, according to FactSet data, with mega cap technology and financial companies doing most of the heavy lifting (about seven points of growth came from each). The Magnificent Seven grew earnings by an average of 37% and financials earnings jumped 50%. But the road ahead gets tougher. With new tariffs in place and more likely on the way — on top of mounting evidence that the U.S. economy is slowing — means that achieving double-digit earnings growth in 2025, as many expect, will be a tall task.

Big Numbers

Six weeks ago in our fourth quarter earnings preview, we wrote that we expected modest upside to the 12% consensus estimate for Q4 S&P 500 earnings growth. That turned out to be too pessimistic because corporate America delivered more than 6% average earnings upside — hardly modest. We expected economic growth to offset currency headwinds, but underestimated the amount of margin improvement companies could achieve, their ability to manage policy uncertainty, and the upside in financials. Operating margins rose a full point year over year, while financials generated average earnings upside of 13%, compared to 8% in the prior quarter.

Perhaps the toughest test this earnings season was around maintaining the optimistic earnings outlook for 2025. As we wrote in our 2025 preview commentary:

“The key to the market’s reaction to results will be whether guidance is upbeat enough to keep market expectations for double-digit earnings gains in 2025 intact. To that end, trade policy expectations will be important factors.”

Estimates held up well enough to keep that double-digit earnings growth outlook within reach — it just may be a bit of a stretch depending on how hard tariffs hit and how much the economy slows. Market reactions to earnings beats and misses have been near historical averages, suggesting overall results and outlooks met expectations.

Improving Manufacturing Outlook Bodes Well

An improving manufacturing outlook was supportive late last year. Historically, the Institute for Supply Management (ISM) Manufacturing Index has correlated well with S&P 500 earnings growth because earnings are more manufacturing-driven than the more consumer-oriented economy.

However, healthy economic activity in the fourth quarter and optimism from manufacturers was not enough to overcome downward pressure on estimates — the consensus S&P 500 earnings per share (EPS) estimate for the first quarter was cut by about 5% over the past six weeks. Near-quarter estimates almost always get cut by 2–3%, potentially more as a new year begins. Plus, the currency headwind stiffened into reporting season, tamping down on guidance. Earnings still could grow 10% in the first quarter, but corporate America will need help from the economy, including more productivity, less inflation, and lower interest rates. Policy matters too, of course, where tariffs remain a big wildcard.

Double-Digit Earnings Growth in 2025 May Be a Stretch

To be clear, LPL Research’s forecast for S&P 500 EPS in 2025 at $260 is an 8–9% increase over 2024, obviously very close to double digits. But both the bottom-up and top-down consensus estimates are calling for a 12% increase. Given actual earnings tend to come in 5–6% below estimates at the start of the year, tariffs probably aren’t in the numbers yet, and most economists aren’t factoring in much of a slowdown in the economy, our forecast seems much more realistic.

Upside could come from an artificial intelligence (AI) productivity boost or continued margin improvement, while downside could come from harder-hitting tariffs and more retaliation from our trading partners. With this much uncertainty (including currency uncertainty), it seems prudent to factor in some downside. Hopefully we’ll be pleasantly surprised. The resilience of S&P 500 earnings estimates for the full year — down just 1.4% year to date — is encouraging.

Watching Asian Export Markets

Another economic data point we monitor to gauge earnings trends is South Korean export activity. The U.S. earnings relationship historically has been tight, indicative of the significant influence technology has on corporate America’s overall profits. South Korean exports fell 10% year over year in January, the first drop since September 2023, and following a more than 6% increase in December. Taiwan’s exports are important to monitor as well, and the story is similar there.

Some of this reduction in trade activity is likely related to chip export controls to China, which highlights the risk to earnings going forward. Again, high-single-digit earnings growth is probably still a reasonable expectation, but a trade war with China that affects the global tech supply chain is a risk to tech earnings in 2025. The tech sector is expected to drive about half of S&P 500 EPS growth in 2025. Something to watch closely.

Conclusion

Earnings grew rapidly in the fourth quarter with solid upside surprises, but the road ahead gets tougher. Companies not only did a good job managing costs and currency headwinds last quarter, but they also waded through policy uncertainty quite well. Doing that again in 2025 will be more difficult as tariffs go into effect and trade tensions potentially ratchet higher as the economy likely slows. Higher productivity following heavy technology investment may help, but with so much uncertainty, it seems prudent to factor in some additional earnings downside. We reiterate our forecast for high-single-digit growth in S&P 500 EPS in 2025, below current consensus estimates calling for a 12% increase. We believe that’s enough to support similar mid-to-high single-digit gains for stocks this year, though the ride to get there may be bumpy.

Asset Allocation Insights

We maintain our tactical neutral stance on equities, with a preference for the U.S. over international and emerging markets, growth over value, and large caps over small. However, we do not rule out the possibility of additional short-term weakness, as a lot of good news is still priced into markets and geopolitical uncertainty remains high.

Within fixed income, we continue to hold an overweight tilt in preferred securities as valuations remain attractive. However, the risk/reward for core bond sectors (U.S. Treasury, agency mortgage-backed securities, investment-grade corporates) is more attractive than plus sectors. In our view, adding duration isn't attractive at current levels, and we remain neutral relative to our benchmarks.

Closing Remarks

You can rely on your Return on Life^® Wealth Partners team to keep you up to date on market and economic developments, and continue to monitor and adjust our portfolios, as appropriate. Please know that you’re always welcome to contact your dedicated team at 440.740.0130 if you have questions or if you’d like to schedule a time to meet with us at our office. For those who prefer to meet virtually, we continue to use Zoom for virtual meetings and are always available via phone. Just let us know how you prefer to meet, and we’ll make it happen!

Real People. Real Answers.

Health, Happiness, and a Life Well Lived,                                                                                                                                         

Frank Fantozzi, CPA, MST, PFS, CDFA, AIF^®, CEPA
President & Founder
Frank@ReturnOnLifeWealth.com 

IMPORTANT DISCLOSURES

*A portion of this research material was provided by LPL Financial, LLC, March 2025. All information is believed to be from reliable sources; however, neither Return on Life Wealth Partners or LPL Financial make any representation as to its completeness or accuracy.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

For a list of descriptions of the indexes and economic terms referenced in this publication, please visit lplresearch.com/definitions.

All index and market data from FactSet and MarketWatch.

Unless otherwise stated, Return on Life Wealth Partners/Planned Financial Services and the third-party persons and firms mentioned are not affiliates of each other and make no representation with respect to each other. Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services.

This information is not intended to be a substitute for individualized tax advice. We suggest that you discuss your specific issues with a qualified tax advisor.

For additional information about the firm and our services, see our Disclosure Brochure (Form ADV Part 2) and Customer Relationship Summary (Form CRS) Brochure.

Investment advice offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-Registered Investment Adviser.

Copyright © 2025 Planned Financial Services. All Rights Reserved.

Growth stocks — equities that are expected to grow revenues faster than their average peers —have largely dominated markets over the past decade. But recent stock market volatility and fears of a recession have some investors turning from these generally riskier equities to value stocks. Should you? Here’s what you need to know.

Fundamentally sound, but undervalued

The goal of value investing is to identify companies whose stock prices don’t currently reflect what the investor considers their value. These companies are fundamentally sound but are undervalued by the market. They may trade at a relatively low price for many reasons. But usually they’re “cheap” because investors have reacted negatively to bad news, such as poor quarterly earnings or legal problems, or because the general market has declined and punished stocks across the board. Value investors hope that attitudes about these stocks will improve over time.

Investors use a variety of metrics to identify underperforming stocks. These include price-to-earnings, price-to-sales and price-to-book ratios. A low ratio relative to comparable stocks in the same industry may indicate that a stock is undervalued. It’s important to understand, however, that a low price isn’t necessarily a bargain price. Sometimes a company’s stock price declines because investors have correctly discerned real problems. And even from a low starting point, it’s certainly possible for stocks to fall in value further.

Prudence and patience required

Value investors look for stocks they believe offer strong future growth and earnings potential that has been overlooked by the market. Successful investors typically research companies thoroughly to evaluate their management, niche, competitive environment, cash flow, growth and dividend history.

Patience and a long-term perspective are critical. There’s a common misconception that buying bargain-priced stocks leads to immediate returns. In fact, it can take years before a value stock becomes what its investors consider fully valued. The performance of value stocks tends to be cyclical, alternately outperforming and underperforming other investments.

Cheap stocks can get cheaper

It’s important to note that some value stocks never realize investors’ expectations that their prices will rise. In fact, it’s possible to lose money investing in any type of security, including “cheap” value stocks. To reduce risk, assemble a portfolio of different types of investments — for example, value and growth stocks, bonds of varying maturity dates, and both domestic and foreign securities. Your financial advisor can help you build a diversified portfolio based on your goals and risk tolerance. © 2024

The opinions expressed and the material provided are for general informational purposes only and are not intended to provide specific financial, tax, or legal advice. Planned Financial Services (dba Return on Life Wealth Partners) recommends consulting with your own professional advisors before making any decisions based on this information.

Investment advisory services are offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-Registered Investment Adviser.

Currently, the gift and estate tax exemption for individuals is $13.99 million (a combined $27.98 million for married couples). But this lofty exemption amount, created by the Tax Cuts and Jobs Act (TCJA), wasn’t designed to be permanent. The TCJA called for the provision to “sunset” at the end of 2025. Unless Congress extends it, on January 1, 2026, the exemption will be cut roughly in half to approximately $7 million for each individual (adjusted for inflation). In addition, the gift and estate tax rate above the exemption will increase from 40% to 45%.

If the law sunsets as scheduled, it’ll have significant tax implications for many high-net-worth families. Fortunately, there are strategies you can use to lock in this year’s exemption amount.

What the “sunset” could mean

What are the potential consequences of the gift and estate tax changes? Suppose, for example, that you have an estate worth $10 million at the end of 2025. Assuming the exemption drops to $7 million on January 1, 2026, your potential estate tax will have gone from zero to $1.35 million overnight [($10 million – $7 million) x 45%].

To prevent this from happening, you might use your current exemption to give away some of your wealth to loved ones, either outright or through an irrevocable trust. Once you make this gift, the assets are removed from your estate. Your recipients or beneficiaries enjoy all future appreciation in value free of gift or estate taxes.

Of course, you may not be ready to part with your assets just yet. In that case, there are tools you can use to take advantage of the current exemption amount while retaining some control over your wealth. Let’s look at a few.

Spousal Lifetime Access Trusts (SLATs)

For married couples, a SLAT makes it possible to remove wealth from your estate using the current exemption while effectively retaining access to it. A SLAT is an irrevocable trust you establish for the benefit of your spouse (or your spouse and your children or other heirs). Typically, the trust permits the trustee to make distributions to your spouse if needed, which benefits you indirectly. As long as you don’t act as trustee, and the trust is designed, funded and operated properly, the assets will be excluded from both your estate and your spouse’s estate. But your spouse will have access to the trust funds should a need arise.

The downside of a SLAT is that your benefits depend on maintaining indirect access to the trust assets through your spouse. If you divorce or your spouse dies, those benefits will be lost. One way to mitigate the risk of death is for you and your spouse to each create a SLAT for the other’s benefit. This allows each of you to use your exemption while retaining access to one of the trusts as beneficiary.

These arrangements must be designed carefully to avoid violating the “reciprocal trust doctrine.” Under that doctrine, the IRS can undo mutual SLATs if their terms are substantially identical.

FLPs and FLLCs

If you own a family business, you might want to structure it as a family limited partnership (FLP) or family limited liability company (FLLC). This would allow you to take advantage of the current exemption amount by giving away significant ownership interests to loved ones without immediately losing control of the company.

Suppose, for example, that you plan to leave the family business to your two children. In a typical arrangement, you would form an FLP to own the business and transfer a 49% limited partnership interest to each child, usually at a discounted value for gift tax purposes. You would retain a 2% managing partner interest, allowing you to maintain control over management decisions. Similar results can be achieved with an FLLC.

Structuring a business as an FLP or FLLC so that it doesn’t come under IRS scrutiny can be challenging. That’s why it’s important to work with experienced advisors if you choose one of these options.

Act now

There are other potential strategies you may be able to use to lock in the current exemption amount. Examples include qualified personal residence trusts (QPRTs), special power of appointment trusts (SPATs) and domestic asset protection trusts (DAPTs). But if you’re interested in taking advantage of one of these strategies, you’ll need to implement it soon. Once the clock strikes midnight on December 31, 2025, the opportunity may be gone.

Sidebar: Don’t overlook income taxes

As you explore strategies for making the most of the current gift and estate tax exemption, be sure to consider potential income tax implications. Inherited assets generally are entitled to a “stepped-up basis.” This means that the assets’ tax basis is stepped up to their date-of-death fair market value, allowing your beneficiaries to sell appreciated assets without triggering a substantial capital gains tax liability.

Gifted assets, on the other hand, aren’t entitled to a stepped-up basis. So, as you consider making substantial lifetime gifts, weigh potential gift and estate tax savings against potential income tax costs. © 2024

The opinions expressed and the material provided are for general informational purposes only and are not intended to provide specific financial, tax, or legal advice. Planned Financial Services, LLC, (dba Return on Life Wealth Partners) recommends consulting with your own professional advisors before making any decisions based on this information.

Investment advisory services are offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-Registered Investment Adviser.

If you have an estate plan that includes one or more trusts, you probably feel certain that your wishes for the disposition of your assets will be respected and followed. If you work with an experienced estate planning advisor, this is usually a safe assumption. However, in some cases, heirs have been known to object to wills and trusts and to challenge them in court. Given this slim possibility, you may want to consider adding a “no-contest” clause to your estate planning documents.

Rules vary by jurisdiction

No-contest clauses generally are used to discourage heirs from making frivolous challenges that only create unnecessary expenses and delays for beneficiaries. These provisions disinherit any heir who contests a will or trust — typically on grounds of undue influence or lack of testamentary capacity.

However, not all states permit or enforce no-contest clauses. Most states do, but the rules governing such clauses may vary by jurisdiction, particularly when it comes to the definition of “contest.” For example, in some states, your heirs would be able to challenge the appointment of an executor or trustee without violating a no-contest clause. In other states where a no-contest clause generally is enforceable, courts might refuse to enforce the clause if a challenger has “probable cause” or some other defensible reason for contesting a will or trust.

Even if you live in a state where no-contest clauses are strictly unenforceable, it might still make sense to include one in your estate planning documents. It could provide protection if you move to another state that does enforce no-contest clauses or if you own property, such as real estate, in another state. Also think about establishing a trust that’s governed by the laws of another state where the clause is enforceable.

Minimize incentives

A no-contest clause can be a powerful deterrent, but it’s also important that your estate plan minimizes incentives to challenge it. Be sure to:

• Work only with reputable and knowledgeable financial and legal advisors,
• Have a qualified physician or psychiatrist examine you at or near the time you sign your will or trust and attest in writing to your mental competence,
• Choose witnesses whom your heirs trust and whom you expect to be able to testify, if necessary, to your testamentary capacity and freedom from undue influence, and
• Record the execution of your will and other estate planning documents.

Also make an effort to treat your children and other family members fairly. If your plan contains any unusual terms — such as leaving the bulk of your estate to charity — meet with your family and explain the reasons for your decision. Keep in mind that if you leave out a child or other person who otherwise would inherit from you, a no-contest clause will be ineffective because that person has nothing to lose by challenging your plan. Instead, think about leaving family members enough to make them hesitate before they contest your plan and potentially receive nothing.

Protecting your wishes

You know your family and other potential heirs best. But if your estate planning advisor thinks a no-contest clause will help protect your will or trust, consider adding one. ©2025

The opinions expressed and the material provided are for general informational purposes only and are not intended to provide specific financial, tax, or legal advice. Planned Financial Services, LLC, (dba Return on Life Wealth Partners) recommends consulting with your own professional advisors before making any decisions based on this information.

Investment advisory services are offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-Registered Investment Adviser.

If you own an interest in a closely held business, a recent decision by the U.S. Supreme Court may cause you to rethink how you value and structure your buy-sell agreement. In Connelly v. United States, the court ruled that a company’s obligation to redeem a deceased owner’s stock didn’t offset the value of corporate-owned life insurance (COLI) used to fund the buyout. As a consequence, some companies with redemption-type buy-sell agreements may want to consider restructuring them.

Tale of two brothers

The company in Connelly was a building supply corporation owned by two brothers. One brother owned 77.18% of the corporation’s outstanding shares and the other owned the remaining 22.82%. To keep the company in the family, the brothers and the corporation entered into a buy-sell agreement. In the event that one of the brothers died, the agreement gave the surviving brother the option to purchase his shares. If the surviving brother chose not to exercise that option, then the company would be required to redeem the stock. To fund a potential redemption, the company purchased $3.5 million in COLI for each brother.

In 2013, the brother who owned 77.18% of the stock died, and the surviving brother declined to purchase his shares. Instead, he and the deceased brother’s son agreed that the corporation would redeem the stock, pursuant to the buy-sell agreement, for $3 million. The deceased brother’s estate filed an estate tax return reporting the value of his stock at $3 million. However, the IRS determined that the stock was worth $5.3 million and assessed additional estate taxes of nearly $900,000.

Dueling numbers

The IRS and the estate agreed that the COLI proceeds were an asset that increased the company’s fair market value. They also agreed that the company assets were worth $6.86 million, consisting of $3 million in COLI proceeds earmarked for the stock redemption and $3.86 million in “other assets and income-generating potential.” (When the Court issued its decision, it was unclear on what happened to the $500,000 in insurance proceeds not used for the redemption.)

However, the parties disagreed about the impact of the company’s obligation to redeem the deceased brother’s stock. The estate argued that the obligation offset the COLI proceeds, so that the value of the stock was approximately $3 million (77.18% of $3.86 million). The IRS argued that the redemption obligation didn’t reduce the company’s value, so that the stock was worth approximately $5.3 million (77.18% of $6.86 million).

Court’s decision

The Supreme Court needed to resolve a conflict among the federal appellate courts. To this end, it accepted the IRS’s argument that “no real-world buyer or seller would have viewed the redemption obligation as an offsetting liability.”

The Court offered an example: A corporation has one asset, $10 million in cash, and two shareholders, A and B, with 80 shares and 20 shares, respectively. The shares are worth $100,000 each. If the company redeems Shareholder B’s shares for fair market value ($2 million), the company will be left with $8 million in cash and 80 outstanding shares, all owned by Shareholder A. Shareholder A still owns 80 shares worth $100,000 each and Shareholder B has $2 million in cash, so the redemption has no economic impact on either owner. Based on this reasoning, the value of the company in Connelly wasn’t reduced by its redemption obligation and the deceased brother’s stock was worth $5.3 million.

Weigh your options

If your company’s redemption-type buy-sell agreement exposes you to additional estate taxes, you may want to consider restructuring it as a cross-purchase agreement. In a cross-purchase agreement, surviving shareholders purchase a deceased shareholder’s stock.

The Court acknowledged that such an arrangement would avoid the result in Connelly. But keep in mind that in a typical cross-purchase arrangement, each shareholder maintains insurance on the lives of the other shareholders, which can be costly and complicated with multiple or unequal owners. Discuss the pros and cons of this option with your advisors. © 2024

This material is for general informational purposes only and is not intended to provide specific tax or legal advice. You should consult with your own financial or legal advisor regarding any potential strategy, including addressing conflicts of interest in buy-sell agreements. Additionally, if a buy-sell agreement involves related parties (such as owners or family members) within financial institutions, Planned Financial Services, LLC notes that the Securities and Exchange Commission’s rules on related party transactions, including transparency and proper valuation requirements, may apply. Please consult with qualified tax and legal professionals regarding your individual situation.

Investment advisory services are offered through Planned Financial Services, LLC, dba Return on Life Wealth Partners, an SEC-Registered Investment Adviser.