Summer Scoop
KFM Update
Happy 4th of July! We hope you had great celebrations with family and friends.
In the upcoming weeks, we will be launching our new KFM Website. We will let you know as soon as it becomes available. While we do not expect our new website to be “life changing” for you, we do want to make it a valuable resource for information. We have significantly reduced the number of “words” throughout the site and have made it simpler to navigate to areas that are most helpful and important to you.
Earlier this year, we hosted a webinar regarding Cybersecurity. We recognize the threat to our security is becoming more sophisticated by the minute. Technology is changing so quickly, and criminals are advancing their skills along with the changing technology landscape.
We have added a page to our website dedicated to important topics, announcements, and alerts such as Cybersecurity threats. Here’s a link to our current site with a potential security threat that has been confirmed and we would like you to be made aware: kempfm.com/alerts
This is something we will update when we receive information that we feel is important to your ongoing security.
Our difficulty is how best to communicate this information to you. Just like you, we receive bogus text messages, voice messages and emails that look and sound legitimate that are in fact NOT. Our process to communicate will be the following:
Text message
Email
Phone call to those without text or email capability
The link will be to our website with the specific warning. We are hopeful this is not used frequently. But we need to establish protocol for future communication. When you receive these notifications, please contact our office at 714-257-0800 should you desire to confirm the validity of the content. We will only send messages at the beginning of a workday to allow you to confirm its content with our office.
On a more positive note, we have enjoyed the uptick in personal meetings at the office. While virtual meetings are great too, it’s been so nice to see people face to face. Even clients that have moved out of state have paid us a personal visit while they have been in town!
Thank you! The number of recommendations to KFM in the first half of the year has surpassed all previous years. We greatly value the trust and confidence you have placed in all of us. We also enjoy getting to know your family and friends. Just like you, they are great people, and we welcome the opportunity to transform their futures.
Please note, we will no longer be automatically mailing a printed version of our quarterly newsletter. If you are receiving your quarterly statement by mail, you will continue to receive a printed copy of the newsletter. Should you like a printed copy, please contact our office to request a current and future copy by mail.
Ladies Night Out - Save the Date!
We will be hosting our annual Ladies Night Out event on Tuesday, September 19th. Save the date for a sunset cruise out of Newport Beach! More details to come.
Last year’s Ladies Night Out Sunset Cruise
Capital Markets Update
Congratulations! Collectively, we hit a new “high water” mark for the year! It’s been a while, but we have had two consecutive quarters of growth. Remember in January 2023 when we stated we had an 80% chance of a positive market? If the year ended with the second quarter, that would be true. But we recognize we have a lot of the year remaining.
With the most recent Independence Day celebration, travel records were set in terms of transporting people on airplanes across the globe. Traveler numbers exceeded those set pre-Covid. While the weather has not necessarily been cooperative, people are not deterred from traveling. We think this is a great “simple” economic example of what we have been going through over the past 3 years.
Here’s a quick recap. Covid hit, markets crumbled, recession hit hard in 2020 and recovery – for the most part – happened quickly with jobs and the capital markets. This was NOT true for all industries. During Covid, we moved, remodeled, bought cars, and watched on-line streaming services, all while staying at home. Quite frankly, doing things most economists and companies never thought we would. If we were lucky, our favorite restaurants remained open for curbside pickup. We didn’t go anywhere except by car. We couldn’t even walk in our own neighborhoods (if you lived in California). While some industries did well, others crumbled. Fast forward to today, some industry groups are declining post-Covid, while others are booming post-Covid. (We know it’s more sophisticated than this).
In July of 2022, KFM, along with many others, claimed we were in a “recession” due to two consecutive quarters of negative Gross Domestic Product (GDP). Along with that, we have witnessed a significant increase in interest rates as directed by the Federal Reserve to combat inflation. Oddly, the calls for “recession” by economists are happening more frequently even though warning signs about recessions have been existent for well over a year.
Back to travel. Many are looking at the past 3 years as a “rolling recession”. A typical recession hits every industry all at once. With a “rolling recession”, industries will be affected differently during changing periods of time. Travel was non-existent 3 years ago. Staying in a hotel, going on a cruise, or dining at your favorite restaurant were NOT an option then. Seems like today those experiences are everyone’s first choice.
Housing: For the most part, our home prices have been down over the past 18 months. It is taking longer to sell your home. Experts anticipate a significant decline in real estate agents in 2023 to 2025. (Source: First Tuesday) The point is a demonstration of how different industries are experiencing “recession” at different periods of time.
Post Covid, it appears we are having an equalization of industries as they all work towards getting back to “normal”. We, like others, are hopeful the redistribution of industry successes will continue to even out. As this continues, we should eventually resume back to more stabilization of the economy and financial markets. While we do not hold the proverbial crystal ball to ensure this is the ultimate outcome, we do have our clients properly allocated to withstand or participate in whatever the financial future holds.
This last quarter we celebrated birthdays, anniversaries, new grandchildren being born and lots of graduations. We saw more of our clients participate in these events than in the past, again showing our clients’ continued pursuit of what matters most. As always, we enjoyed hearing about and seeing them through your social media posts.
As always, we encourage you to schedule an update meeting with your KFM Team should you have any concerns over the current environment. We enjoy the opportunity to reconnect and review your Legacy Action Plan together. We also enjoy putting the news of the day into proper perspective as it relates to your personal Legacy Action Plan. Please contact Kate by phone, 714.257.0800 or go to our website to schedule your next meeting: kempfm.com/schedule.
We look forward to connecting soon!
Legislative Update
Estate Tax and Gifting
The 2017 Tax Cuts and Jobs Act (TCJA) nearly doubled the lifetime estate and gift tax exemption from $5.6 million to $11.18 million (indexed for inflation after 2018) per individual. In 2023, the indexed exemption rose to $12.92 million per individual.
One big caveat to be aware of is the $12.92 million exemption is temporary and only applies to tax years up to 2025. Unless Congress makes these changes permanent, the exemption will revert to approximately $7 million (per individual) after 2025. Any difference between the current higher exemption amounts and the post-2025 reduced amounts will be lost if not used.
Additionally, the current 40% maximum gift and estate tax rate will increase to 45% after 2025- the highest estate tax rate since 2009. Fortunately, a large portion of your gifts or estate is excluded from taxation, and there are numerous ways to give assets tax-free, including:
Using the annual gift tax exclusion: currently, you can give any number of people up to $17,000 each in a single year without incurring a taxable gift ($34,000 for spouses "splitting" gifts)
Using the lifetime gift and estate tax exemption
Making direct payments to medical and educational providers on behalf of a loved one
Should you have any questions about giving and the impact on your long-term plans, please discuss any thoughts you might have with your team at KFM.
ESG (Environmental, Social and Governance) Proposals in California
The approach to ESG investing is causing a growing divide between Democratic and Republican states in directing their pension plans. Colorado and Illinois are among states advancing new climate requirements for their funds this year. In May, a California bill passed the Senate that would require CalPERS and CalSTRS to divest from fossil fuel companies. The bill would prohibit from investing in the top 200 fossil fuel companies and would require the two pension funds to divest any current holdings in these companies by 2031. CalPERS CEO Marcie Frost maintains that the bill would only make it harder to achieve the investment returns needed to pay the benefits promised to CalPERS members.
More recently, the California State Assembly shelved the legislation that would have forced the country’s two largest pension funds to divest an estimated $15 billion from oil and gas companies. It has been converted to a two-year bill. Lawmakers seem to be forced to choose between climate change priorities and concern that this divestment could threaten the financial health of pension fund liabilities. Lawmakers will have the opportunity to address the measure in the next session.
These proposals have no direct effect on you unless you are a retiree within one of these retirement systems. But, there is discussion at the National level to force all retirement accounts (IRA, 401(k), 403(b) etc.) to ONLY be invested in ESG related investments. We are hopeful at both the State and National level, choice for “either or” will be maintained by the individual, not mandated by the powers that be.
Annual ADV Part 2 and Privacy Policy Announcement
You received your copy of our ADV Part 2 at the time you became a client. Every year, we offer a complimentary copy of our most recent ADV Part 2 for your review and files. If you would like a copy of the most recent ADV Part 2, please make your request by contacting Kate by phone at 714-257-0800 or by e-mail at kcoogan@kempfm.com.
We take privacy of information very seriously. To that regard, our Privacy Policy for 2023 will be emailed to you within the next few weeks.
Please note, the most current ADV Part 2, Privacy Policy and Client Relationship Summary can always be downloaded directly from our website as well as your client portal. Visit kempfm.com where you will find a link to each document at the bottom of each page.