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Giving with Gratitude

If gratitude drove your relationships, your calendar, and your bank account, what might happen? Gratitude flips the script in our lives.

 

Thanksgiving is a great time to ask this question, since the holiday focuses on gratitude and many people seek to give in meaningful ways, sharing their blessings with others. On top of giving thanks, it’s a good time to evaluate what causes to financially donate to. This impulse is often initiated by the many charities and non-profits who seek to gain support for the amazing work their organizations do, because not only is giving on people’s mind during the holidays, but tax-deductible donations are due by the end of the year.

 

How can you use this time of gratitude, increased awareness of needs, and tax benefits, to thoughtfully give and make a greater impact? The following principles can offer wisdom for intentional giving:

 

Let values be your guide

As you approach this Thanksgiving season, reflect on what you care about most deeply for your giving. What are the most important values for you and your family? What types of organizations align with those values? Whether it’s supporting education, healthcare, the arts, community engagement, or faith-based organizations, identifying your passions will make your giving more intentional and rewarding. Consider doing this together with your family or close friends:

 

  • Hold a family conversation at a specified time – around the dinner table or during a holiday gathering to hear which causes resonate with each member.
  • In addition to giving financially, is there an activity you could invite your family or neighbors to volunteer for over the holidays?

 

There are so many worthy causes and organizations that make an impact, so answering these questions will help narrow your focus and increase your engagement.

 

The beauty of saying “No”

A friend recently shared how they dreaded “giving season” because they received so many requests from organizations they donated to over the years. For people who are generous with their money and time, this can be a burden because we all have limits. Identifying your most important values helps to address this issue by first deciding what’s important.

 

When you’ve defined your values and priorities, you can more easily identify the causes you should say no to, not because it’s not a good cause, but because it’s not an area that fits at this time. Saying no to opportunities, while difficult, is an important step in the process of making wise decisions.

 

Another benefit to saying “no,” is one that I’ve experienced first-hand. Previously, as the Vice President of Advancement for a global non-profit, I worked closely with board members and donors who had significant opportunities to give charitably. We invested time and resources in building relationships with these individuals and couples to help them understand our mission and purpose, and also to learn what was important to them.

 

In that relationship, if someone knew that they probably weren’t going to partner with us because their values were aligned elsewhere, the most beneficial thing they could do is to tell us “No.” That answer enabled us to use our limited resources more wisely, and took a burden off them, because it wasn’t their highest value.

 

Free to say “yes”

Now comes the fun part, because by identifying your values and what doesn’t fit, you have more margin, mentally, financially and timewise to choose:

  • Who to give to: What organizations match your values and passions? Who is effective and responsible in their stewardship of resources?
  • How to engage with those organizations: Are there ways to contribute beyond finances? How would you want to use your skills and passions to benefit the organization and the community they serve?
  • What level of giving is best for you and the organization: Is it time to stretch yourself? Is there a special need that compels you to give more?

 

Financial Savvy in giving

Now, “how” will you give? There are many avenues you can use to donate, and as you consider all the options, there may be some that are a better fit depending on the source of the funds you will use to donate. You should also consider if there are more tax-advantaged ways to donate. If there are opportunities that the government allows you to use, paying less taxes on those gifts allows you to have more resources to give if you so choose.

Some options to consider:

  • Direct Donations: this is ideal for smaller, straightforward donations. Direct cash gifts are simple, tax-deductible, and can provide immediate support to charities.
  • Donor-Advised Funds (DAFs): this is popular option for high net-worth individuals and households. DAFs allow you to contribute appreciated assets now (like stocks, ETF’s or mutual funds), avoid paying capital gains that would have been owed if the assets were sold, and make grants to charities over time from your DAF. With a DAF, you receive an immediate tax deduction for your contribution, but you can take your time deciding which organizations to support.

Strategies for using a DAF include donating assets on an annual basis or batching several years’ worth of donations in one calendar year to increase the benefit of itemizing your deductions in a given year.

  • Qualified Charitable Distributions (QCDs): If you are over 70½, QCDs allow you to donate directly from your IRA to a qualified charity. Since the QCD is transferred from your IRA to the charity, you don’t have to pay taxes on those funds. In addition, if you are of the age where you have to make a required minimum distribution (RMD), your QCDs count toward your total RMD for that year.

 

There are several other strategies you can use to give more efficiently, depending on your circumstances. If you have questions on this aspect, discuss this with your advisor, or if you don’t currently have one, we’d be glad to schedule a consultation meeting with you to discuss these possibilities.

 

Regardless of how you decide to give this Thanksgiving and holiday season, investing a little time on the front-end can have a much greater impact for years to come, for those in need, the charities that serve, and for you, your family and friends.

To learn more about CapSouth Wealth Management, visit our website at CapSouthWM.com.  To learn more about how we help, click here.

Article by: Clay Cook, Associate Advisor

Investment advisory services are offered through CapSouth Partners, Inc, dba CapSouth Wealth Management, an independent registered Investment Advisory firm. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice

Fighting Financial Crime Through the (CTA) Corporate Transparency Act

New Reporting Requirements – Deadline Approaching Soon

As your trusted financial partners, we are here to share insights that not only keep you informed but also help you feel more connected to the financial world around us…and in some cases help you avoid substantial fines. Recently, the Corporate Transparency Act (CTA) has been making waves, and understanding it can empower you in your business decisions.

What is the Corporate Transparency Act, and Why Are We Having to Do This?

The Corporate Transparency Act, passed in 2021 as part of the National Defense Authorization Act, aims to shine a light on business ownership in the U.S.  Think of it as a way to pull back the curtain on who’s really behind companies, especially those that might be used to hide illicit activities.  This law requires certain businesses (many businesses/entities) to disclose their beneficial owners — the individuals who ultimately own or control the company.  If you own an LLC or small corporation, this likely applies to you.  It’s a big step toward fostering transparency and accountability in our economic landscape.

Filings can be done online through the FinCen’s website at fincen.gov/boi, which is actually quite helpful.  For entities formed prior to 2024, the deadline to file is January 1st, 2025.  Failure to file can result in penalties up to $591 per day.  For entities formed in 2024, you are given 90 days from formation.  Entities formed after 2024, and any entities making updates after a change in the reported information, will have 30 days after the occurrence to file.  It is expected that most companies can file online on their own.  Many attorneys are familiarized with the act and filings, and they are available to assist as needed.  I do recommend filing soon, so that if you find out that you need help, you can obtain assistance before the deadline.

Why is the CTA Important? – The Reality of Financial Crime

We’ve all heard about the shady dealings that can happen behind the scenes.  It’s easy to think these stories are just sensationalized news, but the truth is startling:  An estimated $2 trillion to $4 trillion is laundered each year according to the IMF and World Bank!  Money laundering and funding criminal activities and terrorism are not just abstract concepts; they have real-world implications that affect everyone.

What is Money Laundering?

Money laundering involves taking funds obtained through illegal methods “dirty money” and “cleaning” them by integrating them into the financial system and making them appear to be legitimate.  It is debatable where the term “money laundering” originally came from.  Some would attribute it to Al Capone and others’ utilization of laundromats to figuratively launder or clean money gained from illicit activities.  Cash businesses such as laundromats are often more susceptible to money laundering due to the difficulty in tracking the transactions.  The term may also have begun with the more literal use of actually cleaning old bills.  In 1916, it was estimated that it cost $1.30 to print 100 notes but only $0.30 to clean them.  Over the years, the term took on the more common interpretation we have now, and certainly by the 1970s and 1980s, it had made its way into common financial jargon.

Let’s take a stroll down memory lane with some notable examples of money laundering:

Al Capone – The infamous mobster wasn’t just about the flashy lifestyle; he was a master at laundering money through bars and gambling operations. His story reminds us that behind every glittering facade, there can be a murky reality.

Wachovia Bank Scandal (2010) – Wachovia, now part of Wells Fargo, was implicated in a scandal involving the laundering of more than $420 billion in drug trafficking proceeds through its accounts and settled the case by paying $160 million.  The bank failed to report suspicious activities related to money transfers from currency exchange businesses in Mexico, showcasing significant lapses in compliance that allowed criminal enterprises to exploit the banking system.

HSBC Scandal (2012) – HSBC, one of the world’s largest banks, was fined $1.9 billion for failing to monitor transactions linked to drug cartels in Mexico.  Over several years, the bank allowed billions of dollars in suspicious transactions to flow through its accounts without proper scrutiny.  It’s a classic example of how large institutions can fail to safeguard against financial misconduct.  Since then, however, the bank has worked hard to improve their practices, and the Fed ended enforcement actions against the bank in 2022.

The Panama Papers – This leak exposed how some wealthy individuals have used offshore entities to hide assets and launder money, showing that financial crime knows no boundaries.

Of course, not all cases are this large or make the headlines.  Money laundering exploits can exist on smaller scales through fronts such as car washes, property management companies, or even…former professors…

Dr. Bruce Bagley – A former University of Miami professor and known expert and author on crime and corruption was himself convicted of laundering $2.5 million through accounts in his name and in the name of a company he had created.

There is a certain entertainment factor and intrigue to the concept as shown through popular shows in recent years:

Marty Byrde from Ozark:  In the hit series Ozark, Marty is a financial planner who gets entangled with a Mexican drug cartel and moves his family to the Ozarks to launder money through various legitimate businesses, including a struggling marina and a casino.  While fictional, Marty’s escapades highlight how easily seemingly innocent businesses can be used to mask illicit activities and the importance of vigilance and transparency in financial dealings.

Virgin River:  In the popular series Virgin River, even the quaint town is not immune from bad actors.  In the show, a sawmill and an RV campground are used for illicit purposes, and even seemingly innocent parties are pulled into the dangerous world of drug trafficking and related money laundering activities.  The show hints at the complexities of running businesses in a small town and how easy it can be for individuals to blur the lines between legitimate and illegitimate activities, emphasizing the need for clarity and oversight.

These stories give you an idea of why regulations like the CTA are developed to keep our financial system honest and transparent.

How Financial Institutions Monitor for Anti-Money Laundering

So, how do banks and financial institutions help combat money laundering?  Think of them as the gatekeepers of financial integrity:

  1. Know Your Customer (KYC): This is the first line of defense. Financial institutions get to know their clients by verifying identities and understanding their business activities.  It’s a bit like getting to know your neighbor before borrowing a cup of sugar.
  2. Transaction Monitoring Systems: These systems keep a watchful eye on transactions, flagging anything that looks out of the ordinary. It’s like having a vigilant friend who notices when something feels off.
  3. Suspicious Activity Reporting (SAR): When something doesn’t sit right, institutions file SARs with the Financial Crimes Enforcement Network (FinCEN). This helps law enforcement dive deeper into suspicious activities.
  4. Risk Assessment: Institutions regularly assess their risk levels. Understanding where vulnerabilities lie allows them to tailor their monitoring and protect themselves from potential issues.
  5. Employee Training: Employees are trained to recognize red flags and to know the protocols for reporting suspicious activities.
  6. Collaboration with Law Enforcement: Financial institutions often work hand in hand with law enforcement, sharing vital information that can lead to effective interventions.
  7. Regular Audits and Compliance Checks: They conduct audits to ensure compliance with anti-money laundering (AML) regulations. This helps maintain accountability and trust.

We’re all in this together!

The Corporate Transparency Act represents a significant shift in how businesses are regulated in the U.S.  By increasing transparency and accountability, it helps combat financial crimes that can undermine the economy and national security.  If you operate an LLC or small corporation, it’s vital to stay informed about these changes and ensure that your business complies with the new requirements.

Since this is new legislation, unfortunately word of the requirements seems to be moving slow.  Feel free to forward this message to others you know that may be impacted.

As always, we are here to help you navigate these developments.  Unfortunately, due to the legal nature of interpreting the legislation and requirements, we can provide limited guidance in the area of the CTA.  We recommend reviewing the FinCen website and associated FAQ’s and consulting with your attorney to further determine how the provisions may affect you or your company.

To learn more about CapSouth Wealth Management and how we can help, visit our website at www.capsouthwm.com/what-we-do or contact our office to schedule an appointment with an advisor at (334) 673.8600.

Article by:

SCOTT MCDOWALL, CFP®

Sources:

https://www.mentalfloss.com/article/502449/myth-how-al-capone-gave-us-term-money-laundering
https://www.state.gov/anti-money-laundering-and-countering-the-financing-of-terrorism/
https://fincen.gov/boi
https://www.npr.org/2010/03/18/124807736/wachovia-settles-money-laundering-case
https://www.reuters.com/business/finance/us-fed-terminates-enforcement-action-against-hsbc-2022-09-02/
https://www.barrons.com/news/key-background-on-the-panama-papers-scandal-06242c47
https://www.fbi.gov/history/famous-cases/al-capone
https://www.nytimes.com/2021/11/17/us/bruce-bagley-money-laundering-venezuela.html

 

CapSouth Partners, Inc, dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from this article. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to a third-party entity. Some information in this article was produced with the assistance of ChatGPT (October 24 Version); Chat GPT is an artificial intelligence model owned by OpenAI. CapSouth is not affiliated with OpenAI.

 

 

 

 

Control and Influence

As the father to four young men, one of my goals is to successfully make the transition from a relationship of control to one of influence. Control is easy, right?  Do this, don’t do that. For example, don’t take off your clothes and turn the garden hose on the sweet little Japanese family that your mom tutors.  In my defense, I didn’t think I would have to provide such counsel to my 4-year-old, but I guess I should have. First-time parent rookie mistake, I guess.  Or please do take off your clothes before using the restroom. Thought I covered that in the first several years or so, but I guess not. (Sophomore slump with #2 – child #2, that is.)  And one of my personal favorites of #2, please don’t tell the hairy man at the pool that you thought cavemen were extinct. On second thought, maybe control isn’t that easy. But in the world of personal finance, believe it or not, control is a bit more obtainable.

Today and every day, and in every facet of our lives, we should be focusing more on things we can control and worrying less about the things we can’t. In the world of finance, for example, none of us has any control over the markets, taxes, interest rates, inflation or the headlines of tomorrow’s news outlets. Yet, such things can affect our outlook on our financial situation and lead us down the path of worry and anxiety. And left unchecked, that worry can lead to paralyzing fear, or possibly worse, emotionally charged decisions. Both of which can be detrimental to our financial wellbeing. So, what should we focus on?  There are essentially four primary factors within your control when it comes to your finances. I’ll present these in a “self-fulfilling prophesy” kind of way.

I can control how much I spend.  Unless you have an unlimited supply of resources, your spending will need to be controlled. Similar to exercise, it can be difficult and painful, but it can be done. And you’ll be better off because of it. Let’s define spending as how much you’re choosing to live on every day and how much you’re choosing to spend to enjoy your life today and in the years to come.

I can control how much I save.  I will save X amount now, so that I’ll have Y amount to spend later. If you’re still in the wealth accumulation stage, you or your spouse likely have access to a 401(k) retirement savings plan. And in some cases, your employer may incentivize you to save for retirement by offering an employer “match.” That is, your employer will match a certain percentage of your contribution (to your plan) up to a certain percentage of your salary. In such a case, your decision to save not only provides for your contribution to be spent later, but your employer matching contribution as well.  The industry term there is “free money”. And yet another contributor to your retirement account will be the law of compounding returns – what Einstein called the 8th wonder of the world – whereby you’re earning returns on both your original investment and on returns you received previously. Picture a snowball rolling down a mountain, picking up more snow as it goes. Before long, your snowball is a heaping mound of cash. You catch my drift.  See what I did there? (Bonus Track:  Look up the Rule of 72 and thank me later.)

I control how much risk I take. Indeed, you do. Not every person that invests in the stock market is 100% invested in stocks.  In fact, an August of 2024 survey from Empower Retirement has the average stock allocation for those in their 20s, 30s and 40s to be approximately 50% of their total portfolio. Can you guess which age group from that same survey is credited with holding the 2nd highest percentage of cash at a whopping 30.8%?  Wrong – those in their 20s. Bested only by retirees 70 and older.1 A post for another day, maybe, but such a conservative and seemingly “risk-averse” strategy may be anything but.

I control the timing of my financial decisions. Yes, you do. Like when you pull the trigger on a large purchase, or decide to retire, change jobs or (these days) even take on a second job. Also within your control is the timing of when to save more, spend less, invest more aggressively. They say, Timing is everything. I don’t know about everything, but it’s a fairly big lever to pull with respect to your financial security.

As I’m sure you’ve recognized by now, these four areas of control are inextricably linked.   You’d be hard pressed to change one without affecting the other. Again, assuming resources are finite, if you choose to spend more, then you’ve also chosen to save less. If you’re spending less, you very well could be saving more. And saving more (or saving less) will certainly subject your goals to more (or less) risk, right? If, for example, you’re spending a great deal of money now on Alabama season tickets, you’ll presumably have less money saved to put your daughter through Auburn. (We’ll do anything for our kids, won’t we?) And anytime you’ve chosen to make any changes in savings, spending or risk taken – or not – you’ve made a decision in timing.

So where does influence come in? Great question. Influence certainly has its role in your finances. As we’ve stated, none of us will likely ever move the stock market, nor will we affect the tax structure or control interest rates.

Each of those, however, will influence what we can control.

Let’s say inflation rises – a lot. And you find yourself barely having the money for the things you need – much less the things you want. Now what? Well, that means you’ll need to prioritize and spend less on the things you could do without and save more for the things you really want. Or possibly change the amount of risk you’re taking to increase the chance you’ll make more money for the things you want. Maybe you’ll choose to work longer? Or maybe you’ll have to find a new job or possibly a second one?  Or it could easily be some combination of these. It’s important that we understand when it’s time to adjust the factors that are within our control – our spending, our saving, the risk we take, and the timing of our decisions. Many factors can and will influence our decision-making process. Which begs the question,

Do you know what matters most to you in your financial life?

A quick answer can be found in your check register. Or for those of you under the age of 50, your online bank statements.  Your answer to that question will guide you as you create a plan to help you live your one best financial life. And through that financial plan, you’ll be able to manipulate those areas within your control in anticipation of those influencing forces outside of it.

As for my boys, #1 is married and finishing up med school, #2 is a junior at Auburn and literally creating his own path toward a career of film/sharks/ecotourism, #3 is a senior in high school and likely to change the world through music, and #4 is a sophomore in high school and winning the hearts of college basketball and soccer coaches alike. All accomplished young men in their own rights, but all benefiting from the influence of those who’ve gone before them. I’m honored to be a part of that counsel.  Whether serving as a father or a financial advisor, having influence for the betterment of one’s life is a legacy I’m proud to be a part of.

Article by:  Billy McCarthy, Investment Advisor

To discuss this article further or to learn more about CapSouth Wealth Management, visit our website at www.capsouthwm.com or www.capsouthwm.com/what-we-do/ Call 800.929.1001 to schedule an appointment to speak with an advisor.

1  What is the average allocation by age? (Empower Retirement, The Currency, 08.07.24)

 

Investment advisory services are offered through CapSouth Partners, Inc, dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. This information has been prepared solely for informational purposes, is general in nature and is not intended as specific advice. Any performance data quoted represents past performance; past performance is no guarantee of future results.

 

 

 

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