Millionaires prefer Facebook, so why are financial services firms flocking to Twitter? Put simply: Twitter is easier.

The number of high-net worth individuals using Facebook has doubled in the last year to 46%, according to a report released by Spectrum Group. And ultra-high-net-worth individuals aren’t far behind, using Facebook in similar numbers. Twitter is far less popular among millionaires, with only 3-6% using the site.

But financial services firms aren’t in sync with their top prospects when it comes to social media. A Corporate Insight report released earlier this month found that Twitter use by financial services firms has grown exponentially in recent years, while Facebook use has grown at a more modest rate.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of social media use by advisors in Advisor’s Journal, see Advisors Get Failing Grade for Social Media Flirtations (CC 11-157), Getting Your Feet Wet in the Social Media Market (CC 11-79), & SEC Says “Not So Fast” to Advisor Social Media Marketing (CC-11-40).

When an estate is facing a liquidity crisis, why not tap the family limited partnership (FLP) for cash? After all, the decedent was a partner in the partnership and the partnership can make distributions to the estate, which is now a partner in the FLP.

No so fast. Although an FLP may look like a prime source of cash for paying an estate tax bill, the move can come back to bite the estate in a big way. Done the wrong way, it could jeopardize the valuation discounts and estate planning objectives your clients and their estate planning professionals worked so hard to secure.

The IRS is perpetually on the lookout for new weapons to use against FLPs, but Section 2036 of the Internal Revenue Code has been the IRS’s weapon of choice against FLPs over the past decade.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of family limited partnerships in Advisor’s Journal, see Use Charitable Giving to Enhance Family Business Succession Planning (CC 10-76) and
Practical Succession Planning for the Family-Owned Business (CC 08-22).

For in-depth analysis of family limited partnerships, see Advisor’s Main Library: FF—Family Limited Partnership.

Just two weeks after Standard and Poor’s (S&P) downgraded the U.S. government’s credit rating to AA+, the New York Times reported that the Justice Department is investigating S&P’s ratings of mortgage securities in the lead up to the recent mortgage crisis.

Despite the timing of the news, we know that the investigation isn’t retribution for the downgrade since the investigation precedes the downgrade by months. But the rating agency’s downgrade of US treasuries certainly didn’t help its case, and is construed by many as an effort at establishing S&P independence.

The investigation began with the Securities and Exchange Commission (SEC) looking into whether S&P and Moody’s Investors Service turned a blind eye to problems with sub-prime mortgage bonds that it rated prior to the recent financial crisis. The Justice Department joined the SEC’s investigation in recent months.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the debt crisis and U.S. downgrade in Advisor’s Journal, see What Does the U.S. Downgrade Mean for Clients? (CC 11-159), Debt Limit Deal Leaves Unfinished Business (CC 11-154), & Democrats Call Debt Limit Unconstitutional (CC 11-134).

Congress’s solution to the debt limit crisis and rising deficits is fully operational, but many are left wondering whether the bipartisan Joint Select Committee on Deficit Reduction (the Deficit Reduction Committee) is capable of fulfilling its mandate when Congress as a whole couldn’t make the hard decisions that were necessary for a long-term solution. And the Deficit Reduction Committee is even more susceptible to deadlock than the full Congress since the Committee is populated by six Republicans and six Democrats.

The super-committee was the end result of months of negotiations between Democrats and Republicans during the debt limit debates. The resulting compromise included $917 billion in discretionary spending cuts over 10 years. The Committee must come up with another $1.2 to $1.5 trillion in cuts.

The Committee must pass a deficit reduction plan by a simple majority vote (7 out of 12). The plan will then go to Congress for a vote. If the Committee fails to reach a compromise proposal or Congress does not adopt the Committee’s proposals, a series of sharp automatic cuts will kick in, slashing budgets across the entire federal government, including the Defense Department.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the debt limit fight and resulting compromise in Advisor’s Journal, see Democrats Call Debt Limit Unconstitutional (CC 11-134), Debt Limit Standoff Boils Over (CC 11-115) and Storm Clouds over U.S. Debt (CC 11-85).

Upheaval in the long-term care (LTC) market has drastically increased premiums and reduced consumer choice. In the last couple years, many LTC carriers left the market or dramatically increased their rates when they discovered that they had dramatically underpriced coverage.

MetLife, for instance, eliminated its long-term care insurance products at the end of 2010, saying that interest rates, among other things, made the product line impossible to continue. At the same time, John Hancock announced that it was raising premiums on in-force policies by 40%.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of long-term care insurance in Advisor’s Journal, see Long-term Care Insurance Reform Act of 2010 (CC 10-46) & Long-Term Care Insurance—A Desirable, Tax-Advantaged Employee Benefit (CC 08-28).

For in-depth analysis of long-term care insurance, see Tax Facts: Long-Term Care Insurance.

Your questions and comments are always welcome. Please post them below or call the Panel of Experts.

The rich are protected like “spotted owls” and other “endangered species,” wrote Warren Buffett in a recent New York Times op-ed piece. And despite Republican assurances that they will not approve any tax increases, they may be inevitable.

Buffett says that his effective tax rate is far lower than anyone else’s in his office. Citing the sacrifice of the poor and middle class who fight for the US in Afghanistan and who are struggling during the halting post-recession recovery, Buffett says that Washington spared him and his billionaire friends when it called for “shared sacrifice” in the recent debt limit discussion.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of reverse mortgages in Advisor’s Journal, see Report Slams Reverse Mortgages (CC 10-121).

As questions arise about the SEC’s ability to fulfill its mandate, and a growing chorus of commentators, legislators and professionals calls for appointment of a self-regulatory organization to oversee registered investment advisors, Financial Services Committee Chairman Spencer Baucus is proposing a less radical solution to the agency’s problems.

Chairman Baucus is drafting legislation—the SEC Modernization Act—that would reorganize the Securities and Exchange Commission (SEC), and bring “comprehensive reform” to the agency. “The SEC is structurally flawed and suffers from operational inefficiencies and organizational incoherence,” according to Chairman Bachus. “This legislation will be a comprehensive restructuring of the SEC. It will make the SEC more efficient, consolidate duplicative offices, enable the agency to use better technology, and strengthen ethical safeguards to avoid conflicts of interest.”

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of the SEC and its regulatory activities in Advisor’s Journal, see Better Late Than Never: SEC Implements the Switch (CC 11-129), Disarray at the SEC Is Complicating the “Switch” (CC 11-83), & Hedge Funds Must Now Register with the SEC under the New Wall Street Reform Act (CC 10-45).

The National Underwriter Company Presents:

Advanced Markets Case Study

Beginning next month The National Underwriter Company will begin its case series for wealth managers. The case studies will be in addition to our daily articles. Check back in September to see the new content.

The case studies have expert commentary and analysis to help wealth managers with common planning issues.

Here’s a sneak peak of what is to come…

In the last couple years, US life settlement funds have made significant inroads into the UK. Last year, the UK’s securities regulator, the Financial Services Authority (FSA), began approving life settlement funds—opening life settlements to UK investors.

In the US, life settlements expanded rapidly in the early 2000s from less than $1 billion in 1999 to about $12 billion (face value) in 2008. Life settlements then contracted between 2008 and 2010 to about $7 billion. Although estimates from before the financial crisis estimated that life settlements would increase to between $90 and 140 billion in face amount settled by 2016, it’s looking like those projections were far too ambitious.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of life settlements in Advisor’s Journal, see Life Settlements—Savior of Municipal Finance? (CC 11-97), Life Settlement Provider Accused of Falsifying Life Span Reports (CC 11-23).

For in-depth analysis of life settlements, see Advisor’s Main Library: A—Life Settlements—Introduction.

When your clients roll over a retirement account into an annuity, stay alert. They could lose significant tax benefits if they don’t document their investment in the contract.

Gains realized on surrender of an annuity are taxed as ordinary income, but the entire amount received on surrender might not be taxed, since a taxpayer is entitled to receive their investment in the contract back tax-free.

Keeping track of investment in the contract is simple enough when a person pays premiums out a checking account into the annuity—the total amount of the premiums will constitute investment in the contract. But when a rollover is made from a pre-tax retirement account like an IRA, things get more complicated, and documenting investment in the contract is essential to preserve its tax benefit.

Read this complete analysis of the impact at AdvisorFX (sign up for a free trial subscription with full access to all of the planning libraries and client presentations if you are not already a subscriber).

For previous coverage of annuities  in Advisor’s Journal, see Annuity Respect: Earning It! (CC 11-150), IRS Streamlines Partial Exchanges of Annuities (CC 11-153), and GAO Report Touts Annuities in Uncertain Retirement Environment (CC 11-141).

For in-depth analysis of the taxation of distributions from an annuity, see Advisor’s Main Library: A—Amounts Received As An Annuity & B—Amounts NOT Received As Annuities.