A-B Windfall Call to Action to Update Tax, Estate Plans

Julia M. Johnson – St. Louis Business Journal

Kevin Williams said former A-B shareholders who are close to retirement should keep their payout in safe investments “till the smoke clears” in the economy.

Now that brewing giants InBev and Anheuser-Busch Cos. Inc. have topped off their $52 billion merger agreement, many A-B stockholders are finding a significant amount of cash pouring from their stock portfolios. The question many now face is, what to do with that money?

The price of Anheuser-Busch stock rose about 30 percent from $52.58 on May 22, 2008, the day before InBev’s interest in the merger was announced, to its final closing price of $68.58, the day before the deal’s Nov. 18 completion at $70 per share. Over the same period, the equity market fell 42 percent, so shareholders seeing a large windfall from A-B stock now have a pile of cash to reinvest at an opportune time.

“Now that the sale has been finalized, many families are wondering what to do with the cash that has replaced the BUD stock in their portfolios,” said Doug Mueller, senior manager with the downtown St. Louis office of accounting and tax firm BKD LLP. “Now may be a good time to begin reallocating these new cash positions back into the market.”

Former A-B investors should meet with tax and wealth advisers to figure out their year-end tax planning, how their stock payout will affect it and what they should do with the cash depending on their needs, said Steve Toomey, a principal with BKD Wealth Advisors LLC in Kansas City.

“We recommend our clients utilize a 2008 tax projection to determine if they will be within the Alternative Minimum Tax, and if prepaying any state income taxes in December will result in tax savings,” he said. “This will help quantify how much of your cash from the proceeds should be held to pay your tax in April.”

Kevin Williams, a financial adviser in the Creve Coeur office of Waddell & Reed, said investors should consider a range of investment vehicles to make the best use of their “beer money.” Fixed-income products such as government securities and money market accounts are good options for those with a short time horizon, he said, while younger investors can take more chances on stocks since there’s more time for the market to rebound.

“You want to keep your money in safe investments till the smoke clears in the market, especially if you are close to retirement,” Williams said. “That’s when you want your portfolio to be somewhat conservative, more stable, with less volatility.”

Current market chaos makes diversification among asset classes and periodic portfolio rebalancing more important than ever for those nearing retirement, said Dave Purcell, an estate planning attorney with the Sunset Hills-based Purcell & Amen LLC law firm.

“Rare is the individual investor who can maintain a disciplined approach without assistance,” he said. “If you are in or approaching retirement, the typical adviser may recommend you weight heavily in bonds and steer clear of stocks.”

According to Purcell, some investors may simply wish to park their cash in savings accounts till the stock market stabilizes. Others who want a steady stream of guaranteed income can consider annuities.

Investors receiving cash from A-B stock now also face the issue of capital gains taxes.

“These people probably want to think about whether they want to take some losses in other investments as a way of offsetting the A-B stock gain,” Williams said. “For example, say you bought some other company’s stock for $1,000 back in January, but now it’s worth $600. You’d have that $400 loss now if you sold it. That’s one way to offset the gain.”

Kathleen Bilderback – Affinity Law Group, LLC

Kathleen Bilderback, an estate planning attorney and member of the Creve Coeur-based Affinity Law Group LLC, said it’s too late for shareholders to avoid capital gains recognition on their A-B stock. But charitable gifts of cash — or stock from other companies — are another way to offset one’s overall tax liability.

“You may have situations where clients have a broad portfolio, and now they’re cashed out on the A-B stock side, but they can give away some Exxon or Bank of America stock and take advantage of that ability,” Bilderback said. “In the end, it’s better to give away appreciated stock rather than cash.”

Larry VandeVen, a regional director with the Chesterfield office of Penn Mutual, said appreciated securities from other companies can be donated to a charitable remainder trust to offset one’s capital gains on A-B stock.

“With a charitable remainder trust, you can donate stock to the trust, receive income from it during your lifetime and get a current deduction based on the expected remainder interest that will go to a charitable organization in the future — presumably on your death,” VandeVen said.

Finally, if you’re a current or former Anheuser-Busch staffer, it’s important to make sure you have an estate plan in place to deal with this major liquidity event, Bilderback advised.

“We have seen a significant rise in the number of A-B executives and employees revising their estate plans or creating plans for the first time,” she said. “For a lot of them, this event has been a real call to action.”

Originally Posted Here