[Guest post by Christopher Guest] One of the areas of estate planning that causes the most confusion is gifting. Gifts are transferred from a donor to a done in several ways. Gifting has a huge diversity of answers in how gifting is accomplished.
Here are some basics on gifting. The IRS considers any gift from one person to another a taxable gift. But, there are some exceptions to the rule:
- Gifts of any property that are not more than the annual exclusion for the calendar year. (Note – the annual exclusion is $13,000 for 2011.)
- Tuition or medical expenses you pay for someone (the educational and medical exclusions).
- Gifts to your spouse.
- Gifts to a political organization for its use.
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Fear
On March 6, 2009, about lunch time, I got a call from Mrs. C. Apparently she was in some sort of a panic; she asked me when the market would stop falling. I couldn’t predict the future, all I could tell her: the market will eventually turn around, and when it does, it will stage a huge rally and we won’t know it in advance.
I felt I was making some progress in comforting Mrs. C and convincing her to stay the course. Then, I heard a roaring voice: “Get out! Get out! Tell him to get the hell out of stocks!!!” I knew it was Mr. C in the background. Mrs. C broke down in tears on the other end of the phone call. She said, “Michael, I can’t take it anymore, just get out of stocks.” I meekly replied: “OK, but you should never try stocks again.”
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This year, total federal spending in theU.S.is projected to be $3.6 trillion. The top three budgetary categories are:
- Medicare/Medicaid — $826 billion
- Social Security — $717 billion
- Defense/Wars — $703 billion
Medicare and Medicaid costs alone account for 23% of total federal spending.
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Imagine your house has a ticker symbol, and it scrolls along the bottom of CNBC together with other ticker symbols. The price of your house, like a stock price, is set by a bunch of people you’ve never met making apparently random bets based on a combination of intuition, general economic statistics, output of an automatic-trading program, and, a couple of times a year, the real price achieved by one of your neighbors actually selling a house.
Minute by minute, the price of your home would gyrate wildly. If you are a nervous type, you might lie awake at night wondering if its value would cover your mortgage in the morning.
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10. How Often Do Market Corrections Happen?
9. Google’s Revenge: Morgan Stanley’s Downgrade Fiasco
8. America’s Top Financial Advisors: How They Are Made?
7. How Can A Investor Prepare for Market Corrections?
6. The 2011 Estate Tax Changes
5. Variable Annuity Fees You Don’t Know You Are Paying
4. Why Doctors Don’t Get Rich?
3. Bonus Depreciation – Congress Wants Businesses to Invest in 2011
2. Recession and Stock Market Performance
1. Profit from Harry Dent’s prediction? Think Again.
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Tax Planning for College
Posted on: August 23, 2011
[Guest post by Jeremy Bendler] 
It’s back to school time! Many of our clients are wondering how to properly plan for higher education expenses. If your children are younger you may be wondering how to efficiently save for college. If your children are already college age, your goal is to pay for current or imminent college bills. I’d like to address both of these concerns by suggesting several approaches that seek to take maximum advantage of tax benefits to minimize your expenses. (Please note that the following suggestions are strictly related to tax benefits. You may have non-tax-related concerns that make the suggestions inappropriate.)
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Not satisfied with its downgrading of U.S. Treasury Debt and Fannie Mae, today S&P downgraded Google’s stock from “Buy” to “Sell,” sending GOOG tumbling by 3.3%.
In case you don’t remember, yesterday Google announced that it would purchase Motorola Mobility for a whopping $12.5 billion in cash – a decision that prompted S&P’s downgrade of Google. According to S&P’s equity analyst, Scott Kessler:
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Trustee Powers
Posted on: August 13, 2011
[Guest Post by Christopher Guest] Last month, I discussed the questions a settlor, or creator of a trust, needs to ask before selecting a trustee. Once a trustee is selected, a settlor needs to determine the trustee’s powers with respect to the trust.
The trustee is charged with caring for and managing the trust property. To do this, the trustee must have the ability to control the property, and, depending on the property, the trustee can be given a vast array of powers. A few of those powers could include the power to: Read the rest of this entry »
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Harry Markowitz
The common approach to dealing with a market correction is trying to get out of the way at the first sign of trouble before the big one hits, like getting out after a 5% dip before the 30% drop hits. This approach requires perfect foresight. God can do that, not you, and certainly not a financial advisor who needs the job to make a living. (FYI, only one out of every thirty 5% dips turns into a 30% fall.)
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US Credit Downgrade: Stock Market Panics, Bond Market Thumbs Its Nose at S&P
Posted on: August 9, 2011
On the first trading day after the US credit rating was downgraded, the markets seemed to suffer from bipolar disorder.
The stock market was a bloody mess: the Dow Jones was off 634.76, its worst ever decline since the credit crisis in 2008!
The bond market, especially the treasuries market, which was supposed to take the brunt of S&P’s downgrade, responded positively. In fact, the 10-year treasuries yield dropped to a record 2.38%. The yields on long-term municipal bonds also dropped, to below 4%. This actually makes government borrowing costs lower, not higher. In a way, the bond market just thumbed its nose at S&P: to hell with your downgrade, we like US bonds even more.
Why the bond market reaction is important
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Market Correction
As of yesterday, the market had dropped more than 10% from its recent peak on 5/2. Many investors are very concerned. I am too.
Whenever I find my emotions are unsettled, I study historical data. That has always given me a perspective unavailable from the tick-by-tick reporting of the real-time financial media.
The following table summarizes the frequencies of market declines of various magnitudes.
| Magnitude of market decline | Frequency of occurrence |
| >5% | Every year |
| >10% | Every two years |
| >20% | Every five years |
| >30% | Every ten years |
| >40% | Every twenty-five years |
| >50% | Every fifty years |
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Portfolio Rebalancing Returns
Posted on: August 5, 2011
Asset Class Rebalance
In one of my previous posts, I showed how diversification across asset classes is superior to momentum and contrarian strategies. Today, I am going to show how disciplined rebalancing adds to returns. I will first demonstrate this using a stylized example and then through historical returns.
An example of two asset classes
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Assets without Physical Form
Posted on: August 2, 2011
[Guest Post by Anthony Carducci] Do you own a domain name . . . you know, a web address? How about a Facebook account? What about an easily recognizable email address or a Twitter handle? Are any of those things valuable and worth passing on to your loved ones? If so, have you made arrangements to have ownership of those assets transferred upon your death?
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10. Google’s Revenge: Morgan Stanley Downgrade Fiasco
9. America’s Top Financial Advisors: How Are They Made?
8. Italian Debt Crisis + US Debt Ceiling: Now What for Stocks?
7. Variable Annuity Fees You Don’t Know You Are Paying
6. The 2011 Estate Tax Changes
5. Why Asset Class Diversification is Superior
3. Bonus Depreciation – Congress Wants Businesses to Invest in 2011
1. Profit From Harry Dent’s Prediction? Thank Again
Get informed about wealth building, sign up for The Investment Scientist newsletter
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Today, I received an economic commentary from WisdomTree that includes a piece written by Professor Jeremy Siegel. He is a University of Pennsylvania professor and author of several books totting stocks as long-term investments. His piece covers four subjects: economic slowdown, US default, European debt crisis, and corporate earnings. Below, I have excerpted key passages for readers.
On economic slowdown
“Estimate of GDP growth in the second and third quarters have been marked down significantly over the past three months, mainly the result of lackluster consumer demand …US consumer sentiment has plummeted. Much of that is due to the continued stalemate on the budget deficit and politicians talking about curtailing Social Security and Medicare benefits.”
On US default
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I asked my PhD analyst John Want to pull the Harvard Endowment 13F filing for the first quarter of 2011 and find out what has changed sinceour last examination three months ago. From the table of the top 15 holdings that is attached, we can see three changes:
1. The iShare S&P 500 Index ETF is no longer among the top 15 holdings. Though there are still a number of individual U.S. stocks among the top 15, their relative weights have decreased. Does that signify Harvard is a tad less bullish on U.S. equities over all?
The Investment Scientist 