Having just seen my 2 year old granddaughter in the Elmo outfit she plans to wear for Halloween, I’m a little scared right now. Perhaps not as scared as Jeremy, whose charge it is to take her around the neighborhood in a couple of weeks in an effort to support the local pediatric dentist!
Speaking of the upcoming Halloween festivities, this week’s Update focuses on “Control From the Grave”; the concept of making sure your loved ones can receive the type of assets and support they need when you’re gone in the way you want.
Enjoy!
All the best,
Lee and Jeremy
P.S. We’ll find out shortly if our prediction of a political agreement by late October is correct…. We like our odds.
P.S.S. If you’d like a picture of Jeremy’s daughter Sloane in that Elmo outfit, jot us a note!
This Week’s Quote:
“I like control.” ~ Michael Jordan
JL Davis Thoughts This Week:
At critical points in any game, the amazing basketball player Michael Jordan loved control. At the critical point where many of us will gift or pass on our wealth to our loved ones, many of us want the same kind of control.
In preparation for year-end planning, several of our clients have been asking about ways to make sure that their beneficiary designations, wills, trusts, and planning instruments can provide for even an extra level of control. Their concern is to make absolutely certain that their hard earned money is not squandered, either on purpose or accidentally once they give it away or pass on. The sad truth is not all beneficiaries are responsible enough to manage an inheritance or significant gift.
So for many, utilizing a “control from the grave” approach can be helpful. Often called Restricted Beneficiary Agreements, these instruments allow clients to specify how monies are dispensed to their heirs. A restricted beneficiary agreement can be a very useful tool in regard to IRA or even nonqualified (non-IRA) assets.
Here’s how they can work. Often, at or near retirement, clients will shift assets to annuities as an instrument to provide monthly or annual distributions to themselves. By simultaneously using a restricted beneficiary agreement, the annuity can continue distributions to their heirs as well. It gets better. Using a “stretch” option for one’s IRA then allows beneficiaries to take the money out over their own life expectancies, or in any way which you personally predetermine to be best for them. This can increase the period of tax deferral—a very good thing for heirs.
A popular option is to arrange for your assets to provide “income for a specified period” to your beneficiaries. For example, you might wish to provide 10 years of income support for a beneficiary or maybe just coming out of college and getting started on a new career. In this case the restricted beneficiary agreement can be arranged to do just that. Of course, all of these arrangements can be changed later relatively easily by simply changing the beneficiary agreements that control the distribution—but in the event of an untimely death (was there ever not an untimely one?) the distributions are set.
Though it doesn’t have to be Halloween to “control from the grave”, the holiday might just be a good time to open the discussion in the family. If so, let us know. We’d be glad to chat with you and your tax/legal advisors (whom you should always consult on such issues as well) to see what might work best in your circumstances.**
Market Week: October 14, 2013
The Markets
Deal or no deal: If there was any doubt about whether Washington has been driving equities lately, it vanished on Thursday when a glimmer of hope for an end to the fiscal stalemate emerged. After stocks started the week with a swoon, the two-day rally that followed let the Dow reclaim 15,000 and the S&P 500 edge above 1,700. Meanwhile, the Nasdaq, which had demonstrated some resilience the week before, couldn't quite manage to turn positive.
Last Week's Headlines
• Global growth this year is expected to be more sluggish than previously thought, according to the International Monetary Fund's latest report. The new 2.9% figure for 2013 is lower than the 3.2% forecast in July and would be the slowest growth in four years. The IMF cited as key threats the potential impact of reduced Federal Reserve quantitative easing, slowing growth in China, high global debt, and the continuing eurozone credit problem. The IMF's growth forecast for 2014 is 3.6%, with most of that acceleration coming from advanced economies rather than emerging markets. However, the IMF said its forecasts assume a short-lived U.S. government shutdown and timely resolution of the debt ceiling conflict.
• President Obama nominated Federal Reserve vice chairman Janet Yellen to replace Ben Bernanke when the Fed chairman's term expires January 31. Her confirmation hearings could provide clues to Fed sentiment about future tapering of economic support. Minutes of the Fed monetary policy committee's September meeting showed that most committee members continue to favor a start to tapering sometime before the end of the year. However, with one exception, they voted not do so in September because of concerns that it could bring on "unwarranted tightening of financial market conditions."
• Data on the U.S. balance of trade, wholesale inflation, and retail sales were unavailable because of the federal government shutdown.
Eye on the Week Ahead
With government data nonexistent and the clock ticking down toward Thursday, when the Treasury says it will start running out of cash to pay all its bills, very little outside Washington is likely to matter to financial markets (unless the debt debacle prompts another U.S. credit rating downgrade, which would get plenty of attention). Options expiring at week's end could prompt a scramble to adjust portfolios.
Key dates and data releases: Empire State manufacturing survey (10/15); consumer inflation, Fed "beige book" report, international capital flows (10/16); housing starts, industrial production, Philly Fed manufacturing survey (10/17); leading economic indicators (10/18).*
Data sources: All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. News items are based on reports from multiple commonly available international news sources (i.e. wire services) and are independently verified when necessary with secondary sources such as government agencies, corporate press releases, or trade organizations. Market data: U.S. Treasury (Treasury yields); WSJ Market
Data Center (equities); Federal Reserve Board (Fed Funds target rate); U.S. Energy Information Administration/Bloomberg.com Market Data (oil spot price, WTI Cushing, OK); www.goldprice.org (spot gold, NY close); Oanda/FX Street (currency exchange rates). Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.
The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.
*Because of the government shutdown, some data releases may not be available.
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