Tuesday, June 26, 2012

Does Your Hedge Fund Manager Have Time to Talk?

A medium-security facility at Butner
Prompted by an upcoming book on Connecticut's notorious Ponzi artist, Joe Nocera of the NY Times went to the Butner Federal Correctional Complex in North Carolina to talk with the subject, Sam Israel III.

The manager of the mostly mythical Bayou funds said hedge fund investors should  investigate before they invest:
Seek as much transparency as possible. If they do not understand exactly how a manager is making money, do not invest. If there is a secret process that cannot be explained, run. Go see the organization yourself, talk to the employees. The manager cannot see everyone or he could not be making money; if he has all the time in the world for you, that is a flag.
Good advice, but unlikely to stop investors for stumbling into the next Bayou. Sam Israel's approach, short-term trading of stocks, sounded simple enough. Who knew his accountant was as fictitious as his returns?

Top SSRN downloads

When Professor Gerry Beyer writes an Estate Planning Study for us, we provide a PDF for him to post to the SSRN Journal of Wills, Trusts and Estates Law.  We're pleased to see that, according to his blog, his April Study is the second-most downloaded paper for the current period.  I expect that if people are willing to go to the trouble to download it, those who receive it free from our clients will be willing to read it.

Saturday, June 23, 2012

Jonathan Blattmachr's Mindboggling Trusts

Will more people with eight-or-nine-figure net worths (a somewhat limited market) set up trusts that take advantage of this year's extraordinarily generous federal gift tax and GST exemptions?

Jonathan Blattmachr, the noted tax-planning guru, is not letting the opportunity go to waste. According to Paul Sullivan in The New York Times, Blattmachr has created what could prove to be an estate-planning masterpiece.
[Blattmachr] has structured trusts with his wife, Betsy, that are so complex they boggle the mind. They enable the Blattmachrs to take advantage of the current exemptions and gift money today to reduce future estate taxes. But he has structured the trusts, which each hold about $4 million, in such a way that they have a built-in safety valve if something goes wrong: they can get the money back.
Could the IRS consider the trusts a shell game and deny the Blattmachrs' tax savings? Time may tell.

Wednesday, June 20, 2012

The Top 400 Taxpayers Club

Bruce Bartlett's post at Economix looks at income inequality over the years. For members of the Top 400 Taxpayers Club, there's good news and bad news.

Good news. The effective tax rate paid by club members, which had risen to about 30% in 1995, was only about 20% in 2009.

Bad news. For about three out of four members, their club membership expired after one year and was never renewed.

Tuesday, June 19, 2012

The Mystery of Joe Paterno's Will

Like many 21st-century wills, that of the late Penn State football coach Joe Paterno is uninformative. He had a living trust, so his will simply disposes of tangible personal property and sweeps any remaining assets into the trust.

Because the terms of living trusts usually remain private, we may never know much about Paterno's estate plan.

The mystery: Why did the Paterno family nevertheless seek to keep the will secret?

Wednesday, June 13, 2012

Women of the 1960’s: It was Complicated

Mad Men ended its season last Sunday. We'll have to wait for season six to find out how Joan, Megan and Peggy cope with their careers and romances (relationships hadn't been invented yet).

 Meanwhile, this comparison will help illustrate the complexity of women's roles in the 1960's.

"The little woman." What did The Women Who Lunch do for the rest of the afternoon? Apparently they played bridge. Even when this Merrill Anderson ad for US Trust appeared in 1966, the image seemed dated and Merrill's copy condescending:
The man who introduces his wife to the Trust company – to observe and take part in his talks with them – is filling the role of a devoted and far-seeing husband.
But remember, in those days many a high-net-worth man was married to a woman who didn't know how to write a check. Often the men liked it that way. "You want my wife to talk with you? What if she learns my net worth? Good grief! Next thing, you'll be wanting to tell her my income."

Mad women. In the 1960's women found little welcome in many areas of business, especially banking and Wall Street. Advertising was something of an exception, and had been for decades.

In London in the 1920's, Dorothy Sayers worked for an ad agency. (So did the hero of her mysteries, Lord Peter Wimsey, in "Murder Must Advertise.") In New York, circa 1930, another Dorothy worked for Edwin Bird Wilson. So did young Merrill Anderson. They married, and in 1934 Merrill and Dorothy Anderson launched The Merrill Anderson Company.

In the 1960's, the really big news on Madison Avenue was a woman. Mary Wells Lawrence. Read her story and you'll appreciate the challenge faced by Mad Men creator Matthew Weiner: you can't make this stuff up.

How the Great Recession Dented Family Finances

You've heard about the Great Recession, right? So no surprise when the Fed's new Survey of Consumer Finances revealed (BREAKING NEWS!) that the fall in prices of real estate and corporate shares caused Americans' wealth to decline.

This decline, The Wall Street Journal points out, further dampens Boomers' hopes of retiring in comfort on the inheritances they receive from their parents. Those hopes were overblown anyway. Only the notorious Top One Percent of families ever had enough wealth – at least a few million – to leave their children significant nest eggs.

The new Fed survey offers plenty of tidbits for those with time to browse. Households in the East are significantly richer than those in the South or Midwest. Americans now have 38.1% of their financial assets in retirement plans. Only about 1% report having trusts or managed investment accounts. That sounds low. Can we try for 2%?

Sunday, June 10, 2012

Death of an Inheritance Tax

Tennessee is ending its taxation of gifts and inheritances, and the governor figures Tennessee will come out ahead. 

Tennessee's action leaves our sponsor's home base, Connecticut, as the only state that continues to tax gifts.

Saturday, June 09, 2012

The Birth of Inherited Wealth?

Along with farming and architecture (think Stonehenge) inheritance may have developed way back in the Neolithic – the New Stone Age. So suggests this research reported by The Guardian.

Inheritance taxes came a little later.

Two Neolithic figures

Sunday, June 03, 2012

When Jaguars Were Like Hedge Funds

Last week Sterling Cooper Draper Pryce, the Mad Men agency, won the Jaguar account. Back then, Jaguar's cars behaved a bit like the hedge funds of our time. At their best, the E-Type roadster, Jags were like a stellar fund that generates a 23% annual return. Otherwise, Jaguars were like the average hedge fund – upscale image despite decidedly mediocre performance.  (One of my college roommates prospered quickly, acquired a Jaguar sedan, and promptly regretted it. The temperamental beast seldom took him far.) 

At Bonham's June 3 Greenwich Concours action, this fully restored 1964 Jaguar E Type roadster just sold for $128,00. Will hedge funds will remain as popular three or four decades from now?

Queen Elizabeth celebrated her Diamond Jubilee today, so it's appropriate to recall British autos. But let the record show that America also produced notable roadsters. This ad is from 1966.

Investing in art

Interesting piece in the NYTimes on why the art market seems to be doing so much better than the rest of the economy. Best bit:
Sergey Skaterschikov, who publishes an influential art-investment report, says that no painting bought for $30 million or more has ever been resold at a profit.

Friday, June 01, 2012

Estate Planning Isn’t Just Estate Tax Planning

What kind of federal estate tax will we have next year? Year after that? Nobody knows. Meantime, Estate Planning.com, a site produced by WealthCounsel, reminds us that estate planning isn't just about taxes. Good to see that the featured article, recently, was Understanding the Significance of Trusts. You'll find other articles of interest as well.