Saturday, April 30, 2016

New Jersey's Tax Problem

If you owe the bank $100 that's your problem.
If you owe the bank $100 million, that's the bank's problem.  
– J. Paul Getty
 Hedge-fund billionaire David Tepper was the richest taxpayer in New Jersey. He's still rich, but …One Top Taxpayer Moved, and New Jersey Shuddered.

Thursday, April 28, 2016

The falling cost of living

JLM's photo of a flat screen TV in the post below reminded me of this post today from Walt Mossberg, who takes a journal down memory lane, "When gadgets were king."

Mr. Mossberg plucks a few of his gadget reviews from Wall Street Journal in the 1990s to share.  My favorite was the first digital camera in 1991, which could take 32 B&W photos and cost only $995.

How times have changed.

Wednesday, April 27, 2016

Why Do Americans Spend Instead of Save?

In The Atlantic author Neal Gabler riffs on the finding that almost half of all Americans (Gabler included!) would be hard pressed to come up with $400 in an emergency.

Lack of growth in median incomes in recent decades gets blamed for the American lack of saving. In a public radio interview, however, Gabler pointed out that residents of other nations have experienced similar stagnation without drastically reducing their savings rates. Americans seem to be born spenders.

Greater income inequality may be exacerbating the tendency. Knowing we haven't a prayer of keeping up with the billionaires, we try harder to keep up with the Joneses. Renewed growth in household incomes is unlikely to help. Parkinson's law remains firmly in place: Expenditures rise to meet income. 

According to a recent Gallup survey, most Americans say they prefer saving to spending. They're not exactly lying. They really do intend to save their tax refund. If only that 85" LED 2160p Smart 3D 4K Ultra HD TV hadn't gone on sale….

Apparently Prince died without a will

Here's the report that his sister has asked for a special administrator to be appointed for the estate.  She states that she is unaware of any testamentary instruments.  Happily, Prince was already working with Bremer Trust in St. Cloud, MN, so she asked that they be appointed.

With Prince being so intensely private in life, many are surprised that he ignored his estate planning. But did he?  Might he have employed trusts for his wealth management, the terms of which might never be made public?  Might he have concealed these matters from his siblings?  Not impossible, given the friction over the settlement of their father's estate in 2001.

I was going to jump on this story for our publications, but now I think I better wait a bit, to see if there is more to the story.

Monday, April 25, 2016

Let the Fox Guard Your Nest Egg?

"Never let the fox guard the henhouse," the saying goes. American Culture Explained offers this example
“You put your spendthrift brother in charge of managing your inheritance and gave him power of attorney for your account? That is letting the fox guard the henhouse!”
So why is the fox pictured above allowed to guard a nest egg? Because he's the mascot of Middleburg Bank. What grunge is to Seattle, fox chasing is to Middleburg, Virginia. Here's a vintage Sports Illustrated feature from the Camelot era that captures the flavor of the place.

The Middleburg fox popped up today because David Sobel, once expected to succeed Warren Buffet at Berkshire Hathaway, believes the bank is too small (assets of a billion or so) and wants to see it sold.

Will Middleburg's gentry set the hounds on him?

Wednesday, April 20, 2016

High Income? More Tax!

Most Americans think top earners should pay more tax. Even 46 percent of conservatives believe top incomes are under taxed.

Tuesday, April 19, 2016

Gerry Beyer Goes Into "Hotchpot"

In Parade, the Wills, Trusts and Estates Prof introduces laymen like me to "going into hotchpot." That's a procedure for figuring the kids' equitable shares of an estate when they have had unequal advancements.

In non-legal usage, the dictionary explains, hotchpot evolved into hotchpotch and hodgepodge." Hodge" was an English nickname for Roger that came to refer to the "ordinary Joe."

You learn something new every day.

Wednesday, April 13, 2016

Easing the British Death Tax

After World War II the stately homes of England (think Downton Abbey) took a heavy hit from harsh death taxes. Many were dismantled, given to the government or converted into tourist attractions.

By the harsh standards of fifty years ago, today's UK inheritance tax is fairly tepid. By our American standards, it's still oppressive.  We can leave well over $5 million tax free. Brits are limited, at current exchange rate, to about $460,000.

The UK tax picture lightens a little next year, with the addition of a "family home allowance." With two inheritance-tax exemptions plus the new allowance, married couples will be able to leave about $1.4 million tax free.

Monday, April 11, 2016

William Hamilton (1939-2016)

For the low-down on the upper crust, generations of New Yorker readers turned to the cartoons of William Hamilton, who died recently in a car crash near his Kentucky horse farm.

Hamilton's cartoons showed us hedgies (one hedgie to another: "Millions is craft. Billions is art") and the sort of High Net Worthers who see status in alternative investments and immortality in dynasty trusts.

The New Yorker's cartoon editor, Robert Mankoff, assembled a few of his favorite Hamiltons as a tribute, including this one:

The Bell Tolls for Long-Term-Care Insurance

Perhaps the product was doomed from the start. As critics pointed out, people who needed long-term-care insurance couldn't afford it; people rich enough to afford it didn't need it.

And those were the good old days. Most holders of LTC policies have seen their premiums soar. Sales of new policies have plummeted.  In 2002 the number of individual policies sold peaked at 750,000. Last year's sales: 110,000.

As if soaring premiums and severe shrinkage in the number of companies offering policies aren't trouble enough, marketing of long-term-care insurance also has clashed with an opposing concept: Medicaid planning. Why buy a policy to protect yourself against the risk of exhausting your wealth and ending up in a Medicaid-funded nursing home? Medicaid planners  offer techniques for diverting or divesting assets in order to achieve that very result.

Still, LTC insurance and Medicaid planning share the goal of protecting the children's inheritance. Shouldn't the kids be glad to pay their parents' LTC premiums?  The idea hasn't  gained traction.

If the potential costs of long-term care can't be insured against, they must be met through added savings and investment. The job of investing for financial independence only begins with building a source of regular retirement income.

Thursday, April 07, 2016

"The Secret of Wealth"

For no good reason (maybe Siri's looking for a more luxurious lifestyle) my iPad presented me with the results of searching this blog for "the secret of wealth." The posts are worth revisiting. You can read them here.

For those considering dynasty trusts as well as the rest of us, the "secret" is clear: Families can enjoy lasting wealth only if it's replenished from time to time.

Wednesday, April 06, 2016

Long-Term Investors and Short-Haul Stocks

Some companies play for keeps. Others are in it for the short haul. One sign of short-haul companies: a fixation with increasing the market value of their shares every twelve months. One symptom of the fixation: irrational CEO compensation. One symptomatic corporation in the news lately: Valeant

As The New York Times observes, the fixation seems contagious:
Paying a chief executive largely or solely on the basis of stock price performance might seem reckless. It would seem to create incentives for the executive to focus on actions that get impressive results for a year or two, rather than longer-term actions that might yield higher and more sustainable profits.
But placing a heavy emphasis on the share price is a surprisingly common practice — and is supported by influential groups that advise shareholders on how to vote at annual meetings.
Index investors can't avoid short-haul companies. Selective investors can. An advantage?