Most Americans Don't Have Wills

Neither do about 70 percent of  Brits, according to The Telegraph's salute to National Write a Will Week. 

According to a Harris Interactive study, about 55 percent of Americans die without a will.

Rush Limbaugh’s Estate Plan

Rush Limbaugh, during a discussion of the possible estate tax on Steve Jobs' billions:

Every year estate planners want to talk to me about estate planning and it seems that they think that the primary objective of any estate planning is going to be to keep money away from the government.  So they want to structure trusts, charitable donations, foundations, any number of things, and I always say to 'em, "Yeah, but the problem with doing that is I am getting rid of all my money before I die." 

Four times married, Mr. Limbaugh has no children.

Steve Jobs postscript

Last week, Apple closed their retail stores worldwide so that employees could participate in a company-wide remembrance of their founder. Apple has now posted the video of that event here.  Note, this seems to only work with Safari.  Norah Jones was delightful, and the speeches were thoughtful and moving.

60 minutes did a piece related to the upcoming Jobs biography. AppleInsider has links to that video, plus links to extra material, here.

Higher Incomes = Greater Giving

Almost one out of every four charitable dollars comes from donors with incomes over $500,000. This elite subset of The One Percent accounts for an even larger share of giving to charities other than religious organizations. Economix illustrates with charts.

"There Is Nothing Like a Trust Fund”

From five decades ago, October 1961, here's an enthusiastic ad for living trusts. Prosaic art and headline, but the body copy starts strong, "Money and trust funds were made for each other," and ends stronger: "There's nothing like a trust fund to keep families and family funds together. "

You can almost forgive the copywriter for addressing "the man" and ignoring the woman.

Secretary 3.0

In the days of Mad Men (and now Pan Am and The Playboy Club) the boss had a secretary.

Times change. In recent decades many minor executives have had to fend for themselves, while CEOs have relied on Secretary 2.0: the executive assistant.

Times are changing again. Meet Secretary 3.0.

(You didn't think Steve Jobs would stop changing the world just because he died, did you?)

Jobs and taxes

Steve Jobs, that is.  Much speculation already about his estate plan.

This item from the NYPost is, well, just stupid.  Essentially, it says basis step-up will apply to all of Jobs' estate assets, so capital gains taxes will be avoided by an early asset sale.  That supposedly justifies the promise of their headline, but they are silent on the more important question of death taxes.

Yahoo points out an intriguing factoid.  Before Steve went for the liver transplant, he and his wife created two trusts and transferred all their real estate to them, according to California land records.  Those trusts could be the receptacles for the rest of his wealth. If he already transferred the assets, he may have achieved true financial privacy.

Finally, surprisingly, the Trust Advisor Blog also overpromises with its headline that the Jobs estate plan will be tax free.  They don't have any access to the will or trust documents, so this is just speculation. However, they add the interesting twist that:

Completely under the radar, SEC filings reveal that Jobs was also busy moving the rest of his material wealth — 5.5 million shares of Apple stock and 138 million Disney shares, a memento of his other baby, the animation company Pixar — out of his estate and into a trust.

 That could be one or both of the trusts holding the real estate.  If the trusts qualified for the marital deduction, or perhaps the charitable deduction, then yes, there may not be much in the way of federal estate tax.  The commenters to the article point out the lack of info for making such a supposition.

Stephen Wolfram on Steve Jobs

From the creator of Mathematica and Wolfram Alpha, an interesting remembrance.

John Markoff on Steve Jobs

John Markoff must have been determined to produce an obituary worthy of its subject. In the print edition of the NY Times, his tribute to Steve Jobs starts on a quarter of the front page and continues for a full page inside.

Markoff reminds us that Jobs was very much a child of the countercultural late 1960's and early 1970's. Some CEOs get to the top by going to Harvard. Steve went to India, sampled LSD and never looked quite right wearing a suit.

There are those of us who, like Steve Jobs, think Steward Brand's Whole Earth Catalog was the greatest paperback ever published. Keep that in mind when client-facing with older Boomers. Especially Californians.

http://www.cnn.com/2011/10/05/us/obit-steve-jobs/

Inheritance Reduces Wealth Inequality

From Barron's Penta blog:

According to a major wealth study produced earlier this year, inheritances are an equalizing force that mitigates the inequalities found in American household wealth.

Interesting notes on the Durbin amendment and debit card fees

From Richard Epstein.

I use credit cards myself, but I should probably switch.

The Top One Percent Revisited

Who's the "Top One Percent"? links to charts showing how much wealth or income Americans at the top enjoyed in the aggregate. What about the individual income and net worth threshholds?

Incomewise, you need north of $380,000 a year to rank as a One Percenter.

For net worth, you need a lot more than $1 million. Last year, Spectrem estimates, about 7% of U.S. households possessed a net worth of a million or more. About 0.9% of households possessed $5 million or more, so you would need almost that much to rank as a net worth One Percenter.

 Most likely, a number of "Occupy Wall Street" protesters are the offspring of millionaire households. They still want to see the unemployment rate go down. And some wouldn't mind seeing the One Percenters who packaged  subprime mortgages go to jail.

Who’s the “Top One Percent”?

What a social-networked mush-up "Occupy Wall Street" turns out to be. Cursory browsing among the protest supporters took me to faith-based foundations, socialist groups  and academia, now joined by such mainstreamers as Hollywood celebs, labor unions and  Move On. The WP's Ezra Klein offers a primer, including a link to We are the 99 Percent.

And who is the other One Percent? Depends on whether you're talking income or net worth, as Catherine Rampell explains in this Economix post. Note that income inequality has increased significantly in recent years; the more extreme imbalance in net worth has changed little for decades.

Kindle Fire

The new Kindle Fire might be a much bigger deal than I realized, if this article is accurate about the security dimension. 

Andy Rooney

You'll get your last regularly scheduled "A Few Minutes With Andy Rooney" this Sunday. Rooney may not be entirely happy that 60 Minutes is laying him off at age 92.

Rooney doesn't write about high finance much, but in one of his later columns he did rise to defend an oppressed minority:

It's time we started being nicer to the rich.

People of this Country should be aware of the contribution made by those who make a lot of money. For too long they have been aligned by politicians, trashed by journalists and portrayed in a bad light by such artists of novelists and motion picture producers. If they rich were an ethnic group they could make the case that they are the persecuted victims of financial profiling. ***

Candidates for office and the majority of the electorate talk and act as if the rich got where they are by luck or dishonesty. Nowhere do we hear anyone say they did it with ability and hard work. No one says it is the financially successful people who make the wheels go 'round.

Rooney remembers the days when a bankroll was a bankroll, not a piece of plastic:

There's something about having a thick stack of money in your pocket that gives you a feeling of wellbeing. I smile more when I have money in my pocket. *** Most of us get no kick at all from a computer printout of a bank's idea of our net worth. What we want is that lump in our pocket.

Now that we're going to have to pay the bank a monthly fee to use those plastic debit cards, carrying a wad of currency may be an idea whose time has come … again.

Evidence That Investment Education Works

After Google's IPO seven years ago, hundreds of shareholding Google employees became millionaires. Brokers, advisory firms and trust bankers circled about. Google took protective action, launching what amounted to a university of investing,. Lecturers included Nobel Prize winner Bill Sharpe, Burton Malkiel and John Bogle.

Did Google's initiative help newly rich employees hold on to their wealth? Yes, in at least one case. At president Obama's Mountain View town hall meeting, it was Doug Edwards, Google's 59th employee, who asked, "Would you please raise my taxes?"

Is Your Social Networking Professional?

Thanks to the Yale Alumni Magazine blog for calling attention to The Unprofessional Sides of Social Media and Social Networking. Although Christina Skinner's prize-winning essay discusses the social networking of young lawyers, others who need to appear professional may find food for thought –and online discretion.

Millionaires, Real Millionaires and Billionaires

John Steele Gordon in The Washington Post joins those pointing out that Americans with incomes over $1 million do pay more income tax: Five myths about millionaires.

According to the IRS, those with adjusted gross incomes of more than $1 million paid an average of 23.3 percent in federal income taxes in 2008; those earning between $100,000 and $200,000 paid 12.7 percent; and those earning between $50,000 and $100,000 paid 8.9 percent. Half of American families don’t make enough money to pay income taxes at all.

Wish Gordon's column didn't perpetuate the confusion between people with net worths of $1 million or more and people with incomes of $1 million or more. (Gordon assumes a net-worth of $1 million can generate interest of $50,000 a year. That's far from safe and easy these days.)

In The New York Times, Paul Sullivan discusses Warren Buffett – who is a billionaire, not a millionaire – and his secretary, who clearly makes a lot more than the average executive assistant. Sullivan's description of the president's proposed phase-outs of certain exemptions and deductions suggests they could inflict serious pain, moving people with income exxceeding the 28% bracket into effective rates far higher than 35%.

Oh, well. As Ron Lieber points out, at least some of these poor souls might avoid the AMT.


How to Tell a Billion From a Million

Taxpayers, Real and Imaginary

Was yesterday's New York Times article on taxing the rich as peculiar as it seemed? One reason high-income Americans pay tax at lower rates than in other countries is that the great majority actually do pay. Greece may tax the rich at higher rates. So what? Greece is the Olympic champion of tax evasion. Does not collecting a 50% tax raise more revenue than not collecting a 40% tax?

And, please, could journalists stop referring to those "top 400 taxpayers" who seem to live higher and higher on the hog? Repeat members of the 400 club are scarcer than … Greek taxpayers.

The Girl With the Family Office

Stieg Larsson's Millennium Trilogy seemed a promising choice for light summer reading – an escape from offshore tax shelters and the world of wealth management.

Except it wasn't. In The Girl With the Dragon Tattoo, Lisbeth Salander steals a fortune. Using her hacking skills, she moves 2.5 billion Swedish kroner, stashed abroad by a bad guy, into her own offshore accounts.

The Swedish films made from Larsson's stories skip over her subsequent wealth management arrangements. It is the print version of The Girl Who Kicked the Hornet's Nest that tells us about Lisbeth's family office on Queensway Quay, Gibraltar.

Age and Investing

Looking for highly capable investors? Start by avoiding people under 50 or over 80. (And remind those over-80s to set up living trusts!) See Jeff Marshall's blog post: Investing Skill Can Decline with Age.

172 Tax Breaks and What They Cost

This Washington Post graphic shows what each tax break is expected to cost this year and allows you to sort breaks by category, such as education or health. Altogether these tax subsidies almost equal tax collections.

From Laughter to Lamentation

Six years ago I used this quote in a blog comment because it seemed funny. Now . . .

Congress is the single strongest argument against Intelligent Design.
 --Alan Abelson, Barron’s, 5/23/05

Contentious Trusts

Across the pond, The Society of Trust and Estate Practitioners has handed out its Private Client Awards 2011/2012. My favorite:

Contentious Trust and Estates Team of the Year: Taylor Wessing LLP

The Luxury of Getting Away From It All

Fifty Septembers ago, when Chase ran this ad, movers and shakers could still get away from it all (except for those pesky "investment cares"). No mobile phones … no e-mail … no Internet access. What luxury!

Quote of the day:

From Megan McArdle:

Providing stimulus through payroll tax cuts that are financed with tax hikes on other people is like trying to boost your household income by making your wife pay you to mow the lawn.

Mitt Romney's Parable of The Faithless Fiduciary

Marc Thiessen in The Washington Post:

Heated exchanges notwithstanding, the fact is that Romney and Perry both agree that Social Security is being run as a criminal enterprise. In his book, “No Apology,” Romney writes: “Suppose two grandparents created a trust fund, appointed a bank as trustee, and instructed the bank to invest the proceeds of the trust fund so as to provide for their grandchildren’s education.” (Yes, he really chose a “trust fund” as an example.) “Suppose further that the bank used the proceeds for its own purposes, so that when the grandchildren turned eighteen, there was no money for them to go to college. What would happen to the bankers responsible for misusing the money? They would go to jail.”

No more tax patents

By 89-9, the Senate passed the patent reform legislation that, among other things, bars future patents on tax strategies.  An estimated 150 such patents have been issued, and 160 are pending, but no more. A distinction is made for tax preparation software, which can still be protected. 

In the old days laws firms used their caches of Private Letter Rulings as a type of intellectual property.  When a firm had a favorable ruling from IRS for one client's strategy, they would share that information with other clients, but not other law firms.  Private Letter Rulings were jealously guarded, they were potent new business tools. Then Tax Analysts successfully sued to make public redacted versions of the Private Rulings, to let everyone in on what the IRS was thinking.

When your tax code is so complicated that compliance strategies can be deemed so unobvious that they are patentable, when lawyers will treat IRS correspondence as trade secrets, I think you have a serious problem. Merely outlawing tax patents isn't the solution.  Radical simplification is needed.  First, go back to Reagan's 1986 Tax Code.  Next, eliminate all deductions for personal expenses--charitable gifts, property taxes, mortgage interest.  Sure, some tax lawyers will lose some business, but the economy will be much better off.  And the feds will have a whole lot more revenue.

Knight regs. are withdrawn

Fees paid for investment management services are subject to a floor of 2% of AGI.  Trust fees are generally fully deductible. In Knight in 2008 the U.S. Supreme Court held that the 2% rule should apply to investment management fees paid by a trustee to an outside investment advisor. Going further, the Court held that only fees incurred because the assets were in an estate or trust (such as trust accounting fees) are fully deductible, and any expenses that individuals might also incur are subject to the 2% of AGI limitation.

IRS has had some trouble with the regulations implementing this decision, particularly on the issue of unbundling of trust fees into components.  The Proposed Regulations on the subject were withdrawn on September 6.  New hearings will be held in December, and new Regs. won't take effect before 2013.

For Steve Jobs fans

I'm one, you must know by now.

Here is one person's take on Steve Jobs' 10 Best Quotes for Advertising Agencies.  Actually, I was underwhelmed by the quotes, but each one includes a link that sources it. So I'm really linking for the links. Those interviews cover a wide time frame.  The Wired interview from 1993 is especially interesting.

Can Investment Advisers Save the Economy?

Savers and investors continue to suffer from an income famine. Yields on CDs are negative. Ditto for real, after-tax yields on ten-year Treasuries. Belatedly, financial journalists have realized that policies intended to bring banks back to life are toxic for savers and investors. 

That's not the worst of it. What's bad for savers and investors is bad for the economy – especially now, as the great tidal wave of Boomers are reaching retirement age. Ordinarily, many business managers and professionals up their spending as they prepare to retire. It's time to expand the cottage at the lake into a real retirement home … launch and equip a retirement business .… take more time off and treat the grandkids to a Disney cruise.

With Boomers suffering from the  income famine, they're not likely to tap their nest eggs to augment consumer spending. Unless ….

When investment advisers help their clients realize income through interest-paying deals that aren't too dicey, plus sturdy income stocks, they're doing more than helping their clients. They're helping save the economy.

This easy $4.2 billion tax hike should not be controversial

From the Washington Post.

That's not the 10-year total, which is the way we usually talk about tax hikes and breaks.  That's just one year. So, $42 billion in ten years.  You know, we might make a down payment on getting rid of the AMT with this!

Retirement: a Low-Stress Alternative to “The Number”

If I want to retire, according to conventional marketing messages, I need to reach a number. Say my number is $1.2 million. When I hit that target I can retire and withdraw 4% a year.

 If only it were that simple. At retirement, volatility in the markets  could chop my expected $1.2 million down to $900,000. (Yikes! I'll never be able to stop working.)

Or volatility could temporarily supersize my nest egg, to $1.5 million or more. (Whoopee! I'll live large for the next 30 years.)

Wouldn't my risk of deep despair or dangerous euphoria be sharply reduced if I set an income target and invested accordingly?

Suppose I want $40,000 a year. If I prepare by building a portfolio from income stocks and a bond fund or two, my chances of success are pretty good. Even if Wall Street goes berserk the year I retire, my dividend and interest income should remain close to expectations.  (The Great Recession hardly dented this blogger's modest investment income. Dividend increases pretty much balanced out dividend cuts.)

David Van Knapp is an author who loves dividends. He favors setting a retirement-income target and investing primarily in stocks known for increasing dividends..

Hardly a new approach. After the Great Depression vaporized his hot-shot portfolio, grandfather promised himself he'd never again buy a stock that didn't pay decent dividends. And he retired in solid comfort.

Should this low-stress approach to retirement investing be encouraged? Or is it an anachronism, unfit for a "total-return" era, where most retirement investing is highly regulated and fewer Americans are accustomed to "living on income"?

Digitally Incommunicado?

Have trouble reaching your clients and prospects? Do they have trouble reaching you? Not surprising, wrties Frank Bruni in The New York Times:

You hear so much about how instantly reachable we all are, how hyperconnected, with our smartphones, laptops, tablets and such. But the maddening truth is that we’ve become so accessible we’re often inaccessible….