Volume 6, Number 2Quarterly Newsletter                                                                                    ...
Top 10 Estate Planning Mistakes - Part 2By: Burton Mitchell and Jill HendersonThis article was first published as a two-pa...
Gifts and Giving, Part 2By: Daniel D. Joss, MBA, CFP®, RLP®                                                               ...
Abigail At a Glance                                                          By: Abigail Reisenfeld 1925 Isaac Newton Squa...
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April 2012


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April 2012

  1. 1. Volume 6, Number 2Quarterly Newsletter April 2012Quarter in Review stocks posted a 12.44% gain. Look- ing abroad, the MSCI EAFE Index, Asset Class Performance Q1 2012:By: Jon P. Yankee, MBA, CFP® which tracks global stock markets in the developed nations, rose 9.97% forHear the Markets Roar the first quarter of 2012, and interna- tional small company stocks increased U.S. Fixed Income 0.30%Who could possibly have guessed? (Barclay Capital Aggregate Bond Index) 11.54% for the quarter. CommercialAfter all the discussion in the press real estate also posted gains just above International Fixed Income 1.19%about the long economic slowdown, 10%. (JP Morgan GBI ex-US (Hedged) Index)last year’s downgrade of Americansovereign debt, talk of double-dip U.S. Equities, Large 12.59% There is little change in the interestrecessions and looming crises in (S&P 500 Index) rate scene over the past quarter;Europe and China, the U.S. investment investors are still getting record-low U.S. Equities, Small 12.44%markets turned around and, in the first yields from Treasuries. The yield on (Russell 2000 Index)three months of this year, posted the 12-month Treasury bonds is 0.17%,best first-quarter returns in 14 years. International Equities, Large 9.97% rising to 0.33% for two year maturities, (MSCI EAFE Index)Global markets followed suit, albeit and 0.5% for three-year issues. At themore modestly, and investors received International Equities, Small 11.54% 10-year maturity level, rates started thedouble-digit returns from real estate as (S&P/Citigroup EPAC Ext. Mkt. Index) quarter at 1.87% and rose to 2.21%well. by the end of March. Investors have Real Estate Investment Trusts (REITs) 10.49% been willing to buy U.S. government (NAREIT Equity Index)Large cap stocks in the U.S. provided debt as a safer alternative to Eurozonepositive returns in the first quarter, Commodities/Natural Resources 0.89% bonds;with the widely-publicized S&P 500 (DJ UBS Commodities Index)index gaining 12.59%. Small cap           Continued Pg. 4Albi At a Glance while working full time. Upon graduation, I began working towards my Master ofBy: Albi Kacani Science Degree in Personal Financial Plan- ning at Texas Tech. This year I have had theI am very thankful for the opportunity to be a summer associate opportunity to volunteer for VITA, providingwith Fox, Joss & Yankee. FJY is committed to helping future financial free income tax preparation assistance toplanners gain experience in all areas of financial planning, which low-income, elderly, disabled, and limitedexplains why their internship program is one of the best in the English speaking people. I am a member ofcountry. the Personal Financial Planning Association at Texas Tech and a member of the FinancialMy family and I moved to the United States, from Albania when I Planning Association of Dallas. I believe thatwas 15 years old. My parents did not have a college fund for their my education, the experience I will gain thischildren so at a very young age I had to learn the value of budget- summer, and my involvement in financial planning associations willing and planning for the future. I have held a job since I was 16 help me succeed as a financial planner in the future.years old because I loved the feeling of independence that it gaveme. My desire to work with people and help them achieve their I am looking forward to joining Fox, Joss & Yankee for the summergoals in life is what first attracted me to financial planning. of 2012. I consider myself very fortunate to have landed such a position. I will be able to learn more about the financial planningI attended Texas Tech University in Lubbock, TX where I earned industry by working side-by-side with some of the best practitio-a Bachelor of Business Administration in Finance and Accounting ners in the business. Quick Planning Question: Have you set up online access to your accounts at Schwab and/or Fidelity?
  2. 2. Top 10 Estate Planning Mistakes - Part 2By: Burton Mitchell and Jill HendersonThis article was first published as a two-part series by the Elite Advisor Forum, a publication of CEG Worldwide and SourceMedia, and is reprinted with permission.When we review estate plans, there are some common mistakes we come across. You may think some of these are obvious, but we have seen themenough to assure you that they are not. Please review the January 2012 newsletter for Part 1 of the top 10 Estate Planning Mistakes.5. Too many seats at the table. A fairly common approach to dividing assets among different groups of beneficiaries is to give the separate groupsa percentage. This creates a number of problems by giving that beneficiary a seat at the table, so to speak. A beneficiary that is entitled to a percent-age of the estate will be concerned with any and all issues that effect the value of the estate, such as valuation issues and costs of administration,because each of these will impact the amount ultimately received by that beneficiary. On the other hand, a beneficiary that receives a specific dollaramount need not be concerned with issues, since it does not change his or her distribution. Where possible, encourage clients to stay away frompercentages or formulas that can back fire. Instead, select a dollar amount that they are comfortable with and review it periodically.6. Giving one child control over another. A typical response from clients about the question of who should be trustee is often followed with “canmy responsible child be the trustee?” This is appealing, because it keeps the burden off other family members or friends and it avoids the trustee feethat would be paid to a financial institution. While we have no doubt that there are many situations where the child is perfectly capable of handlingthe job of trustee, we advise against giving one child control to the exclusion of another child. Our experience is that it can be a costly mistake thatcauses disputes that could have been avoided.Even in the best family situations, the child that is left out of the decision making process will most likely not be pleased. There are important deci-sions that need to be made in the trust administration process, such as whether to sell certain assets, valuation issues and when to make distribu-tions. Giving one child control over these economic decisions to the exclusion of another creates an unpleasant dynamic even when everyone hasgood intentions. It is generally a better practice to name a financial institution, if practical, given the size of the estate, or a trusted and responsiblefamily member or friend (other than a beneficiary), or even naming all children as co-trustees, rather than giving one child control over another.7. Ignoring the personal effects. The personal effects can be the most difficult asset to divide and distribute. Beneficiaries can have strong person-al feelings about what items of the personal effects they want and they can disagree about the value of certain items. It is important to have a systemin place in the estate plan to resolve these disputes. There may also be special circumstances resulting from the structure of the estate plan thatrequire consideration. For example, if a residence is left in trust for use by a beneficiary such as a second spouse, with the residence to ultimatelypass to children, then the contents of that residence should be specifically addressed. Otherwise, you may have an unpleasant situation where thebeneficiary of the residence has the contents immediately removed by the beneficiaries of the personal effects. If there are any items with a largevalue, they should be addressed specifically.8. Not following through on title to assets. A fully funded living trust is the desired goal in any estate plan. An hour of time now can save thou-sands of dollars later. In California, if the client signed a Will and a general assignment of assets to a living trust, we often can petition the Court forconfirmation that an asset is owned by the living trust, but this process takes months and is not guaranteed. The professional advisors should help theclients with completing this process. It is tedious to the clients and they may not understand the significance or the ultimate cost for failing to follow-through, so this is an area where the assistance of professional advisors is critical.9. Letting the client avoid the Advance Health Care Directive. The process of thinking about and completing an Advance Health Care Directivecan be unpleasant. The client has to consider health issues and topics such as life support and organ and tissue donation. The health care power isa critical part of everyone’s estate plan. When the health care power is needed it is invaluable. If the client resists completing the health care poweror wants to think it over, encourage them to complete one now and change it whenever they want. It is generally better to have something in place,rather than nothing.10. Not doing an estate plan at all. If your client is going to live forever and will never be disabled, then skip the estate plan. For everyone else,make sure your estate plan is in order to protect your family.An estate plan is essential to the long-term well-being of your family and heirs. Because your family’s needs change and the legal and regulatory envi-ronment continues to evolve, your estate plan should be reviewed and amended periodically. Burton A. Mitchell is the chairman of the Taxation, Trusts & Estates Department at Jeffer Mangels Butler & Mitchell LLP and a prominent tax and estate planning attorney in Los Angeles. Contact Burton at 310.201.3562 or BAM@jmbm.com
  3. 3. Gifts and Giving, Part 2By: Daniel D. Joss, MBA, CFP®, RLP® Appreciated stock is the best gift for tax purposes. Because you giveLast year, Gifts and Giving, Part 1, outlined various ways of gifting to away appreciated securities, you also give away the potential capitalfamily members. Please review that as you consider transferring wealth gains tax. Because the charitable organization isn’t liable for capital gainsto other generations. Gifts to family members are never deductible for taxes, those taxes are avoided altogether. In essence, you are partner-tax purposes. This article will focus on tax deductible gifts to qualified ing with the government to give to the charity of your choice. Thecharitable organizations. I will define gift and charitable contributions, government wants us to be charitable and therefore, provides an incen-tell you how you can gift, explain how we facilitate gift transactions, and tive to give appreciated securities. When we gift appreciated securities,discuss the tax implications of gifting. you must sign the custodian’s transfer form using information provided by the charitable organization. Securities are then electronically sentAmerican Heritage Dictionary defines a gift as something that is be- from your account to the organization’s account. We follow up with thestowed voluntarily and without compensation. This article focuses charity to ensure donations are properly annotated and recognition, ifmore specifically on the transfer of property, money or assets from one asked for, is given to the donor/giver in whatever way you request.person to another while receiving nothing (or less than fair market value)in return. As with any good intention, problems can arise. Sometimes funds get temporarily lost or misdirected. Sometimes, brokerage accounts areAs you might expect, the IRS does not make it easy to find a definition changed and it can take time to correct the issue. So, if you have theof a charitable contribution as there are so many factors involved. It intention of gifting to a charitable organization with funds from yourdoes, however, make the 24 page IRS Pub 526 available to address portfolio, please allow us and your custodian ample time to completeany questions you may have about them. Investopedia.com defines a the requested transactions. Each custodian has their own rules aboutcharitable contribution as a gift made by an individual or an organiza- timelines and gifts. Do not delay gifting until the fourth quarter of thetion to a nonprofit organization, charity, or private foundation. Charitable year. Think of this from your charity’s point of view: sooner is alwaysdonations are commonly in the form of cash, but can also take the form better.of real estate, motor vehicles, appreciated securities, clothing, and otherassets or services. There are various and complicated deduction rules As of April 2012, Qualified Charitable Contributions (contributions madefor your charitable contributions that come into play if your contribu- from your IRA in lieu of your Required Minimum Distribution (RMDs)) thattions exceed 20% of your AGI. were possible in previous tax years are not allowed. Of course, Con- gress can always change the rules. The government may decide not toWe help many of our clients with their contributions by discussing their make this incentive available or limit the deductibility of charitable con-charitable intentions, planning for their annual giving, and, as part of the tributions. We and your tax preparer will keep you informed of changesestate planning process, making their final bequests. with regards to your charitable contributions.On a periodic basis, we can work charitable gifting intentions into the Please consult with your tax preparer regarding specific rules and tax im-long-term financial planning process to see the implications of those plications of your planned gifting. IRS Pub 526 has a wealth of informa-gifts. Identifying the long term implications of gifting and planning for tion regarding charitable contributions, if you want to do a little researchnear term implementation of gifting is important. If needed, we make on your own.cash or appreciated securities available for the annual gifting processduring our periodic rebalancing efforts. Planning for gifting as part of an As I always say, “give early, give often.” Your charitable contributions areoverall investment strategy will reduce transaction fees and maximize tax greatly appreciated, especially during times of economic trouble.benefits.Cash, as they say, “is as good as money.” Giving cash is the easiestform of gifting. There are no transaction fees and you can control thetransaction by writing checks when you are ready to give. For cash giftswe can either move money to a checking account or use a custodian’scheck form to make the gift payable directly to the charitable organi-zation. We prefer to send the cash to your bank account so you cancontrol the timing.
  4. 4. Abigail At a Glance By: Abigail Reisenfeld 1925 Isaac Newton Square While attending the Schwab IMPACT conference in 2011, I learned of the Suite 400 summer associate position offered at Fox, Joss, & Yankee. The firm offers an Reston, Virginia 20190 incredibly sought-after opportunity for professional and educational devel- opment and I look forward to working with them this summer. 1.703.889.1111 phone 1.877.395.7795 toll free Growing up in a military family has allowed me to experience many different 1.866.366.9233 fax places throughout my life. However, we settled in Fredericksburg, Virginia in 1998 and have lived there since. I am the third of five children, the second to attend Virginia Tech, and I plan to graduate in December 2012 with awww.fjyfinancial.com Bachelor of Business Administration Degree. At Virginia Tech, I am a student in the CFP® Certifica- tion Education track in the undergraduate Finance Program. I participate in the student chapter of the Financial Planning Association and volunteer with Junior Achievement to teach financial skills to high school students in the local community. Being involved in these activities has provided exposure to professional advice and rewarding hands-on experience. Coming from a large family and working through school has given me a great perspective on the opportunities and difficulties that finances can bring to any situation. My work at a wealth man- agement firm last summer enabled me to see the positive effect advisors can have in their clients’ lives. I am excited to be working with FJY this summer and to have the opportunity to learn from their team and clients. FJY Advisors & StaffQuarter in Review: conthowever, a recent article published by Reuters notes that the tentative resolution of the Greek debt crisismight send investors back across the Atlantic. If that does happen, the result is likely to be higher Treasurybond rates, and losses for existing holders of Treasury securities. Marjorie L. Fox Sr. Financial AdvisorIt goes without saying that the strong stock returns were a pleasant surprise, and might be an indication Daniel D. Jossthat investors believe the economy is turning the corner at last. Since early March 2009, the S&P 500 index Sr. Financial Advisorof stocks has more than doubled in value, from 683 to over 1,400 (1,408 at market close at the end of thequarter), making all the peaks and valleys and twists and turns seem like background noise. Since a swoon Jon P Yankee .last summer, the index is up nearly 30 percent. Sr. Financial Advisor Laurie A. BelewThe important lesson for investors is that returns can not be predicted in advance, and that has proven es- Sr. Financial Advisorpecially true of these lengthy – albeit choppy – market updrafts that have restored much of the wealth thatwas lost in the Great Recession. Of course, after a roaring first quarter, the lesson should also be viewed in Tess L. Downingreverse. We do not know what the markets will give us for the rest of the year, and there will almost certain- Financial Advisorly be some more downswings as the roller coaster moves from here to December. But those downswings Lisa J. Craffordwill mean that stocks are (at least temporarily) being sold at a discount to current prices. Even that can be Office Managergood news to investors who are putting money into the markets to meet their financial goals. Sally M. Yankee Administrative AssistantPlease remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the futureperformance of any specific investment, investment strategy, or product made reference to directly or indirectly in this newsletter, will be profitable, equal any corresponding indicatedhistorical performance level(s), or be suitable for your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinionsor positions. Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investmentadvice from Fox, Joss & Yankee, LLC. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. A copy of our current written disclosure statement discussing our advisory services and fees is available forreview upon request.Historical performance results for investment indices and/or categories have been provided for general comparison purposes only, and generally do not reflect the deduction of transactionand/or custodial charges, the deduction of an investment management fee, nor the impact of taxes, the incurrence of which would have the effect of decreasing historical performanceresults. It should not be assumed that your account holdings correspond directly to any comparative indices.