Your Will can have a major impact on your family (including your spouse), friends, and favorite causes after you're gone. It is all too common for someone to die without a will, ensuring that their wishes aren't honored in death. Wills allow individuals to specify how they want their assets divided up after they are gone and can greatly impact the individual's legacy - assets distributed smoothly and in accordance with the individual's wishes, or squabbling and legal challenges that can cause hurt feelings and ill-will among your loved ones.
A second common mistake is making surprise decisions on who gets what, which can also lead to hurt feelings and family conflicts. Most people do not want spouses, children and other relatives fighting over their assets when they are gone, but that is exactly what can happen if they don't take the time to explain to their heirs what they plan.
Cutting out a spouse is surprisingly common, but unless you have a prenuptial agreement, your spouse is entitled to receive up to one-half of your estate, whether you write it into your will or not. Have your spouse sign a waiver before your death or expect your estate to face claims afterwards.
At the other end of the spectrum are those individuals who are in a second marriage and leave everything to their spouse. The children from the individual's first marriage can end up with nothing after the spouse dies if he/she has remarried in the interim. One solution is to set up a marital trust within your Will that holds assets for your spouse and then transfers them to your children after your spouse's death, ensuring that your assets stay in the family rather than going elsewhere.
Another common error is forgetting about Insurance/IRA designations. Separate beneficiary designation forms control the distribution of retirement accounts, annuities and life insurance after death. It is critical to complete beneficiary forms for these assets if you wish to avoid probate court, and the costs and publicity that goes with the probate process. Assets titled in your name, as opposed to jointly held with rights of survivorship, without designated beneficiaries will be distributed according to the general instructions in your Will, possibly triggering taxes much sooner than otherwise would be the case.
Please feel free to call or email with questions!
Tuesday, August 23, 2011
Friday, August 5, 2011
Market Update
The market topping process we wrote about Tuesday is now complete. The stock jockeys bounced the market hard on Wednesday in an effort to avoid a close below the March 16th low (1249), which would have put the top in place and brought in more short term selling. Unfortunately the Wednesday bounce was short lived and itchy trading fingers started pushing buttons on Thursday, pounding the market lower. The S&P 500 basically opened at its high and closed at its low on big volume - just about as negative as you can get from a technical stand point. We will likely get an oversold rally starting either late today or more likely early next week as the speculators (which is almost everyone these days) try to jam the market back into its six month trading range (1249-1370). The rally is likely to fail and further downside testing (perhaps all the way to the low 1100s) is likely by the fall. We continue to think the market will likely rally into year end, following this sell off, with the onset of the real bear market not occurring until sometime next spring. Our best-guess scenario is predicated on the Federal Reserve and/or the Administration coming up with yet another ill-conceived, short term program to support the market, delaying, but not preventing, the inevitable bear market that lurks out there in our future.
Our longer term forecast is unchanged - a bear market within the next 12-18 months that takes the S&P 500 down 20%-40% from its 1370 high. The bear market's underlying causes will include the simple fact that S&P 500 fair value is only about 900, making it an expensive investment currently. Additionally, record net profit margins will revert to their long run mean at some point as the economy continues its slide back into recession, resulting in disappointing earnings from the S&P 500's constituents.
Biechele Royce Advisors continues to buy good companies at great prices as we find them, but has been carrying extra cash in client portfolios and favoring more defensive investments in anticipation of the selling we are now experiencing.
Our longer term forecast is unchanged - a bear market within the next 12-18 months that takes the S&P 500 down 20%-40% from its 1370 high. The bear market's underlying causes will include the simple fact that S&P 500 fair value is only about 900, making it an expensive investment currently. Additionally, record net profit margins will revert to their long run mean at some point as the economy continues its slide back into recession, resulting in disappointing earnings from the S&P 500's constituents.
Biechele Royce Advisors continues to buy good companies at great prices as we find them, but has been carrying extra cash in client portfolios and favoring more defensive investments in anticipation of the selling we are now experiencing.
Tuesday, August 2, 2011
Recession and the Bear
Last week was a big down week for equities, with most major averages down around 4%. DJIA lost 4.24%, S&P500 down 3.92%, and NASDAQ fell 3.58%. The S&P 500 was down 2.2% for July. Treasuries rallied for the week, with the 10-yr. yield lower at 2.79%. Some of the economic highlights to go with the weak stock market action were:
Q2 GDP disappoints…Q1 revised lower.
U.S. economy grew by only 1.3% in Q2, and Q1 was revised down to a mere 0.4% growth rate.
(Weakness in consumer spending suggests that higher prices for certain food / energy items have played a role in restraining spending.)
0.1% increase in personal spending was the lowest since Q2 2009 in the midst of the recession.
Budget cuts in state/local government contributed to a 3.4% drop in government spending.
It appears that sub-par growth continues to be the path of the economy for the second half.
GDP growth has now decelerated to a level below the 2% threshold that has been a predictor of recession in the past. Jobs and housing are closely linked and both remain a drag on the economy. New home sales fell in June as potential buyers pulled back from the market amid job uncertainty and tough lending standards. Canceled home transactions in June jumped to 16%, way above the 4% level seen in May and the 9-10% range of the last year. Tight appraisals and tough loan underwriting scrutiny are to blame, according to the media. Most of the activity in the housing market are distressed sales.
Technically, the market has broken the uptrend begun on 7 July 2010 and continues the topping process begun 18 February 2011. A drop below the 16 March low of 1249 would put the top in place and sharply increase the likelihood that the secular bear market is resuming. We continue to think it more likely that a retest of the 1 July 2010 low at 1011 won't occur until sometime next spring but a fall retest is a possibility. Regardless, we continue to maintain a defensive posture in client portfolios given that S&P 500 fair value is around 900 and that the economy is clearly slowing.
Q2 GDP disappoints…Q1 revised lower.
U.S. economy grew by only 1.3% in Q2, and Q1 was revised down to a mere 0.4% growth rate.
(Weakness in consumer spending suggests that higher prices for certain food / energy items have played a role in restraining spending.)
0.1% increase in personal spending was the lowest since Q2 2009 in the midst of the recession.
Budget cuts in state/local government contributed to a 3.4% drop in government spending.
It appears that sub-par growth continues to be the path of the economy for the second half.
GDP growth has now decelerated to a level below the 2% threshold that has been a predictor of recession in the past. Jobs and housing are closely linked and both remain a drag on the economy. New home sales fell in June as potential buyers pulled back from the market amid job uncertainty and tough lending standards. Canceled home transactions in June jumped to 16%, way above the 4% level seen in May and the 9-10% range of the last year. Tight appraisals and tough loan underwriting scrutiny are to blame, according to the media. Most of the activity in the housing market are distressed sales.
Technically, the market has broken the uptrend begun on 7 July 2010 and continues the topping process begun 18 February 2011. A drop below the 16 March low of 1249 would put the top in place and sharply increase the likelihood that the secular bear market is resuming. We continue to think it more likely that a retest of the 1 July 2010 low at 1011 won't occur until sometime next spring but a fall retest is a possibility. Regardless, we continue to maintain a defensive posture in client portfolios given that S&P 500 fair value is around 900 and that the economy is clearly slowing.
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