Broker Check

November 19, 1999

Stock Market Jitters

          As I predicted the stock market is suffering from schizophrenia and will until we see if the lights are on January 1, 2000.

          Looking   at the   market  objectively,  most  indices are  down since the beginning of the year. If you’re worried about the performances of your portfolio, don’t---unless it doesn’t rise in January.

Worrying About the Future?

          Prepare a  will.  A  will is  a  document by which   a person  (called  a testator) can direct a person (the executor) how to distribute the testator’s assets when he dies. The Will is used to carry out the intention of the testator as to who gets his or her assets at death.

          A Will has many benefits. First of all, it assures that the testator’s assets are distributed according to his or her wishes. This gives the testator peace  of mind in the event of the testator’s death.  Without  a  Will, the state distributes a deceased person’s assets according to rigid guidelines which  do not consider the wishes of the deceased.   This process is costly  and time consuming. Second, a Will allows the testator to structure his or her estate in the most tax efficient manner. Today the Federal estate tax may exceed 50%  and a  carefully  planned estate can minimize taxes.   Third,  the testator  can name  the person (executor)  to  be in charge of distributing his or  her assets in  the event of his or her death, instead of having the court appoint someone.  Fourth, the testator can declare in the Will who is to care for the testator’s minor children in the event of death, instead of having the children become wards of the court.

          The person put in charge of distributing the testator’s assets at  the  death is called the “executor.” The principal duties of the executor are: (1) to inventory and collect the assets of the deceased testator;   (2)  to manage and care for the assets during the administration;   (3)  to receive and pay the claims of creditors and tax collectors; and (4) to distribute the remaining assets of the testator to those entitled under the Will. It is wise for a testator to designate someone as executor whom he or she knows and trusts.

Worrying About the Not so Distant Future?

          Prepare a durable power of attorney.   A  Durable Power of  Attorney is a formal written document whereby an individual  (called a principal) can designate a family member, some other trusted person or bank (called an agent or attorney-in-fact) to have the power to act  on  his or her behalf.  Through  this  document,  the principal can share with the agent almost  every power the principal has, including the power to enter into  contracts, issue checks,  endorse checks, pay bills  and make decisions as to medical care in the principal’s name.   The  medical decisions are usually covered by a Health Care Proxy.   The  Durable Power  of Attorney is written specially for each principal according to what powers they wish to convey to the agents. A Durable Power of Attorney can be general, giving the agent broad power to act on the principal’s behalf.  The Durable Power of Attorney  can be specially   drafted   so   it takes effect only  if and  when the  principal  becomes incompetent to act on his or her own behalf.    The Durable Power of Attorney can be a valuable tool for the management of an individual’s assets and affairs.

          The Durable Power  of Attorney  differs from other forms of  Power  of Attorney in that it does not become void once the principal becomes incompetent. This feature of the  Durable  Power of Attorney makes it especially valuable today with the increase in instances of senility and Alzheimer’s disease. Having a Durable Power of  Attorney avoids  the need for the Court to  appoint a  guardian for  the incompetent, which is extremely costly and time consuming . Moreover, there is no guarantee that the Court will appoint a loved one or close relative as the incompetent’s agent-in-fact.

          Should you be interested in finding out more  about  estate planning, please contact your attorney. If you do not have one, Howard Lisch is an attorney and he can either help you or find you an attorney.

Standard Mileage Rate Raised

          The IRS has announced that for  business  travel  after 1999 the optional mileage allowance for owned or  leased automobiles  will  be  32.5¢  per mile,  up from 31¢ per mile.   Seems the  IRS  essentially admitted they were wrong as they had reduced the mileage rate from 32.5¢ to 31¢ just last March.

Portfolio Update

          The average S & P stock is down 4% year to date.  My model portfolio is up 12% over the same period.

          If you have any questions about these or any other tax or financial matters, please call me.