WEEKLY STOCK MARKET COMMENTARY
For the Week of November 26, 2007
With many of the big players on vacation for Thanksgiving and no major releases of economic data or corporate earnings, trading volume on the major markets was at typical holiday lows. The shortened trading session on Friday helped the Dow and the S&P recover slightly from losses of more than 1.5 percent on Wednesday. The Dow finished the week at 12,980.88, down 1.43 percent, while the S&P closed at 1,440.70, down 1.21 percent. The NASDAQ lost 1.54 percent to finish at 2,596.60.
Here’s The Scoop – The final Fed meeting of 2007 will take place on Dec. 11, 2007. At the conclusion of the meeting, the Fed will release a brief statement (typically five to six paragraphs in length) indicating what action (if any) the Fed has decided to take and how the various members voted. The release of a statement immediately following every Fed meeting has occurred for just the past eight years, a practice that began 86 years after the Fed was started in the year 1913 (Source: Federal Reserve, BTN Research).
Big Bucks For The Fifth Grader – The average cost for one year of college education at an in-state public college is $13,589 for the 2007-08 school year (cost includes tuition, fees, room and board). The total one-year cost has increased 6.5 percent per year over the past 30 years. If that same annual rate of inflation continues into the future, then a 5th grader today will ultimately pay $100,000 for his/her four years of public college education during the years 2015-19 (Source: College Board, BTN Research).
What’s in Your Gift Box? – Last year, consumers lost $8 billion in unredeemed gift cards, according to TowerGroup, a research firm. The growth in gift card giving, which has exploded in the past four years, has slowed to 6 percent this year for a total of $26.3 billion, compared to a 35 percent growth rate in 2006. The National Retail Federation says that 88 percent of consumers in a recent survey say they will buy two or more gift cards this year. Buyers should watch out for fees, expiration dates and penalties for inactivity.
Clarification – Last week’s Weekly Focus article on IRS rule changes for nonspouse beneficiaries of a solo 401k and other qualified plan accounts incorrectly stated that such beneficiaries could delay distributions until age 70½. Distributions must begin by the end of the year following the year of death. If the decedent was under age 70½ at the time of death, the beneficiary has the option of taking equal annual distributions calculated over his own life expectancy or to take distributions of any amount, until the account is liquidated, for the five years following the year of death. If the decedent was over age 70½, the only choice is the five-year option. Situations vary, so consult your financial and tax professional.
WEEKLY FOCUS – Beware Bequeathing Trojan Tax Horses
Last year, according to the National Association of Realtors, a record 1.07 million Americans purchased vacation homes. The typical buyer was 44 years old and had a median household income of $102,000. The vacation home trend, which has been increasing in volume but decreasing in average buyer age for several years, has put a larger amount of property into estate plans than in previous generations.
If your estate plan includes gifting or bequeathing a second home to your children, you may not be doing them a favor. Your heirs will be responsible for paying for
maintenance, insurance and property taxes on a gift they may not use often enough to justify the ongoing expense. If you have multiple children sharing in the property, the decision to keep or sell can be contentious, especially if one child can afford the expenses and another cannot.
Some parents may have the wherewithal to fund a trust specifically to cover the ongoing expenses of the home. Others, especially those already pressed to pay the mortgage on the second home, may want to consider a life insurance policy whose life insurance settlement can be used for property expenses. Another option is to specify in the will that the second home must be sold and the proceeds divided among the heirs.
Some heirs may not want fixed assets or real estate of any kind, viewing it as not only a financial burden, but an emotional one. An adult child may cherish the memories of family time spent at a vacation home, but the realities of his life today may make it unfeasible to continue that tradition with his own children. Guilt ensues over paying upkeep on a property he cannot use or selling the vacation home his parents valued so highly.
Before including a vacation home or other real estate in your estate plan, you should consult with your children about their willingness and ability to handle the ongoing financial responsibility. Our office can help you examine your options and broach the often difficult subject of money with your heirs. Call us for a family appointment.
* The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Morgan Stanley Capital International Europe, Australia and Far East Index (MSCI EAFE Index) is a widely recognized benchmark of non-U.S. stock markets. It is an unmanaged index composed of a sample of companies representative of the market structure of 20 European and Pacific Basin countries and includes reinvestment of all
dividends. WMCSAI# 262138