Stock Market Commentary
For the week of April 13, 2009
With one less trading day in the week due to the Good Friday holiday, the major markets extended their rally for a fifth straight week, fueled by Wells Fargo’s announcement that it expected to report a $3 billion profit for the first quarter. The strength of the rally will be tested this week as quarterly earnings reports continue, including Dow components JPMorgan, Citigroup and GE, along with Goldman Sachs. In addition, the Commerce Department will release the March retail sales report on Tuesday, and the Labor Department will release the March Consumer Price Index on Wednesday. The Dow ended last week up 1.41 percent to 8,083.38. The S&P gained 2.74 percent to close the week at 856.56, and the NASDAQ rose 3.11 percent to finish the week at 1,652.54.
E-filing Jumps – The number of people filing their self-prepared tax returns electronically this year has jumped 20 percent, according to the IRS. A major driver of e-filing has been the decision by two major tax preparation software companies to eliminate their $12.95 per return fee for electronic filing. Congress has set a goal for e-filing of 80 percent of all returns. The IRS predicts e-filing will exceed 60 percent of returns this year. In addition to saving the cost of a stamp, consumers help reduce costs to the government: It costs the IRS $2.87 on average to process a paper return, compared with 35 cents for an electronic return.
The Rich Folks – Forty-five percent of the world’s 793 billionaires are Americans. There is one billionaire worldwide for every 8.5 million people (Source: Forbes, Census Bureau, BTN Research).
Good Month – The S&P 500 gained 8.8 percent (total return) in March 2009, its best monthly performance since October 2002 when the stock index also gained 8.8 percent. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market (Source: BTN Research).
Free E-filing for Extensions – Taxpayers wishing to file an extension from their computer can do so at no cost using the IRS’s FreeFile or FreeFile Fillable Forms. While either FreeFile method for tax returns is available only to those earning $56,000 or less, free e-filing for extensions is available to anyone, regardless of income. Taxpayers filing electronically for an extension will receive a confirmation. Requests, which must be filed by April 15, give the taxpayer until Oct. 15 to file. An estimated 10 million extension requests are expected during 2009, with about 1.9 million of those made electronically.
WEEKLY FOCUS – The Estate Planning Vortex
Estate planning has never been easy. First, you need to consider your own situation, including your assets, your family structure, any special needs your family may have, any legacy you wish to leave. Second, you need to account for any number of “what if” scenarios: What if you die before your spouse, or vice versa? What if you both die at the same time? What if you die before you children are grown? Finally, you have to continually update your plan as your life changes – your family gains and loses members, your assets grow or suffer set backs, your career gains momentum or comes to an end.
A joint House and Senate Committee hopes to remove at least one uncertainty from the complex estate planning process with revisions to the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). Left unchanged, EGTRRA in 2010 repeals both the federal estate tax and the generation skipping transfer (GST) tax, along with rules that allow those who inherit assets to set the basis at the current fair market value rather than the value at the date of purchase. Inherited assets would be valued at the original basis, which is often difficult to determine. Under the current law, in 2010 estates will receive a $1.3 million credit to increase asset basis generally, plus $3 million to increase the basis of “qualified spousal property.”
In 2011, the federal estate and GST tax would reset to pre-EGTRRA levels, as would the gift tax. The maximum estate and gift tax rate would be 55 percent plus a 5 percent surcharge on estates over $10 million, the unified gift and estate tax credit would be $1 million, and the GST would have a flat rate of 55 percent and an exemption of $1,120,000. Should Congress fail to remedy the situation, taxpayers and tax and estate professionals would face a completely new tax system, including new forms, software and accounting procedures.
Now, more than ever, you need to keep close watch on your estate plans. Documents can be structured to include special provisions in the event that EGTRRA remains intact and the estate tax is repealed in 2010. Strategies such as credit life insurance or making eligible transfers before the law changes may be needed.
We can work closely with your tax and estate professionals to keep your estate plan in tune with the changing rules. Call our office to schedule a meeting of your advisor team.
Any tax or legal information provided herein is merely a summary of our understanding and interpretation of some of the current income tax regulations is not exhaustive, and should not be viewed as tax, legal, or estate planning advice. Please consult with a qualified tax and/or legal advisor for estate planning information relating to your specific situation.
* 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. Written by Securities America. SAI# 296736