Recipe For Failure

Ben Stein has an interesting list of what things are needed in a society to destroy capitalism and innovation. It’s no surprise that almost all of the elements in his list are prevalent and growing in America today. The question is whether or not the growth trend of these counter-productive and outright destructive aspects of our society will be able to be stopped before it’s too late to recover true market freedom.

KMK

Survivor Assistance

While it sounds cold hearted to say this, it is a fact that when someone passes away, that person has it easy. Those that are left behind suffer much more, both in the emotional loss, as well as the overwhelming burden of tasks that have to be dealt with to make sure nothing is overlooked. Even when the death is not a big surprise, it’s hard for those left behind to know everything they need to take care. As I explained in this article from five years ago, the financial spouse is usually the first to go, leaving the non-financial spouse in the dark.

A new very handy resource is The Survivor Assistance Handbook, a 44 page booklet written by Certified Financial Planner Mark Colgan detailing all of the little things that a person needs to take care of after someone close to them passes away. I first learned of this booklet in this article on the FoxNews website. I ordered a copy from Mark’s website and was very impressed with it. Mark’s checklists of things to take care of after a person passes away is the most complete I have seen, even including such things as returning library books and videos that the decedent had out. At $14.95 plus postage for a single copy, it’s a bargain compared to the potential cost of overlooking even the smallest detail. Mark is also encouraging bulk sales for gifts with wholesale prices of $9.95 each in lots of 25 or $7.95 each in lots of 100.

KMK

George W. Bush hugged the third rail

Americans are tax cutters by nature

Tapping Into Equity

I have always considered it a shame to see older people sit on real estate worth hundreds of thousands of dollars, yet not be able to enjoy themselves. They are the classic real estate rich, cash poor. I normally meet heavy resistance when I recommend that they borrow against their property and live it up with the money. Because these people, who are often in their 70s, 80s and 90s, grew up during the big depression of the 1930s, they have a terrible fear of debt of any kind. They also have a misguided sense of duty to their kids. They feel guilty about the idea of saddling their kids with a mortgage when they pass away. I have to explain that anyone inheriting a $500,000 house with a $200,000 mortgage is still getting a heck of a windfall.

Reverse mortgages are becoming more common for situations such as this. My personal preference is to have the person borrow out a large lump sum of money as a conventional mortgage. This makes even more sense nowadays because the interest rate can be locked in at very low rates. Reverse mortgages are generally adjustable rate, which means they can go up.

While each person’s circumstances are different, I have worked with several people over the years in this scenario, where a large amount is borrowed and half the money is available to play with and the other half is deposited into an interest bearing bank account, out of which the monthly loan payments are made for the remainder of the person’s life. For someone in his/her 80s or 90s, such an arrangement isn’t difficult to set up.

KMK

Stock Losers

Here are some good tips on dealing with stocks that have declined in value. Some reminders:

To recognize a loss for tax purposes, you have to sell the stocks. Declines in portfolio value are not deductible, which is fair because portfolio gains in stocks still owned are not taxable.

Beware of the wash sale rule. You can’t deduct a loss on stocks if you repurchase shares in the same company within 30 days of the sale. The non-deductible loss has to be added to the cost basis of the replacement shares. One way to get around this is to repurchases the shares through your retirement plan (IRA, SEP, 401k, etc) because IRS considers such plans to be different entities than the individual beneficiaries.

Donating to charity

It only makes sense to donate appreciated stocks to charity because you can deduct the full market value and avoid any capital gain tax. However, if the stock has gone down, you can only deduct the market value at the time of the gift; thus forfeiting the capital loss. It’s a better plan to sell the stock, claim the loss, and donate the cash.

KMK

Bush team forges tax-cut strategy