DATE: June, 2002

The Challenge of Disposing of an Estate (regardless of size)

A parent's death can be devastating, taking a heavy toll even on adult children. Then, to add to the grief, there's the difficult task of disposing of the estate - not just houses, securities and bank accounts, but a lifetime of possessions.

Financial planners say disposing of an estate can be made much easier if parents have done some careful planning, not just leaving a will but letting children know where bank and brokerage accounts and any real property are located.

It can also be helpful if parents write what are known as testamentary letters, expressing their wishes about who gets the good china or the clock that's been in the family for generations. And they should explain to the children their reasoning behind their decisions.
From Associated Press Article 6/3/02 Joyce Rosenberg "Disposing of an Estate can be Challenging"

Government Debt Ceiling Limit

In mid-May, Treasury Secretary Paul O'Neill made a formal request to Senate Majority Leader Tom Daschle that the legal debt limit for the United State Government be increased from the current, and just reached, level of $5.95 trillion to $750 trillion. Secretary O'Neill stated that to avoid a default on federal bonds, some $44 billion would have to be borrowed from the Federal Employees Retirement System.

This issue will come to a head in the next two to three weeks as the House and Senate jostle for position on the borrowing authority increase the Treasury says it cannot do without. If the increase is not enacted, the government could be faced with angering Wall Street (by postponing scheduled auctions of federal securities), federal workers and unions (by delaying government paychecks), millions of Medicare and Social Security beneficiaries (by not making payments to them), and/or government contractors and their trade associations (by withholding payments for work already performed and expenses incurred).
From govexec.com 6/5/02 "Fiscal Feud" By Stan Collender

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Tax Law Proposal Would Allow Non-Itemizers to Deduct Charitable Gifts

The Wall Street Journal reports that Congressional staffers and tax lobbyists say chances are improving for tax-law changes that would benefit millions of people who give money to charity but aren't allowed to write off their donations because they take the standard deduction on their tax returns.

Roughly two out of every three tax filers take the standard deduction -- a flat amount based on filing status -- instead of itemizing their deductions. The proposed changes would allow filers who take the standard deduction to deduct charitable gifts up to a certain amount -- $100 in 2002 and increasing from there -- without having to itemize. The president and Republican leaders have lined up solidly in favor of the changes, as have organizations such as Independent Sector ( http://www.independent.org/ ), a coalition of more than 700 nonprofits, foundations, and corporate philanthropy programs.

Critics of the proposal argue that the plan is too expensive and cite Treasury Department estimates that put the revenue lost if the changes become law at more than $32.6 billion through 2012. In addition, a number of former IRS commissioners have come out against the changes on the grounds that the standard deduction already includes an unspecified amount for charitable gifts as well as a concern that an additional deduction for charitable gifts could lead to an increase in tax fraud.
Herman, Tom. "Taxpayers Who Take Standard Deduction May Soon Be Allowed to Write Off Gifts." Wall Street Journal 05/15/02.

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Senate Agrees To Vote on Permanent Estate Tax Repeal

In a compromise with Senator Phil Gramm (R-TX), Senate Majority Leader Tom Daschle (D-SD) agreed this week on the Senate floor to allow a Senate vote on H.R. 8. The bill would be offered with two potential amendments, either of which would require a 60-vote majority under the Senate Budget Act. The first amendment by Senator Gramm would make the repeal of the estate tax in 2010 permanent. The anticipated alternative Democratic amendment would increase the estate exemption to $4M and allow the estate tax to remain in place.

Senator Daschle noted, "What we have done in this case is simply agreed to a debate on the estate tax legislation sometime prior to June 28. Senators will have an opportunity to debate the estate tax bill. I know there is a great deal of interest on both sides of the aisle."
From GiftLaw 5/13/02

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Social Security Issue Rattling Races for Congress

No other issue is generating more scrambling in this year's Congressional elections than Social Security and what Democrats assert is the looming threat of privatization. It is a debate largely touched off by the Bush administration's proposal to allow people to divert part of their Social Security taxes into private investment accounts.

Younger people, pollsters say, tend to like the idea of private accounts. For voters under 40, "having money in their own account, that they get to keep, and pass on to their heirs, sounds a lot less risky than trusting that the government will be able to fund the program in 30 years," said Bill McInturff, a Republican pollster.

But older Americans tend to be more cautious, fearing the risks and costs of even a partly privatized system. And it is a law of politics that what older Americans think matters more - certainly in a midterm election, where they cast a disproportionate share of the vote. Americans 60 and older accounted for 28 percent of the vote nationally in the 1998 midterm election; they accounted for 41 percent in Pennsylvania.
By Robin Toner

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Gift Annuity Rates See Slight Drop

The American Council on Gift Annuities (ACGA) announced a slight drop in some of the ACGA suggested annuity rates. The American Council on Gift Annuities (ACGA) is a qualified nonprofit organization formed in 1927 as the Committee on Gift Annuities for the purpose of providing educational and other services to American charities regarding gift annuities and other forms of planned gifts. The Council provides suggested rates for charitable gift annuities that have been recognized, not only by charities and donors, but also by state insurance departments and the IRS as being actuarially sound and in the best interests of all parties involved.

ACGA rates for single life annuities for ages 38 and under and two life annuities with a younger life of age 56 and under will be decreasing as of July 1, 2002. The rationale for these decreases is to assure that deductions for gift annuities at these young ages are at least 10% of the gift value when the IRS discount rate dips as low as 5%. The rate change is quite small, a decrease of no more than two-tenths of one percent (.2%) at any age.
From www.acga-web.org