June, 2006
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News Stories
Be
Prepared For ID Theft
It may have already happened to you: A letter arrives in the mailbox from
your bank or alma mater, stating that a hacker break-in or lost laptop
has compromised sensitive data on thousands of people, and that you could
be among the unlucky ones. What to do?
(editor's note - rather than condense the article and leave out
important details, please access the article in it's entirety at http://www.futurefocus.net/idtheft.doc)
"Strong
Feelings" on Estate Tax Compromise Following a preliminary vote on
estate tax repeal legislation that fell three votes short of the required
60 in the Senate last week, Republicans and Democrats have been involved
in negotiations on an estate tax compromise. The Republican efforts continue
to be lead by Sen. Jon Kyl (R-AZ) and the Democratic efforts by Sen. Max
Baucus (D-MT). Sen. Kyl continues to advocate an estate exemption of $5
million and an estate tax rate of 15%. Sen. Charles Grassley (R-IA), Chair
of the Senate Finance Committee, suggested that a second rate of 30% for
estates over $30 million should be used. Other Senators have discussed
a potential rate of 35% for estates over $35 million. Sen. Baucus met
with Democratic senators to discuss a potential estate tax compromise.
Sen. Baucus stated, "There are strong feelings all the way around. Because
of the strong feelings, I just don't know [whether a compromise is possible
at this time]". The July 4 Congressional recess is nearing and it seems
likely that any estate tax compromise will be deferred until after the
recess. Since tax laws must start in the House, a compromise bill would
be introduced and passed in the House of Representatives first. Then it
would be sent to the Senate. Given the procedural requirements of the
Senate, the estate tax compromise could very possibly be delayed until
the fall.
6/16/06 GiftLaw
UPDATE:
House Ways and Means Chairman Bill Thomas of California introduced legislation
6/19 that would reduce the number of Americans subject to the estate tax
by raising the per-person threshold for the tax to estates valued at more
than $5 million beginning in 2010. Mr. Thomas would set the tax rate for
estates valued at less than $25 million to the capital-gains rate, currently
15%. The value of estates above $25 million would be taxed at a rate equal
to twice the capital-gains rate. The new legislation would retain the
"step up" in basis and would unify the estate, gift and generation-skipping
transfer taxes.
6/20/06 Wall Street Journal
UPDATE:
The House Ways and Means Committee on June 19 summarized
a bill to provide permanent estate tax relief with a $5 million exemption
and a rate pegged to the capital gains tax rate (twice the capital gains
rate on estates over $25 million) and to reunify estate, gift, and generation-skipping
transfer taxes. The Permanent Estate Tax Relief Act of 2006 would:
- reunify the estate, gift and generation-skipping transfer taxes -- giving individuals greater flexibility to make estate planning decisions during life. A non-unified estate and gift tax provides less favorable tax treatment for gifts made during lifetime than gifts made (through a will) at death.
- increase the exemption amount to $5 million per person effective January 1, 2010.
- reduce the rate of tax on estates up to $25 million to the capital gains tax rate (currently 15 percent, set to increase to 20 percent in 2011 unless extended). The bill would reduce the rate of tax on estates of $25 million or more to twice the capital gains rate (currently 30 percent, set to increase to 40 percent in 2011 unless extended).
- simplify
estate tax planning by allowing married couples to take full advantage
of the $5 million exemption by carrying over any unused exemption to
the surviving spouse.
6/20/06 Planned Giving Design Center
GOP
Fails in Attempt to Repeal Estate Tax
Senate Republicans failed on Thursday to muster the votes needed to abolish
the estate tax on inherited wealth, but supporters of a compromise held
out hope for a deal this year that could attract enough Democrats to pass.
Voting 57 to 41, with only a few lawmakers crossing party lines, the Senate
was three votes short of the number needed to end debate on the bill,
dooming it on procedural grounds.
The vote all but killed hopes at the White House and among Republicans
on Capitol Hill of eliminating the tax on large estates, which under current
law would be phased out by 2010 but would return in 2011. Republicans
are now debating whether to give up on their goal and attack Democrats
in the coming midterm elections as obstructionists on a measure that they
say has considerable support, or settle for a bipartisan measure that
would stop short of eliminating the tax entirely.
Senator Jon Kyl, Republican of Arizona, said he would continue to meet
with Senate leaders and crucial Democrats to discuss options for compromise.
But there were few signs on Thursday of any new deal.
6/9/06 NY Times
IRS
Ruling Imperils 'Gift Fund' Charities For Home Buyers
A ruling by the Internal Revenue Service threatens to extinguish a fast-growing
-- but controversial -- charitable industry that has funneled hundreds
of millions of dollars in cash to first-time home buyers for their down
payments. The unexpected IRS edict throws into question a practice that
has helped boost national home ownership rates to a near-record 69 percent
in the past six years. Almost 200 charities, such as AmeriDream, based
in Gaithersburg, and Nehemiah Corp. in California, have acted as cash
conduits between home sellers and buyers. Under the system, sellers provide
cash to the charities, which then give it to home buyers for their down
payments. The sellers, who pay the charities a service fee, often recoup
their money by charging a higher price for the homes -- usually 2 or 3
percent more, or an amount equal to the down payment, says a Government
Accountability Office study. Federal authorities have raised concerns,
because the mortgages are insured by the Federal Housing Administration.
When a home buyer defaults, the FHA loan fund suffers. Home buyers receiving
assistance from the charities were more than twice as likely to default
or become delinquent in their payments as those who used FHA loans without
the charities' assistance, according to a GAO study last year.
6/2/06 Washington
Post
AFP
Testifies Before Congress on Charitable Giving Act
At a hearing of the Small Business Subcommittee on Rural Enterprises,
Agriculture and Technology, AFP called on Congress to help charities
by passing charitable giving incentives.
Paulette V. Maehara, CFRE, CAE, president and CEO of AFP, represented
the association on Thursday, May 25, before the subcommittee chairman,
Rep. Sam Graves (R-Mo.), who has expressed interest in many of the charitable
giving provisions in H.R. 3908, the Charitable Giving Act. The legislation
contains numerous tax incentives designed to encourage charitable giving,
including the IRA (Individual Retirement Account) rollover provision
that AFP has supported for many years.
During her comments, Maehara stressed that new charitable giving incentives
are required because the services of charities are in increasing demand.
Maehara also noted that charities can do more, but only if they are
given the tools to do so. Most of Maehara's comments focused on the
IRA rollover, which is estimated to generate billions of dollars in
additional giving if it was signed into law.
5/30/06 GiftLaw
Modern
Day Estate Planning For The Intangibles
Every state
has statutes and mechanisms in place that deal with disposal of tangible
assets whether the deceased had a will or not. According to Ronald Hudkins,
a leading expert in the field, families might fight over who gets the
house, the cars, the stocks and the cash, but there is generally no
question about where such property is located.
"On the other hand, Hudkins said, many of the questions surrounding
intangible digital assets are just beginning to be asked, much less
answered. Estate planning in the information age raises a whole new
set of issues that just didn't exist even as few as ten years ago."
"When a person dies, for example, who inherits the computer files, the
web pages, blogs and emails? More complicated yet, how are online bank
accounts, stock holdings that exist entirely in digital media, or the
rights to an exclusively online business to be handled? The proliferation
of online businesses and the world's propensity for doing paperless
business means that digital holdings very often have considerable monetary
value. What if nobody knows your passwords or your various usernames?
Do your digital assets just disappear into the ether? Can your online
business be seized and sold to pay your creditors? These are important
matters to consider in our modern times," Hudkins said.
Hudkins further stated, "The dynamic nature of Internet transactions
makes their inclusion in a will eminently impractical. User names and
passwords change, new businesses are created, new stocks are e-traded,
and new email accounts come into being. Changing a will, or adding a
codicil, every time your online dealings change is not at all feasible."
He likewise advised, "Even though the law governing digital assets is
unclear, largely because it hasn't yet been written, there are ways
to protect those assets and make sure your heirs are able to locate
and use them."
"First, keep a master list of all your online dealings, complete with
urls, user names and passwords," Hudkins said. "The list should include
items like domain names, where they are registered, and when they need
to be renewed to keep the business name and Internet location. Put this
particular information on paper, update it every time something new
is added or something old deleted, and keep it in a safe place with
your other important business papers, preferably in a safety container."
Hudkins also advised, "Make sure your attorney or your estate executor
is aware of the list, even if you don't want it opened until after your
death. Instruct your executor or attorney as to when the list is to
become available to your heirs - for example in the case of serious
illness in the event that someone needs to take care of online business
transactions in your stead. Such instructions may or may not be legally
binding, but chances are your instructions will be followed, as a matter
of moral obligation."
"If you have a prosperous online business, online bank accounts, e-trade
accounts, or other valuable digital assets, those need to be figured
into your estate planning," Hudkins said. "Otherwise, your heirs may
be stuck with a messy situation and many unexpected expenses, or even
legal challenges to deal with - problems that your estate planning was
initially designed to protect against."
5/25/06
by Ronald E. Hudkins, President, American Industry Maintenance (AIM),
LLC
Private
Philanthropy Accounts
Sen. Johnny Isakson, R-Ga., has introduced the Personal Philanthropy
Account Act of 2006 (S. 2688), which if enacted would amend the Internal
Revenue Code to allow a tax deduction (whether or not the taxpayer itemizes
deductions) for cash contributions to a personal philanthropy account.
The account is defined as a tax-exempt trust created to make distributions
for charitable purposes. It would allow an exclusion from the gross
income of an employee for contributions made by an employer to the employee's
personal philanthropy account.
5/16/06 PGDC
(editor's note - from an initail reading - and noting that there are
no co-sponsors - this appears to be a flawed approach that is not needed.
Should more information become available we will look further at it)
Decimating
an IRA
Not long
ago, a son who had inherited his father's Individual Retirement Account
wisely decided that he wanted to preserve his windfall. He concluded
that the best place for this money was in his own IRA, so he rolled
the money into a new account. What the son failed to realize was that
he couldn't take his dad's IRA and transfer the cash into his own IRA.
The IRS regulations stipulate that only a spouse can perform this sort
of rollover. So for doing something that seems imminently reasonable,
the son was severely punished: He paid income tax on this inheritance
and his IRA was dissolved.
He needed to keep his dad's name on the account and add his own name
and Social Security number. Here's how the revised title might appear:
(father's name) IRA (deceased April 2, 2006), F/B/O (for the benefit
of) (son's name), beneficiary.
To keep your own IRA or inherited IRA from imploding, you need to be
especially vigilant during the following IRA milestones:
-
When retirement assets are moved from a workplace plan into an IRA rollover.
-
When required minimum distributions start after an investor reaches age 70 1/2.
-
When loved ones inherit an IRA.
Once
an IRA mistake occurs, it often can't be stuffed back into the box.
That's why some advisers call them Internal Revenue Accounts.
Copley News
Service By Lynn O'Shaughnessy 5/11/06
THE
ECONOMY: SEVEN INDICATORS - From
CNN Money (as of 6/22/06)
|
The
Indicator
|
What
It's Telling Us
|
Next
Update
|
| Consumer Confidence | Slipped in May | June 27 |
| Retail sales | Sales growth slows | July 11 |
| Leading Economic Indicators | Fell more than expected in May | July 27 |
| Manufacturing Activity (ISM) | Manufacturing growth loses momentum | July 3 |
| Industrial Output | Edged lower in May | July 17 |
| Job Growth | Just 75,000 added in May | July 7 |
| Inflation (CPI) | Running at 4.2% annual rate...above expectations | July 19 |
Durable
goods orders fall 0.3% in May Shipments rise 2.6%, biggest gain this
year - 6/23/06 MarketWatch
Led by a big drop in orders for aircraft, U.S.-made durable goods
fell 0.3% in May, the second decline in a row, the Commerce Department
said Friday. Economists expected orders to fall about 0.2%, according
to a survey conducted by MarketWatch. The report is not likely to
have any impact on deliberations at the Federal Reserve next week
about interest-rate policy. Concerns at the Fed revolve around inflation,
housing and consumer spending, not the factory sector.
Leading
Indicators fall 0.6% in May - 6/22/06 MarketWatch
U.S. leading economic indicators fell 0.6% in May, suggesting that
the economy is likely to grow at a "slow to moderate' pace in the
near term, the Conference Board said Thursday. Economists were expecting
the leading index to decline 0.4%. The leading index fell 0.1% in
April, and has fallen in three of the past four months. It's down
0.2% over the past six months, with half of the 10 indicators showing
weakness. Seven of 10 leading indicators were negative in May. In
May, the coincident index rose 0.1%. The lagging index rose 0.2%.
U.S.
May housing starts rise 5% to 1.96 million - 6/20/06
MarketWatch
New construction of U.S. houses increased 5% in May after three months
of declines, the Commerce Department estimated Tuesday. Despite weakening
confidence among builders, housing starts rose to a seasonally adjusted
annual rate of 1.96 million in May, stronger than the 1.86 million
pace expected by economists surveyed by MarketWatch. Starts of single-family
houses rose 2.1% to 1.59 million in May, while starts of large apartment
units rose 19.7% to 371,000. Building permits, a leading indicator
of housing construction, fell 2.1% to a seasonally adjusted annual
rate of 1.93 million from 1.97 million in April.
U.S.
June housing market index falls to 11-year low -
6/19/06 MarketWatch
Sentiment among U.S. home builders fell for the sixth month in a row
to an 11-year low in June, the National Association of Home Builders
said Monday. The housing market index dropped four points to 42, the
lowest since April 1995. May's reading was revised up to 46 from 45.
Readings over 50 indicate most builders think business conditions
are good or fair. The index was at 68 in October and peaked at 72
in June. It has fallen in eight of the past nine months. The index
declined in all four regions of the nation in June, but still remains
positive at 61 in the West. All three subindexes declined in June.
Fed's
Dilemma: Prices Climb as Economic Growth Slows - 6/16/06
NY Times
Economic growth in the last month and a half was generally
strong across the country, the Federal Reserve said in a report yesterday,
but showed "some signs of deceleration." At the same time, prices
in most regions rose, according to the report known as the Beige Book.
With a decision on setting interest rates two weeks away, the report
underscores the two issues competing for the Fed's attention: rising
inflation and softening economic growth. Remarks in recent weeks by
the Fed's chairman, Ben S. Bernanke, and other central bank officials
have made clear that their primary concern is fighting inflation.
Consumer
Spending Drops Sharply in May - 6/14/06 Washington
Post
Consumers cut back sharply on their spending in May, providing further
evidence that the economy is slowing, but it is still an open question
whether the slowdown is coming soon enough to keep inflation under
control. The Labor Department reported yesterday that wholesale prices
rose by 0.2 percent in May, a big drop from the past two months. But
core inflation, excluding food and energy, increased 0.3 percent,
faster than analysts had expected (note - economists surveyed by MarketWatch
expected a .2% gain). The Commerce Department reported that retail
sales edged up only 0.1 percent last month and would have been in
negative territory had it not been for a big rise in the price of
gasoline.
Fed's
Beige Book sees signs of slowdown - 6/14/06 MarketWatch
Fed report highlights dilemma: Higher prices and softer economy. The
economy continued to expand in most regions of the country in May
and early June, but there are signs of a slowdown, the Federal Reserve
said Wednesday in the Beige Book report on economic conditions. Price
pressures were rising in most regions, but there was limited success
in passing higher prices along to consumers, the Fed said. Wage pressures
were said to be moderate. "Economic activity continued to expand"
in all 12 Federal Reserve districts, "but there were signs of deceleration,"
the Beige Book said. In most regions, the economy could be summed
up simply as "Healthy, but ..."
U.S.
May PPI up 0.2%, core PPI up 0.3% - 6/13/06 MarketWatch
U.S. producer prices increased 0.2% in May as energy prices moderated,
but core prices inched higher amid signs that inflationary pressures
are growing. The Labor Department said Tuesday prices for finished
goods rose 0.2%, while the core PPI - which excludes food and energy
prices - rose 0.3%. The results were close to expectations of economists.
In the past year, the PPI is up 4.5%, the fastest year-over-year gain
since January. The core PPI is up 1.5% in the past year. While prices
for finished goods were relatively tame, prices for goods under production
jumped. Intermediate goods prices increased 1.1%, the biggest gain
since October. Crude goods prices increased 2%, also the largest since
October.
Retail
sales growth slows - 6/13/06 CNN Money
The latest numbers point to weakness in consumer spending that could
get worse in coming months, analysts say. Retail sales barely edged
higher in May as rising gasoline prices helped counter sluggish consumer
spending in some other retail categories. The Census Bureau said Tuesday
that sales overall rose just 0.1 percent last month, less than the
revised 0.8 percent increase in for April. Economists surveyed by
Briefing.com had forecast retail sales to be flat. Excluding auto
sales, retail sales rose 0.5 percent, in line with expectations. Ex-auto
sales were up a revised 0.8 percent the previous month. Ex-auto sales
were originally reported to have increased 0.7 percent in April.
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Revised: July 3, 2006 10:29.