DATE: May, 2002

Federal Reserve to Maintain Current Benchmark Interest Rate

(May 7, 2002) With the current economic conditions, the Federal Reserve today voted to maintain its benchmark interest rate at the current level. The Board reviewed data that showed inflation to be under control but the strength of the current economic recovery still undetermined.

Earlier the Labor Department reported a larger surge in the growth rate of productivity than had been expected. It appears that the central bank is not in a hurry to raise interest rates even with the first quarter's sharp increase in economic growth. With productivity increasing, the thought is that companies will be able to restore their profit margins without resorting to price hikes.

This decision by the central bank has left the federal funds rate (the rate for overnight loans to banks) at a forty year low of 1.75 percent. While it has been at this level for the past five months, the bankers have indicated they are not likely to consider any rate increase before August.

Bill Proposed to Fund Prescription Drugs from Estate Taxes

Rep. Barney Frank (D-MA) has proposed a bill that would use estate tax revenue to fund a prescription drug benefit. The bill would permit the increased estate exemption of $1.5 million in 2004, $2 million in 2006 and $3.5 million in 2009. Thereafter, the estate tax would not be repealed, but the exemption would be maintained at $3.5 million.
From GiftLaw

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Changing Patterns in Philanthropy

Many families with relatively new money are fueling a transfer of wealth unlike anything ever seen in this country. Models developed by Prof. Paul G. Schervish and John J. Havens at the Social Welfare Research Institute at Boston College predict that $40 trillion to $136 trillion will migrate between generations over the next 50 years, depending on economic growth rates. A big chunk of that will end up in charitable endeavors: Professor Schervish estimates that $19.2 trillion to $50.2 trillion will be spent on philanthropy by 2052, again depending on the growth of the economy.

"A big part of my giving is about coming into it suddenly," said Dawn Trudeau, a former Microsoft executive whose mother was a teacher and whose father drove a truck. "Having a lot of money was never really part of our lifestyle."

While Ms. Trudeau had long given money a couple of national charities, her giving changed when she retired in 1998 at 40. "I now get personally involved," she said, "and I do think that changes the way you give." The more involved she gets, Ms. Trudeau said, the more she wants to give away. "It becomes contagious," she said. "You start giving and you see how much just a little bit of money can do and you start having bigger ideas."
taken from The New York Times, 4/27/02 by Stephanie Strom

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Proposal to Ease Donating Savings Bonds to Charity

Currently the only way to make a charitable bequest of savings bonds is through instructions in a will or a trust that the bonds be physically distributed to a charity by the estate or trust. The bonds have to go through probate, unless the owner used a "living trust" with instructions to distribute the bonds to a charity. Either way, a charitable bequest of savings bonds cannot be accomplished under current law without a document drafted by a lawyer.

Christopher R. Hoyt of the University of Missouri-Kansas City, Kansas City School of Law has asked Treasury to consider a reform to facilitate charitable bequests of savings bonds. He says owners of savings bonds should be able to name a charitable organization as co-owner or beneficary on the face of the bonds.
From a letter to the Department of the Treasury from Christopher R. Hoyt

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Computer Virus Alert

A rogue computer program that is the online equivalent of a quick-change artist is infecting computers around the world via e-mail and clogging computer networks. The program, W32/KLEZ.H, is a "blended threat," combining elements of a virus, which infects machines, and a worm, which transports itself from machine to machine. It also tries to disable some antivirus programs.

It makes itself hard for users to spot by changing its e-mail subject line, message and name of the attachment at random, drawing from a database that includes, for example, such subject lines as "Hello, honey," and "A very funny website." The program has grown increasingly common as users unknowingly activate it - sometimes without even opening the e-mail attachment that carries the virus - and allow it to send copies of itself to those in the victim's e-mail address file.

The rapid spread of the program caused Symantec and McAfee, two prominent computer protection companies, to upgrade their warnings about it in recent days; Symantec said on its Web site that it now considered the program a "category 4" risk, its second-highest ranking.
taken from The New York Times, 4/27/02 by John Schwartz

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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.