A decline in the number of new unemployment applications for the third week in the past month could not offset a lower-than-expected consumer sentiment reading and a decline in the consumer price index. The Labor Department reported Thursday that new unemployment claims for the week ending July 10 dropped to their lowest level since August 2008. The Thomson Reuters/University of

Cut In Half – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.57 percent on July 8, 2010, half of the nationwide average of 9.15 percent from January 1995 or 15½ years ago. (Source: Freddie Mac, BTN Research).   

Not A Baby Anymore – “Baby Boomers” are traditionally defined as the 78 million Americans born between 1946 and 1964. The oldest “boomers” will turn 65 years old in 2011 (Source: BTN Research).  

Not Enough Tenants – The national vacancy rate for apartments was 7.8 percent as of June 30, 2010, down from 8 percent as of March 31, 2010. The first quarter vacancy rate was the highest level achieved in the past 30 years (Source: Reis Inc., BTN Research).   

WEEKLY FOCUS – Reason to Rally a Retroactive Estate Tax? 

With the potential loss of an estimated $500 million in taxes on the estate of George Steinbrenner, the New York Yankees baseball owner who died on July 13, the Senate may be wishing it had worked a little harder to pass a bill last year that would have extended the 2009 rates rather than letting the tax expire in 2010. 

In fact, two days after Steinbrenner’s death, two senators introduced a proposal to permanently set the estate tax rate at 35 percent, with a $5 million exemption indexed for inflation and phased in over 10 years. The bill would also provide a “stepped-up basis” for inherited assets, meaning capital gains on future sales would be taxed on the value of the assets at the time of the owner’s death not the original value when the owner purchased them. 

If Congress takes no action, the federal estate tax in 2011 will be 55 percent and a $1 million exemption. The 2009 rate was 45 percent with a per-person exemption of $3.5 million. Applying 2009 rates to Steinbrenner’s $1.1 billion estate (as estimated by Forbes magazine), his heirs may have forfeited almost $500 million in taxes. Even without a current estate tax, Steinbrenner’s heirs must pay capital gains tax when they sell their inherited assets. Using the current top capital gains rate of 15 percent, if his heirs sold the assets immediately, they would pay about $165 million (depending on how much the assets have appreciated since Steinbrenner bought them). 

That’s a difference in tax of about $328 million – or, as the Associated Press put it, about 10 times Alex Rodriguez’s salary of $32 million.  With so much about uncertainty around the estate tax, many Americans are finding it difficult to plan their legacy. We welcome the opportunity to help you analyze your current situation in conjunction with your estate attorney and tax professional. Please call our office to schedule a joint appointment. 

* 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,

The Market

The markets shook off the pessimism of the end of the second quarter with their highest weekly gains in almost a year last week. The Dow and S&P had their best weeks since July 13, 2009, while the NASDAQ had its biggest gain since Oct. 5, 2009, according to the Associated Press. Earnings reports begin Monday, with Thomson Reuters expecting an increase in second-quarter profits of 27 percent over last year. During the shortened trading week (markets were closed Monday, July 5, for Independence Day), no further negative news came from Europe, while

Who Is Buying What – Foreigners bought a net $223.5 billion of U.S. stocks and bonds in March and April 2010 (i.e., the difference between the amount that foreigners bought in American securities vs. the amount that Americans bought in foreign securities), the second largest back-to-back monthly total ever recorded. This record amount may suggest confidence in the

Better Than Expected – The

Billions – Using the Treasury Department’s projection of $3.72 trillion of spending, the

* 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,

The Dow continued its decline through this past Friday, its longest losing streak since October 2008. According to the Associated Press, employers added 83,000 jobs last month while analysts had forecasted 112,000. For the week, the Dow lost 4.47 percent to close at 9,686.48. The S&P declined 4.99 percent to finish at 1,022.58, and the NASDAQ dipped 5.92 percent to end the week at 2,091.79.

Get a Job – Thirty-nine percent of CEOs of large

Stay Home, Save Money – A recent study by Genworth Financial found that the cost of in-home care is rising at a slower rate than the cost of care in a nursing or assisted living facility. Home care costs have risen just 1.7 percent in the past five years, while assisted living has increased 6.7 percent and private room nursing home care has increased 4.5 percent. In an earlier Genworth survey, 78 percent of respondents said they would prefer to receive care in their own home. 

Public Speaking, Outliving Savings and Death – The old saw about most adults fearing public speaking more than death may have a new twist. According to a recent survey by Allianz Life Insurance Co. of North America, two-thirds of boomers fear outliving their savings more than they fear dying. Unfortunately, that doesn’t seem to be motivating them to plan ahead. Thirty-one percent aren’t sure how much their retirement expenses will be and 36 percent said they have “no idea” how long their retirement income will last.  

WEEKLY FOCUS – Passing On Your Vacation Home 

The U.S. Census, currently underway, was intended as the basis for allotting congressional representatives in each state (and subsequently, representation for city, state and other government entities). In its current form, the census gathers much more information. For example, the last census in 2000 found Americans own more than 3.5 million vacation homes, often passed from parents to children. 

If your estate plan includes gifting or bequeathing a second home to your children, you may not be doing them a favor. Your heirs will be responsible for paying for maintenance, insurance and property taxes on a gift they may not use often enough to justify the ongoing expense. If you have multiple children sharing in the property, the decision to keep or sell can be contentious, especially if one child can afford the expenses and another cannot. 

Some parents may have the wherewithal to fund a trust specifically to cover the ongoing expenses of the home. Others, especially those already pressed to pay the mortgage on the second home, may want to consider a life insurance policy whose settlement can be used for property expenses. Another option is to specify in the will that the second home must be sold and the proceeds divided among the heirs. 

Some heirs may not want fixed assets or real estate of any kind, viewing it as not only a financial burden, but an emotional one. An adult child may cherish the memories of family time spent at a vacation home, but the realities of his life today may make it unfeasible to continue that tradition with his own children. Guilt ensues over paying upkeep on a property he cannot use or selling the vacation home his parents valued so highly. 

Before including a vacation home or other real estate in your estate plan, you should consult with your children about their willingness and ability to handle the ongoing financial responsibility. Our office can work with your estate attorney to help you examine your options and broach the often difficult subject of money with your heirs. Call us for a family appointment. As always, we are happy to include your accountant or attorney. 

* 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,

The Federal Reserve’s Open Market Committee ended its two-day meeting on Wednesday by leaving the federal funds rate unchanged at zero to 0.25 percent, where it has been for the past 18 months. The Fed’s statement about financial market conditions, which it described in April as “improved,” showed concern this time as it stated, “Financial conditions have become less supportive of economic growth on balance, largely reflecting of developments abroad. Bank lending has continued to contract in recent months.” Manufacturing activity has been increasing, however, and businesses are spending more, leading Fed Chairman Ben Bernanke to express confidence that the country will not face a “double-dip” recession. Markets will be closed Monday, July 5, in observance of Independence Day. For the week, the Dow dropped 2.94 percent to close at 10,143.81. The S&P declined 3.63 percent to finish at 1,076.76, and the NASDAQ fell 3.74 percent to end the week at 2,223.48.

Stocks Down, Bonds Up – Since 1976, the S&P 500 has had a negative total return in seven separate calendar years. In each of the seven years when the stock index was down, the bond market (using the Barclays Aggregate bond index as the benchmark) produced a positive total return (source: BTN Research).   

Summer Travels – Every 1-cent reduction in the price of gasoline saves Americans $3.4 million a day.  The national average price of gasoline peaked on July 16, 2008, at $4.11 a gallon. As of June 18, 2010, the national average price of gasoline had fallen to $2.72 a gallon (source: AAA, BTN Research).     

Where Did The Extra Hours Go? – The productivity of the average American worker over the 10 years ending Dec. 31, 2009, is up 31.2 percent or 2.75 percent per year. That means the workload that would have taken an average employee 40 hours to complete in 1999 in a single week can now be done in 30 ½ hours (source: Department of Labor, BTN Research).

WEEKLY FOCUS – Protecting Seniors From Scams and Swindles 

Like the financial markets, money scams run in cycles. Resurfacing last year was the grandparent scam, in which a caller poses as an elderly person’s grandchild in distress, usually involving an arrest or car accident while traveling in Canada. The “grandchild” asks the grandparent to wire a few thousand dollars and to please not to tell mom and dad. 

A recent survey by the Investor Protection Trust, an independent group that promotes investor education, found that more than 7.3 million older Americans – about one in five – has been swindled, with above a third of adults over age 65 saying they receive phone and mail solicitations for money or participation in money-making schemes. 

Adult children tend to be unaware of the prevalence of scams aimed at the elderly. In the same survey, only 19 percent thought their parents had been approached by a swindler. While most were confident their parents would tell them immediately if they lost money in a scam, 16 percent thought their parents would be too ashamed to tell, and 35 percent said they wouldn’t be able to determine a scam had taken place if their parent didn’t disclose it. 

Elderly Americans can be particularly vulnerable following the death of a spouse, particularly if the deceased handled the couple’s finances. Scams at this time often come in the form of callers claiming the deceased spouse had entered into a contract or agreement for services that the surviving spouse must now pay. 

Approaching elderly parents about their finances and their ability to continue making rational and informed decisions can be difficult for adult children. We can help by creating nonthreatening opportunities to help educate your parents about potential dangers and encouraging them to take steps now to prevent future problems. Call our office to schedule a multi-generational appointment.

* 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. Barclays Capital Aggregate Bond Index is an unmanaged index comprised of U.S. investment-grade, fixed-rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and 10 years. Written by Securities America. SAI#305496

The Dow posted a second straight week of gains in excess of 2 percent last week, its strongest two-week stretch since November 2009. The two-week increase of 5.2 percent placed the index almost halfway back to its 2010 year-to-date high that it reached on April 26. Over the weekend,

The Money Companies – The 79 stocks in the S&P 500 that are “financial” companies have tripled in value (i.e., increasing 206 percent from $523 billion to $1.598 trillion) from the close of trading on Monday, March 9, 2009, (i.e., just over 15 months ago) to the end of Friday, June 11, 2010. Over the same 15-month period since the bear market bottomed on March 9, 2009, the S&P 500 stock index has increased only 61 percent. Both return calculations do not include the impact of reinvested dividends (Source: S&P, BTN Research).   

Up Or Down – Since 1950, economic expansions have lasted six times as long as economic contractions. Economic expansions are defined as “trough to peak” periods, and economic contractions are defined as “peak to trough” periods. The average expansion has lasted 62 months while the average contraction has lasted 10 months (Source: National Bureau of Economic Research, BTN Research).    

Be Careful – Revolving credit, which includes credit card debt, fell in April 2010, its 19th consecutive monthly decline. This total peaked in September 2008 and has fallen every month since then (Source: Federal Reserve, BTN Research).        

WEEKLY FOCUS – Control Your Legacy with a Private Foundation 

If your calendar has filled with worthy causes seeking your name and your wallet, consider channeling your time and money into a private family foundation. 

Private family foundations aren’t the sole domain of the Gates, Fords and Rockefellers. The estate planning industry’s rule of thumb says a foundation needs an annual minimum of about $25,000 from endowments, annual contributions or both available for making grants. This may be prohibitive to estates under $2 million, but you certainly don’t need the billions of dollars that Bill and Melinda Gates have put into their foundation. 

You can establish a stand-by foundation, which is created to receive lifetime contributions or a major bequest, or a flow-through foundation, which converts appreciated property into cash and distributes the proceeds to public charities but does not build up an endowment. A flow-through foundation can provide capital gains tax benefits if you have highly-appreciated assets. Individuals may deduct cash and property contributions to a private foundation up to certain limits established by the tax laws. All contributions specified in a will are fully deductible for estate tax purposes. 

Your foundation can be a non-operating foundation, meaning it makes grants to help fund the efforts of other organizations or individuals, or an operating foundation, which runs a facility or institution, such as a museum or research lab. Your foundation’s purpose can be as broad as world hunger or as specific as modest scholarships to a local liberal arts college. Tax laws require private family foundations to distribute a minimum amount of assets each year and pay tax on investment income. However, as part of an overall retirement and estate plan, a private family foundation decreases the amount of taxable assets in your estate. You can make gifts to your foundation without affecting the annual gift tax exclusion or the gift tax credit. 

Creating a foundation requires careful consideration and planning. We can work with your legal counsel and tax advisor to see how a private family foundation could work with your retirement and estate plans. If you’d like to learn more about establishing a private family foundation, please call our office. 

* 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,

Very Low – The average interest rate nationwide on a 30-year fixed rate mortgage was 4.79 percent on June 3, 2010, just 0.08 percent higher than its all-time low. From January 1978 to September 1991, the average interest rate nationwide on a 30-year fixed rate mortgage never got below 9 percent (Source: Freddie Mac, BTN Research).   

On The Job – Employers in the

Another potential European debt crisis and a disappointing May jobs report took the Dow down more than 324 points Friday. The

 What We Save – The national personal savings rate in the

Need to Do More – One in four American workers surveyed (25 percent) admits that he or she is “significantly behind” in the accumulation of assets necessary for his or her eventual retirement (Source: MetLife Mature Market Institute, BTN Research).   

Money Coming Back to Us – The $700 billion TARP legislation (Troubled Asset Relief Program) that was signed into law by President George Bush on Oct. 3, 2008, included $245 billion that was paid to

They Like Us – Foreigners bought a net $140.5 billion of U.S. stocks and bonds in March 2010 (i.e., the difference between the amount that foreigners bought in American securities vs. the amount that Americans bought in foreign securities), the largest monthly total ever recorded. The previous monthly high was set in May 2007. This record amount may suggest confidence in the

A Billion Dollars a Day – Retail sales to American consumers in April 2010 totaled $366.4 billion compared to $336.7 billion in April 2009, an increase of $29.7 billion. That’s equal to $1 billion of additional retail sales per day in April 2010 when compared to the same month in 2009 (Source: Census Bureau, BTN Research).  

And They’re Healthy – An average American couple both age 75 and in good health would need to have set aside $265,000 (i.e., a present value amount required at age 75) to pay for future healthcare costs that they will incur including any long-term care assistance (Source: Center for Retirement Research at Boston College, BTN Research).   

WEEKLY FOCUS – Half-Time Check with Your Financial Coach 

If you look at one year as a single game of finances, we’ve reached half-time. Time for a pep talk from your financial coach, a check of your goals and possibly some game plan adjustments for the second half. 

Retirement: Have you kept your resolutions for paying yourself first by adding to your retirement accounts? If you’ve received a raise and haven’t done so already, consider increasing your 401(k) contribution or having your employer direct deposit the extra into your investment account for IRA contributions. Same is true of any bonuses, tax refunds or other windfalls. Choose saving or paying down debt over consumption. 

Spending: If you resolved to curb your spending, take time to check yourself and see if you’re still on budget. That bit of drift that may have started earlier in the year could have escalated to unacceptable levels. Rein it in now, before you get out of control, and you’ll find yourself more flush when you need it – like when the holiday buying season arrives. 

Credit: If you haven’t done so in the past 12 months, request your credit report. You get one free each year. Read through it for errors and suspicious activity that might indicate potential identity theft. 

Cash Reserves: Do you need to make home repairs or improvements? Will you be paying tuition or fees for children or grandchildren’s education and activities in the fall? Is there a charity event coming up to which you’d like to make a good-sized donation? How much cash are you going to need for these kinds of items in the next six months? Plan now how you’ll fund those needs while still maintaining an emergency fund for the ones you aren’t expecting. 

Taking stock of your performance in your financial game can help ensure you make your goals before time runs out this year. Call our office for a half-time review and pep talk! 

* 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,