By Edward Leone Jr. CFP RFC MBA DMD
Contact Information; 303-478-6793 edleonedds@gmail.com
It is possible based on proposed U. S. Treasury regulations to take effect early next year, that the concept of valuation discounts for gift and generation skipping transfer taxes as we understand them today will be droped. It may be appropriate for those married with net worth above $14 million to consider some gifting strategies now or to investigate trust structure options.
The global economy stagnation is a continuing problem. Governments’ excessive taxation along with increasing regulation and spending are a drag. The Central Bank activities of quantitative easing and low to zero interest rates has skewed credit markets to deflate economies not inflate them. Governments and large corporations have access to low-cost money, but the significant drivers of the economies — small businesses and individuals are restricted from adequate capital access. Progrowth structural economic changes are needed. I am not sure that I am hearing discussion of such issues here in the U. S. with election season rhetoric.
HSAs (Health Savings Accounts) are a valuable strategy to consider if available to you. You contribute money to pay medical bills pre-tax and both asset growth and payment of qualified expenses is tax-free. For 2016, individuals can put aside $3,350 and families can put aside $6,750. If you are over the age of 55 add another $1,000 to the opportunity. Given the current challenges with increasing healthcare costs and the activity occurring in the health insurance industry with cost shifting to the policy holder or plan participant, the HSA can be a helpful tool.
For many people in retirement or on the door step to such an event, generating adequate income from investment sources with this low interest rate environment is a challenge. Invesments that generate higher yields than money market funds and U.S. Treasury Bonds come with significant market price risks. Solutions for many are coming from dividend paying stocks and a variety of alternative investment products. Be careful if you are in such a position and seek qualified help in navigating the landscape. Regulators are generating new rules regarding money market funds. If in place, institutional money market funds will have to let their share price float instead of it being fixed at a steady $1. If the share price goes bellow $1, the fund sponsor is expected to back up the fund value. Depending on the credit rating of the fund sponsor, this may not be possible in some situations. You will recall the the U. S. Government backed up some money market funds in 2008. These assets are not generaly government insured by FDIC.
On a final note, the Department of Labor is generating universal fiduciary rules applied to investment advisor professionals. Certified Financial Planners have been engaged in the fiduciary standard for there work with cleints for many years (act always in the best interest of the client), but broker dealers and other sales people and other advisors have not adopted such a standard. If these new regulations are applied, there will likely be better protections for the investing public. Advisors fees may increase under the model and consumers will be more aware of potential conflicts of interest which occur from time to time in the brokerage industry. We will have to wait and see just how all of this evolves.
Enjoy a new school year which is just beginning. Students and parents must be engaged in advancing the learning skills of our society.
For The Record:
DJIA 18,552.57
NASDAQ 5,238.38
S&P 500 2,183.87
Suggested Reading: “Rescue Your Money” By Ric Edelman
Leonesmoneymonitormonthly's Blog 