Holiday Spending

Holiday spending: It could be a new record!

 Why does the holiday spending season start after Thanksgiving, and why is it called Black Friday? Is it because:

A. There was a market crash in gold in 1869 that cause financial distress to many.

B. There was generally chaos in the streets of Philadelphia in the 1950s on Friday after Thanksgiving with an increase in shopping.

C. Retailers wanted a positive image for themselves and their customers, and their books going “in the black” was considered positive for them and the consumer.

D. Both B and C.

Answer – D.

Answer A is true, and was the first documented usage of the term “Black Friday”, but is unrelated to the current usage today.

There was a negative connotation associated with the term when if first started being utilized in Philadelphia in the 50s and the term caught on in 1961 and appeared in print. It wasn’t utilized nationwide until 1985, after retailers had rebranded the term as positive and being about going from their books being in the red, to turning a profit and being in the black.

A more detailed description of the history can be found here:

https://www.history.com/news/whats-the-real-history-of-black-friday

What about Cyber Monday?

Similarly, the current usage of the term came from promotion within the industry itself. It was coined by the National Retail Federations own Ellen Davis, SVP of research and strategic, in 2005 after seeing an uptick in online sales from multiple retailers on that date year after year.

A more detailed description of the history can be found here:

https://www.rd.com/culture/history-of-cyber-monday/

What about 2018?

Matthew Shay, the National Retail Federation President and CEO, said in October:

“Thanks to a healthy economy and strong consumer confidence, we believe that this holiday season will continue to reflect the growth we’ve seen over the past year.”

Their recent news report (Click here for more info) suggests that the spending on Thanksgiving weekend was consistent with their earlier forecast of an increase of 4.8 percent in holiday spending. Even though the average spent per consumer is down for the weekend, they think the overall spend will be higher for the holiday season.

According to Adobe Analytics the sales for Cyber Monday this year set a new record, going up from 6.59 Billion to 7.9 Billion, almost a 20% increase!

Shopping online is becoming more ubiquitous, which means less of a personal touch. Although the NRF is projecting that holiday employment will rise from last year’s 582,500 to as many as 650,000 workers, one still may feel the absence of salesmen to help with a purchase as retailers try to create a more efficient slimmer version of themselves that can compete with Amazon.

At Garden State Trust Company, we know that each client is unique, and needs guidance for their individual situation. We’re local, and continue to provide the same high level of service one expected from their trust officer in the past, and should continue to expect in the future. Not a 1-800 number, or generic product model – we’re here for our clients and are ready to serve.

Photo By Benson Kua, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=5610284

Charitable IRA Gifts

Dear Garden State Trust:

I’ve heard of something called a “charitable IRA rollover.” What is that?

—Generous But Prudent

Dear Generous:

Those who are older than 70½ are permitted to arrange for a tax-free transfer of up to $100,000 per year from their IRA to the charity of their choice. This is the technique you are referring to, although strictly speaking it isn’t a “rollover.”

The other thing that those of that age must do is take required minimum distributions (RMDs) each year from their IRAs. These two things can go together. A direct transfer to a charity from an IRA counts toward the RMD for that year. Some retirees simply direct their IRA custodian to send the RMD to a charity, without worrying too much about the amount.

There’s no tax deduction when one does this, because there is also no inclusion of the distribution in taxable income, which would be the usual case with an RMD. Avoiding income inclusion is more valuable than getting a tax deduction. For example, it may avoid additional income taxes on Social Security benefits that otherwise could be triggered by an RMD.

This year many fewer taxpayers will be itemizing, thanks to the doubled standard deduction. For these taxpayers, arranging for a transfer to charity from an IRA will have better tax results than simply making a gift of cash in the same amount.

Do you have a question concerning wealth management or trusts? Send your inquiry to contact@gstrustco.com

(November 2018)
© 2018 M.A. Co. All rights reserved.

Sudden Wealth

Lotteries have grown in popularity in recent years, as jackpots have grown in size.

In October, the multistate Mega Millions jackpot grew to more than $1.5 billion if taken as annuity payments, and the largest jackpot on record won with a single ticket.

Lotteries are seen by some as the shortcut to financial security, even though the odds of winning are so low (1 in 302,575,350 for the recent Mega Millions jackpot). Ironically, some studies show that as many as 70% of lottery winners end up broke or filing for bankruptcy. In fact, 44% of winners have spent the entire jackpot within five years!

Some people earn very high compensation for a very short period of time, playing professional football is one example. According to a 2015 study, the median career earn­ings of an NFL player, expressed in inflation-adjusted dollars, were $3.2 million. That is far above the median lifetime career earnings of most Americans. Yet after 12 years of retirement, 15.7% of the players had filed for bankruptcy, a rate that is roughly three times greater than that of the rest of the male population of comparable age. The study did not try to pinpoint the causes.

Similarly, many notable actors and celebrities (For example, Johnny Depp) found themselves in a financial crises despite their large earnings.

Did they have a plan for their financial windfalls?

The phrase “sudden wealth” may be associated with lot­tery winners, but life provides many other opportunities for a sudden increase in net worth. Lump sum distribution of retirement benefits, insurance settlements, inheritance, or the sale of a business or investment real estate can create large sums of money for talented people who, like most lottery winners, do not have experience with wealth management.

Taxes are the first concern when sudden money is com­ing into one’s life. Taxes simply need to be assessed and addressed as part of the process. For lottery winners, for example, there isn’t much tax planning to do. The tax rules for retirement distributions are pretty straightforward as well. Planning a liquidity event, such as the sale of a business, can get more complicated. A legal consultation is likely advisable.

The harder talk is about the friends who may show up, looking for a loan or offering an “investment oppor­tunity.” Most difficult of all is broaching the idea that one’s family might not act honorably.

Garden State Trust Company has experience with wealth man­agement. We know all about financial transitions and attendant emotional adjustments. When you come into significant sums, call upon us for:

  • personal investment accounts, with asset allocation planning, unbiased investment advice and fees linked to account value (not transactions);
  • revocable living trusts, for an added measure of finan­cial flexibility, including protection in the case of disabil­ity and probate avoidance;
  • rollover IRAs to extend the tax-deferral benefits for your retirement money.

If you be will creating sudden wealth for someone else

If your estate plan includes a substantial legacy for a younger family member who lacks full financial maturity, consider using a trust for the bequest. Your trust will be a gift of more than financial resources. You will be includ­ing our investment and financial management expertise as well. A gift or bequest in trust can provide for a lifetime of financial security.

We look forward to being of service.

IRAs

Dear Garden State Trust:

Which is better, the traditional IRA or the Roth IRA?

—Future Retiree

Dear Future:

There is no simple answer to your question, unfortunately.  The traditional IRA offers an immediate income adjustment and savings in federal and state income taxes.  Taxpayers who are short on cash may need the deduction to be able to make a full $5,500 IRA contribution ($6,500 for those 50 and older).  The income adjustment also may affect eligibility for other tax credits.

The downside for the traditional IRA is that all retirement withdrawals are fully taxable as ordinary income, even long-term capital gains.  If one is in a lower tax bracket in retirement, this may not be a concern, but future tax brackets are unpredictable.  What’s more, distributions from a traditional IRA are required once one reaches age 70½. Taxable IRA distributions also may increase the taxes on one’s Social Security benefits and one’s Medicare premiums.

These potential tax traps are avoided with the Roth IRA, as all distributions will be fully tax free after age 59½, provided only that the account has existed for five years.  There are no required minimum distributions.  A Roth IRA may be an especially good choice for a bequest, as tax-free distributions may be spread over the beneficiary’s lifetime. (Estate taxes will be due on the Roth IRA in very large estates.)  The difficulty with the Roth IRA is that the hit to one’s cash flow is more severe without the current deduction.

These tax considerations, although significant, are less important than making a full contribution to one or the other IRA form early in one’s career.  The more time that one is invested in the market, the better the odds of having a financially secure retirement.

Do you have a question concerning wealth management or trusts? Send your inquiry to contact@gstrustco.com

(October 2018)
© 2018 M.A. Co. All rights reserved.

Falling into Foliage

New Jersey may not be part of New England, but its reputation for the beautiful changing leaves could be extended to our trees and changing colors too.

New Jersey’s peak fall colors are usually between October 19th and the 29th, so it’s the perfect time to plan a trip.  Many factors contribute to the exact timing of the leaves changing, from temperature to rainfall and elevation. In the category of “I didn’t realize they tracked that information”, you can now get a better sense of exactly what’s going on by looking at up-to-date reports from:

http://www.foliagenetwork.com

Where to go for the best views depends on your capabilities and time investment. If you’re healthy and ready for hike, you may want to consider going to the highest elevation in New Jersey on the Appalachian Trail. You can see NJ, PA, and NY from the top of the obelisk there.

There are many parks that may be hiked, and a wonderful list of them has been compiled here:

https://www.njhiking.com/best-fall-foliage-hikes-in-new-jersey/

While it may not have made their list for the best foliage hikes, Double Trouble State park is close to where we are in Toms River, and has some easy trails that can be walked too.

Hiking can be strenuous for all ages, so be careful out there! Don’t push yourself too hard or think that you have to hike to experience the foliage.

New Jersey has also has three scenic byways that are particularly good for experiencing the fall foliage, so you can enjoy the views from the comfort of your vehicle:

  • Delaware River Scenic Byway (32.8 miles)
  • Millstone Valley Scenic Byway (27.5 miles)
  • Palisades Scenic Byway (13 miles)

Here’s a link to New Jersey Department of Transportation’s website for more information about the byways:

https://www.state.nj.us/transportation/community/scenic/

Enjoy the fall, while it lasts!

Stock Markets

Dear Garden State Trust:

How about that stock market? Can it last?

—Happy Investor

Dear Happy:

Higher stock prices are driven by two factors: increasing earnings, and increasing investor speculation. The good news for investors is that the stock market records set in August were grounded upon increased earnings and a strongly growing economy. We do not seem to be in a bubble.

Second-quarter GDP growth was revised upward, to a strong 4.2%, by the Commerce Department. The third quarter growth looks likely to be over 4% as well. Second-quarter after-tax profits rose 16.1%, the largest year-over-year gain in six years.

Sales of the S&P 500 companies grew by 9.5% in the second quarter, leading to a 24.8% increase in earnings. A strong economy translates to increasing consumer confidence. The Conference Board reported in August that its consumer confidence index reached 133.4, the highest reading since October 2000.

Interestingly, as a result of the booming economy federal tax revenue has gone up, not down, following enactment of the Tax Cuts and Jobs Act last year. The Congressional Budget Office reports that income and payroll tax collections rose 5% through the first nine months of this fiscal year, a whopping $105 billion. This more than offset the decline in corporate tax collections of $66 billion. Overall tax receipts are up 1%.

However, this torrid rate of growth is expected to slow. The current bull market is a long one by historical standards. Eternal vigilance is the price of owning a stock portfolio.

Do you have a question concerning wealth management or trusts? Send your inquiry to contact@gstrustco.com

(September 2018)
© 2018 M.A. Co. All rights reserved.

The Queen of Soul: Aretha Franklin

The queen of soul, Aretha Franklin, has passed away from advanced pancreatic cancer at the age of 76 a month ago, and we mourn the passing of a bright star.

Aretha was a prodigy from the very beginning. She learned to play the piano by ear as a child, and by age 12 was already performing and earning money for the family in various churches. Her first album, “Songs of Faith,” was released when she was only fourteen.

From spiritual music, to blues, to R&B, to rock and roll, Aretha connected with her audience.  She was recognized for it. She was the first female performer to be inducted into the rock and roll hall of fame in 1987. She was awarded the presidential Medal of Freedom, and was ranked in 2008 to be the greatest singer of all time by the Rolling Stone magazine. She won 18 Grammy awards, and has sold more than 75 million records worldwide.

Remarkable achievements from an extraordinary woman.

How did Aretha Franklin handle the finances from such success? What will happen to her estate now? Since she was diagnosed with an illness in 2010, did she make arrangements?

Here’s an interesting story from Billboard that answers some of those questions:

https://www.billboard.com/articles/news/8471888/aretha-franklin-business-estate

Some of the highlights:

  • Aretha Franklin demanded to be paid in cash, to make sure everything stayed honest.
  • She never made Forbes highest-paid celebrities list, but they estimated that her annual income was in the low seven figures.
  • She was very strict in creating an environment to work in.
  • One estate planning firm suggests her legacy could be worth as much a $1 billion when the recordings, the publishing, the goodwill, the name and likeness are added into the picture (Other sources have suggested ~$80 million).

Even though Aretha likely knew the end was nigh, reports indicate that she died without utilizing a will or trust services for the disposition of her estate.

Perhaps she felt that the laws of intestate succession were sufficient, and she didn’t need to keep the family financial affairs private. Perhaps she felt she would keep on going, so there was no need. We cannot know.

We do know that there are some benefits she missed out on by not utilizing trust services. Benefits such as: an easier way of transferring the assets, retaining a greater degree of privacy, or preventing possible family disputes.

Longevity

Dear Garden State Trust:

I’m turning 65 this year and thinking about retirement. How long should I plan for?

—Anxious Pre-Retiree

Dear Anxious:

According to the latest data from the National Vital Statistics Reports (August 2017, reporting on 2014 experience), a male age 65 should expect to live 18 more years (to age 83) and a female 20.6 years (to age 85.6). Half of 65-year-olds will die sooner, half later.

That tells us nothing about you, of course. How’s your health? Your family history? You’ll want to take these into account, and you probably should plan for longer than you expect to live.

Here’s another way to look at the numbers from that report. For every 100,000 men, how many reach age 85? 35,518 men do. For every 100,000 women, 49,225 reach age 65. Mortality increases precipitously after that, as shown in the table below.

At AgeMenWomen
7564,06675,495
8051,40764,616
8535,51849,225
9018,649
30,228
956,21412,697
1001,0772,974

Source: National Vital Statistics Report, Volume 66 Number 4, August 14, 2017

Does that help answer your question?

Do you have a question concerning wealth management or trusts? Send your inquiry to contact@gstrustco.com

(July 2018)
© 2018 M.A. Co. All rights reserved.

Here’s to Five More Decades!

Fifty years ago a goal of inclusion for those with special needs was set through the establishment of the Special Olympics, and this year we celebrate getting closer and closer to that goal each year. The community supporting those with special needs grows larger each year ,as well as the community of Special Olympics athletes themselves.

At this point, there are 4.9 million Special Olympics athletes from 172 countries!

Why sports? Their website says it well:

“Through sports, our athletes are seeing themselves for their abilities, not disabilities. Their world is opened with acceptance and understanding. They become confident and empowered by their accomplishments. They are also making new friends, as part of the most inclusive community on the planet — a global community that is growing every day.”

To celebrate, last month the organization put a festival on Soldier Field with celebrities and live entertainment among other events, such as a historical and cultural walk and the first ever Special Olympics Unified Cup.

To see videos that show some of the milestone moments from their history, click here.

Supporting those with special needs.

This has been a real goal in the trust industry, far beyond when “Special Needs Trusts” or “Supplemental Needs Trusts” have been around.

One of the fundamental motivations for creating a trust often can be to create a professionally managed lifetime income stream, for a spouse or child who does not have a way to earn an income stream themselves. When you add into the scenario a case where the person’s needs are greater than average due to disabilities, creating a trust seems like it would be the natural choice.

So… why the distinction of “Special Needs Trust”?

It’s because the usual ways of providing for your loved ones with special needs such as gifting or inheritance may place governmental assistance programs in jeopardy. Many government programs have strict need-based requirements, and if the assets were transferred directly they may end up paying for basic services instead of the quality of life improvements that could be otherwise created by an outside provider.

There are other benefits too, such as the trust being able to be customized to provide the disabled beneficiary’s specific needs, and avoiding family conflict regarding who the caretaker would be.

Special Needs Trusts are complex, so a qualified attorney should be consulted to ensure that they are properly drafted.

Garden State’s trust professionals have years of experience working with special needs trusts. We’re glad that the community that supports those with special needs is growing, that we get to be part of it, and look forward to many more years of increasing inclusion.

Marital Trusts

Dear Garden State Trust:

Now that the federal estate tax exemption is over $10 million, do I still need a marital deduction trust in my will for my wife?

—Concerned Husband

Dear Concerned:

Most likely, yes. If your current will includes a trust for a surviving spouse, you probably will want to keep it.

A trust for a surviving spouse provides important asset management benefits that can be vitally important to a person who is entering widowhood. For most affluent families, a marital trust is the way to go.

Blended families are a special case for which provision may be made for a spouse and children from an earlier marriage. The tool is called the Qualified Terminable Interest Property Trust, or QTIP trust. Even if the marital deduction allowed for the QTIP trust is not needed, securing the inheritance for all beneficiaries may be an important enough consideration to employ the trust in wealth management.

If you live in one of the states that still imposes an estate or inheritance tax, you may want a marital deduction trust even if the estate isn’t large enough to incur a federal estate tax.

Finally, keep in mind that the larger exemption expires after 2025.

If you are married and don’t yet have a will, make an appointment to see an estate planning attorney soon. Your spouse will thank you for it.

Do you have a question concerning wealth management or trusts?  Send your inquiry to contact@gstrustco.com

(July 2018)
© 2018 M.A. Co.  All rights reserved.