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Slick TV ads often make financial planning and wealth management sound simple, but it’s usually not. Managing wealth requires knowing a lot about highly technical topics, like taxes, government regulations, and finance as well as history, psychology and how to communicate with loved ones about sensitive issues. This article highlights some of the knowledge needed to manage wealth and why it’s often so daunting without the help of an independent personal financial advisor who is familiar with your situation.
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Understanding The Federal Reserve Mandate To End Inflation
The Federal Reserve System, the nation’s central bank, has a dual mandate to pursue maximum employment and maintain price stability. These two priorities are currently treated equally, but that was not always the case. In fact, the Fed’s bias toward maximizing employment was a critical driver of the stagflation that plagued the U.S. in the late 1960s and 1970s. Recognizing the need to balance price stability and maximum employment, in 1977, Congress revised the Federal Reserve Act.
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Fed Governor Kugler Details Inflation And Economic Outlook
The 12-month inflation rate, as measured by the personal consumption expenditures (PCE) index, was 2.6% in December, down from its peak of 7.1% in June 2022, and the six-month rate for PCE inflation was even lower, at 2%, which is the target rate set by the Federal Reserve.
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Why Rates May Not Be Cut Until June
The cost of a loan to buy a home, car, college education, and achieve the American Dream is staying the same for now. As expected, Federal Reserve Chairman Jerome Powell said the central bank did not lower loan rates following the Fed’s Wednesday, Jan. 31, 2024, policy meeting.
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Practical Suggestions For Achieving Your 2024 Resolutions
New Year’s resolutions usually fail because they‘re often too hard to achieve. After six months, only 10% of people who make resolutions achieve them or remain committed to them, , according to a study by Dr. Mark Griffiths, a Chartered Psychologist and Distinguished Professor of Behavioral Addiction at the Nottingham Trent University. What can you do to make financial, medical, or other personal resolutions more likely to be achieved?
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A Sign Of Progress In Solving U.S. Economic Problems
The Federal Reserve appears to be pulling off a feat most experts did not believe it could: ending its aggressive inflation-fighting campaign of 11 interest rate hikes without tipping the U.S. economy into a recession.
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Fed Keeps Rates Unchanged; Expects Easing In 2024
To promote transparency and free markets, the Federal Reserve System began publishing the opinions of the 19 U.S. central bankers that decide interest rate policy.
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Have You Logged Into Your Social Security Account?
Have you logged in to your Social Security account? Creating an online account at SSA.gov is an important first step in understanding your retirement income situation. However, only about 60 million of the 160 million individuals in the U.S. labor force who have Social Security accounts have created a way to access the Social Security Administration’s website.
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The Great Fake Out Of 2023 Is Poised To Extend Into 2024
All year long, the economy and stock prices have fooled experts and consumers, outperforming expectations month after month.
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Test Your Financial Planning IQ
The five questions below are a challenge meant to allow you to assess your knowledge of investing, tax and financial planning. If you have been following our news stream, this quiz draws on familiar ground. The answers are below.
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Planning Briefs
A Five-Point Covid Diagnostic For Family Wealth Management
Published Tuesday, August 25, 2020; 10:00 PM EST
(Tuesday, August 25, 2020; 10:00 PM EST) A terrible truth of the Covid pandemic is that families are at greater risk of losing a matriarch or patriarch. Whether you're a beneficiary or grantor, here's a five-point diagnostic for managing family wealth; issues to consider that might require urgent action due to the unusual times we are living through:
When did you last update your will? Wills should be reviewed annually.
Do you need a revocable trust to avoid probate? State laws vary, so there are no hard and fast rules, but the Covid crisis has made the use of revocable trusts a more popular estate planning vehicle, preferable to a Will. Courts were recently shuttered across the country. It's prudent to continue expecting delays in the probate court process. If a family patriarch is intubated and can no longer manage family financial matters, a revocable trust facilitates the transition in the management of family assets. Whoever is named as successor Trustee may present the trust document to the bank (which should have a copy of it already) and the management of assets can then be assumed by the successor.
GRATS and other trusts should be reviewed, and they are expected to be recommended more often in managing family assets in the months ahead. Grantor retained annuity trusts (GRATS) are a way to freeze the value of an estate, to reduce estate taxes. For many years, GRATs have been set up based on the IRS's mid-term Applicable Federal Rate (AFR). However, with the AFR dropping in mid-August to 40-basis points (0.40%), trusts may need to be updated to use the long-term IRS AFR. With higher taxes expected, due to the weakening U.S. balance sheet, locking in the long-term AFR on a GRAT is worth considering. To be clear, higher taxes on inheritances are a likely target for generating new revenue, which makes it wise to consider 10-year GRATs instead of the traditional two-year GRAT.
Intrafamily loans are also pegged off the IRS's AFR, and this may also be a way of transferring wealth. While direct loans to children might expose assets to divorce settlements or claims by business creditors, loans made through trusts are more compelling tax-wise. They allow you to loan some money to the trust at a 40-basis-point interest rate for a mid-term loan of up to nine years, or you can even go out 20 years, with the rate at 1.2% here in August 2020. Any earnings beyond that 40 basis-point hurdle rate is shifted over to the trust tax-free.
Don't wait until the end of the year to do any of this. Don't wait until after the election. Estate and trust lawyers are already overwhelmed with work, and may not be able to get everything done before the end of the calendar year, before higher tax laws could potentially be retroactively applied. And it's not simply a matter of just drafting a trust. You also must get the Grantor and the Trustee to execute it. Or, if you have an institutional trustee, you must determine , "OK, what am I going to transfer to the trust? Am I going to need appraisals?" All of these decisions take time. It's therefore best to start now, just in case you run into problems.
Tax and financial management for private wealth requires highly personal advice beyond the scope of this article.
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