PERSONAL PLANNER
What Do You Own?
John and Helen have been thinking about updating their estate plan. They called and made an appointment with their attorney, Clara.
John and Helen updated Clara on their current family situation. They have three children who are now on their own and successfully pursuing careers. After listening to the short update on the three children, Clara turned to a review of John's and Helen's property.
Clara: "Before we update your plan, we need to make sure we have a complete list of your property. Let's start with a few questions. Do you have a home? Are there bank or security accounts?"
John: "Well, we do have our home. It's in both of our names. There is our joint checking account and a savings account. Both of us also have some other accounts. I have one savings account with myself and our son Bill. Helen has a savings account with our daughter Susan and another one for Helen and our daughter Linda. We have some mutual funds with a large financial company. I think that's in both our names."
Clara: "That's a very good start. Now most people also have a pension or retirement plan and some life insurance. Do you have both of those?"
John: "Yes, I have a 401(k) at my work and Helen has an IRA. She had a 401(k) at one time and we rolled it over into an IRA when she changed jobs. I have a life insurance policy and I think it pays Helen $300,000 if something happens to me."
Clara: "So you have a life insurance policy. Do you know if it is a whole life, universal life or a term insurance plan? If it is a whole life or a universal life, it probably has a certain amount of cash value now."
John: "I am not real sure but it probably is a whole life plan. We bought the policy about ten years ago and I make payments every month."
Clara: "Is there any other real estate or other securities accounts?"
Helen: "When my dad passed away, he owned 640 acres of timberland. It was divided three ways between my brother, my sister and me. My share is still in my name. We don't get income from the timberland because we only cut enough timber to pay the property taxes."
Clara: "Thanks, Helen. That's helpful to know. What about personal possessions? You probably have automobiles, furniture, perhaps a collection of items or a recreational vehicle?"
John: "Yes, we have two cars. I think my car is in my name and Helen's car is in her name. Of course, we have furniture in all of the rooms of our four-bedroom home. We also have an RV that we use to take trips in the summer. I think it is in both our names."
Clara: "And are there any other types of ownership interests or business interests? Are either of you likely to receive an inheritance in the near future?"
Helen: "Yes, my mother is still living. John's parents have passed away and we received a moderate inheritance when his mom passed away. When my mother passes away, I will probably receive some additional property. When dad passed away, half of the timberland was given to the three of us and mother has the other half. When she passes away, I would guess that the three children would each receive a third of the timberland that she owns."
Clara: "This is a very good list of the assets. Let's now try to estimate the values of your property. The value will not be the initial amount you paid for each property, but a general estimate of what they are worth today."
(John, Helen, and Clara spent 20 minutes estimating the value of all of their property before moving on to discuss their debts.)
Clara: "John and Helen, there is just one more part to this inventory process. While I know you both are very careful and conservative in your financial affairs, some people have debt. Do you have a home mortgage? Is there a loan on a car or on your recreational vehicle? And do you have an ongoing credit card balance?"
John: "Yes, we do have a mortgage on the home. It still has a balance of $100,000. There is a loan on my car of about $3,000. Helen's car is paid off and we pay off our credit cards each month."
Clara: "Thanks very much for patiently working through the inventory with me. This is going to be very important as we make decisions about your estate plan."
Why the Inventory Process is Important
It takes time and effort to make a list of your property. However, there are several important reasons why that property list is a crucial part of a successful plan. The list enables you to identify your assets, estimate the value, understand the best potential benefits for your children or other heirs, plan to reduce your taxes and set up goals for your children.
Identification of your property is very important. If both John and Helen pass away, the first responsibility of their executor or personal representative is to identify and list all of their assets. The inventory will be an excellent guide for the executor. Without an inventory, some assets might be forgotten, lost or eventually abandoned and transferred to state government.
Valuation is important. The values are estimates, but frequently the total value is significantly larger than you may realize. Values also need to reflect the potential reductions for liabilities. Most families are similar to John and Helen in that they have fairly modest liabilities and quite substantial total values at the time of retirement.
Benefits For Children and Other Heirs
Benefits for children and other heirs are best determined after you list all of your property values. It's also extremely important to understand how the property is owned. Some of the property in joint ownership will be transferred under state property law to the survivor. Only the property subject to the probate process is transferred by your will.
Because many people have substantial assets in their 401(k), IRA, other retirement plan or life insurance, and these assets are all transferred by the beneficiary designation, it is essential to help your attorney know how the property is titled and who the beneficiary is of the various retirement and insurance plans. The correct beneficiary designation enables your children or other heirs to receive benefits.
Estate taxes may be applicable for those with larger estates. Because some individuals have property that may have increased in value (the timberland owned by Helen had increased greatly in value over the past 30 years), and because there may be an inheritance that increases the estate yet further, it is important to consider the potential impact of estate taxes. A good plan can save thousands and even millions in future estate tax.
A final benefit of the inventory process is that the parents now have a much clearer picture of their assets. This enables them to make decisions that will be important for deciding the amount and type of inheritance for their children. There may be specific assets, such as family heirlooms or land, that should be transferred to one child rather than the others. Because parents frequently are interested in treating children equally, knowing the approximate values of the property enables them to make plans for transfer of some assets to specific children and to maintain overall fairness in the plan.
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 FINANCES
Stocks - H&R Block Increases Revenue | H&R Block, Inc. (HRB), a provider of tax preparation services, reported its quarterly earnings on Wednesday, September 3. The company’s earnings report encouraged investors. |
| The company reported quarterly revenue of $133.59 million. This represents an increase from the same period last year when the company reported revenue of $127.20 million. |
| “I am pleased with the progress we’ve made this offseason in preparation for tax season 2015,” said Bill Cobb, President and CEO of H&R Block. “This year, we’ll continue our Tax Plus strategy to drive profitable growth and maximize the value offering to our clients. I like our competitive position and believe that we have the right people, resources, and expertise to continue to provide best-in-class service to our clients, and to take advantage of the long-term opportunities that lie ahead.” |
| H&R Block reported a net loss of $116.23 million for the quarter. This is very similar to the comparable quarter last year when the company reported a loss of $115.19 million. The company reported a loss of $0.40 per share. |
| The large loss would seem to indicate that H&R Block had a difficult quarter, but the market had expected an even larger loss from the tax preparer. The company generated more revenue than originally forecast due to a five day extension of the Canadian tax season. As a result, shares of H&R Block rose 3% after the quarterly report was released. |
| H&R Block, Inc. (HRB) shares ended the week at $32.52, down 3.56% for the week. |
| Bebe Still Looking for Leadership |
| Bebe Stores, Inc. (BEBE), designer and purveyor of women’s clothing, reported its latest quarterly earnings on Thursday, September 4. The company is struggling to find leadership as it is now under the direction of its third CEO in as many years. |
| Bebe reported revenue of $103.57 million for the quarter and $425.12 million for the year. Quarterly revenue is down 8.7% from last year at this time. Annual revenue is down 8.2% year-over-year. |
| “The company took significant steps during the fourth quarter to re-focus on the Bebe brand, to preserve cash and to gain operating efficiencies across the organization,” said Jim Wiggett, CEO of Bebe Stores. “This was marked by changes in leadership, the closure of the 2b division and the restructuring of our corporate office including retail management. Looking ahead, we will continue to focus our efforts on re-building the Bebe brand, enhancing the product offering and merchandising the stores by lifestyle occasion, while maintaining a compelling fashion and value equation for our customers. In addition to driving sales and improving margin, our focus will also continue to be on pragmatically preserving cash with the goal of delivering value to our shareholders.” |
| The company reported a net loss of $34.1 million for the quarter and $72 million for the year. The annual net loss is an improvement over the net loss of $77.42 million reported last year. |
| Bebe has struggled since the height of the brand’s popularity in 2005-2007. In January 2013, Bebe Founder Manny Mashouf stepped aside as CEO and became a non-executive chairman of the company. Since then, the company has struggled to find a leader that will take the company in the right direction. Steve Birkhold took the reins in January 2013 and then resigned in June 2014. Now, Jim Wiggett has taken the helm. His most recent experience is as an executive at Moet Hennessy Louis Vuitton. Only time will tell if he is the corporate leader that will turn around this struggling retailer. |
| Bebe Stores, Inc. (BEBE) shares ended the week at $3.00 per share, down 9.91% for the week. |
| Quicksilver’s Earnings Disappoint |
| Quicksilver, Inc. (ZQK), a designer and retailer of clothing products, reported its latest quarterly earnings on Thursday, September 4. The company reported significant losses this quarter. |
| Quicksilver reported revenue of $395.66 million for the quarter. This represents a decrease of 19% from the same period last year when the company reported revenue of $488.33 million. |
| “We continued to execute against the key initiatives laid out in our profit improvement plan and to drive growth in our direct to consumer channels and emerging markets,” said Andy Mooney, President and CEO of Quicksilver, Inc. “As we expected, revenues for the third quarter declined in our wholesale channels in North America and Europe. In addition, late product deliveries, largely the result of our transition to global demand planning, negatively impacted our sales performance and gross margin.” |
| The company reported a quarterly net loss of $222.14 million. This is an improvement over the comparable quarter last year when the company reported a net loss of $268.05 million. |
| Quicksilver did not perform up to the level analysts had expected this quarter. After adjusting per share earnings for restructuring and asset impairment costs, Quicksilver reported a loss of $0.20 per share. Analysts had expected the company to report positive earnings of $0.03 per share. In addition, quarterly revenue came in $44.6 million below expectations. As a result, shares of Quicksilver hit a five year low in the hours after the earnings announcement. |
| Quicksilver, Inc. (ZQK) shares ended the week at $2.13 per share, down 27.30% for the week. |
| The Dow started the week of 9/1 at 17,097 and closed at 17,137 on 9/5. The S&P 500 started the week at 2,004 and closed at 2,008. The NASDAQ started the week at 4,592 and closed at 4,583. | Treasury prices rose and yields dropped after the U.S. Labor Department released the jobs report for August. The report increased speculation that the Federal Reserve will continue to keep interest rates low into the fall of next year. |
| The jobs report released by the Labor Department announced that the U.S. economy added 142,000 jobs in August. Economists had expected 220,000 to be added last month. In addition, the number of jobs added in June and July was revised down by 28,000 jobs. The unemployment rate decreased from 6.2% to 6.1%. However, this was largely due to a decrease in the number of unemployed persons actively looking for work. |
| This sobering report caused traders to speculate that the Federal Reserve will hold the federal funds rate at its current range into the second half of 2015. “This is the perfect excuse for the Fed not to move early,” said William Larkin, a money manager at Cabot Money Management. “It’s a little on the weak side. It will keep the bond market in play for a while. We’ll probably drop below the 2.4% range.” |
| The 10-year treasury note yield dropped as many as six basis points to settle around 2.44% in early Friday morning trading. Bond traders expect the range for the 10-year treasury note yield to be between 2.37% and 2.75% through the end of 2014. |
| On a positive note, the Commerce Department announced on August 28 that U.S. gross domestic product rose at a 4.2% annualized rate in the period between April and June 2014. This was above expectations of a 3.9% annualized rate and comes after a contraction in the first quarter of this year. |
| The 10-year Treasury note yield finished the week of 9/1 at 2.46% while the 30-year Treasury note yield finished the week at 3.24%. | Freddie Mac released the results of its latest Primary Mortgage Market Survey (PMMS) on Thursday, September 4. The results showed average fixed mortgage rates remaining largely unchanged for the week. |
| The 30-year fixed rate mortgage averaged 4.1% this week. This rate was unchanged from last week. Last year at this time, the 30-year fixed rate mortgage averaged 4.57%. |
| This week, the 15-year fixed rate mortgage averaged 3.24%. This represents a slight decrease from last week when it averaged 3.25%. One year ago, the 15-year fixed rate mortgage averaged 3.59%. |
| “Mortgage rates were little changed amid a week of light economic reports,” said Frank Nothaft, Vice President and Chief Economist at Freddie Mac. “The 30-year fixed rate mortgage rate remained unchanged from the previous week at 4.1%. Of the few releases, the ISM’s manufacturing index rose to 59 in August from 57.1 the previous month. This was the highest reading of the index since March 2011.” |
| The money market fund finished the week of 9/1 at 0.4%. The 1-year CD finished at 0.7%. |
Lenexa, Kansas, United States - Leaving a Lasting Legacy Through Planned Giving from the Global Church of the Nazarene Foundation for Saturday, 6 September 2014
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