Where There's a Will, There's a Way...

In January 2009, the U.S. and global economy was on the precipice: the international financial system was in near-meltdown, global unemployment was soaring, world trade was in a freefall, the housing market was devastated and economists were warning that a turnaround was nowhere in sight. Governments faced the prospect of widespread social instability and popular unrest. Ominously, historians were recalling that the Great Depression had set the stage for World War II. In fact, in February of 2009, the director of national intelligence, Dennis Blair, told the U.S. Congress that the global economic crisis had replaced terrorism as "the primary near-term security concern of the United States."

What a difference a year makes. As 2010 begins, we are starting to see signs of a recovery, including a growing global economy that appears to have accelerated in the fourth quarter. Unemployment has leveled off, world trade has picked up, businesses are starting to invest again, consumer confidence and spending are on the rise and the housing market is more stable. In addition, intelligence officials are no longer describing global economic problems as the paramount U.S. security concern – even as an apparent Al-Qaeda attempt to take down a Northwest Airlines jet on Christmas Day reminds us that terrorists are an ongoing threat. Looking back, the biggest economic story of 2009 may well be what did not happen – the Great Recession of 2008-2009 did not, in fact, lead to another Great Depression.

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Message from the CEO: Lessons Learned During the Loss Decade

To put it mildly and simply, 2009 was a challenging year to be an investor. But as difficult as that was to endure, the experience of the past decade was, arguably, even worse. Since 1999, the United States has endured two wars, two recessions, 9/11, and the worst natural disaster in our nation’s history – Katrina – which almost completely wiped out a U.S. city. As if that weren’t enough, a series of financial shocks greatly tested investors’ faith in the integrity of the markets, including pervasive corporate accounting scandals, significant regulatory lapses that contributed to the demise of major financial institutions, and the discovery of some of the most extraordinary Ponzi schemes of all time. No wonder the S&P 500 experienced its first “loss decade” since its inception, when $100 invested on January 1, 2000 shrank to approximately $90 ten years later – an annualized total return of -0.95%. And that includes dividends. read more

Letting the Air Out of Inflation Fears

Judging from our clients’ questions and news headlines, inflation anxiety goes beyond the typical concerns about Fed policymakers falling behind the curve as the economy recovers. The unprecedented government response to the deep recession has stoked fears of a fundamental shift away from the low and stable inflation environment that has prevailed since the early 1990s. Some fear that the United States could slip into a Japanese-style deflation, while others warn of a return to 1970s-style stagflation. The possibility of these scenarios has critical implications for investors. read more

Legislative Update: Enjoy the Bush Tax Cuts While They Last

As we head into 2010, there seems to be very little good news on the horizon for wealthy taxpayers. Due to the temporary nature of the tax cuts passed during the Bush Administration and new initiatives being pushed forward by the Obama Administration, Congress is likely to enact legislation this year on personal income taxes, health care reform, and the estate tax, all of which may have an impact on most of our clients’ pocketbooks. Below we summarize the current consensus on income tax rates that will likely prevail starting in 2011, mention a few tax planning strategies worthy of consideration for many of our clients, and comment on the direction of possible surcharges Congress is considering to help pay for health care reform. Later in this Insight, Clay Stevens discusses the outlook for estate tax reform, which many observers believe will be made retroactive to January 1, 2010. read more

Is a Roth IRA Conversion for You?

Congress devised the Roth IRA in 1998, creating a novel option for taxpayers to pay tax currently in order to exempt some assets from the income tax system down the road. But Congress created a Catch 22 situation by setting income limitations on who qualified for the Roth opportunity. If you could afford "to Roth," you generally weren’t eligible; and if you were eligible, it was generally difficult to afford to take advantage of the opportunity. read more

Ensuring That Good Deeds Go Unpunished (Mitigating Risks When Serving on Non-Profit Boards)

Whether from a sense of responsibility to the community at large or the opportunity to combine the passion for a particular non-profit organization with managerial or fund raising skills, sooner or later many clients find themselves sitting on a non-profit’s board of directors. Unfortunately, despite some legislative protections, sitting on a non-profit board can expose an individual to liability risks. To help ensure that these organizations and our clients are able to continue pursuing "the mission," we recommend conducting a risk assessment. Such an assessment should help all parties – the board member and the organization – understand the threats they could face from a lawsuit related to board service and the costs and limitations of insurance to mitigate those threats. read more

Estate Tax Law Update

It's actually happened! Due to Congressional inaction - some would say gross irresponsibility - the current estate tax rules changed dramatically on January 1, 2010 as the unified exemption amount (the amount one can pass estate tax-free at death) became unlimited.  The catch, unfortunately, is that a taxpayer has to pass away during 2010 to take advantage of this benefit as the current law expires on December 31, 2010 and the estate tax rules revert to the very unfavorable law in effect in 2001.  Further, one cannot take advantage of the new unlimited exemption amount by lifetime giving because the credit for gift tax purposes remains at $1,000,000 per person.. read more