Amy & Dan Smith's Planning for Life: Five Equity Market Themes for 2015

By Amy Smith

Each year I read many market forecasts for the coming year from investment experts around the globe. Accordingly, I’d like to provide you with a recent article from Jeffrey Saut, Raymond James Chief Investment Strategist titled “Five Equity Market Themes For 2015”. (Readers may find the complete 2015 Outlook from Raymond James Investment Strategy Quarterly on my website www.amysmithwealthmanagement.com under “Market Views.”)

Lower Fuel Prices

This extended period of lower fuel costs should benefit companies that are dependent upon fuel as an input, such as the airlines, trucking and cruise lines, railroads, shipper, etc. Additionally, consumers are paying less at the pump and the hope is that those savings will now flow into other areas of the economy, like the consumer discretionary sector.

Smarter Policy Makers

One of my major themes has been that we will elect smarter government policymakers and subsequently smarter policies. With the mid-term elections over, we now shall see whether these newly elected officials can help enact policies to further boost the economy and create jobs.

Interest Rate Increases

The Federal Reserve is expected to begin raising short-term interest rates in the second half of 2015. Will the market begin to anticipate this move and buck the trend of lower rates that we have seen in 2014? We believe so, with higher rates more likely in second half of 2015, because the economy is strengthening.

Immigration Reform

President Obama issued an Executive Order in November that may allow approximately five million immigrants to legally work (and pay taxes) here in the United States. This action should benefit certain companies and industries, while providing additional tax revenue for the country.

Long-Term Secular Bull Market

Equity markets tend to enter a long period of expansion after emerging from an extended period of negative returns (the lost decades of 1964-1982, or 2000-2012). Typically, these expansion periods last for about 15 years with annualized returns of roughly 16 percent per year. Using March 2009 as a starting point implies that we may have another 10 years left in the current secular bull market. Of course, there will be corrections, but they should be viewed within the context of the long-term secular bull market. To quote my departed friend Sir John Templeton, “Bull-markets are born on pessimism, grow on skepticism, mature on optimism and dies on euphoria.” We are still in the skepticism phase …

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Amy & Dan Smith's Planning for Life: Planning Your Will

A will is a highly protected form of writing. The requirements for a valid will must not be casually regarded. With rare exception in Virginia, only the original of a will – not a copy – may be admitted to probate. To be admitted to probate a will must (1) be in writing, (2) signed by the testator (the person making the will) and (3) signed by two competent witnesses who were both present with the testator either to watch him sign it or to hear him acknowledge his signature. There is a popularly known exception for a will, which is entirely in the handwriting of the testator, called a “holographic” will. However, it is dangerous to rely on this exception because it is very narrowly applied by the courts.

The requisite formalities may not be strictly applied to wills made by persons in military service. Wills made by a person deemed of “unsound mind” or by a minor are not valid.

The most convenient and efficient manner of proving a will is for the will to include a notarized statement (an “affidavit”) reciting that the formalities were followed. If a will is presented with such an affidavit attached, it is said to be “self-proving.” Without the affidavit, the witnesses must appear personally before the clerk or may, in some cases, provide a written statement to prove the due execution of the will.

The will should name the executor (also called the “personal representative”) and, if there are children under the age of 18, a guardian for the person and property of each minor child. An executor is required to give bond at the time he/she is “qualified” (that is, when he/she is appointed). The bond is a personal pledge by the executor in the amount set by the clerk that he/she will perform the required duties of the office. In many cases a “surety” will be required. A surety is a contract from an insurance company to protect the beneficiaries and creditors of the estate. A surety policy requires annual premiums until the estate is settled. Increasingly, insurance companies are raising the requirements for issuing surety contracts making them more difficult to obtain. The will may waive the requirement for a surety. However, while the executor need not be a resident of Virginia, the surety requirement cannot be waived for a non-resident executor. This problem can be avoided by having the non-resident executor appoint a resident co-executor to serve.

The testator expresses his directions regarding the disposition of his estate in the will. The law allows the will to refer to a separate informal writing outside of the will to direct the disposition of items of tangible personal property, such as furniture and jewelry. It is important to note that the will has no effect on property placed in certain forms of ownership such as, for example, property in a living trust, in joint tenancy with survivorship, in accounts with pay-on-death designations, and life insurance and retirement funds with beneficiary designations. These forms of ownership supersede any provisions in a will.

Marriage, divorce and the birth of a child can affect the provisions of an existing will. Thus, in such situations, and upon a change in financial circumstances, the will should be reviewed. A change to a will, called a “codicil,” requires the same formalities as the will.

At the risk of sounding self-serving (admission: your author is an attorney), the do-it-yourself will and trust kits are not recommended. Dollars saved initially are often lost in fees and courts costs necessary to unravel self-made documents.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.

Smith & Pugh, PLC: What's So Complex About Administering a Trust?

The process of identifying and collecting assets; paying debts, expenses and taxes; and making proper distributions of remaining assets after one’s death is referred to as estate or trust administration.

The identification of assets begins with the inquiry as to how assets are titled. Assets that are jointly held with survivorship will pass automatically to the survivor; assets that have a beneficiary designation will go to the person(s) so designated. Assets held in a trust are to be administered pursuant to the instructions provided in the trust document. Assets in a person’s sole name must be administered pursuant to the terms of his/her will or, if none, by the laws of intestacy (that is, death without a will).

The collection of assets depends on who may access the deceased person’s assets. With respect to assets held in a trust, the trust document typically designates someone (individual or financial institution) as Trustee. A person who established the trust (the Settlor or Trustor) often designates himself/herself as trustee. Upon his/her death, a successor trustee is typically named in the document. In other words, the trust document itself gives the successor the legal authority to administer the assets.

If assets are administered under a will, an Executor (sometimes called “Personal Representative”) is named to administer assets. If there was no will, an heir (or sometimes a creditor) may step forward to be the Administrator. In either case, however, the Executor or Administrator must apply to the local court having probate authority to qualify as such. This begins the process referred to as probate. This process can vary greatly from state to state.

The administration of the estate of a deceased person can be viewed as:

1. determining the extent and nature of the deceased person’s assets,

2. transfering title of assets to obtain legal control,

3. paying debts, expenses and taxes, and

4. distributing the remainder pursuant to the terms of the trust, will, or laws of intestacy.

This person may be an Executor under a will, or an Administrator in intestacy, or a Trustee under a Trust. Sometimes the documents require that the assets be held in trust for an extended period such as for the life of a beneficiary or until the beneficiaries reach a certain age. By the end of the process, there should be no assets left in the name of the deceased person.

Estate and trust administration takes time. How much time depends on several factors: Can the original documents be located easily? Is real estate among the assets? Are the assets easily liquidated? Are there estate or income taxes to pay? Who is the executor or trustee? Who are the beneficiaries and can they be located? Are there any provisions in the trust or will that are unclear? Are there significant assets which were held jointly or passed by beneficiary designation? Were the rights of the surviving spouse addressed in the documents?

As with estate planning, the complexity of the administration of an estate or trust is affected by the beneficiary list and decedent’s financial holdings. Anyone who has served as Executor, Administrator, or Trustee can attest that these are positions of great responsibility. For most clients, service in such a position is a once in a lifetime role. Most people finding themselves with such responsibility can benefit from legal and accounting guidance throughout the process.

The foregoing article contains general legal information only and is not intended to convey legal advice.

Daniel D.  Smith and W. Franklin Pugh are partners in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176 (703-777-6084, www.smithpugh.com).

Amy V. Smith, CFP®, CIMA®: Starting at the Finish Line

In preparing for a recent speaking engagement on “Financial Planning for Life,” I was reminded that there is more to talk about than money in the world of financial planning. Money is just the vehicle to get us to our financial destinations.

What we do when we arrive is another issue.

Why should we try to plan for life? Because life is full of surprises. We cannot control our future, but we can control our financial behavior—planning, saving, budgeting, investing, and covering risk of loss. This is when the discipline and benefit of financial planning is realized.

After 15 years as a certified financial planning practitioner, I have learned that the essence of effective financial planning is holistic, not compartmentalized. To talk only about money is to see a work of art with one eye closed.

Sticking with the vehicle analogy, you may have a brand new car, but where is it taking you? If you’re planning a trip, where are you going? How will you get there? When will you arrive? You’ll likely need a road map to reach your final destination.

The same analogy applies to financial planning. For example, when setting goals for retirement, most of us will want to maintain, at the very least, today’s standard of living, before inflation, when we retire and not take a pay cut when we no longer earn an income. How and when we plan to get there is the equivalent of a financial road map, a financial plan.

Starting this month, I’d like to expand the scope of this column to include the whole picture, not just the parts, and begin asking the “big questions.” This means not only presenting ideas on individual topics such as investments, taxes, and insurance, but also exploring how these financial vehicles can work together to benefit you, the reader, in your personal retirement planning, risk management and legacy planning.

To address these bigger life issues, I’ve invited my husband, Dan Smith, practicing estate planning attorney for more than 40 years, to join me in writing this column with a new title to fit this broader perspective: Amy and Dan Smith’s Planning For Life. Dan and I have been married almost eight years. We both experienced the death of our spouses. While neither of us had planned for this to happen, it did. Were we prepared? Not really. Were these lessons learned that influenced our work as professionals? Absolutely.

As this column goes forward, we will share with you information and suggestions, which hopefully, you will find helpful in your planning for life.

From "Amy & Dan Smith's Planning for Life" column appearing monthly in the Blue Ridge Leader, Loudoun County, VA.

The foregoing article contains general legal information only and is not intended to convey legal advice.  For legal advice regarding estate planning, the reader should contact his/her lawyer.

Daniel D. Smith is a partner in the law firm of Smith & Pugh, PLC, 161 Fort Evans Road, NE, Suite 345, Leesburg, VA 20176. (Tel: 703-777-6084, www.smithpugh.com). He has practiced law in Loudoun County since 1980.