What makes up my taxable estate?
Your gross estate for federal estate tax purposes includes:
- All property you own at death (e.g., real estate, investments, business interests, personal property, mortgages held by you);
- Property you have given away while retaining a lifetime interest in the income from the property, the use and enjoyment of the property, or the right to determine who ultimately receives the property;
- Gifts that don’t take effect until you die;
- Property you own jointly with another person except to the extent the other party contributed to the purchase price of the property;
- Property over which you possess a general power to appoint the property to yourself or others;
- Life insurance policies owned by you or in which you retained the right to change the beneficiary, cancel the policy, or make policy loans;
- Your one-half interest in community property, and
- Annuities, pensions, and profit-sharing plans.
From your total gross estate, your estate may take deductions for funeral expenses, administration expenses (e.g., executor’s fees, court costs, attorney’s fees, appraiser’s fees), certain debts and income taxes, state death taxes paid, and property left to your U.S. citizen spouse or to qualified charities.
The net amount may be subject to estate taxes. However, the amount of taxes payable on your taxable estate may be reduced by the unified credit and a credit for foreign death taxes.
We have $80,000 cash and have recently paid off all credit card debt. We have two children, 7 and 10. We have only one 529 started with $6,000 in it. Should we invest all of our savings into their college funds?
In short, no. Your children can borrow money for college, or they can work to pay for their education. They may also be able to get scholarships to help with the cost. You cannot borrow money for your retirement.
We think you should first make sure you have emergency reserves in place. Then you should focus on saving for your own retirement. You do not want to be a burden on your children when you retire, as they will be saving for their own retirement and possibly saving for their own children’s education.
Your oldest child has eight years before he or she will be in college. We think you should maximize your IRAs, Roth IRAs and 401(k)s until then. If you choose, when they enter college, you can then stop putting your money in your retirement accounts and pay for their education. If you put the money away for their education now, you will be penalized if that money is not spent on that one specific purpose.
I have held Dish Network for a while. It’s been doing well this year, but I wanted to know if there were better opportunities out there. CableVision and Time Warner both pay dividends.
Cable and telecommunications companies have been involved in a series of mergers lately. Rupert Murdoch was looking to buy Time Warner Cable (NYSE: TWC) but the deal fell through. DirecTV (NASDAQ: DTV) may be acquired by AT&T (NYSE: T), while Dish Network Corp. (NASDAQ: DISH) has considered acquiring T-Mobile US Inc. (NYSE: TMUS).
Right now, Dish Network and CableVision Systems Corp. (NYSE: CVC) do not look attractive. We view them as pipeline providers because they do not offer any content. Content adds value in our opinion.
Time Warner has content, and the company is growing faster. We think this would be a good pick if you wanted to stay in this space.
How soon do you consider a stock for investment after its IPO? Three years? Five years?
We generally do not buy a company on its initial public offering because of the run up in price. The average investor generally cannot get an IPO at its initial market price. Oftentimes, there are a limited number of shares, and those are sold to the biggest clients. The demand is high for the IPO and with few shares available for the general public, the price can run up 50% or more. There is also a lack of financial analysis. We look at a stock’s financial strength and projected earnings. Much of the time, there is no such information for an IPO or a spinoff, but there are exceptions.
Typically, we do not have a time limit. However, generally after six months, financial information becomes available, and if the stock meets our investment criteria, it may be considered for investment.
I’ve been looking at Huaneng Power International. I know Utilities aren’t your favorite, but they’ve done well for me, and this might satisfy some international exposure needs. Should I buy?
Huaneng Power International Inc. (ADR) (NYSE: HNP) is a producer and distributor of power for China and Singapore. The company trades as an American Depositary Receipt on the U.S. markets, so the company has some transparency in their financials. The company pays a 5.41% dividend. China’s growth has moderated, but there is a long-term trend for a higher standard of living. Even with that, we would want detailed financial information on the company before considering it for investment. There is very little analyst coverage. While it may look good on the surface, China often has very little transparency in their businesses. We recommend avoiding this stock.
At Henssler Financial we believe you should Live Ready, and that includes understanding the fundamentals of your investments. If you have questions our experts are here to help: