If you are in the minority of parents who are saving all their darling’s material memories, it may be time to settle up with them- and give them their things. After all, it’s theirs, isn’t it? Wouldn’t you like to have the space back that is being held by the 20 year old rocking chair and the hundreds of books, dolls, and the like? G’won, admit it- you want it out! I brought it to my daughter each time I visited- two boxes at a time- until I was void of her things. This gave her the ability to decide what she wanted, and what to give or throw away. It worked for both of us.

But what do you do when they come back to live at home? While we love our children, the fact is that we’ve settled into a lifestyle without children, and having them home again puts a crimp in our style. Yes, the little darlings just look at us as parents: little do they know we too have a life outside of them! But how do you handle the sudden change in your lifestyle, and what are the terms of them coming home? You did set terms, didn’t you?

Congress recently voted to allow parents to extend health insurance benefits to age 26 for children living at home. After that time, if they have not found gainful employment (ouch) they may apply for individually owned insurance. Check www.healthins.com for continuation of coverage for them. What else should you do? Don’t forget it’s your home, so setting guidelines and ground rules are applicable even though they are all grown up. It’s important for them to understand that they are impeding on your lifestyle, so the old “I’m 21 now and too old for curfews” doesn’t work. If they expect to live under your roof, you deserve the respect from them to go by your rules, or at least those that are agreed to by both parties. You’re not the Happiness Hotel: be keenly clear that this is temporary, and there are conditions.

Offer to pay for their health insurance and car payments or car insurance for a specified period of time: perhaps three months only. After that time, it is their responsibility to have a job and pay for it themselves. If they are not employed at that time, draft an agreement that they are responsible to pay you back when they do find their way. A little pressure is good motivator. You wouldn’t enter into an open agreement- why should they? Give them some incentive to go job hunting. Once they find a job, if they want to continue to live at home, define an amount for them to contribute to the household expenses and be sure to collect it. If they have a 401(k) option at work, require them to contribute 10% of their pay, or charge them rent which you will NOT give back to them. Don’t co-sign any loans for them- it could adversely affect your credit rating, or you may find yourself at the end of a lawsuit should they not keep up on their payments.

Teaching our children sound financial principals and integrity is part of being a good parent. Don’t fall into the black hole of enabling- there is no good to be had by it.

So what’s the test you ask? Well back on February 17, 2010 I posted a blog entitled “My Mea Culpa on Estate taxes.” In it I spoke to the fact that I never would have thought that Congress could have allowed us to move into the year 2010 without some form of estate tax on the record. However, they did, apparently because they were so tied up in other matters such as healthcare reform. I went on to say that their intent was going to be that whatever eventually got passed would be implemented retroactively to the first of the year. Even my most recent tax newsletters that I receive give every indication of that intention still being on the table. I also said that it could prove quite interesting for the estate of some highly wealthy individual, who passed away before an amended law was put in place, to challenge the constitutionality of imposing a retroactive tax to January 1. Enter the estate of George Steinbrenner!

It is impossible to imagine that the conscience of The Boss, even from the grave, will not be inspiring his estate team, should there be a Federal tax challenge, to fight any attempt at collection all the way to the Supreme Court. With all due respect to the man and his passing, it is nevertheless so ironic that he, of all people, could be the test case should it be necessary.

Certainly it behooves the fiduciary and beneficiaries to test the unplanned gap in the estate tax, the first since it was enacted in 1916. At the estimated estate value mentioned above and based on the last set of tax rules in effect for 2009, there could have been a possibility of tax due of approximately $500 million. Obviously this is not precise as much depends on how his estate had been structured over the years, but nevertheless it provides a good indication of the dollar magnitude that could be involved. All of this would not be saved, however, as beneficiaries would eventually have to pay capital gains taxes when assets, such as the Yankees, are sold based on original acquisition cost. But the net savings in total would indeed be substantial.

So George’s death may just be the catalyst in Washington to get movement on the estate tax issue and then let’s see how it all plays out. Meanwhile Mr. Steinbrenner…R.I.P.

With my newfound awareness of this tool in my financial planners toolbox, I made it my business to research the issue further to understand some of the implications of executing the strategy. Interesting also, was the fact that it surfaced in one of the workshops that I attended last week at an annual financial conference that I go to.

So my early due diligence validated the obvious question….does it really work? The answer is yes it can under the right circumstances and it is totally legal and allowable under Social Security Administration guidelines. Alright, what is the right situation to consider the strategy? Assume an individual began taking Social Security at age 62 which would be 75% of their primary insurance amount known as the PIA. At age 70, and with all indications being of good health, a reapplication to Social Security benefits might reap them a monthly check of 132% of PIA. So in order to get that amount all the dollars received since the age 62 start date must be repaid. It should be pointed out here that the payback is made without interest. So essentially the payback can be looked at as a free loan from the government.

But remember I raised the caveat in the preceding paragraph about being of good health. The reason being that with the lump sum repayment to make the strategy work it will require a recovery of those same dollars through the higher new monthly checks before getting into the bonus dollars as I would refer to it. So obviously for someone with any serious health condition it probably would not pay to play the odds of getting more money in total from the system.

Additionally, there are other issues that need to be considered to make a prudent decision on follow through. Don’t forget that for many individuals income taxes have been paid over the years on up to 85% of the social security received. The recovery of those taxes would be necessary to come out whole in the overall exercise of the plan. That in itself could require a bit of work.

So summing up, withdrawing and reapplying to social security is not a guaranteed solution for increased income for everyone. But it does warrant the proper review when individuals had elected to take early social security benefits.

This document comes into play when a person is unable to either perform legal duties due to physical limitations, or is mentally incapable or unwilling to make decisions for his or her benefit. Real estate transactions, banking needs, and a vast plethora of legal obligations may be utilized with this document. Essentially, you are giving another individual the power to sign for you, transact business, control your finances and make decisions for you.

The power in the document is general, as opposed to a ‘limited power f attorney” where the powers’ are limited to a certain transaction or are closely defined, allowing the individual to perform tasks specific to those noted on the document.

The powers can be immediate or “springing” meaning that they come into power in a certain time or circumstance: hence, they “spring into action” based on the specifics of the document. A durable power of attorney may save the arduous instance of a court appointed conservatorship, which may be cumbersome and outside the actual wishes of the disabled grantor. However, a court appointed conservatorship is supervised by the court.

Significant powers may be granted under a power of attorney, Essentially, you are giving another individual the right to sign for you and may have access to your money, deeds or other legal documents. Before entering into this or any legal agreement, be sure to consult a qualified attorney to see if the arrangement is applicable to you, your state regulations, and in your best interest.

First off this will never be a significant one time adjustment in valuation. Instead, as a follow up to the weekend announcement, the People’s Bank of China indicated that any strengthening in its currency would be done gradually. For nearly two years now, the Yuan has been pegged at a rate of 6.83 versus the U.S. dollar and despite the recent news, the China central bank maintained that parity rate to begin the new week. So once again, don’t expect any change to happen fast.

More likely, at this time, the announcement will probably serve to diffuse what could have been perceived as building tension among participants at the upcoming G-20 meeting to address the Yuan valuation issue. China has been essentially accused of keeping its currency artificially low to support its exports. Now while representatives such as U.S. Treasury Secretary Geithner may still want to press for the speed of revaluation, the Chinese will be better able to defer that conversation having at least “thrown a bone” on the floor, so to speak.

I have no doubt that the Chinese government will do what’s best for China and how that effects the global economy is of secondary matter. To their credit, it does appear that China has been managing rather effectively the soft landing of its economy in the midst of the global economic crisis. With what might be construed, on the part of the Chinese, as increased confidence that there can be sustained improvement in the world economy, a strengthening of the Yuan will prove quite beneficial to the residents of the country as it can make imports cheaper.

Here in the United States the administration has clearly been trying to bully, as it would like to think, the Chinese into a revaluation mode. Now that it appears some concession is on the table it should prove interesting. Certainly for our domestic companies that export to China it should prove beneficial   increasing business. However, stop and think about all the imports that we make from China beginning with all the many retail products that could now cost us more money. It will be interesting to see whether the rate change that takes place proves to be more positive than negative for us here in the states!

In matters of healthcare, of course we have seen advances in new drug therapies and high tech medical device equipment that is either used for diagnosis or treatment. However, we have not made the major breakthroughs for treatment in many of the forms of cancer, nor neurological disabilities of Multiple Sclerosis or Parkinson’s disease. Rapid advances here cannot come fast enough.

So let me get to the real point now of this article. As I mentioned above, much of my time is spent on the computer reviewing investment market activity. As I find so much of the financial news lately evolving around whether the Dow Jones will stay above the 10,000 level, or break below it, the issue is clearly the index continues to represent a milestone that draws attention. Well at one time it really did represent a milestone, but the problem is that point in time was March of 1999. Yes, you read correctly. It was actually more than a decade ago that we first hit the mark.

My mind wanders back in time watching the financial news network on that day and the euphoria on the floor of the stock exchange. It was kind of like a New Years Eve celebration. In fact, it was an achievement marked by a virtually continuous annual rise in the Dow index that had started in the late 1980’s at a level approximating 2000. If my memory serves me correctly, the news at that time (March ’99) already began forecasting how long it would be until we hit Dow 20,000!

So we did make it to the all time high of 14,165 back in October 2007. It wasn’t easy getting there with the events of the early part of the decade, but we overcame that to hit that mark, only to fall back with the financial crisis of the past few years. So now we ponder whether we can hold a 10,000 level so that we can say that we have gone no where in the last eleven years! So do you still believe in buy and hold as an investment strategy? By the way, we also went nowhere in the S& P over the last ten years.

But now for the good news! We are not even close to being caught up in the all time malaise of the investment market. After the market peaked above 1000 in 1929 it did not regain that level until 1954…25 years later. So I want to believe that record will stand and for us better market days will be coming!

As a business owner, we sometimes feel invincible: we can do it better that everyone else, faster than everyone else, of course (at least to us) more efficiently than anyone else. Sound familiar? (C’mon, fess up!) The fact is, although we may feel this way, there may be a time that a serious illness or accident will take you out of the office or company unexpectedly for a period of time. This absence leaves a gap in the team, may lead to reduced revenues, or may in fact endanger the existence of our company that we spent years or decades to build.

Business Overhead Expense Insurance is a form of disability insurance specially designed for the business owner. Should the business owner become unable to attend work due to natural or unnatural causes, the insurance will pay to keep the company running, up to the limits of the policy. While an individual disability policy will replace wages, the BOE policy may cover other expenses such as salaries, taxes, rent, utility payments, lease payments, utilities, etc.

The components of the policy closely mirror the individual policy, but in the application process the overhead expense of the business is taken into account in applying for the coverage needed to pay the business expenses in the absence of the business owner. Elimination period, coverage period and amounts of coverage are the main parts of the policy: depending on your industry, state of residence and factors individual to your needs and occupation all may vary from issuing company to company.

Speak with your insurance agent or Certified Financial Planner™ to determine if this type of coverage is suitable for your needs. The best time to apply, like all insurance coverage, is when you least need it…

So with that kind of a mindset I am asking myself these days why do I have to deal with yet another kind of roller coaster that I find to be to my disliking? That turns out to be our current stock market environment! It is definitely a wild ride. One of the measures that we observe in monitoring market activity is an index that is known as the market volatility index or “VIX.”

This is an index designed to track market volatility as an independent entity. It is calculated based on option activity and is used as an indicator of investor sentiment with high values implying pessimism and low values implying optimism. There are three volatility indexes in the Chicago Board Options Exchange which track the three main stock indexes. The VIX is the most widely used, tracking the S&P 500, but there also is the VXN which tracks the Nasdaq and the VXD which tracks the Dow Jones Industrial Average.

Looking at the VIX over the month of May it started at the beginning of the month at a value approximating 20, as it is measured, and hit an intraday high of 48+ mid month. That is a serious increase in volatility over a short period of time not to speak of the rather significant day to day moves that we are experiencing. As I write this article the value is approximately 30. So let’s see now….20….up to 48….down to 30, hmmm, no wonder I feel like I’m on a roller coaster, and I don’t like it.

My problem, however, is that whether I like it or not, we are going to have to ride this out as I don’t see any way for any of us getting off of it any time soon. We have had a week where we witnessed the Dow one day up nearly 300 points and yet another day down over 300 points. As long as the global markets are faced with the continuing pressures of attempting to implement austerity measures and getting fiscal “houses” back in order, the ride is going to be rather precarious. I suggest making sure your seat belt is on tight!

When terminating or changing employment prior to age 591/2, a person often has several options as to what to do with the funds in his or her qualified retirement plan. He or she may choose from the following possible actions:

• Leave funds in current plan: If the current value exceeds $5,000, there may be some benefit to leaving the funds where they are. They will continue to grow tax-deferred and can be transferred at a later date to a rollover IRA or a new employer’s eligible recipient plan.

• Take cash in lump sum: This option will require the entire amount (less participant after-tax contributions, if any) to be subject to income taxes in the participant’s current tax bracket. There will be an additional 10% penalty tax for a participant under age 591/2 unless he or she falls under certain exceptions.’ The law requires that 20% of the taxable portion of the distribution be withheld for federal income taxes. (2)

• Rollover or transfer within 60 days: Individuals who receive a cash, lump-sum distribution have a 60-day period during which funds may be transferred to either a rollover IRA or a new employer’s qualified plan. Because this is a cash distribution, a 20% federal income tax withholding is required. Failure to transfer the funds within the 60-day period will result in the total amount (cash received plus the amount withheld) being added to taxable income for the year. Further, if an individual is under age 591/2 at the time of distribution, the total amount will be subject to the 10% penalty tax on early distributions, unless an exception applies. (1)

• Make a direct transfer: The distribution can be transferred directly from the original, employer-sponsored qualified plan to another employer plan or to a rollover IRA. Since the participant does not actually receive the funds, there is no 20% withholding.

Potential Problem

However, if the plan withholds 20% for federal income taxes, which cannot be returned until after the tax returns for that year are filed, the participant may have to come up with additional funds to make a full rollover.

For example, assume a. distribution of $100,000 is made directly to a terminating employee. The employer would withhold 20%, or $20, 000, for income tax purposes and the employee would receive only $80, 000 in cash while the employee decides within the 60-day period to roll the fund over into an IRA or a new employer’s qualified plan, then he or she must come up with another $20, 000 to make the full transfer. If the funds are not found to make the full $100, 000 transfer, then the $20, 000 withheld becomes taxable to the employee as ordinary income. If the employee is under age 591/2 when the distribution is made, a 10% penalty tax may also be due unless certain exceptions apply

Possible Solutions

To avoid this potential problem, the participant must make some decisions before the plan administrator prepares the check. If the transfer is made directly to a rollover IRA or a new qualified plan, the 20% is not withheld and the entire amount can be transferred. An alternative might be for the participant to transfer the funds to a rollover IRA, and then elect to receive substantially-equal payments over his or her life expectancy and that of another person, if desired. Consult your planner and tax advisor s to the ramifications of each option available to you, taking into account your age, state of residence and individual situation.

1- Distributions before age 59 1/2 from SIMPLE IRA plans made within the first two years of participation are subject to a 25% penalty, rather than a 10% penalty subject to the usual exceptions. If a premature distribution from a SIMPLE IRA is made after two years of participation, the 10% penalty applies. See IRC Sec. 72(t)(6). SIMPLE IRAs are not subject to the 20% mandatory withholding requirement.
2- State law may differ on both the withholding requirements and the penalties for withdrawals prior to age 59 1/2.

To be fair, the networks should be unbiased and by providing guest commentators that take both sides of the argument they are attempting to meet that responsibility. Where I see the predicament for the mainstream investor is the gusto with which many of the guests take their stand on portfolio positioning and that creates a lot of “noise” as we have often referred to in the media. I’m sorry if I am allowing my own bias to get in the way here but the facts, as I see it, is that there is no one who really knows what is going to happen. Consequently, it is all the more important that an investor learn that they need to separate noise from facts and that is easier said than done!

As an example of that difficulty let’s look at recent news that has been coming out of China. For several weeks now there have been rumors of major economic and financial policy changes within the country to modify its growth rate as a precaution against a risk of inflation rapidly developing. The consequence has been significant moves both to the upside as well as the downside in their equity markets. The pattern seemed to be that some announcement would be made regarding policy and within a short period of time there would be clarification by a more senior official of the government moderating the earlier statement. In the meantime there were swings in the Shanghai equity markets of as much as 5%. How would you really know what was just noise?

More immediate was the global panic caused by a Financial Times news article of a rumor that China was considering diversifying itself away from the Euro, given the significant risk issues that are in play as to its stability and even viability. Within twenty four hours the State Administration of Foreign Exchange in China denied such action being contemplated. Realistically it does not seem like it would be in China’s best interest to telegraph any possibility of such a move given its obvious large holding in Euro currency within foreign reserves. A huge selloff would take place further devaluing the currency.

So the point, once again, is that you need to, as an investor, become more aware of what is noise and what is fact. It is not something you will learn overnight and you need to recognize that reality.