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June 24, 2022

Plan finances early in 2003

Here are a few tips for 2003.
Here are a few tips for 2003:

First, if you maxed out your deductible tax losses for 2002, be sure to take them early in 2003. While the market is still down, you can sell that loser of a stock or mutual fund in order to declare that loss for 2003. Moreover, if you feel that the market is cheap, replace that downtrodden stock or mutual fund with what you feel is an equal or better investment. Hence, you are killing two birds with one stone. Remember however to seek advice from nice tax professional folks such as Bianchi, Lorincz & Co. or elsewhere before you make these decisions.

Second, are your estate-planning strategies in place? Do you need a living trust or is a will sufficient? The primary focus here is what would happen if both you and your spouse die at the same time. If only one of you dies, in most cases the survivor would inherit all assets. But if both passed away, how many heirs are there? How are the assets distributed? What about business assets? Are you business partners with someone and if so, how are the business assets distributed if one should die? If a life-insurance vehicle is used here, has it been updated properly?

Here is an unfortunate scenario that involved an attorney client of mine. He and two other attorneys own a building in downtown San Jose and maintain their offices at this location. Twelve years ago they purchased

life insurance policies that would pay the heirs of each partner the value of each partner’s property and business interest in case of death. That way, if one of the three partners died, the surviving heirs of that person would not be stuck with a business interest that was unfamiliar to them.

Life insurance worked perfectly here, because the surviving partners simply bought out the deceased partner’s value of the property and business with life insurance proceeds. No out-of-pocket whatsoever.

The problem arose when the value of the business and especially the property increased sharply over the next decade. The partners were so busy solving legal issues for their clients that they forgot to revisit some very important business issues. As you may surmise, there were not enough life insurance proceeds to pay off the deceased partner’s business and property interest. As a result, each of the two surviving partners was forced to find $250,000 for the deceased partner’s widow. Where do most upper-middle-class people find a large sum of cash in a hurry? That’s right, in their residence. Each of the two surviving partners had to execute a second mortgage for the $250,000 debt they owed. What a shame.

Another important point is your overall investment strategy. Have your goals changed? Is it because they should have changed or is it because the market has given you the heebie-jeebies? If you do not know which way to turn with your financial market assets, talk to someone whom you trust will help you. You do not have to spend money to sit down with some financial market professionals, so why not needle one of us a little? What do you have to lose anyway? You get a comfortable chair (I’m sure you can lie down on a couch if you wish), a glass of water or coffee, a piece of candy and even a company brochure. Your conversations are fiduciary, so no one else will know about them except you and the pro you visit.

There are many other tips to consider, too many to mention here. Please don’t wait until the end of 2003 to visit these and other issues. I urge you to be proactive in 2003. If you are not, I may have to bore you with more procrastination stories a year from now.

Jeff Welch helps individuals with long-term financial planning. He is a registered representative of and securities offered through Financial Network Investment Corporation, member SIPC. His office is located at 339 Seventh St. in Hollister. Phone 630-1525.

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