Weekly Financial News Update – Week of May 12
According to a recent report by USA Today, of those economists who believe the US is either already in a recession or will enter into one later this calendar year, 89% of this group anticipates that the economic downturn will be short and shallow in duration and intensity as opposed to long and deep. The Wall Street Journal ran a report at the end of 2007 in which a variety of seasoned financial experts were asked where the markets were headed in 2008. The predictions were mostly bullish – Dow 14,000 – Dow 15,000 – Dow 16,000. A couple more accurately predicted flat markets in the face of staggering oil prices and a weak housing market. But none of the experts expected a 10% decline in the first quarter alongside a massive credit crisis.
QUICK FEDERAL ESTATE TAX PRIMER:
Your gross estate consists of everything you own or have an interest in at the date of your death; the fair market value of these items – at the time of death – is used to calculate their worth. This includes life insurance proceeds on policies insuring your life and which you owned. Let’s assume all of the details have been worked out and you know the value of your estate. Before you calculate your projected estate tax, you first subtract the “exemption equivalent”. The amount left over after you subtract the exemption equivalent is subject to estate tax. What is the estate tax exemption equivalent? The exemption equivalent is the amount you can pass through to your heirs without having to pay estate tax to Uncle Sam:
- For 2008 – you can pass the first $2,000,000 of your assets w/o owing estate taxes. The top estate tax rate is 45%.
- For 2009 – you can pass the first $3,500,000 of your assets w/o owing estate taxes. The top estate tax rate is 45%.
- For 2010 – there is no estate tax, as per the Act signed into law in 2001. For this one year ONLY, there is what is called a sunset provision on the estate laws, where no estate tax is owed. On the bright side, if you are vulnerable to estate tax this would be the year you want to go.
- For 2011 – currently, the laws are set to revert back to the federal estate thresholds used before the 2001 Economic Growth and Tax Relief Reconciliation Act. Most think this won’t happen, as new legislation will be introduced sometime in the next few years to avoid this reversion. If they revert back, the exemption equivalent will be $1,000,000 and the top estate tax rate will be 55%.
Certified Mortgage Planner – Primary Residential Mortgage, Inc.
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248 E Chestnut Hill Rd, Newark, DE 19713
