Mountain Views News          Saturday, October 11, 2014

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BUSINESS NEWS & TRENDS

 Mountain Views News Saturday, October 11, 2014 


FAMILY MATTERS By Marc Garlett


IT PAYS TO STAY 

 If you want to take advantage of the affordability 
of homes today, but anticipate major life changes in 
the next couple of years, you have to consider the 
implications of selling so soon. Keep the following 
factors in mind when making your decision. 

 As long as you sell for more than you owe on 
the mortgage, you’ll be fine. Otherwise, you’ll 
lose those costs associated with your initial 
investment, including the money you spent on 
loan and closing fees. 

 Also consider the cost of selling your home 
soon after purchasing. You paid closing costs 
when you bought it, but you face more closing 
costs when you sell it. In just a couple of years, 
most people won’t build up enough equity in 
the home to justify selling so soon and paying 
transaction fees again. 

 Finally, if you sell your home in less than two 
years - for a profit - you may have to pay capital 
gains taxes on that profit. Currently, homeowners 
are exempt from those taxes up to $250,000 (or 
up to $500,000 for married filers) - but the home 
must be your primary residence and lived in for 
at least two years. 

 Hardships like health issues or job relocation 
may allow you a partial exclusion on those taxes, 
though. Speak with your tax advisor and real 
estate agent for some solid advice.

7 THINGS TO THINK ABOUT BEFORE MAKING 

GIFTS TO GRANDCHILDREN


WHAT HAPPENS WHEN THE 
WORLD GOES CRAZY?

By Greg Welborn

I love being a parent… well, most of the time. But my 
parents - and my wife’s parents – tell me there is nothing 
better than being a grandparent, and the joy they feel 
about their grandchildren comes with no interruption. 
And I get it. After all, they get to spoil my kids and focus 
on connecting with them while leaving all the heavy 
lifting to my wife and me.

In fact, many grandparents who enjoy financial freedom 
are often more than generous to their grandchildren. 
And some even want to see their grandchildren enjoy an 
inheritance now instead of waiting to pass along assets 
after they are gone. If that’s you, consider these 7 points 
before you make gifts to your grandchildren.

Clarify the gift. Most grandparents make outright gifts 
with no strings attached. But if you intend to provide a 
loan or an advance on an inheritance, you should always 
clarify that in writing. 

Equal treatment. It is not unusual for a grandparent to 
be closer to some grandchildren than others, but when 
gifting assets, unequal treatment among grandchildren 
will almost certainly lead to family resentments. Even 
if you give more to some than others during your life, 
consider treating all grandchildren equally in your estate 
plan.

Taxes. With the federal gift tax threshold at $5.25 million 
(double that for married couples), most people won’t 
have to worry about paying federal gift taxes. However, 
any gift to an individual that exceeds $14,000 each year 
($28,000 for married couples) must be reported on a gift 
tax return. 

Education. You can help with a grandchild’s college 
tuition by making payments directly to their educational 
institution. That doesn’t have to be reported. And there is 
no limit on these contributions. Investing in a 529 plan 
for each of your grandchildren is also a great way to help 
them (and their parents!) save for college, building a tax-
deferred account that will never be taxed as long as it is 
used for educational purposes.

Your own needs. It’s tempting to be overly generous in 
making gifts to grandchildren, but you should not give 
to the detriment of your own needs. Finding the right 
balance will help ensure your children and grandchildren 
don’t have to support you because you gave too much to 
them.

Long-term care. Chances are that you will need some 
kind of long-term care at the end of your life, research 
shows that most of us will. If you can’t afford long-term 
care and need help, any gift of assets you have given could 
make you ineligible for Medicaid benefits for five years. 

Consider a trust. There are many reasons why you should 
not give gifts of cash or assets to grandchildren, some 
that you may not even be aware of. Lots of cash could 
be fuel on the fire of bad behavior or undermine your 
own children’s goals for their children. To make a lasting 
gift, consider using a trust that will pass assets along to 
grandchildren safely and protect those assets for their 
entire lifetimes from bad behavior, bad credit, and even 
bad marriages. 

I see how much my kids love their grandparents. And 
there’s no doubt, the relationship between grandchildren 
and grandparents is something special. If you are a 
grandparent, with just a little planning you can deepen 
that relationship and have an even greater impact on the 
lives of your grandchildren. 

To your family’s health, wealth, and happiness,

A local attorney, father, and CASA volunteer (Court 
Appointed Special Advocate for Children), Marc Garlett 
is on a mission to help parents – and grandparents – 
protect what they love most. His office is located at 49 
S. Baldwin Ave., Ste. G, Sierra Madre, CA 91024. Call 
626.355.4000 to schedule an appointment to sit down 
and talk about ensuring a legacy of love and financial 
security for your family or visit www.GarlettLaw.com for 
more information.

Headlines seem to be filled with one calamity 
after another: Ebola, ISIS, Hong Kong protests, 
Chines saber rattling, troubles in Afghanistan 
– the list goes on. And yet, the stock market is 
still in upbeat territory (anything in the 16,000s 
to 17,000s is at the top of the historical charts). 
But what if there is some terrible world event on 
the horizon which does cause the Dow to really 
swoon (say a 1,000 or more point loss)? What 
should an investor do?

 The best advice is drawn from a history lesson. 
A Ned Davis Associates study of worldwide 
crises from 1940 onward produced some 
amazing insights. The researchers found that 
after almost every global crisis, markets react 
to the fear. Stocks get hammered. But with 
equal consistency, once the dust settled, stocks 
bounced back to where they were before the 
crisis, reflecting the broader economic reality 
rather than the geopolitical crisis.

 After Pearl Harbor, stocks fell 4% immediately 
and another 14% in the quarter following the 
surprise attack. But then as the fear dissipated 
and America responded, the market rose at an 
average annual rate of 25% for the next 3 years.

 The same pattern was present after the fall of 
France to the Nazis, North Korea’s invasion of 
the south in 1950, Iraq’s 1990 invasion of Kuwait, 
the world trade center 1993 bombing, 9/11, and 
the 2009 financial crisis. In each and every one 
of them, there was panicked selling followed by 
very profitable buying. So here are 4 things to do 
to handle the next crisis.

 Diversify: own lots of stocks, not just a few, 
and make sure you own them throughout the 
spectrum. You need some large cap growth, 
some value, some small cap, some international, 
and emerging market stocks. 

 Keep Some Bonds: balance between stocks 
and bonds prevents the wheels from coming off 
your portfolio trolley. Bonds may not produce 
double digit gains, but they help smooth volatility 
and let you sleep at night.

 Invest Consistently: you cannot time the 
market. I repeat; you cannot time the market. 
Invest regularly from your earnings and remain 
consistent in your strategy regardless of world 
events or headlines.

 Take Advantage of Panic: when the market 
tanks, your portfolio will have more bonds as a 
percentage and fewer stocks as a percentage than 
before the panic. Take the opportunity to sell 
some of those bonds and buy those cheap stocks. 
It’s called rebalancing, and it’s the closest thing 
to magic there is.

 The advice above is easy enough to write, but it 
can be hard to practice. Emotions are powerful 
things, so now is the time to think about what 
you’re going to do when/if the world goes crazy.

 About the author: Gregory J. Welborn is the 
Managing Partner of First Financial Consulting, 
a fee-only advisory firm. He has worked with 
The Today Show, Kiplinger’s Magazine, and USA 
Today to provide objective financial advice to their 
readers and listeners. He has 3 grown children 
and is honored to be married to his wife of 25 
years. He can be reached at gwelborn@ffconsult.
net


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