Investment and Finance

A Bond is a security that represents a loan from the purchaser of the bond to the issuing organization. The Organization may be a private company or a federal, state or local government. Bondholders receive a specific amount of interest on a regular basis and the return of their loan principal at the end of a stated period. A Bond provides a fixed amount of income. Its value will increase if interest rates fall and decrease if interest rates rise.

Cash equivalent investments are often called reserves. These represent short term loans ti high quality borrowers such as the U>S> Government. Examples of cash equivalent securities are Treasury bills and money market mutual funds. Cash equivalent investments offer stability of principal and high liquidity. Cash equivalent securities can be turned into cash easily and quickly. Due to the fact that risk is relatively low, the return on these investments is also relatively low.

In the most basic sense, risk can be defined as the chance of financial loss. The term risk is used interchangeable with uncertainty to refer to the variability of returns associated with a given asset. The more certain the return from an asset, the less variability and therefore the less the risk. Market risk is the chance you may lose money in a market decline.

Risk in the most basic sense is the chance of financial loss. Inflation erodes your purchasing power. Inflation risk is the chance that your savings lose purchasing power due to the steady increase in the cost of goods and services over time. Inflation is is a major threat for investors with a long time horizon.
These investors may want a large portion of their investment portfolios invested in securities that historically have outpaced inflation by a decent margin. Generally these investments are in common stock or common stock mutual funds.

Diversification is the spreading out of your investments among a number of different securities. Diversifying reduces risk because the value of yoyr holdings is not dependent on the performance of any single investment. A easy and quick way to diversify your investments is investing in a mutual fund.

Note that in 2013 the federal estate tax exemption has been made transferable between spouses. This is referred to as "portability of the estate tax exemption" and means that if one spouse dies in 2013 and his or her entire $5,250,000 estate tax exemption is not needed to avoid estate taxes on his or her estate, then the unused portion of the deceased spouse's estate tax exemption can be added to the surviving spouse's estate tax exemption.
This, in essence, means that a married couple will be able to pass on up to $10,500,000 to their heirs free from federal estate taxes without the need to use AB Trust planning.
But keep in mind that if the married couple have different sets of final beneficiaries, such as in the case of a second or later marriage where each spouse has their own children that they want inherit their separate assets after both spouses are deceased, then the couple will want to make use of AB Trust planning in order to insure that their separate beneficiaries will be their ultimate beneficiaries.
An A-B Trust is a regular trust made during the lifetimes of a taxpayer and spouse. One of its characteristics is that upon the death of either a husband or wife, it splits into two separate trusts, an "A" trust and a "B" trust. By doing this, the trust takes advantage of the decedent's current year's exemption ($5,250,000) and the unlimited marital deduction. The surviving spouse becomes the trustee of both trusts and has access to the funds in both trusts. The purpose of the A-B trust is to eliminate all estate taxes upon the death of the first spouse. You will be able to use an A-B trust if you are married and have an estate tax. That means an estate in the year 2013 worth more than $5,250,000 Million. If you do have an estate worth more than $5,250,000 Million in 2013 an A-B trust can help you. Speak to your local CPA or attorney about this tax planning strategy.

A QTIP Trust is a Qualified Terminal Interest Property Trust. A QTIP Trust permits the spouse with all of the assets to "leave" the property to the surviving spouse, but the surviving spouse cannot touch the principal of the trust. He or she must hold on to the QTIP Trust's income (interest, dividends, royalties, etc.) for his or her lifetime. But, the spouse with all the assets gets an Unlimited Marital Deduction that makes his estate pay Zero Estate Tax upon his death and it can utilize the surviving spouse's exclusion when she dies. Speak to your local CPA or attorney about this tax planning strategy.

An estate plan is a premeditated, systematic process of planning for the accumulation, conservation, and distribution of an estate using the most efficient and effective methods for accomplishing the goals of the owner. Tax considerations are usually a significant part of the effort. At the death of the owner, the estate plan insures the distribution of the estate with minimum administration costs and taxes, according to the wishes of the owner. Minimizing the cost of distributing an estate can only be accomplished by anticipating expenses and planning ways to avoid them before death occurs. Speak to your local CPA about the strategies to accomplish your plan.

A state court must authorize transfer of probate assets. Non-probate assets transfer automatically to the new owners at death.
Characteristics and examples of Probate assets are assets are owned individually by the decedent.
Decedent's share of assets is owned as tenants in common. Life insurance, annuities and retirement assets without any beneficiary designations.
Life insurance, annuities and retirement assets if the estate is the named beneficiary or if the estate receives the asset because the named beneficiaries are deceased.
Characteristics and examples of Non-probate assets are assets are owned jointly with the right of survivorship. Life insurance, annuities and retirement assets with valid beneficiary designations other than the estate. Securities or security accounts to be "transferred on death".
Bank accounts and other assets with "pay on death" or trust designations. Assets in trust if the instrument includes a plan for distribution after death.