SPENCE Asset Management

The Reality of Mortality November 2009

While we monitor our existing investment holdings carefully, we also scour the equity and bond markets regularly for growth or income producing investments. Another duty we have is to keep a wary eye on the prospects for taxation of income, taxation of capital gains, and taxation of estates. These days the potential for federal government policy changes suggest that there could be significant increases of taxes in each of these areas. These potential changes will most definitely affect future decisions we might make in each area.

Based on our own experiences we think it is a good time to address the prospects for major changes in estate planning needs. Back in the mid-1990’s we recall a series of meetings we had. The meetings involved members of several generations of a particular family. Each family member we met with had been a client of ours for several years. At the time, the family patriarch was getting up in age and had, a few years earlier, become a widower. Though we had been providing investment advice for the family for more than a decade, we all mutually agreed that the time had come to investigate the estate plans of both the patriarch and of his sole heir, a daughter who was herself, fast approaching retirement age.

It is sometimes hard to conceptualize the new problems that can be presented when an investment accumulation/ management process has been successful. When this occurs, it is often the soundness of an overall estate planning program that can either ultimately enhance what has been accumulated or quickly unwind a significant portion of a hard-earned and painstaking process. In this particular family instance, the fact that the patriarch was already a widower meant that while we were able to mitigate some estate tax liabilities, we were not able to fully eliminate the federal government’s grab of estate taxes out of this particular family’s inherited wealth.

And so it was, with that very experience in our minds, that earlier this year we engaged our good friend and estate planning expert John Wedel. We asked John to assist us in a review of our own twelve year old estate plan. His processes included a thorough review of our life insurance contracts, our retirement income estimates, our potential estate tax liabilities, and many other related contingencies we needed to consider. In the end, John convinced us of the need to make a handful of changes to our wills and our trust agreements. He also encouraged us to re-structure some of our life insurance arrangements.

Though our hopes are to live to be a ripe old age, we recognized that we had procrastinated long enough, and it was high time that we turn our estate planning needs over to a seasoned professional, a person who could give us objective advice on the long range implications of our existing arrangements and work side by side with our CPA and attorney.

In the quarters just ahead, the potential for changes in estate tax laws are great. Many of the most important elements of estate tax laws are set for expiration very soon. So in this month’s newsletter we want to encourage EVERYONE that does not hold a lease on life (hardly an exclusive club) to consider engaging in the same process we just completed. It may well be time to take into account the various contingency planning that will be uniquely required in your situation.

For our part we will stand ready and willing to facilitate this process on your behalf. Hopefully we can assist you in the process of exploring ways to increase the chances that your estate plan will produce the desired results long before the reality of mortality is at hand. Happy Thanksgiving!

—Jim Spence, Registered Principal, Spence Asset Management

The information contained herein is for informational purposes only without regard to any particular user’s investment objectives, risk tolerances or financial situation and does not constitute investment advice, nor should it be considered a solicitation or offering to investors. To determine if investment in a Separately Managed Account with Spence Asset Management is an appropriate investment for you please call 1.800.230.1840.

Investment Advisory Services are offered through Spence Asset Management, a federally registered Investment Advisor. Investment Advisory Services offered through IAR’s of Spence Asset Management, a Registered Investment Advisor to all residents of the United States.

The views expressed here are those of Spence Asset Management and are subject to change with market conditions. The information contained in this newsletter is derived from sources believed to be accurate. You should discuss any legal, tax, or financial matters with the appropriate professional. Neither the information presented nor any opinion expressed constitutes investment advice or a solicitation for the purchase or sale of any security. Market forecasts cannot be guaranteed. Past performance does not guarantee future results.