Harry Newton's In Search of The Perfect Investment
Newton's In Search Of The Perfect Investment. Technology Investor.
8:30 AM EST Friday, April 28, 2006: Good
news for the weekend: We continue to chug along handsomely. Forecasters expect
the Commerce Department this morning to report that the economy grew about 5%
in the first quarter, the biggest increase since 2003. And the Fed is hinting
that it may stop raising interest rates. So the businesses it was choking off
-- like housing -- may yet have a second life. Reports today's New York Times:
The industries leading the way are ones that have been receiving far less
attention than cars or real estate, though they have been adding thousands
of new workers each month. In the last year, hospitals, doctors' offices and
other health care employers have created almost 300,000 jobs; restaurants
have added 230,000; and local governments including schools
have added 170,000. "The good news for the U.S. is that growth
has diversified," said Nariman Behravesh, chief economist at Global Insight,
an economic research firm. "We aren't just relying on the consumer and
planning is not easy, cheap or intellectually interesting -- at least
in the beginning. But it can be done and it must be done. My estate
planning will continue until the day I die. The law will change. My family will
change. My paperwork will need changing. Worse, there is no free lunch. My friend
Dennis Mykytyn, emails me, "As to life insurance, dont kid yourself,
it may pay your estate taxes after you die, but YOU are paying upfront through
premiums for the insurance, there is no free lunch unless you die quickly after
buying the insurance." Nice thought Dennis! And I thought you were
my friend. Buy today. Die tomorrow. Funny.
Today's BIG estate planning lesson is to keep your sense of humor as
you work with the most humorless people you'll ever meet. Can you imagine throwing
a party with estate planners and estate lawyers? "Any of your clients die
this week?" "What's your longest in probate? Seven years. I can beat
you. I have one that's been there 11 years and it's a beaut."
J. Roger Moody, a very smart and very old friend, writes:
Roger is an intelligent
businessman. He sought a solution, found it, implemented it and moved on with
his life. I sense his early frustration -- all those seminars, all those boring
people who want to complicate your life. All of them seem to revel in complications
and insane families. The insaner the better. I'm just beginning down this path.
So, my dear readers, you will suffer along my journey. Let me have your solutions.
My first phone call this morning will be to Roger. He's the sanest person I've
met so far in this whole process. Neat golfer, too.
Read your column today. Went through the same process in 1994 and 1995 when
I retired and moved out west. Attended multiple free estate planning seminars
until I found a knowledgeable and trustworthy firm.
Three major steps I took:
1. Created a revocable living trust which replaces the will. Major benefits
are no probate, no publication when you knock-off, no wait. Your assets are
distributed according to the trust provisions which you can change anytime
you choose. All our assets were taken out of our individual names and put
in the trust.
2. Created living wills, medical powers-of-attorney, etc.
3. Created a family partnership with wife, three children and myself as equal
limited partners. For legal protection the general partner is an S corp. owned
equally by my wife and me. Instead of waiting until Kay and I die, we gave
each of our children $400,000 of assets (cash, stock, & land). In 1996
each person had a $ 600,000 estate tax exemption. (I believe it is now $2
million) Many people do not realize that one doesn't have to wait until death
to use the estate tax exemption. You can use it today. The advantage is that
any appreciation belongs to the limiteds and the children's portion is not
taxable at Kay and my deaths.
Because the children will have no control of these assets until both Kay and
I are six feet under, the IRS let us discount the assets given to the partnership.
Given a 1/3 discount, we could fund the partnership with $ 3.0 million pre-discount,
i.e. 20% ($600,000) for each child, Kay and me. As the estate tax exemption
increased over the years, we increased our contribution to the partnership.
As a result, more than half of our assets are now in the partnership.
Since the trust is revocable you merely file your usual 1040 tax return. I
have been using TurboTax for Home & Business for years. Never been audited.
The partnership requires a IRS form 1065. For this I use TurboTax for Business.
Again, never been audited. TurboTax creates a K1 for each partner.
In any case, my strong advice is to find a firm or lawyer who understands
and can explain revocable living trusts and family limited partnerships before
you and Susan decide on an estate plan. You'll also need a firm to keep your
plan up-to-date. The Federal and State governments occasionally require changes.
For more on estate planning, see yesterday's column. Click
Internet is not a mystery. But it is the greatest sales tool ever invented.
A friend is putting her new business on the Internet. She came to visit yesterday.
To her, the Internet was a mystery -- a potentially expensive mystery.
I sat her down in front of my computer and showed her how web sites worked, how
they got built and changed. It took 10 minutes. What she learned armed her to
save huge monies on the design of her web site for her new business. If you're
contemplating a web business, have your friendly 18-year old explain:
1. What a web server is. How it connects to the Internet.
2. What browsers do.
3. How simple the language of the Internet is -- i.e. HTML. Which means when all
else fails, anybody can edit the source code. My friend actually thought all web
sites were written in machine language. In fact, HTML is English.
4. How you can easily steal the source code of the web site you love and want
5. How Macromedia's Dreamweaver is to web sites, what Microsoft's Word is to writing
letters. Just as easy to use. (And just as quirky.)
6. How you can update a web site in seconds -- literally -- by using the world's
easiest communications program, WS_FTP.
are such lovely people: So, I'm sitting in the chair with three of
them -- an endo, a perio and a normal one -- staring into my mouth. I look up
and question, "My mouth is a disaster?". They ponder and peer. Shortly,
one answers, "No, Harry, your mouth is not a disaster. It's an annuity."
Meantime, I have
a screaming toothache. One of them suggests "eating on the other side."
Another suggests gargling with warm salt water." They all finally agree
that a visit to a fourth dentist is in order. You can guess the rest. He's on
vacation and won't be back until Monday. So, this weekend, I'm stuck with eating
on the other side, gargling with saltwater and popping Advil.
Never try to outsmart a woman
A man calls his wife and says, "Honey, I have been asked to
go fishing at a big lake up in Canada with my boss and several of his friends.
We'll be gone for a week. This is a good opportunity for me to get that promotion
I've been wanting, so would you please pack me enough clothes for a week and
set out my rod and tackle box. We're leaving from the office, and I will swing
by the house to pick my things up. Oh, and please pack my new blue silk pajamas!"
The wife thinks
this sounds a little fishy, but, being a good wife, she does exactly what her
The following weekend he came home a little tired but otherwise looking good.
The wife welcomes him home and asks if he caught many fish? He says, "Yes!
Lots of walleye, some blue gill, and a few pike. But why didn't you pack my
new blue silk pajamas like I asked you to do?"
The wife replies
"I did... they were in your tackle box."
There's a solution for every problem
A biker stops by the local Harley Shop to have his bike fixed. They
couldn't do it while he waited, so he said he didn't live far and would just
On the way home
he stopped at the hardware store and bought a bucket and an anvil. He stopped
by the feed store/livestock dealer and picked up a couple of chickens and a
outside the store he now had a problem: how to carry all of his purchases home.
While he is scratching
his head he was approached by a little old lady who told him she was lost. She
asked, "Can you tell me how to get to 1603 Mockingbird Lane?"
The biker said,
"Well, as a matter of fact, I live at 1616 Mockingbird Lane. I would walk
you home but I can't carry this lot."
The old lady suggested,
"Why don't you put the anvil in the bucket, carry the bucket in one hand,
put a chicken under each arm and carry the goose in your other hand?"
you very much," he said and proceeded to walk the old lady home.
On the way he
says, "Let's take my short cut and go down this alley. We'll be there in
The little old
lady looked him over cautiously and then said, "I am a lonely widow without
a husband to defend me. How do I know that when we get in the alley you won't
hold me up against the wall, pull up my skirt, and have your way with me?"
The biker said,
"Holy smokes lady! I am carrying a bucket, an anvil, two chickens, and
a goose. How in the world could I possibly hold you up against the wall and
The lady replied,
"Set the goose down, cover him with the bucket, put the anvil on top of
the bucket, and I'll hold the chickens."
This column is about my personal search for the perfect
investment. I don't give investment advice. For that you have to be registered
with regulatory authorities, which I am not. I am a reporter and an investor.
I make my daily column -- Monday through Friday -- freely available for three
reasons: Writing is good for sorting things out in my brain. Second, the column
is research for a book I'm writing called "In Search of the Perfect
Investment." Third, I encourage my readers to send me their ideas,
concerns and experiences. That way we can all learn together. My email address
is . You can't
click on my email address. You have to re-type it . This protects me from software
scanning the Internet for email addresses to spam. I have no role in choosing
the Google ads. Thus I cannot endorse any, though some look mighty interesting.
If you click on a link, Google may send me money. Please note I'm not suggesting
you do. That money, if there is any, may help pay Claire's law school tuition.
Read more about Google AdSense, click
here and here.