Friday Financial Five – February 13th, 2015

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Friday, February 13, 2015

Dan Forbes, GoLocal24 Contributor

The Treasury released budget data for the first four months of the fiscal year and recent positive trends are facing a reversal. From October of last year through January 2015, the government took in over a trillion dollars in tax revenue, but the deficit increased over last year’s time period by six percent to $194 billion.  There were increases to Medicaid spending in conjunction with the implementation of the new healthcare law, while defense spending fell over 4 percent.

Traditional pension to 401(k) more expensive?    

The National Institute on Retirement Security (NERS) has analyzed the impact of shifting pension plans from defined benefit plans to defined contribution plans. According to the group’s study of three states (Alaska, West Virginia, and Michigan), there have been increased funding issues, costs, and debt incurred by changing from traditional pensions to a 401(k) style plan. This information may provide a different perspective for numerous other states considering a similar change.

Expatriates on the rise

Tax policy should factor into living decisions, especially for those that have options.  CNBC cites a Treasury report indicating a record number of people gave up their American citizenship in 2014. While an increasing income tax policy is usually cited as the reason people leave a state or country, CNBC also cites FACTA (Foreign Account Tax Compliance Act) as a contributing factor. FACTA requires foreign banks to report Americans with $50,000 or more held outside of the country. With no citizenship, there’s no reporting requirement on those individuals.

Smaller banks getting harmed by regulations

Marshall Lux and Robert Greene of Harvard University have conducted a study about Dodd-Frank’s effects on the banking industry. Community banks are suffering an accelerated decline in share of total banking assets and commercial market lending. The report compares FDIC data before and after the implementation of the regulatory measures.  Small bank assets have fallen to 20 percent of the total, down from 40 percent in 1994. If these trends continue, larger banks may swallow up community banks, leaving a hole for certain sectors that are primarily serviced by smaller institutions.

Revisiting Robin Williams’ estate

The conflict between Robin Williams’ beneficiaries proves legal disputes occur even when estate planning documents are in place. The heart of the dispute between Williams’ widow and three children from previous marriages is the division of contents. Specifically, Williams’ trust uses the term “memorabilia”, which may be open to different interpretations. When planning estates involving multiple marriages or a prenuptial agreement, it’s an added level of importance to be very specific when listing the recipient of valuable items or those with sentimental value.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in East Greenwich, RI and can be reached at [email protected]. 

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