“The Era of Fiscal Austerity is Over”

Click here to read a recent New York Times article entitled “The Era of Fiscal Austerity is Over. Here’s What Big Deficits Mean for the Economy.”   It explains the implications of rising government deficits brought on by recent tax cuts and proposed spending hikes.

We agree that a near-term economic boost is likely.  However, the longer-term implications, including potential surges in inflation, interest rates, and the national debt, may present challenges to the economy and markets.  We will continue to monitor economic and fiscal developments for appropriate response.

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Resolutions for 2018

Jazon Zweig is one of our favorite columnists who is published in the Wall Street Journal every Saturday/Sunday Edition.

Here are his comments on 2018 New Year’s resolutions, surprisingly not about investments and most worthwhile reading.  Click on the link below.

http://jasonzweig.com/less-phone-more-nature-34-resolutions-for-a-better-2018/

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Best Practices to Help Prevent Cyber Fraud

At our November, 2017 Investment Forum, we discussed cyber security and the measures you can use to protect your identity, personal data, and assets from online theft.    We developed a 1-pager that outlines the best practices to help prevent cyber fraud as well as the resources available if you do find yourself the victim of cyber fraud.    We hope you find it useful.

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Be Tax Efficient This Giving Season

As we approach the end of the year, charitable giving is once again expected to ramp up between Thanksgiving and December 31st, and we at Edgemoor would like to share some advice with any clients that wish to make donations. Although there is no wrong way to donate to charity, there are steps you can take to minimize taxes and maximize impact.

Donating IRA Distributions

Clients over the age of 70 ½ who have an IRA can donate up to $100,000 of distributions to charity instead of receiving it as taxable income. We recommend using funds from non-IRA accounts for donations above the Required Minimum Distribution amount. This strategy allows IRA assets to grow tax-free for as long as possible, ultimately increasing the funds available for future donations, expenses, and beneficiaries of Inherited IRAs.

Gifting Appreciated Stock

You can avoid taxable capital gains if you donate appreciated securities that have been held in taxable accounts for at least a year. This is preferable to selling the securities and donating the cash proceeds, because you avoid realizing long-term capital gains while still getting the full deduction for up to the fair market value of the donated securities. We recommend donating the securities with the largest capital gains to maximize the tax benefits of charitable giving.

Making Direct Donations vs. Funding Donor-Advised Funds

Appreciated securities may be donated either directly to charities or to a Donor-Advised Fund (DAF). DAFs are investment vehicles for giving to charitable organizations. Edgemoor offers DAFs through its custodians, Fidelity Investments and Charles Schwab & Co.

Appreciated stock donations to DAFs have several advantages:

  • You can choose the charities that will receive grants from DAFs
  • You can take the full tax deduction upfront for donating to DAFs and then distribute the donated assets to the designated charities over time
  • You can invest and grow your assets donated to DAFs if you wait to distribute them over time
  • You can get help from DAFs to research charities, track your donations, and set up automatic recurring donations

Fidelity and Schwab both require a minimum initial balance of $5,000 for DAFs and provide lists of select funds for investment of donations pending their distribution to charities. For accounts exceeding $250,000 you can have your DAF funds managed by the investment advisor of your choice and invest in stocks, bonds, and a wider range of funds. Administrative fees for DAFs range from 0.10%-0.60% based on account size.

We at Edgemoor would be happy to provide allocation recommendations free of charge for DAFs invested in the lists of DAF select funds, or to manage DAFs exceeding $250,000. Setting up a charitable giving account through a DAF is easy, and Edgemoor is ready to prepare all forms and guide you through the process.

Timing Your Donations

You receive the tax benefits from giving to charity, either directly or to a DAF, in the year you make the donation. There is a maximum deduction you can take for charitable giving which is a function of your taxable income. Spreading out your donations over multiple years may maximize your tax savings. However, if you have a higher than usual income in a single year (e.g. from selling a family business), it may be best to make one large donation to a DAF to reduce your large tax bill that year, then distribute the funds to designated charitable organizations over multiple years.

If you wish to receive tax benefits in a certain year, the charitable organizations or DAFs must receive your donations by December 31st of that year. We recommend beginning to transfer assets at least several weeks before the end of the year to ensure the charitable organization or DAF can process your donations in time.

Contacting Edgemoor

If you have any questions, please feel free to call 301-543-8881 or e-mail us at rroane@edgemoorinv.com.

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Cybersecurity and Your Credit

Cybersecurity is a major concern, and recent data breaches heighten the importance of protecting one’s privacy and data security.  Following is a summary of the latest data breach at Equifax and our recommendations to reduce the risk that someone can obtain and use your personal identity and data.

Equifax Incident

On Thursday, September 7th, the credit reporting agency Equifax announced it had been the target of a cybersecurity breach that could potentially impact 143 million Americans. Criminals accessed files that included the names, Social Security numbers, birth dates, addresses, and even some driver’s license numbers of Equifax customers.  A more detailed summary can be found here: https://www.equifaxsecurity2017.com

Equifax is giving all consumers the ability to check whether they have been impacted by this breach and the option to enroll in its credit monitoring service, TrustedID Premier, for free for one year regardless of whether you were impacted by the breach. TrustedID Premier includes:

  • Copies of your Equifax Credit Report
  • Credit file monitoring at all three major credit bureaus
  • The ability to lock your Equifax Credit Report
  • Social Security number monitoring
  • Identity theft insurance

To check whether you have been impacted and enroll in TrustedID Premier, simply follow these steps:

  1. Visit https://www.equifaxsecurity2017.com/enroll/ and click the red button “Begin Enrollment” on the left side.
  2. Type in your last name and the last 6 digits of your Social Security number.
  3. The next screen indicates whether Equifax believes your information may have been impacted; click “Enroll” if you wish to sign up for TrustedID Premier for free.
  4. The next screen may show you your enrollment date for TrustedID Premier. If so, return to https://www.equifaxsecurity2017.com/enroll/ on or after this enrollment date and click the red button “Continue Enrollment” on the right side of the page; otherwise, go directly to the next step.
  5. Follow the instructions as prompted, providing any additional information requested and a valid email address to finish enrollment.
  6. You will receive an email within a few days with a link to activate TrustedID Premier.

Freezing Your Credit and Other Tips for Protecting Your Identity

In the wake of this breach, The New York Times has also provided tips for protecting one’s information online in a variety of articles.  Helpful tips include:

  • Lock your credit reports at the three major credit reporting agencies (Equifax, Experian, and TransUnion), either through a security freeze or another option provided by the agencies. This service locks your credit files and prevents the opening of new credit card accounts or loans unless you temporarily open your files to apply for new credit. Please be aware that you may be charged a fee for this service depending on the credit agency and the specific service requested. Fees tend to be one-time charges in the range of $5-$20.
  • Review your credit report at least annually by obtaining it for free from this site: www.annualcreditreport.com. Be sure to use this official site and not others with similar names that companies use to try to sell you services.
  • Change all passwords for websites that store any of your personal information, especially those related to your finances or health.  Do not use the same password for multiple websites.

We at Edgemoor recommend all our clients take the above steps and begin monitoring any online accounts with personal identifying information for suspicious activity. We also urge everyone to be cautious regarding any suspicious requests received online, whether through a website or e-mail.

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