bestdebtadvisory

Terminating Life and Joint Tenancies

admin — Wed, 13 Oct 2010 12:02:24 +0000

The regular procedure for terminating a joint or life tenancy prescribes the filing of a petition in the District Court. The Court fixes a time and place for hearing on the petition and enters an order accordingly. Notice to all persons deemed by law to be interested in the hearing is given pursuant to the court’s order that directs the mailing of notice to interested persons and the publishing of notice in a legal newspaper. The notice informs all persons having an interest in the estate of decedent that they may attend the hearing and file their objections.
At the hearing, evidence is adduced to show that the real property involved was owned by decedent in joint tenancy and that the co-owner(s) survive(s) and is entitled to have the property decreed to the surviving joint tenant(s) upon death of decedent. Upon finding sufficient evidence in support of the petition and that the notices were properly given is ordered, the Court enters its decree terminating the joint tenancy and ordering title to the real property to be vested in the surviving joint tenant(s) upon death of decedent. Refer to the post entitled “Transfer by Co-ownership” for a list of the documents required for termination of joint tenancy.

Probate Proceedings

admin — Wed, 06 Oct 2010 12:01:01 +0000

The process of settling an estate is usually referred to as probate. The primary purpose of probate is to fix the rights of the persons who are to receive the property of the decedent. When these rights are established by the probate court, questions will not likely arise later as to ownership of the property.
The steps in probating an estate of a deceased person are similar whether the decedent died testate (with a will) or intestate (without a will). A petition is filed in the District Court setting out the time and place the decedent died, together with facts showing that the Court has jurisdiction over the estate. Such facts may be that the decedent died or owned property within that county, or was a resident thereof when he died; in addition the petition shows the name of the executor (the person named by the decedent in his will to be his personal representative) and whether he is willing to serve, the names, ages, and residences of known heirs, and the probable value and character of estate property. The petition may be filed by any person interested in the estate including creditors of decedent.
Whether the decedent died testate or intestate, a hearing will be held. A legal notice must be published at least one time in a newspaper within the county. The publication must appear at least ten days before the date set by the court for hearing the petition; also the notice must be mailed to every known heir, legatee, and devisee of decedent.
At the hearing on the petition to probate a will, evidence is offered to prove the above mentioned statements. The executor testifies at the hearing and at least one witness who attested the execution of the will must testify unless the will is self-proving. If no will was left by the decedent, then in addition to the above-mentioned facts, the testimony must show that the applicant for Letters of Administration is eligible to serve.
After an executor or administrator is appointed, a Notice to Creditors is published in a newspaper within the county twice a week for two consecutive weeks. The notice directs the creditors of the decedent to submit their claims against the estate within two months from first publication of the notice or the claims will be barred from collection.
While the Notice to Creditors is being published, the executor or administrator prepares an inventory of the real and personal property in the decedent’s estate under the direction of his attorney. Three appraisers (usually nominated by the executor) are appointed by the court. The appraisers are directed to determine the value of property shown on the inventory. Their report is then filed with the court. The executor must prepare and file an estate tax return with the Oklahoma Tax Commission and if the gross estate exceeds the allowable exemptions and deductions a return must also be prepared and filed with the Federal Government. These returns must be submitted by the executor and if any tax is due, it must be paid by the executor from the estate of the decedent.
After the estate taxes have been paid, the executor files his final account with the court showing all income and disbursements of the estate and the property under his control available for distribution; he asks the court to fix a time for hearing his accounting and report. A notice of the hearing is published two times by a newspaper at least 20 days before the hearing. It is mailed to all of the heirs, legatees, and devisees of decedent prior to the hearing on the final account.
The notice must also state that the court will make a determination of the heirs and devisees of the decedent. At the time of the hearing on the final account, evidence is offered in support of the final accounting and to prove the identity and eligibility of those persons who by law or by the will are entitled to receive property remaining in the estate. When proof of distribution can be shown by the executor, he asks the court for discharge from his office as executor.

Other Uses of Trusts

admin — Wed, 29 Sep 2010 11:59:44 +0000

Some additional conditions and uses for which a trust should be considered are as follows:
• When the beneficiaries are minors.
• When dependents are incapacitated.
• When a beneficiary is a spendthrift or incapable of managing the business.
• When the beneficiary is a person who does not desire to worry or be bothered with the business responsibilities.
Many professional trustees, such as banks and trust companies, have special arrangements for handling farm trusts. Generally banks charge 1/2 to 1 percent of the trust principal per year. This charge may vary depending on size and nature of the trust. On the other hand, a relative or a person having management experience and qualifications and trusted by the family could be named as a trustee.

Special Purpose Trusts

admin — Wed, 22 Sep 2010 11:59:24 +0000

There are a number of special named trusts depending on their purpose and use. A few of them are as follows:
• A charitable trust may be either permanent or short term (reversionary) depending on the objective of the grantor. For example, a man could set up a permanent trust with the income payable to his wife for her lifetime. At her death, the remaining assets could be paid over to the charitable or educational institution. The grantor in this case would receive an immediate charitable deduction from his taxable yearly income for the “present value” of the amount that the institution will receive from the trust fund. The amount is calculated from actuarial tables. The total assets would be removed from the grantor’s estate for estate tax purposes provided all requirements are met.
• A short term reversionary trust may be used as a tax-saving tool for making annual donations to charity. For example, securities might be placed in trust to provide $1200 of income per year. The trustee pays the whole income to the charity without it having been taxed as part of the grantor’s income. A charitable trust may last for as short a period as two years and still relieve the grantor of the tax on its income.
•   Marital   deduction   trusts are used to take maximum advantage of the estate tax laws. Usually they are divided into two parts. One-half of the trust assets are given to the spouse for life with a general power of appointment. The other half would name him or her as the beneficiary for life with a remainder interest to the children. It is usual to suggest that the spouse use money from the part one trust first in order to reduce estate taxes at his or her death.
• The reversionary   trust   or   short   ter trust is sometimes referred to as the “Clifford Trust.” The trust property in a reversionary trust reverts to the trustor (settlor) of the trust after a stated period of time. Under this type of trust the property and/or securities are placed in the care of a trustee for a period of not less than ten years. At the end of the ten-year period, the property would revert back to the original owners. Normally the objective of creating a reversionary trust is to reduce income taxes. However, the 1986 Tax Reform Act removed the ability to reduce income taxes by using a Clifford trust. Note that if all the income is paid to the beneficiary(s), the tax return is filed by the beneficiary(s). If the funds are accumulated, the tax return is filed by the trust; note that a trust required to distribute all of its income currently is allowed a personal exemption of $300. All other trusts are allowed $100. (I.R.C. Sec. 642.)
•   Life   insurance   trusts are used widely in estate planning. The trusts may be either funded or unfunded. If the policies are on the lives of persons other than the creator of the trust, the income from trust funds used to pay the premiums will be taxed to the trust. Thus an income tax saving may result. There are many variations of the insurance trusts for which insurance advisors should be consulted.
•   Power   of   Appointment   Trust. A general power to appoint during life is the equivalent of outright ownership since the capital is available for the asking. Most authorities prefer to restrict the power to one exercisable by will only. This is enough to qualify the bequest for the marital deduction and preserve the property for future generations.
Some of the advantages of a power of appointment trust are as follows:
• There is a good chance the property will pass according to the wishes of the first spouse to die, because of the usual clause designating how the capital will be distributed at the surviving spouse’s death in the event he or she fails to exercise the power.
• There will be savings in administration fees and attorney fees since the trust assets will form no part of the surviving spouse’s probate estate.
• It relieves the surviving spouse of investment and management problems.
• Flexibility may be introduced, allowing the surviving spouse limited invasion privileges during life and by authorizing the trustee to pay additional capital sums to the surviving spouse at any time or times.

Credit spreads

admin — Sun, 22 Nov 2009 12:11:24 +0000

Credit spreads on corporate bonds will widen in the event of a ratings downgrade or a general flight to quality, in other words prices will fall. In these circumstances an appropriate strategy is to short lower-quality corporate bonds and buy high quality bonds of similar duration. If, however, corporate asset quality is expected to improve then a viable strategy is to write credit derivatives with spread-based payouts. If credit spreads narrow the options will expire unexercised.

Term spreads

admin — Wed, 02 Sep 2009 12:10:22 +0000

The yield curve is not static and may experience parallel or non-parallel shifts. When an economy is overheating and inflationary expectations are rising the rates at the short end tend to rise further than rates at the long end. Central bank open market operations are more effective at the short end of the yield curve than the long end. When an economy is slowing or moving into recession central banks tend to cut rates at the short end aggressively. These shifts provide opportunities to bet on the spread between short-term and long-term rates widening or narrowing.

Openness to Trade

admin — Fri, 03 Jul 2009 10:55:00 +0000

The degree of openness to commercial trade of goods and services is also an important consideration with regard to the exchange rate system, both how it has developed and where it is going. As with capital ﬂows, emerging market participation in global trade has risen exponentially in the last two decades. The average share of external trade (measured by exports plus imports, divided by two) in GDP for emerging market countries rose from about 30% in the late 1960s to 40% in the late 1990s. Within this, the trend towards opening up to trade has been particularly marked in Asia. As trade makes up an increasingly large share of emerging market GDP, so changes in the exchange rate and in output and prices are increasingly interrelated. At the same time, the type of trade has changed signiﬁcantly, moving away from a dependence on commodities towards manufacturing. This change appears to have helped stabilize the terms of trade of emerging market economies, as manufacturing prices change considerably more slowly than do commodities. However, it has also made the economy as a whole more sensitive to exchange rate ﬂuctuations. Commodities are priced in US dollars and ﬂuctuate for the most part independently of ﬂuctuations in exchange rates. Conversely, supply and demand of manufactured trade is very sensitive to exchange rate ﬂuctuations.

The Rise of Capital Flows

admin — Wed, 01 Jul 2009 10:53:56 +0000

A key reason for the move by emerging markets from pegged exchange rates to ﬂoating exchange rates has been the rise in the importance of global capital ﬂows and the extent to which emerging markets have participated in and been integrated within those capital ﬂows. As stated, the rise in the importance of capital ﬂows since the early 1980s reﬂects the wave of capital account liberalization and capital market integration that has taken place since that time. As a proportion of GDP, capital inﬂows to the emerging markets rose six-fold in the 1990s relative to the 1970s and 1980s, only to fall back in 1998 in the wake of the Asian and Russian crises. A similar trend has been seen in bank lending, which also fell back in the wake of these crises. The vulnerability of emerging markets to capital outﬂow and reversal has been a key focus for the emerging markets, and is likely to remain the case for some time to come. A key differentiation between the emerging markets and the industrial countries is the depth of their asset markets and their ability to absorb capital inﬂows and outﬂows without signiﬁcant policy and economic distortion.

A BRIEF HISTORY OF EMERGING MARKET EXCHANGE RATES 2

admin — Tue, 30 Jun 2009 16:52:38 +0000

1995– This last period has been characterized above all by volatility, on the one hand by huge capital inﬂows and on the other hand by frequent currency devaluations. One by one, peggedexchange rate regimes tried to defend themselves, tried to delay the inevitable. However, capital mobility, coupled with pegged exchange rate regimes and in some cases a degree of monetary independence were a poor policy mix, forgetting the principles of Mundell–Fleming, and one by one they were forced off their pegs, to “ﬂoat” (devalue) their currencies. Among those emerging market currencies forced to devalue during this time were:
1994/95 — Mexico
1996 — Czech Republic
1997/98 — Asian region (Thailand, Indonesia, Korea, Philippines)
1998 — Russia
1999 — Brazil
1999 — Ecuador
2000 — Colombia
2001 — Turkey
The year 2002 has brought with it so far the devaluation of the Argentine peso, the ﬁrst “currency board” in history to be defeated, and also that of the Venezuelan bolivar. There have also been cases where emerging market countries have either had some success in ﬁghting back or alternatively have de-pegged voluntarily during periods of exchange rate stability, rightly anticipating that a freely-ﬂoating exchange rate would provide a far more effective buffer for the economy during subsequent periods of market turbulence than the alternative, which would require defending an overvalued exchange rate. In the ﬁrst camp, we have had countries such as Malaysia and also Hong Kong, which have tried various strategies to ﬁght the market. Malaysia, for its part, in September 1998 banned offshore trading of the Malaysian ringgit and pegged it to the US dollar at 3.8 — where it has stayed ever since. Hong Kong, long the self-proclaimed bastion of the free market, intervened in the stock market, ostensibly to rid it of “manipulative, speculative elements”. In the second camp, countries like Chile, Poland and Hungary have de-pegged their exchange rates voluntarily, under calm and stable market conditions. As a result, when market conditions became more volatile, the freely ﬂoating exchange rate was able to buffer or insulate the real economy from damaging imbalances or instability.
As the emerging markets became integrated into the global economy and particularly within the global ﬁnancial system rather than just commercial trade, so the pressure became irresistible for them to move from a ﬁxed or pegged exchange rate system to more ﬂexible exchange rate arrangements, such as the free ﬂoat — the reed that bends in the wind, rather than the pane of glass that shatters. Two major trends in terms of the liberalization of capital markets have played a major part in the development and history of exchange rate systems within the emerging markets — the rise of capital ﬂows and the opening of the emerging markets to international trade.

A BRIEF HISTORY OF EMERGING MARKET EXCHANGE RATES

admin — Tue, 30 Jun 2009 10:51:39 +0000

The history of emerging market currencies and exchange rate systems can most usefully be divided into four main periods — 1973–1981, 1982–1990, 1991–1994 and 1995–2001.
1973–1981 For the most part, this period saw relative exchange rate stability, not least because most emerg- ing market currencies were not freely convertible either on the current or capital accounts. There was a steady if modest capital outﬂow from the industrial countries to the emerging markets, which were mostly at that time dependent on commodities rather than the manufacturing bases they would become.
1982–1990
If the previous period was characterized by stability, that of 1982–1990 was one of anarchy followed by a gradual attempt at restructuring. Massive tightening of monetary policy in the US and a consequent dramatic rise in the US dollar, plunging commodity prices and a reversal in capital ﬂows out of the emerging markets combined to trigger ﬁrst emerging market currency devaluations and then defaults, most notably in Mexico and also elsewhere in Latin America. Given ensuing capital ﬂight, many emerging market countries sought to impose capital controls, driving interest rates artiﬁcially low in response. The gradual debt restructuring process during 1985–1990 helped restore some stability to emerging markets, helped in part by lower interest rates in the US and a sharp fall in the value of the US dollar. The currency devaluations and then low nominal interest rates — and negative real rates — as capital controls were imposed, resulting in very poor returns for passive currency investors.
1991–1994
This was the heyday for the emerging markets. As the Berlin Wall was torn down, so the East was opened up to investment. Latin America had a slightly better time of it as economies gradually recovered in the wake of the Brady bond restructuring programme. Capital controls were lifted, largely as demanded by the IMF, and domestic interest rates, which had been kept artiﬁcially low, were set free to the whim of market forces. “Privatization” of state assets was greatly accelerated, supporting budget balances and helping to attract capital inﬂows. Rising interest and exchange rates greatly boosted total returns for currency investors during this period. In light of this, the Mexican peso devaluation of December 1994 came as rather a rude awakening.