Monday, December 20, 2010

New Tax Laws Preempt Existing Trusts Tax

/PRNewswire/ -- Late Friday afternoon, Congress enacted the most sweeping change in the estate tax law in 29 years. The new law contains some good news for the very wealthy, but it also makes most estate plans obsolete. Everyone who has a living trust (family trust) should update it promptly.

Tax lawyer and estate planning expert Robert F. Klueger notes that, "At a minimum, the new law requires every married couple who wrote an estate planning trust to have that trust reviewed, and perhaps modified. If not, many people will learn that their trust doesn't reduce their taxes but can indeed increase their tax liability."

Klueger & Stein, LLP has prepared a short video featuring Robert F. Klueger that reviews the changes to the estate tax law and how it impacts existing estate plans, with suggestions as to how these plans can be modified. The video can be viewed free of charge at or

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Friday, December 17, 2010

Fed Proposed Debit Interchange Fee Cap Rule Could Have Unintended Consequences for Government Benefit Cards, Flexible Spending Accounts and Reloadable Prepaid Cards

/PRNewswire/ -- The Network Branded Prepaid Card Association (NBPCA) is concerned that the interchange fee structure and network routing terms announced by the Federal Reserve in its proposed rulemaking will inevitably increase costs to consumers and issuers. Operational flaws, such as requiring prepaid gift cards and flexible spending account cards to include PIN-based debit, not only serve no purpose but also create inefficiencies, increase risk of fraud and unnecessarily raise costs.

Of particular concern to the prepaid card industry is the proposed rules do not clarify how the critical exemptions for government benefit cards and reloadable prepaid cards would be implemented by the card networks under the proposed interchange fee cap rule, as mandated by the Dodd-Frank Wall Street Reform Act. This fact was noted during yesterday's meeting, when a Federal Reserve official acknowledged the proposed rule permits but does not require card networks to allow a higher interchange fee for government benefit cards, reloadable cards not marketed as gift, or cards issued by banks with less than $10 billion in revenue. The official added if it becomes problematic for the card networks to implement the exemptions, then the lower interchange rate would apply.

"At a time of historic economic hardship, millions of Americans rely upon government benefit cards and reloadable prepaid cards as a secure, convenient, non-stigmatizing payment tool to make everyday purchases," said Kirsten Trusko, NBPCA President and Executive Director.

"NBPCA looks forward to submitting comments to the Federal Reserve and hopes it will clarify how exemptions will be handled in its final rule. Failure to do so could reduce the availability of prepaid cards, resulting in a catastrophic impact on consumers and governments," added Trusko

Financial institutions offer government benefit cards to states at little to no cost because they receive revenue primarily from the debit interchange. Nearly every state in the nation (47 states) either uses prepaid cards or is in the process of setting up programs to administer a variety of benefits, such as unemployment and Temporary Assistance to Needy Families (TANF) to millions of needy Americans.

The US Treasury dispenses Social Security benefits through its Direct Express government benefit card. Not only do states save money from check related costs, which is critical at a time when states are experiencing huge budget deficits, but consumers benefit from receiving their funds more efficiently and quickly through this electronic payment tool. Without the exemption from the lower debit interchange fee, it is likely banks will be forced to reduce or eliminate the availability of government benefit cards to nearly every state in the nation.

Millions of unbanked and underbanked individuals also rely upon prepaid cards to participate in our card based economy. It is quite probable if these cards aren't exempted from the interchange fee cap, prepaid card users will be subject to merchant minimums for credit cards because clerks could confuse the cards with credit cards and deny prepaid cardholders from making basic purchases like milk and eggs.

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Wednesday, December 15, 2010

Study: Recession Will Cost Baby Boomers Up To $40,000 in Social Security Benefits

/PRNewswire/ -- Baby Boomers will see greatly reduced Social Security benefits over the course of their retirements due to an unprecedented combination of low wage growth and no annual cost-of-living adjustments (COLA), according to a new study by The Senior Citizens League. And those who first become eligible for Social Security in 2011 will receive lower benefits than retirees born a year earlier.

This is the most comprehensive study ever released to show the recession's impact on Social Security benefits for the first wave of baby boomers.

It found that the combination of rapidly slowing wage growth and no COLA is shrinking the normal increases in initial retirement benefits. An inequity will also be created: people born in 1949 (who turn 62 next year) will receive lower benefits than retirees with similar work histories born just one year earlier. Moreover, the lack of a COLA will reduce lifetime Social Security benefits by as much as $40,000 for many retirees with average earning histories (reductions will be felt regardless of the age at which people begin claiming benefits, and some higher-earning seniors stand to lose even more).

Recent wage and consumer price trends – two of the key factors in determining Social Security benefits – have combined to form a "perfect storm" for the first wave of Baby Boomers. Since the start of the recession, average wage growth has plummeted, and there will be no COLA in 2011 for the second year in a row.

Under normal economic conditions, the initial benefits of each succeeding birth year tend to be slightly higher than the previous birth year as wages rise over time. But average wage growth has been slowing since the 1980s and has dropped markedly since 2008.

Furthermore, low inflation (a situation that government economists expect to continue) led to no COLA in 2010 and 2011. The loss of the compounding effect of a COLA on lifetime benefits is high, and grows the longer a senior spends in retirement. Seniors who turn 62 during the years of no COLA are hit with the full brunt of the compounding loss and stand to lose the most.

Aggravating the situation is the fact that, although general inflation is low, seniors' living costs have increased, especially due to rising Medicare premiums.

Lifetime Social Security Benefits an Average Senior Will Lose Due to No/Low COLAs(1)

Year of Birth
62-Year-Old Retiree

66-Year-Old Retiree

(1) Low COLA is defined as less than 2.8 percent, which is the average COLA paid from 1975 through 2009. This chart shows how much low or no COLA will affect benefits over a 20-year (for those retiring at age 66) or 25 year (for those retiring at age 62) retirement.

"Large numbers of seniors will be at risk of outliving their retirement income and being pushed into poverty due to an unprecedented combination of economic factors," said Larry Hyland, chairman of The Senior Citizens League. "The Senior Citizens League is adamantly opposed to deficit reduction proposals that would cut COLAs. Instead, Congress needs to pass an emergency COLA provision or guarantee a minimum average COLA to prevent this disturbing erosion in Social Security benefits."

The Senior Citizens League also recommends that any legislation that changes how Social Security benefits are calculated is devised in a way that is fair to all, to prevent inequities between retirees close in age.

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Monday, December 13, 2010

Consumer Reports Index: Worried Consumers May Make Reluctant Shoppers During Final Weeks of December

/PRNewswire/ -- While retail spending was strong this November, consumers are feeling the pain of a weak employment picture and increased financial troubles. Americans are showing signs of waning confidence, increased stress and reluctance to spend more in December than a year ago, according to the Consumer Reports Index December report.

The Consumer Reports Retail Index showed that the Past 30-Day Retail Index for December, reflective of November activity, was 12.4, up from both the prior month (10.9) and one year ago (11.2). But with just two weeks left to go in the holiday shopping season, the Consumer Reports Index offers some troubling signs for retailers. The Next 30-Day Retail Index for December (reflecting planned December activity) is down slightly (11.8) versus a year ago (12.2). This was led by the soft performance of planned purchasing of personal electronics relative to last year (27.8% versus 32.9%, respectively).

"Despite all the talk and media attention about positive economic growth, consumers are telling us that they are not seeing or, more importantly, not feeling the difference," said Ed Farrell, a director of the Consumer Reports National Research Center. "The consumer may not be confident enough to continue spending through the holiday season. It may require deep discounting from retailers to get consumers back to the store in the final weeks of December."

After five straight months of improvement, the Consumer Reports Trouble Tracker Index points to an increase in consumer financial difficulties (e.g. missed major bills, job loss, loss of health-care coverage) and is up this month to 52.7 from 49.3 the prior month, but well below one year ago (62.0).

The Consumer Reports Employment Index is down in December to 49.2 from 50.3 in November, and is on par with one year ago (48.9), bringing to a halt three months of modest gains. December's Employment Index is indicative of an economy shedding more jobs than it is creating. In the past 30 days, the proportion of Americans that have lost their job has increased to 7.4% from 4.9% a month earlier. Past 30-day job losses are at their highest level since June (8.6%).

The Consumer Reports Index report, available at , comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index : 45.1*

The Consumer Reports Sentiment Index (45.1) has slipped slightly from the prior month (46.6), but is up slightly from one year ago (41.8). Sentiment has doggedly refused to enter positive territory (over 50) since it was first measured by the Consumer Reports Index on October 5, 2008 and stood at 45.3.

* The most optimistic consumers: Age 18-34 – 53.5, (down from 58.4 the prior month) and those with household incomes $100,000 or more – 54.5, even with prior month (55.1).
* The most pessimistic consumers: Households with income less than $50,000 (40.2, down slightly from the prior month at 42.2), and consumers age 65 and older (38.7, little changed from a month earlier at 38.4).

* The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.

Consumer Reports Retail Index : Past 30-Day 12.4, Next 30-Day – 11.8*

* The Past 30-Day Retail Index for December (reflective of November activity) is 12.4, up from the prior month (10.9), as well as a year ago (11.2). December's Next 30-Day Retail Index (planned purchases for December), is at 11.8, up substantially from last month (8.0), but is slightly trailing last year at this time (12.2).
* Looking in detail at the categories comprising the Past 30-Day Retail Index* gains were attributable to an uptick in small appliance sales versus the prior month (21.8% versus 16.7%, respectively); gains in home electronics, up to 15.0% from 11.8% a month earlier; and personal electronics (26.2), up substantially from the prior month (19.6). Versus one year ago, sales in the past 30-days were up for home electronics (15.0%) versus 11.9% last year; and for major appliances (8.1%), up from 6.8% a year ago.
* The gain in the Next 30-Day Retail Index* for December, reflective of December activity, was attributable to an increase in planned purchasing of personal electronics (27.8%), up from 18.2% a month earlier; and a gain in planned purchasing for home electronics (16.5%) versus the prior month (10.0%). Compared to last year, however, planned purchasing of personal electronics was down for this December, 27.8% versus 32.9%, respectively.

* The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30 days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.

Consumer Reports Trouble Tracker Index : 52.7

* Consumers faced more troubles than last month, signaling a halt to five months of improvement. The trouble tracker index increased to 52.7 in December, up from November's 49.3, though the Trouble Tracker Index is much improved from one year ago (62.0).
* Negative developments were led by an increase in consumers that lost their job in the past 30 days to 7.4% from 4.9% in November, and an increase in those that have missed a payment on a major bill (not mortgage) to 9.5% from 8.9% a month earlier.
* A sign of the weak jobs market is the proportion of consumers that have lost or face reduced health-care coverage (9.0%), up slightly from last month (8.7%), but up from a year ago (7.9%).
* On the positive side, there were fewer consumers that could not afford medical bills or medications (13.3%) versus last month (14.5%) and one year ago (15.7%). However, the improvement in the proportion that could not afford medical bills or medication may signal a change in behavior, where consumers are availing themselves of medical services less often.
* Overall, the most prevalent consumer troubles include: the inability to afford medical bills or medications (13.3%) missed payment on a major bill – not a mortgage (9.5%), and lost or reduced health-care coverage (9.0%).

* The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced health-care coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.

Consumer Reports Stress Index : 60.8*

* The level of stress consumers feel they are under is down to 60.8 from 58.5 the prior month, but is below the level from one year ago (63.0).

* The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).

Consumer Reports Employment Index : 49.2*

Regionally, the Northeast is doing slightly better this month, led by declining consumer stress and improved retail activity. The North, Central and South have declined slightly as a result of increased consumer economic difficulties and a decline in Consumer Sentiment.

* The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

For more information regarding the Consumer Reports Index, visit .

The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,263 interviews were completed (1,013 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between December 2 and December 5, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available.

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