Gross domestic product increased at a prodigious annual rate of 4.9% in the third quarter, according to the first estimate released by the Commerce Department’s Bureau of Economic Analysis. That runs laps around the second quarter’s 2.1%. The increase reflects acceleration in consumer spending for both goods and services, private inventory investment, exports, government spending, and residential fixed investment.

Total nonfarm payroll employment in the U.S. grew by 150,000 jobs in October. While that would generally be considered a solid reading, it is well below the average  of 258,000 we saw  over the trailing 12 months. The unemployment rate and labor force participation rate both remained steady at 3.9% and 62.7%, respectively.

Initial jobless claims increased by 5,000 to 217,000, seasonally adjusted, in the week ending October 28. The four-week moving average, which removes volatility, increased by 2,000 to 210,000.

The Consumer Price Index for All Urban Consumers was unchanged at 0.4% in October on a seasonally adjusted basis, according to the Labor Department. Over the last 12 months, the all-items index increased 3.2% before seasonal adjustment, less than the 3.7% recorded the previous month. Shelter costs continued to rise, offsetting a decline in those for gasoline. Core inflation, excluding volatile food and energy, rose 0.2%, marking a slowdown from September’s 0.3% rise. That still amounted to a 4.0% trailing-12-month increase.

The S&P 500 retrenched for the third month in a row, losing -2.1% on a total-return basis. In October, the CBOE VIX “fear gauge” began to steady, ending the month up 3.5% at 18.14 after a sharp September surge.

Equities retreated all around the world. In Europe, London’s FTSE 100, Amsterdam’s Euronext 100 and Frankfurt’s DAX were down between -3.7% and -3.9%. In Asia, Shanghai’s SSE Composite, Tokyo’s Nikkei 225 and Hong Kong’s Hang Seng were all down between -2.9% and -3.9%.

The Federal Reserve held interest rates steady after its November 1 meeting, keeping the Fed funds target in the 5.25%-5.5% range. The central bankers are stepping back, allowing lenders’ tight credit policies to do the hard work of cooling the economy without scuttling it altogether.

According to the CME FedWatch Tool, 80% of Wall Street traders surveyed believe the Fed will again stand pat at its next meeting, set for December 13.

West Texas Intermediate crude prices finally cooled off in October’s frost, diving -10.8% to end last month at $81.02 per barrel.

Gold surged in October, as both stock and bond markets hit the doldrums. The price of the precious metal climbed +6.9% to end October at just under $2,000 per ounce.

The U.S. dollar held steady against the euro, rose fractionally against the pound, and improved +1.5% against the struggling yen.

Cryptocurrency is back in the chips. Bellwether bitcoin celebrated its 15th birthday by soaring +27.9% in October, ending the month at $34,562.

Probate: The legacy you don’t want to leave to your kids

This is a Debby Downer of a newsletter, we freely admit. After asking you to picture yourself as a mentally diminished octogenarian, we now turn to asking you to contemplate your inevitable demise. No need to thank us.

Pardon the gallows humor, but this is as uncomfortable to write as it is to read. We wouldn’t be bothering if it weren’t critical to the preservation of the assets you spent a lifetime accumulating.

So, let’s get on with it and discuss how you can use a living trust to bypass the probate process and move money from your estate to your heirs’ accounts.

Probate in a nutshell

Probate is the court’s process of determining whether a will is valid and ensuring the executor carries out the deceased person’s legal and financial wishes. Along the way, the executor is charged with such duties as making an inventory, transferring assets to the estate, paying bills and taxes, collecting debts owed to the estate and investing the assets until the court gives permission to distribute them to the heirs. (This last part is important. If there’s any ambiguity in the will, it’s typically the executor who directs where the money ultimately goes.)

Probate is not necessarily unpleasant, but it is time-consuming and generally takes more than a year – often several years. During this period, assets can’t be distributed without a judge’s permission.

Saving time, though, is only one reason to avoid probate. Another is saving money by not generating as many billable hours for lawyers. (Yes, there are hearse chasers just like there are ambulance chasers.) To be fair, court costs, executors’ remuneration and appraisal fees can also start to add up. Further, probate leaves a trail of public records; you might not want your financial condition as of your last day on earth to be available to anyone with wi-fi. And, of course, there’s something to be said for letting your heirs get on with their lives.

Probate, by the way, is not all-encompassing. First, there are minimum dollar values. If an estate’s total value is less than x, there’s no need for probate and the estate can be disbursed using far more streamlined procedures. The problem is solving for x. In New York, x=$30,000, in Texas, x=$75,000 and in California x=$184,500. We could go on.

Aside from that, a lot of assets can be passed down outside the probate process. Anything joint-owned goes straight to the other joint owner – typically a spouse. Life insurance policies get paid out to the named beneficiaries. When you opened your retirement accounts, you were probably asked, though not required, to name a beneficiary who would receive all proceeds that survive you. If nobody told you then, we’re telling you now: That’s a good idea. You might want to take a quick break from reading this and make sure each of your IRAs and 401(k) plans point to someone who should inherit the funds they contain.

But if you still have other assets, how can you eliminate the need for probate? That’s where living trusts come in.

Trust, but verify

A living trust is called that because the grantor – that’s you – is still alive at the time of its inception. It transfers selected assets to a trustee who holds and distributes property and income for one or more beneficiaries. This is supposed to be done in accordance to your instructions, but ultimately the trustee holds a lot of power. (By the way, a living trust is different from a living will but, while we’re tangentially on the topic, you might want to look into that too.)

While living trusts are most widely associated with end-running around probate and transferring your wealth to your heirs, you can actually name yourself as a beneficiary.

“If you have an illness that is likely to disable you, you can establish a living trust and put the title to your assets into the trust for your benefit, naming yourself as trustee and someone to replace you as trustee when and if you become too sick to continue,” according to New York City Bar.

Regardless of who you name, use of the property or receipt of income from the trust passes to one or more beneficiaries after your death, without the need for probate.

When you create a living trust, you must place the asset into the trust once the trust document is signed.  This includes the deed to a house or the title of a car.

If you do form a living trust, you need to decide if it will be irrevocable or revocable. The latter makes it easier for you to change the terms. Certainly, that means you can add or subtract beneficiaries, but it also facilitates your ability to dump a trustee who isn’t living up to the title.

The payout

Revocable living trusts not only give you more control, they’re also easier to set up and need less attention from lawyers. So why would anyone ever establish an irrevocable living trust?

First, “irrevocable” is a bit of an overstatement. They can be altered given either a court order or the approval of 100% of the beneficiaries. Even so, that’s a high bar.

Irrevocable trusts’ main selling point is that they are not subject to an estate tax and shield the grantor from income taxes incurred by the assets. They also provide a layer of insulation from litigation and creditors.

It’s a delicate decision, and one size clearly does not fit all. It’s always a good idea to consult a qualified financial professional for specific advice.

-Rex

Rex Moxley

Rex Moxley joined Smith Anglin in 2001. Since then, he's served as a Managing Partner and as a member of the firm's Investment Committee. He regularly meets with prospective clients, counsels existing clients, participates in investment portfolio analysis and develops materials for communicating with the firm's clientele and target markets. He holds a BBA in Finance and Marketing, a graduate degree in Law and numerous securities licenses and designations.