The logic is brutal: Before costs, investors collectively earn the market’s return. After costs, we inevitably lag behind.

This Week/Feb. 18-24

GET A WILL. Less than half of U.S. adults have a will. Without one, many of your assets will be distributed according to state law, plus you won’t have a say in who becomes your children’s guardian. Some folks don’t bother with a will, because they have a revocable living trust. But when you die, there’ll inevitably be assets outside the trust—and, for them, you need a will.

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Federal Estate Taxes

YOU CAN LEAVE ANY AMOUNT to a spouse who is a U.S. citizen without worrying about federal estate taxes, thanks to the unlimited marital deduction. But if you bequeath a total of more than $11.2 million to other folks in 2018, federal estate taxes kick in at a 40% rate. This $11 million-plus threshold is sometimes referred to as the unified credit—though this isn’t strictly correct, because the credit is the tax you avoid, not the sum that avoids taxation. Don’t have anything close to $11 million? Taxes could still take a bite out of your estate for two reasons. First, your estate could be taxed at the state level. A third of states levy either an estate tax or an inheritance tax, and sometimes both. Second, if you bequeath retirement accounts, other than Roth accounts, your heirs will owe income taxes as they draw down those accounts. The embedded income tax bill on traditional retirement accounts affects far more Americans than federal and state estate taxes, but it doesn’t garner nearly as much attention. What if you leave your heirs your home, which is worth far more than you paid? What if you bequeath regular taxable accounts where you hold, say, stocks with large unrealized capital gains? For those investments and for your home, there’s good news: These assets enjoy a step-up in cost basis, which means their purchase price for tax purposes becomes the price as of your death. Result: Unlike with a retirement account, the embedded tax bill disappears. You may want to factor this into your planning as you consider which accounts to spend down during your lifetime and which to bequeath. Next: Unlimited Marital Deduction Previous: Titling
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Latest Blog Posts

Simple but Not Easy

WHEN I FIRST BEGAN INVESTING 16 years ago, I threw a bunch of investments at a wall to see what would stick. Someone I respected encouraged me to invest in master limited partnerships, so I purchased a few companies. I had no real idea what an MLP was or did. Sure, I spent some time surfing the net. But that was about it.
Fast forward one year to tax time. I had lost money and had no idea I had to file with the IRS for an extension,

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Investors Have Spoken

THE MARKET IS ALWAYS RIGHT. It may have a different opinion tomorrow—perhaps radically different—but that doesn’t mean current prices aren’t the right ones.
Holler all you want that the stock market ought to be far lower. I do a fair amount of that myself (though the shouting is more akin to grumpy mumbling). But whether we like today’s share prices or not, they reflect the collective wisdom of all investors—and, if we want to buy or sell,

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Tales to Be Told

IF THIS TURNS OUT TO BE a major bear market, there will be a slew of articles to be written. It’s the negative correlation enjoyed by every financial writer: Even as our portfolios shrink, our potential for pontification soars.
But what if the market bounces back? It’s almost too painful to contemplate. Think of all the articles that won’t get written. If the past week’s rally continues, here are 10 stories that will have to wait for the next market downturn:
1.

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Money Guide

Everything you need to be smarter about money—all in one place.

Start Here

Federal Estate Taxes

YOU CAN LEAVE ANY AMOUNT to a spouse who is a U.S. citizen without worrying about federal estate taxes, thanks to the unlimited marital deduction. But if you bequeath a total of more than $11.2 million to other folks in 2018, federal estate taxes kick in at a 40% rate. This $11 million-plus threshold is sometimes referred to as the unified credit—though this isn’t strictly correct, because the credit is the tax you avoid, not the sum that avoids taxation. Don’t have anything close to $11 million? Taxes could still take a bite out of your estate for two reasons. First, your estate could be taxed at the state level. A third of states levy either an estate tax or an inheritance tax, and sometimes both. Second, if you bequeath retirement accounts, other than Roth accounts, your heirs will owe income taxes as they draw down those accounts. The embedded income tax bill on traditional retirement accounts affects far more Americans than federal and state estate taxes, but it doesn’t garner nearly as much attention. What if you leave your heirs your home, which is worth far more than you paid? What if you bequeath regular taxable accounts where you hold, say, stocks with large unrealized capital gains? For those investments and for your home, there’s good news: These assets enjoy a step-up in cost basis, which means their purchase price for tax purposes becomes the price as of your death. Result: Unlike with a retirement account, the embedded tax bill disappears. You may want to factor this into your planning as you consider which accounts to spend down during your lifetime and which to bequeath. Next: Unlimited Marital Deduction Previous: Titling
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Think of the Children

I FEAR I AM GROWING WEALTHY at my children’s expense. My investing life began in the late 1980s. Yes, there have been stock market bumps since then, notably the 2000-02 and 2007-09 market crashes, and even a minor hiccup over the past week. But if you look at the broad trend, it’s been three decades of rising stock market valuations.
From year-end 1987 to year-end 2017, the S&P 500’s price-earnings multiple climbed from 13.8 to 24.6,

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Jonathan Clements

About Jonathan

Jonathan Clements is the founder and editor of HumbleDollar. He spent almost two decades at The Wall Street Journal, where he was the personal finance columnist. His latest book: How to Think About Money.

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