Finance

The lion’s share of charitable contributions every year are made between October and Dec. 31, so the last three months of the year present a window of opportunity for you to make sure your favored charities are spending your money the right way. Last month we looked at gifting from your IRA; this month, in the second of two parts, we look at evaluating the charities themselves.

A recent study by the Aspen Network of Development Entrepreneurs, the Metanoia Fund and the Rockefeller and William and Flora Hewlett foundations found surprisingly few donors really looked into how effectively a nonprofit organization performed. In addition, older donors tended to rely more upon information from the organization being considered, rather than seek out more independent research.

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Late last year the president signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act. One of its important provisions reinstated for 2011 the option for direct distribution of funds from IRAs to qualified charities. This applies to investors over 70 1/2 who are taking their required minimum distributions.

In the past, if you were older than 70 1/2 and planning a charitable donation, you would have to first recognize your RMD (required minimum distribution) as taxable income. The money could then be used to make your contribution. The contribution would be shown on your tax return as a charitable deduction, part of your itemized deductions and subject to any limitations that apply. Your alternative would be to gift appreciated stock or other assets directly to your chosen charity, avoiding capital gains tax and taking the current value of the asset as a charitable deduction.

When we ask “How did the market do today?” we’re usually looking for averages like the Dow and the Standard & Poor’s 500. But we tend to be unclear about how they came about and what they really reflect.

Dow Jones
The three best known Dow Jones averages are the Industrials (30 stocks), Transportations (20 stocks), and Utilities (15 stocks). The originator, Charles H. Dow, began working on the concept of a benchmark or market barometer in 1884, and the results of his research, an 11-stock average, were first published in The Wall Street Journal on May 26, 1896. By 1929, the original average had split into Industrials and Railroads (later renamed Transports), and a third, comprised of major utilities, was added. Over the years, Dow Jones has expanded its indices into many other areas.

For most of us, end-of-life decisions — those issues relating to medical care and advanced directives to doctors and health care providers — are among the most difficult to discuss. They carry their intimations of illness and mortality like so much excess baggage, and they grow heavier as we age. In addition, they bring with them religious beliefs and moral considerations that are deeply personal, and these can result in conflict between spouses, parents, children and siblings. That’s a shame, because this kind of discord can be easily prevented.

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Sell in May and go away and don’t come back ‘til St. Leger’s Day,” is a somewhat tarnished pearl of stock market wisdom, one that’s sometimes known as the Halloween indicator. It purports to help investors increase their return and avoid losses by staying out of the markets from May through Oct. 31. Since St. Leger’s Day in mid-September marks the last day of the British racing season (about which we in America are mostly clueless), investors on this side of the Atlantic have substituted Halloween.

Most investment analysis involves some degree of fundamental research — the study of individual companies, sectors or markets and the economic forces that drive them higher or lower. Other strategies involve market timing — trying to discern where the markets are going and acting accordingly — or technical analysis, the process of studying price and volume changes in order to make near- and longer-term judgments on individual company stocks or the broader markets. You often hear investors say “Don’t follow the crowd,” but you’ll also hear them say “The trend is your friend.” We know there is safety (or at least comfort) in numbers. However, the discipline known as contrarian investing, which builds a sophisticated philosophy and strategy out of going against the grain, has considerable resonance for many investors.

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In his State of the Union address, President Obama issued a challenge to America to produce 80% of its electricity from clean energy sources by 2035. This ambitious initiative would require an almost unprecedented partnership between government and the private sector and will certainly be controversial.

More recently, the interior department announced a $50 million program to expedite the development of wind farms off the coast of the mid-Atlantic states, as well as a $25 million program to support new and existing wind turbine technologies. While these stately turbines are good in theory, the reality is much more controversial. It took eight years for final approval of the nation’s first wind farm off the coast of Cape Cod, over opposition from environmentalists, Indian tribes and the tourist industry.

Without knowing how Congress will resolve the issue of taxes for 2011 and beyond, end-of-year investment and tax planning will be a challenge to say the least. Still up in the air are not only the all-important income tax rates and brackets, but also the capital gains tax rate, dividend tax rates, itemized deduction phaseouts, the alternative minimum tax, the estate tax and more.

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As of 2010, the $100,000 modified adjusted gross income limit for conversion of IRAs to Roth IRAs has been waived. This presents an opportunity for thousands of investors whose income made them ineligible for Roth conversions in the past. In addition, the taxable income resulting from a Roth conversion (in 2010 only) can be spread out over two tax years. Half of the income can be recognized in tax year 2011, due by April 15, 2012 (or Oct. 15 with extensions), and the other half can be recognized in 2012, due April 15, 2013 (or Oct. 15 with extensions). Alternatively, the income can be recognized in 2010, the year of conversion.

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Investors are anxiously awaiting the results of November’s midterm for varying reasons and with a wide range of expectations. Some are hoping that a decisive change in the congressional status quo will reignite enthusiasm for the stock market in the coming year. Others are counting on a relatively strong showing by the Democrats, which would revalidate the current economic strategy and boost investor confidence. Elections influence markets — and the other way around — and now is a good time to look at the intersection of markets and politics.

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Hurricane season starts on June 1, so now is a great time to take a look at your insurance policy and your coverage.

Hurricane season starts on June 1, so now is a great time to take a look at your insurance policies and your coverage. Here are five mistakes people make when it comes to insurance.

More and more retirees, hit hard by the downturn in the stock market, are turning to the once-controversial reverse mortgage to tap into their home's equity and boost their monthly income.

A reverse mortgage is a special type of home loan that lets seniors convert a portion of the equity in their home into cash, according to the U.S. Department of Housing and Urban Development.

Unlike a traditional equity loan, a reverse mortgage does not have to be repaid as long as the borrower lives in the house. There are no qualification requirements based on assets, income or credit score.

Millions of people took advantage of the $8,000 tax credit for first-time homebuyers that was set to expire on Dec. 1. But there’s good news for many people: Congress extended the program through April 30, 2010, and it’s not just for first-time home buyers anymore.

The credit, called the Worker, Homeownership, and Business Assistance Act of 2009, now also allows those who have not have owned another home for at least the previous three years to take advantage of the $8,000 tax credit.

The experience of renting out a home can be both rewarding and challenging. If you’re pondering on the idea of renting out an existing residence or purchasing a property for the purpose of renting it out, there are a few things to know before you get started.

CHOOSING THE RIGHT PROPERTY
The popularity of investing in a home as a rental property has increased over the years. Right now is an ideal time to purchase a home for investment. With interest rates low and a multitude of homes on the market, many homeowners are choosing to purchase a home solely for the purpose of renting it out. Investors are looking to sell the home later to make a bigger profit.

When searching for a rental property, the location should be a top priority. In the Lowcountry, it’s not difficult to find residential properties with ocean front lots, golf course views or an array of fabulous amenities. Purchasing a home that backs up to the green or is close to beach is desirable to many tenants and can get the property rented quickly. Other amenities to consider are gated communities with swimming pools, tennis courts, playgrounds and fitness centers.