Helpful Steps My Late Father-in-Law Took
Thursday, March 23, 2017

My father-in-law passed last week. Les was a person who was willing to take risks when the potential payoff seemed to warrant doing so. This led him to stop his graduate school studies at the University of Chicago and join what was then a brand-new government agency: NASA. His attitude toward risk carried over to investing where, like many investors, he realized profits and occasionally incurred some bad luck, such as the Enron bonds he owned. Though many of the conversations Les and I had involved non-financial topics, it was not unusual for him to discuss investing with me. Les even once gave me his copy of Benjamin Graham’s “The Intelligent Investor” to read, not realizing I already owned a copy of it.

Among the best financial steps Les made didn’t involve security selection or portfolio allocation, but rather the management of his finances. The process of assisting my mother-in-law with her finances has been greatly helped by what my father-in-law did before he passed. I’ll share some of the actions Les took with you in the hope you’ll consider following in his footsteps.

Conversations: I cannot begin to stress how helpful I am now finding the conversations Les and I had to be. My wife and I know about all the accounts my in-laws have, bank or brokerage. We also know about the sources of retirement income and the life insurance policy. There are also no disagreements about how to manage the money, since it was previously discussed. The simple act of conversing has allowed me to me quickly start on the transition, including making calls on my mother-in-law’s behalf.

Good Record Keeping: My father-in-law maintained copies of his account statements and tax returns. Having access to both allowed to me to quickly assess my mother-in-law’s financial situation. The tax returns were particularly helpful for filling out their 2016 tax returns. Though I write our annual tax guide and have done my own taxes for as long as I can remember, doing somebody else’s taxes was a new experience. Being able to both identify what tax forms I needed and have a prior return to compare my work against were immensely helpful.

It’s not just the record keeping, but also knowing where everything was located. A few months ago, I followed my father-in-law around the house with a notebook, writing down where the various documents were kept. This has helped me to know what to look for and where to find it.

Estate Planning: My parents-in-law updated their wills and set up trusts. My wife accompanied her parents to the estate attorney, while I dialed in. Knowing who the attorney is, having her know who I am and having a plan in place has provided much peace of mind.

Account Access: My wife and I are listed as agents on the investment accounts. This allows us to act as if we were the account owners. We also have the powers of attorney over my in-laws' finances. Combined, these authorizations enable us to make financial decisions and take actions on their behalf.

There are issues of trust and competency to be considered when granting such authorizations since it can leave the door wide open for mistakes, abuse and fraud. My father-in-law trusted us; my wife and I are being fully transparent with my mother-in-law, and she is doing the same with us. Not every family is fortunate to have this type of trusting relationship.  As such, while naming agents and granting powers of attorney can be very helpful, much thought must be given to the decision of who to give them to.

Pre-Planning the Funeral: My in-laws previously established their final arrangements. There are no questions about what Les would have wanted. We also don’t have to worry about purchasing a plot, deciding which casket to buy, etc.

Though nobody likes to think about their own demise, planning your own funeral has big advantages. The fixed costs are locked in at current prices. (There still may be variable costs, such as transportation.) Your surviving loved ones are not put into a position of making costly decisions at a time when they’re grieving. (Making financial decisions when you are emotional is never a good idea.) Plus, your personal wishes are more likely to be carried out. The latter particularly matters if you have special requests, such as casket preferences, cremation or a mausoleum. If you desire to be buried in a particular cemetery or a specific area of a cemetery, pre-planning can give you the option of waiting for a plot to become available on the secondary market.

There are a few other things worth mentioning. I’ve been keeping a separate notebook dedicated to my father- and mother-in-law’s affairs. It has proven to be invaluable for keeping track of various items as well as detailed notes about what still needs to be done. Call about survivor benefits as soon possible following the deceased’s passing to get the ball rolling. For instance, the Office of Personnel Management told me it could take two to three months before survivor benefits start. Be prepared to get copies of the death certificate (the funeral home should assist with this) and marriage licenses. Finally, don’t be afraid to reach out to friends and extended family. Many of them will want to help, even if it's just sending food or being there for you.

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Highlights from this month's AAII Journal

The Week Ahead

Five members of the S&P 500 are scheduled to report: Red Hat Inc. (RHT) on Monday; Carnival Corp. (CCL), Darden Restaurants (DRI) and McCormick & Company (MKC) on Tuesday; and Paychex (PAYX) on Wednesday.

The week’s first economic reports will be February international trade, the January S&P Case/Shiller home price index and the Conference Board’s March consumer confidence survey, all of which will be released on Tuesday. Wednesday will feature February pending home sales. The second revisions to fourth-quarter GDP will be released on Thursday. Friday will feature February personal income and spending, the March Chicago purchasing managers’ index and the final University of Michigan’s March consumer sentiment survey.

Seven Federal Reserve officials will make public appearances: Chicago president Charles Evans on Monday and Wednesday; Dallas president Dennis Kaplan on Monday, Tuesday and Thursday; Kansas City president Esther George on Tuesday; Boston president Eric Rosengren on Wednesday; San Francisco president John Williams on Wednesday and Thursday; Cleveland president Loretta Mester on Thursday; and St. Louis president James Bullard on Friday.

The Treasury Department will auction $26 billion of two-year notes on Monday, $34 billion of five-year notes on Tuesday, and $13 billion of two-year floating rate notes and $28 billion of seven-year notes on Wednesday.

AAII Sentiment Survey

Pessimism among individual investors is down for the second consecutive week, according to the latest AAII Sentiment Survey. At the same time, neutral sentiment is now at its highest level since mid-February.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 4.1 percentage points to 35.3%. The historical average is 38.5%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged over the next six months, rose 4.1 percentage points to 34.2%. The increase puts neutral sentiment back above its historical average of 31.0% for the first time in five weeks.

Bearish sentiment, expectations that stock prices will fall over the next six months, plunged 8.2 percentage points to 30.5%. Pessimism was last lower on February 8, 2017 (27.7%). This is the ninth week in the past 10 with a bearish sentiment at or above its historical average of 30.5%.

After reaching an unusually high level of 46.5% two weeks ago, pessimism has pulled back by a cumulative 16.0 percentage points. At the same time, neutral sentiment has rebounded by a cumulative 10.7 percentage points. Neutral sentiment had fallen to near the bottom of its typical range, having registered 23.5% on March 8, 2017. It is worth noting that despite these shifts, pessimism is currently right at its historical average while optimism remains below its historical average.

Some individual investors view last week’s rate hike by the Federal Open Market Committee (FOMC) as a positive, though have not changed their outlook in response, as the answers to this week’s special question show. The speed and the extent of the post-election rally and the prevailing level of valuations remain a point of concern. At the same time, the potential impact that President Trump could have on the domestic and global economy continues to cause uncertainty or concern among some investors, while encouraging others.

This week’s special question asked AAII members how the FOMC’s raising of interest rates has impacted their market outlook. Approximately 60% of respondents said that the rate hikes are having no or very little impact on their outlook and/or their portfolio decisions. Many of these respondents said that last week’s announcement by the Federal Open Market Committee was expected or otherwise already priced in. Several others said interest rates still remain too low. About 19% have a positive view, saying that the tightening cycle expresses confidence in the economy and/or is a sign of economic growth. Just 6% view the rate hike as a negative for stocks.

Here is a sampling of the responses:

  • "Rising interest rates have been expected for quite some time, so no surprise.”
  • “I want to purchase some higher-yielding CDs, so waiting for that. No impact on my market outlook.”
  • "Not at all. I view it as a return to normal.”
  • "Confirmed improving economy. Slow raises should be of benefit to equity growth.”
  • "It’s made my outlook, short-term, a bit more bearish as the market digests what looks like three interest rate hikes.”


This week’s Sentiment Survey results:

Bullish: 35.3%, up 4.1 points
Neutral: 34.2%, up 4.1 points
Bearish: 30.5%, down 8.2 points

Historical averages:

Bullish: 38.5%
Neutral: 31.0%
Bearish: 30.5%
Take the Sentiment Survey.

Local Chapter Meetings
AAII Local Chapter Meetings offer you a variety of presentations from expert speakers who will give you their view on the world of investing. A bonus of attending a Chapter Meeting near you is the opportunity to meet other AAII members who share your interest and enthusiasm for investing. You can even share the Chapter experience with your family and friends by inviting them to attend Chapter Meetings with you!