Personal Financial Planning
, by Hallman, G. Victor
- ISBN: 9780071419444 | 0071419446
- Cover: Hardcover
- Copyright: 5/28/2003
With more than 135,000 copies sold in previous editions,Personal Financial Planninghas become one of today's top answer books for people who want to know what to do with their money, and why.This streamlined seventh edition provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on planning and paying for education expenses, including the new 529 plans; ramifications of the GST estate tax repeal; new checklists and questions to tie up each chapter; and more.
G. Victor Hallman is a lecturer in estate and financial planning at the Wharton School.
Jerry S. Rosenbloom is a professor of insurance and risk management at the Wharton School.
| Preface | p. xxi |
| Coordinated Financial Planning | p. 1 |
| Personal Financial Planning--The Process | p. 3 |
| What Is Personal Financial Planning? | p. 3 |
| Focus on Objectives | p. 4 |
| Need for Personal Financial Planning | p. 5 |
| Steps in the Planning Process | p. 6 |
| Use of Financial Planning Statements | p. 7 |
| Setting Financial Planning Objectives | p. 12 |
| Importance of Setting Objectives | p. 12 |
| Organizing Objectives | p. 12 |
| Adjusting Objectives for Inflation and Possible Deflation (Recession or Depression) | p. 23 |
| Adjusting Objectives to Changing Tax Laws | p. 24 |
| Using Insurance Effectively | p. 27 |
| Personal Insurance Principles and Selecting Insurers | p. 29 |
| Personal Risk Management | p. 29 |
| The Insurance Principle | p. 30 |
| Considerations in Choosing an Insurer | p. 30 |
| Considerations in Choosing an Agent or Broker | p. 34 |
| Life Insurance and Social Security | p. 36 |
| Sources of Life Insurance Protection | p. 36 |
| Social Security | p. 38 |
| Types of Individual Life Insurance Contracts | p. 42 |
| Definitions of Life Insurance for Income Tax Purposes | p. 55 |
| The Life Insurance Contract | p. 57 |
| Planning and Using Life Insurance | p. 62 |
| Substandard Risks | p. 64 |
| Nonmedical Life Insurance | p. 64 |
| What Actions Can an Uninsurable Person Take? | p. 65 |
| Group Life Insurance | p. 65 |
| How Much Life Insurance Is Needed? | p. 67 |
| Health Insurance | p. 70 |
| Sources of Health Insurance Protection | p. 70 |
| Disability Income (Loss-of-Time) Coverages | p. 71 |
| Medical Expense Coverages | p. 79 |
| Individual Health Insurance Policy Provisions | p. 90 |
| Medical Savings Accounts | p. 92 |
| Health Reimbursement Arrangements (HRAs) | p. 93 |
| Long-Term Care Insurance and Medicaid Planning | p. 94 |
| Nature of Exposure | p. 94 |
| Basic Planning Approaches | p. 95 |
| Long-Term Care Insurance and Other Arrangements | p. 95 |
| Medicaid Planning for Long-Term (Custodial) Care | p. 101 |
| Property and Liability Insurance | p. 109 |
| Property Insurance | p. 109 |
| Personal Liability | p. 110 |
| Homeowners Insurance | p. 112 |
| Automobile Insurance | p. 116 |
| Other Property and Liability Policies to Consider | p. 120 |
| Insurance Companies and Premiums | p. 122 |
| Investments and Investment Planning | p. 125 |
| Basic Investment Principles | p. 127 |
| The Basic Investment Objective | p. 127 |
| Investment Directly or Through Financial Intermediaries | p. 127 |
| Investment and Speculation | p. 129 |
| Factors in the Choice of Investments | p. 130 |
| Security of Principal and Income | p. 130 |
| Rates of Return | p. 137 |
| Marketability and Liquidity | p. 146 |
| Diversification | p. 146 |
| Tax Status | p. 148 |
| Size of Investment Units (or Denominations) | p. 148 |
| Use of Collateral for Loans | p. 148 |
| Callability | p. 148 |
| Freedom from Care | p. 149 |
| Common Stocks | p. 150 |
| Characteristics of Common Stocks | p. 150 |
| Some Measures of Value for Common Stocks | p. 150 |
| Information About Common Stocks | p. 154 |
| The Investment Process | p. 155 |
| Diversifying a Common Stock Portfolio | p. 157 |
| Periodic Review | p. 157 |
| Decisions Concerning Selling Common Stocks | p. 157 |
| Dollar-Cost Averaging | p. 158 |
| The Mechanics of Buying and Selling Common Stocks | p. 158 |
| Margin Accounts | p. 160 |
| Selling Short | p. 160 |
| Securities Investor Protection Corporation | p. 161 |
| Investment Categories of Common Stocks | p. 161 |
| Some Theories of Common Stock Investment | p. 164 |
| Common Stocks and Market Cycles | p. 166 |
| The Case for Long-Term Investments in Common Stocks | p. 166 |
| Some Caveats | p. 170 |
| Other Equity Investments | p. 174 |
| Real Estate | p. 174 |
| Oil and Gas (Natural Resource) Ventures | p. 182 |
| Other Tax Shelters | p. 182 |
| Impact of Passive Activity Loss Rules | p. 183 |
| Put and Call Options | p. 184 |
| New Issues or Initial Public Offerings (IPOs) | p. 186 |
| Commodity Futures Trading | p. 186 |
| Art, Antiques, Coins, Stamps, Gold, and Other Precious Metals | p. 188 |
| Fixed-Income Investments | p. 189 |
| Types of Fixed-Income Investments | p. 189 |
| Ways of Taking Returns from Bonds | p. 189 |
| Corporate Bonds | p. 191 |
| Municipal Bonds (Munis) | p. 192 |
| U.S. Government Obligations | p. 196 |
| Market Discount Bonds | p. 199 |
| Zero-Coupon Bonds (Zeros) | p. 200 |
| Preferred Stocks | p. 201 |
| Guaranteed Principal Fixed-Income Investments | p. 202 |
| Liquid Assets | p. 204 |
| Conversion Privileges in Fixed-Income Securities | p. 204 |
| Bond Ratings and Investment Quality | p. 204 |
| Strategies for Investing in Fixed-Income Securities | p. 207 |
| Mutual Funds and Other Investment Companies | p. 209 |
| Kinds of Investment Companies | p. 209 |
| Why Invest in Mutual Funds? | p. 209 |
| Disadvantages of Mutual Funds | p. 210 |
| Types of Funds--Some Planning Considerations | p. 210 |
| Regulation of Investment Companies | p. 213 |
| How to Invest in Mutual Funds | p. 213 |
| Distributions from and Exchanges of Mutual Funds | p. 214 |
| Mutual Funds and Their Investment Objectives | p. 215 |
| Getting Information About Mutual Funds | p. 222 |
| Mutual Fund Performance | p. 222 |
| Mutual Fund Expenses | p. 225 |
| Factors Involved in Selecting Mutual Funds | p. 226 |
| Planning Considerations for Mutual Funds | p. 227 |
| Tax Aspects of Mutual Funds | p. 227 |
| Exchange-Traded Funds | p. 230 |
| Hedge Funds | p. 230 |
| Asset Allocation Strategies and Models | p. 232 |
| Fundamentals of Asset Allocation | p. 232 |
| Steps in the Asset Allocation Process | p. 233 |
| Personal Factors and Asset Allocation | p. 233 |
| Investment Objectives | p. 235 |
| Investment Policies | p. 236 |
| Possible Asset Classes to Be Considered | p. 237 |
| Investment Vehicles to Be Considered | p. 237 |
| Return-Risk Considerations | p. 239 |
| Allocations Within Asset Classes | p. 243 |
| How Investments (Asset Classes) Should Be Held | p. 243 |
| Illustrations of Asset Allocation Strategies | p. 245 |
| Income Tax Planning | p. 255 |
| Income Tax Fundamentals | p. 257 |
| The Federal Income Tax on Individuals | p. 257 |
| The Federal Income Tax on Corporations | p. 273 |
| Pass-Through Business Entities | p. 277 |
| Federal Income Taxation of Trusts and Estates | p. 278 |
| State and Local Income Taxes | p. 280 |
| Basic Income Tax Saving Techniques for Individuals | p. 281 |
| Eliminating or Reducing Taxes | p. 281 |
| Shifting the Tax Burden to Others | p. 287 |
| Allowing Wealth to Accumulate Without Current Taxation and Postponing Taxation | p. 288 |
| Taking Returns as Capital Gains | p. 290 |
| Taxation and the Capital Gains Lock-in Problem | p. 290 |
| Tax-Planning Caveats | p. 298 |
| Charitable Giving | p. 300 |
| Basic Tax Principles | p. 300 |
| Planning Techniques | p. 302 |
| Planning for Retirement and Capital Accumulation Plans | p. 317 |
| Employer-Provided Qualified Retirement Plans and Social Security Benefits | p. 319 |
| Economic Problems of Retirement Years | p. 319 |
| Steps in Planning for Retirement Income | p. 319 |
| Sources of Retirement Income | p. 320 |
| Characteristics of Employer-Provided Retirement Plans | p. 322 |
| Pension Plans | p. 333 |
| Profit-Sharing Plans | p. 336 |
| Savings (Thrift) Plans | p. 338 |
| Stock Bonus Plans and Employee Stock Ownership Plans (ESOPs) | p. 344 |
| Hybrid Qualified Retirement Plans | p. 345 |
| Retirement Plans for the Self-Employed (HR-10 or Keogh Plans) | p. 346 |
| Other Employer-Provided Retirement Plans and Other Employee Benefits | p. 351 |
| Other Employer-Provided Retirement Plans | p. 351 |
| Other Employee Benefits | p. 358 |
| Individual Retirement Accounts and Annuities (IRAs) | p. 361 |
| Basic Concepts | p. 361 |
| Types of IRAs | p. 362 |
| Other Aspects of IRAs | p. 371 |
| Planning Issues for IRAs | p. 372 |
| Planning for Taking Distributions from Qualified Retirement Plans and IRAs | p. 377 |
| General Considerations | p. 377 |
| Taxation of Benefits from Qualified Plans and IRAs | p. 379 |
| Planning for Distributions from Qualified Retirement Plans and IRAs | p. 397 |
| Individual Investment Annuity Contracts | p. 406 |
| Fundamental Purposes of Annuities | p. 406 |
| Types of Individual Annuities | p. 406 |
| Parties to the Annuity Contract | p. 409 |
| Phases of Annuities | p. 409 |
| Investment Returns on Annuities | p. 410 |
| Expense Charges on Annuities | p. 412 |
| Withdrawals and Loans | p. 413 |
| Exchanges of Annuities | p. 414 |
| Annuity Distribution (Payout) Options | p. 414 |
| Annuity Death Benefits | p. 414 |
| Split-Funded Annuities | p. 415 |
| Taxation of Nonqualified Annuities | p. 416 |
| Other Individual Annuity Arrangements | p. 418 |
| Using Life Insurance Values to Provide Retirement Income | p. 418 |
| Employee Stock Compensation Plans | p. 420 |
| General Considerations | p. 420 |
| Types of Plans | p. 420 |
| Statutory Plans | p. 421 |
| Nonstatutory Plans | p. 424 |
| Provisions of Stock Option Plans | p. 428 |
| Valuation of Stock Options | p. 431 |
| Some Caveats Concerning Stock Options and Other Plans | p. 434 |
| Planning Issues Regarding Stock Options and Other Stock Plans | p. 434 |
| Estate Planning | p. 437 |
| Estate Planning Principles | p. 439 |
| Objectives of Estate Planning | p. 439 |
| Methods of Property Disposition | p. 440 |
| Property and Property Interests | p. 441 |
| What Is Meant by the "Estate"? | p. 448 |
| Settling the Estate | p. 452 |
| Trusts in Estate Planning | p. 454 |
| The Transfer Tax System | p. 462 |
| Impact of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) | p. 462 |
| Applicable Credit Amount (Unified Credit) and Applicable Exclusion Amount | p. 463 |
| Federal Gift Tax | p. 464 |
| Federal Estate Tax | p. 472 |
| Federal Generation-Skipping Transfer (GST) Tax | p. 480 |
| Lifetime Giving and Sales Within the Family | p. 486 |
| Making Lifetime (Inter Vivos) Gifts to Noncharitable Donees | p. 486 |
| Sales Within the Family | p. 503 |
| Loans to Family Members | p. 506 |
| Marital Deduction Planning, Postmortem Planning, and Estate Liquidity | p. 507 |
| Marital Deduction Planning | p. 507 |
| Postmortem Estate Planning | p. 522 |
| Estate Liquidity | p. 524 |
| Life Insurance in Estate Planning | p. 526 |
| Taxation of Life Insurance | p. 526 |
| How to Arrange Life Insurance | p. 533 |
| Gifts of Life Insurance | p. 540 |
| Revocable Living Trusts, Other Will Substitutes, and Property Management Arrangements | p. 544 |
| Revocable Living Trusts as a Will Substitute | p. 544 |
| Joint Property with Right of Survivorship | p. 548 |
| Property Management Arrangements to Deal with Physical or Mental Incapacity | p. 549 |
| Financing Education Expenses | p. 552 |
| Importance as a Financial Objective | p. 552 |
| Nature and Growth of Education Costs | p. 552 |
| Estimating Education Costs | p. 553 |
| Financial Aid Considerations | p. 554 |
| Tax "Breaks" for Education Costs | p. 555 |
| Strategies in Planning for Education Costs | p. 557 |
| Planning for Business Interests | p. 572 |
| Potential Issues | p. 572 |
| Characteristics of Closely Held Businesses | p. 573 |
| Types of Business Entities | p. 573 |
| Check-the-Box Regulations | p. 581 |
| Income Tax Basis in Business Interests | p. 582 |
| Factors in Choice of Entity | p. 583 |
| Disposition of Business Interests | p. 588 |
| Retention of Business Interests | p. 598 |
| Index | p. 601 |
| Table of Contents provided by Ingram. All Rights Reserved. |
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