America’s Most Prolific Inventor

On July 7, 2015, Lowell Wood became America’s Top Inventor surpassing Thomas Edison. Edison, often credited as the man who invented the 20th century, was the record holder for eighty-two years. Wood now owns an astonishing 1,085 patents and has 3,000 more awaiting review.

Lowell Wood is quite the intriguing individual who enthralls himself with an abundance of reading each day. Reading allows him to obtain the information needed for inventing. That’s a trait he shares with the great Edison. Like Edison, when a problem presents itself that needs to be solved, the first thing Wood does is research and read.

Edison was an elementary school dropout, and school was never easy for Lowell Wood, either. His struggles taught him that repetition and persistence were his path to success.

Wood is driven by a passion to help others, “At least half of his activities—maybe more—are trying to help the least fortunate people on earth.” says Nathan Myhrvold, former chief technology officer at Microsoft. “His ideas have already saved tons of lives and have the potential of saving enormously more.”

Lowell presents to the world the possibilities that advancement in technology provides. He is currently a full-time inventor and continues to find ways to make the world a better place. Although not all of his inventions are widely accepted, they are generally ideas that could potentially solve vast world issues.

Ashley Vance of Bloomberg Businessweek wrote of Lowell, “The scope of his inventions is insane… he’s just this guy who is compelled to solve problems and invent new ideas.”

It is estimated that Wood will double Edison’s record of patents in his lifetime. Currently, he averages one new patent each day of the week.

One of Wood’s inventions is the “Photonic Fence”. The fence is made up of sensors that detect mosquitoes. A laser then zaps the bug to eliminate its ability to infect a human with Malaria. This technology also may aid as a defense against the West Nile Virus.

Wood’s wife and daughter are following in his footsteps with many patents of their own. Lowell Wood and his family are not alone. Other Americans share their passion and persistence, too. These qualities drive many Americans to make their mark on the world by creating products that result in a better and more interesting life for us all. I am confident America will remain the world’s most innovative, inventing nation as bright minded individuals such as Wood, continue to emerge and evolve. jh




Why You Need Heroes (Even If You Aren’t Sure You Believe in Them)

There is a story of Ray Bradbury’s that lives just under my skin, ready to be brought out at any time to be marveled at, nodded in agreement with, and used as a reminder. It’s not fiction; it’s an anecdote from his childhood. It’s about having a hero and abandoning him.

From Zen in the Art of Writing: “Buck Rogers arrived on scene [when I was nine], and it was instant love. I collected the daily strips, and was madness maddened by them. Friends criticized. Friends made fun. I tore up the Buck Rogers strips.”

Buck Rogers was the star of one of the first sci fi comic strips, an intrepid adventurer on the front line of fictional space exploration. It must have been a grand thing, being a kid in the days when space was “the final frontier,” and its exploration and the innovation that would get us there were still to come. It’s easy to see why Buck Rogers would’ve captured the hearts of kids like Ray. He was a hero.

The raison d’être of the hero

Heroes serve an important function in our lives: They represent the basic idea that human beings, by their nature, are capable. They show us that we as a species are efficacious — we are so good at living! (Not surviving. Living.) They show us, over and over again, that man can be successful at even the most far-flung, impossible-seeming, unbelievable feats of innovation, creativity, and exploration. They stand as an example of the nobility of man. We need this. We need it as much as we need food — it is food, for the mind and spirit. Seeing men with character triumph over obstacles to achieve great things affects us in two important ways:

  1. We experience hero worship.

This is one of the greatest feelings in existence, and there is nothing else like it. Remember when you were a kid? When the whole world was new, and you were filled to the brim with finding stuff out and exploring new places (like the woods and the park and your own backyard)? When everyone and everything around you seemed ripe with grand possibility? When you felt like you could do anything? You were full of wonder. You were full of the sense that life holds great promise, that there’s grandness out there, and that it’s within your reach. The stars were within your reach. They still are.

Heroes remind you of that, when you don’t feel like a kid anymore. They show you again that there’s grandness out there, and it’s within your reach. Without them, it’s all too easy to forget.

  1. We feel like we can do it, too.

Heroes provide concrete examples of people overcoming obstacles, including their own fear, and winning. They show us that success in our endeavors is possible, before we’ve achieved it, and that gives us more courage and motivation to lift our heads and keep trying.

If Buck Rogers can travel to the moon, surely I can write this blog post. If Beryl Markham can cross the Atlantic by herself in a rattling 1930s biplane, with the wind battering her the whole way, surely I can launch a website.

If Brian Wilson can keep his sunny, childlike disposition and honest wonder after growing up with a demanding father, withstanding the pressure to create hits for years, taking drugs, living his life very much in public, etc., surely I can have a positive outlook on taking new and scary career directions. Even if I’m not planning to fly to the moon or cross the Atlantic in a biplane or create genius-level music, a member of my species has, and that shows me what’s possible.

Heroes show us that it has been done and therefore can be done. They cross barriers, challenge boundaries, innovate, and stand up to criticism. They show us that we can say “full speed ahead; damn the torpedoes” and win.

The absence of heroes

With a need this deep and important, you’d think that heroes would be everywhere. But they’re not. Heroes are in danger in our culture. The tall, broad-shouldered, confident, capable hero who knows what he wants and goes for it — the ideal man — has disappeared from serious literature and nearly from art in general.

You can still find remnants of him in genre fiction, especially fantasy. You can find his spirit in young adult and middle grade novels. You might find some version of him in the preponderance of superhero movies and detective shows being made. But he will not be the same as he once was, for the ideal man is passé. He’s “too perfect.” Our culture scoffs at him. He must be dull; he has no flaws. At the very least, he isn’t like us, for we are all flawed, aren’t we?

Professors of creative writing urge their students to give their heroes flaws. For readers to connect with him, he must be more “human,” they say. Being heroic is not really human, they say. Being a screw-up is “human.” Being an alcoholic is “human.” Being condescending to everyone you meet is “human.”

If your hero is a genius doctor, then he ought to have the manners of a total asshat. If he’s a skilled innovator in technology and robotics, so skilled that he might single-handedly save the world, then he’d better be an irresponsible, drunk playboy (never mind that it’s nearly impossible for those two things to live side-by-side in the same man, in reality — according to them, this is what makes him more “real” — his flaws).

We don’t even call them “heroes” anymore — main characters of stories are “protagonists” in college creative writing classrooms. Given this attitude, the “protagonists” who have replaced the ideal man are men like Larry David. Unattractive, bumbling smart-alecks who live in an absurd universe, where even the smallest task becomes an insurmountable obstacle, unachievable with even the most Herculean patience.

In the Larry David universe, everything is chaos, and man can do nothing in the face of it. It’s an existentialist vision, with us as helpless playthings at the mercy of forces outside of our control. Since we cannot control our own lives and they are full of little awful absurdities, the only option we have is to mock ourselves. Man, in such a world, is small and ugly. You can’t even say “incompetent,” because in such a world there is no such thing. In such a world, man is impotent by his nature.

But is the world like that? What you believe about heroes relates directly back to what you believe about a) what the world is really like and b) what people are like and whether or not they are fundamentally capable of succeeding in the world or not. If the world is nothing but chaos, if we create reality by our wishes and whims, if we are fated and destined and have no control over our own lives, then yes, it’s true, we are helpless.

But if reality is what it is regardless of our wishes, if things are what they are and act in ways that are in accordance with what they are (meaning they are predictable, meaning, causality exists), if man is capable of understanding the world through reason, and if we are not determined or fated, but have free will and are in control of our own lives, then …

Well, then man is capable. It is possible for him to not only survive but thrive—to succeed. Then he is able to do things like invent penicillin; discover how to fly; create exalted, moving art; and even travel to the moon. In which case, he desperately needs heroes to show him what’s possible. He desperately needs to understand one thing that has been lost. Our childlike innocence and our hungry, tired adult souls need us to recapture it. It is: the view of man as a noble being.

A rebirth of heroes

Having heroes can be scary — that hero worship feeling means there’s something to live up to. It means saying you care, and that means being vulnerable. It takes a lot of courage to be a hero worshipper. Ray Bradbury did not abandon Buck Rogers for long. It took about a month before that integrity-having 9-year-old realized that the ideal that Buck Rogers represented meant more to him than the so-called friends who’d driven him to rip up his precious comics.

The rest of the story goes like this: “For a month I walked through my fourth-grade classes, stunned and empty. One day I burst into tears, wondering what devastation had happened to me. The answer was: Buck Rogers. He was gone, and life simply wasn’t worth living.

The next thought was: those are not my friends, the ones who got me to tear the strips apart and so tear my own life down the middle; they are my enemies.”  Bradbury knew, as a 9-year-old kid, that, for a happy life, he must hold onto Buck and abandon those who would laugh at him for having his hero. It takes a lot of strength to admit to having heroes, and there will always be those who poke fun. But denying the need for heroes weakens us. It makes us cold and brittle and hard.

It leaves us frustrated and struggling rather than open and ready to connect. It turns us into bone-weary, cynical adults rather than allowing us to hold onto our childhood wonder. It makes us less capable, not more. We begin to lose touch with our dreams. We need them, and it hurts us to deny it.

Who are your heroes?

If you don’t think you have them, think of people who risk things in ways you want to or in ways you know you will never be able to. Think of people who push you to stretch your boundaries in healthy ways and of people who have taught you so much. Look to art — that favorite TV show? Which character is the reason you watch it? And books, of course the books. My best, most cherished hero comes from Ayn Rand’s Atlas Shrugged. How could you ever forget a man with as much sparkling life in him as Francisco d’Anconia?

Don’t deny your heroes. Don’t be afraid to acknowledge them. It will make you stronger. You will be less afraid to reach out and touch your own dreams. Enjoy your heroes, celebrate them, and let your enthusiasm for them show. Some of the greatest friendships of my life have come from reaching out and saying, hey, you know what? That thing you did was amazing, and it changed me. You’re my hero. Thank you.

If somebody wants to make fun of you for it, just pack up your heroes and go. You don’t need the fun-poker. You need your heroes.

Heroes will save your life.


This essay originally appeared at; reprinted by permission.

Social Security Claim Changes

There’s been lots of coverage in the news the past couple weeks about changes to Social Security claiming strategies, so we’d like to share a few key highlights about what’s changed and how it may affect you.

The Bipartisan Budget Act of 2015, signed into law by President Obama on Monday, November 2, 2015, closes several “unintended loopholes” in Social Security’s rules. It effectively eliminates a married couple’s ability to use well-known social security claiming strategies – file and suspend and restricted application for spousal benefits – which have made it possible for both members of a couple who are 66 or older to delay claiming benefits based on their own earnings record, while the other receives a spousal benefit based on their spouse’s earnings.

What do the Social Security changes mean for you?

  • The file and suspend strategy has been eliminated. When you suspend your own benefit, you suspend all associated benefits (spouse, children).
  • Individuals who will be age 62 or older by December 31, 2015 will be grandfathered in and still be able to use the file and suspend and restricted application strategies. However, after May 2, 2016, the restricted application strategy will no longer be available.
  • Deemed filing now applies to age 70, rather than at full retirement age. This means that when you file for social security benefits, you file for the maximum personal and spousal benefits, not one or the other.
  • Those already implementing the file and suspend and restricted application strategies are also grandfathered in under the previous laws.
  • Persons turning 62 in 2015 will have options, but there is a six-month window to file a restricted application.

Unfortunately, if you turn 62 after December 31, 2015, you will not be able to use the file and suspend or restricted application strategies.

Even though the file and suspend and restricted application strategy may no longer be an option for you, we can help you optimize your social security benefits. If you have any questions about these social security changes or intend to follow the file and suspend or restricted application strategy, please contact us for a complimentary social security analysis that takes into account the new rules.  mh

Six Estate Planning Mistakes

I. Choosing the Wrong Controlling Instrument

Don’t let the fancy language scare you.  It just means that some people choose wills when they should have a trust, and vice versa.   I’ll admit to you right here that I prefer trusts for most of my clients, even for those who do not yet have substantial net worth.  However, I always leave that decision to a conference between the clients and their attorney.  In cases where wills are used instead of a trust, I still often like to see provisions in the will for the creation of a trust or trusts at death.  Briefly, my main reasons for preferring the trust are “privacy” and “asset protection” for the beneficiaries, including in many cases the surviving spouse of the first-to-die client.  Also, trusts don’t die.  What I mean is that you can provide continuity of purpose and management of your assets for possibly two or three generations.  (I’m writing a book about that.  Stay tuned.)

II. Not Integrating the Plan

Your estate documents—wills, trust, powers of attorney, living wills, etc.— must be integrated with each other as to who, how, where, and when.  Assets must be titled in a manner consistent with trust documents.  Likewise, beneficiary designations must be updated to be consistent, though not necessarily identical, with your documents.  I like to have my clients bring their newly drafted and signed documents to our office, so that we can be sure that everything that needs to be changed—ownership, beneficiaries, etc.—has been changed.  We’ve had to do this for clients (including my father) on their deathbeds, and that’s really not ideal.

III. Not Creating a Minor’s Portion

This will sometimes be called “An Emergency Medical Authorization for Minors”.  Imagine you’re a grandparent caring for your grandchild.  Horror of horrors, that child gets whacked with a baseball bat and needs emergency surgery.  The parents, who usually are the people who can authorize emergency care, just happen to be away from home and unreachable by cell phone.  If the grandparents were given those emergency powers in advance, they could authorize the needed surgery when time is the very essence of the emergency.  Stuff like that happens all the time.

IV. Believing Life Insurance Isn’t Taxable in an Estate

There are exceptions, but life insurance is almost always paid to the beneficiaries free of income tax.  However, life insurance death proceeds are almost always includable in the estate of the owner.  It’s always a good idea for your estate planning attorney, your CPA, and your financial advisor to know how much life insurance you have and who owns it, so they can be sure that it’s been accounted for in your estate plan—and appropriately titled.  Depending on the size of your estate, you may need to create an irrevocable trust to hold your policies to remove those death benefit proceeds from your taxable estate.  No estate plan should be a do-it-yourself project, and this is one of the biggest reasons why.

V. Underestimating the Value of the Estate

This really is two mistakes in one.  Let’s start with the life insurance we just discussed in paragraph IV.  You have your documents—wills, trusts, etc.—when you’re forty-five years old.  Then you buy a business or farm, or you build a new house.  Over time, any or all of those assets can appreciate in value at an amazing rate, lifting your net worth well into seven digits.  It’s not rare for that to happen.  Then your bank wants you to own more life insurance.  Before you realize it—say in fifteen or twenty years—your net taxable is subject to a 35% estate tax rate.  Your IRA or 401)k) has grown, too, and you’ve failed to provide stretch provisions for your beneficiaries.  Double trouble: Estate tax of 35% or more; ditto, income tax on your IRA.  Your life insurance isn’t enough to pay all the taxes, so your heirs have to sell the farm or business.  Most of you probably know whether you’re in this situation or not, but as Nick Murray says, “knowing is to doing, as one is to sixteen.”

VI. Not Planning for Your Own Medical Emergency

Estate planning can be stressful.  After all, it forces you to contemplate your own death.  Two years ago, when Linda and I decided to update our plan, the death scenario wasn’t the most difficult part.  We really struggled with what would happen if one or both of us became mentally disabled; and beyond that, the idea that one of us—or even worse, one of our children—would have to decide whether we should kept on life support.  We each came to our own decision independently, so no one else will be put in that most uncomfortable situation.

That’s not all you need to know, obviously, but you know that tomorrow is promised to no one; and it’s your job to make sure that your affairs are in order, regardless of how much time you may have left.  mh

A Little History Lesson for Investors

For those of you who are my age (69) or older, this little essay will be as much a refresher as a history lesson.  But, if you’re younger than I am (most of you), read very carefully and pay really close attention; you are about to receive an investing lesson for the ages.  (My thanks to Nick Murray for the data and the idea.)


The war in Vietnam had been won militarily, and a peace accord had been signed.  The communists had withdrawn to the prewar border.  But, Congress pulled America’s financial support of the democratically elected government of South Vietnam, and the North Vietnamese army returned to fight again.  To our everlasting shame, Saigon fell and millions were enslaved, driven from their homeland, or murdered.  That was the bad news.

More positively, Andrei Sakharov, the great hero of anti-communist resistance in the Soviet Union, was awarded the Nobel Peace Prize. Margaret Thatcher became the first female leader of the Conservative Party in Britain; and in 1978, her historical and spiritual collaborator, Cardinal Karol Jozef Wojtyla, became Pope John Paul II.

Global population in 1975 was 4.1 billion, fully half of whom lived in extreme poverty.  U.S. inflation-adjusted GDP for the year was $5.49 trillion.  An Apollo/Soyuz first class postage stamp set you back a dime.

Earnings on the S&P 500 were $7.71, and dividends were $3.73.  The S&P 500 index closed the year at 90.19.


Mikhail Gorbachev came to power in the Soviet Union and scheduled a historic meeting with President Reagan.  The Internet domain name system was created.  Microsoft published Windows 1.0.

The song of the year “We Are the World” was produced by Quincy Jones.  Written by Michael Jackson and Lionel Ritchie, the album sold more than twenty million copies.

Coca Cola introduced, and then killed, “New Coke” in the greatest corporate marketing debacle since Ford introduced the Edsel in 1958.  A first class postage stamp cost twenty-two cents.

Global population reached 4.85 billion, with U.S. population accounting for 238 million.  U.S. inflation-adjusted GDP in 1985 was $7.71 trillion.

S&P 500 earnings were $15.68, dividends were $8.20, and the S&P 500 Index closed the year at 211.28, an annualized gain for the decade of 8.88%, excluding dividends.


This was my first full year in Winfield.  On April 19,  we watched on television the most horrific domestic terrorist attack in American history—the bombing of the Alfred P. Murrah Federal Building in Oklahoma City by Timothy McVey and Terry Nichols.

  1. J. Simpson was tried and acquitted for the 1994 murders of Nicole Brown Simpson and Ron Goldman. Israeli Prime Minister Yitzhak Rabin was assassinated. Jerry Garcia of The Grateful Dead died.  The Rock and Roll Hall of Fame Museum opened in Cleveland.

Global population reached 5.7 billion people.  America was home to 266 million.  A first-class postage stamp was now 32 cents, more than triple what it had been in 1975.

S&P 500 earnings had grown to $37.70 and dividends to $14.17.  The S&P 500 Index closed the year at 615.93, an annualized gain for the decade of 11.29%, again excluding dividends.

At this point, you will have noticed that in the twenty years from 1975 through 1995, the S&P 500 Index was multiplied nearly seven times, dividends nearly four times, and earnings nearly five times.  The cost of living, as evidenced by the price of a postage stamp had tripled.  At the risk of redundancy, please read on.


Hurricane Katrina swept into Louisiana, devastating a land area larger than Great Britain.  Saddam Hussein went on trial in an Iraqi courtroom.  Islamic terrorists attacked the London bus and subway system, killing fifty-two innocent people.

His Holiness John Paul II—one of the truly great men of the twentieth century—passed away in Vatican City, one month shy of his 85th birthday.  A first-class American postage stamp cost thirty-seven cents.

Global population was 6.5 billion.  The U.S. population was 296 million.  Inflation-adjusted U.S. GDP was $14.37 trillion.

S&P 500 earnings were $76.45.  Dividends were $22.38, and the S&P 500 Index closed the year at 1,248.29, an annualized gain for the decade of 7.32%, excluding dividends.


The Islamic terrorist group ISIS committed atrocities on a scale rarely seen since America abandoned its allies in Southeast Asia in the mid 1970’s.  Reminiscent of the so-called “boat people” of that era, refugees poured into Europe from the Middle East.  Apparently, some among those refugees have carried out atrocities of their own after they arrived.

The world’s leading nations reached a nuclear accord with Iran.

Lawrence Peter “Yogi” Berra died at the age of ninety.  A first-class postage stamp cost forty-nine cents.

Global population is now 7.29 billion, and fewer than 10% live in extreme poverty.  The U.S. population has reached 322 million.  Real, inflation-adjusted U.S. GDP for 2015 is estimated to approach $18 trillion.

Earnings on the S&P 500 for 2015 are currently estimated to be $117.  Dividends for 2015 are estimated to be $43.  The S&P 500 Index closed 2015 at 2043.94, an annualized gain—in spite of the 2008-2009 financial crisis, and again excluding dividends, of 5.05%.

Summary: World population is up 80% since 1975, but extreme poverty has been slashed from one person in two to one person in ten.  There are 3 billion new middle class consumers and entrepreneurs, with more on the way.

The U.S. population is fifty percent higher, having gained a new person through net births and immigration every fourteen seconds for forty years.  Still, America is blessed with unimaginable room to grow.  Population density is a mere 85 humans per square mile; it’s 300 in France, 590 in Germany, 680 in the U.K., and 870 in Japan; all this before the recent influx of refugees into Europe from the Middle East.  We have more than a hundred years’ worth of dormant hydrocarbon energy under out feet, and the rights thereto are vested predominately in the land owners.  Ditto, the industrial technology which brings that dormant energy to the surface and converts it into warmer, well-lit homes, businesses, and hospitals; and a million conveniences of modern life.  Many of you will remember when President Carter told us that we would run out of oil and gas before the end of the last century.  Like so many others, he underestimated the American businessman and the creative power of his free and incentivized mind.

Since 1975, real GDP in the U.S. has more than tripled, while the population is up only 50%.  Bringing the meaning of that closer to Main Street, inflation-adjusted GDP per person has risen from $25,000 per person to nearly $56,000.  I don’t know if that really accounts for the omnipresence of high definition televisions, smartphones, and global positioning systems, but I doubt it.

The S&P 500 index rose by more than twenty times in the past forty years.  Earnings increased more than fifteen times.  The difference between those two multipliers can be accounted for, I believe, by the fact that interest rates back then, though far from the highs they would attain in the early 1980’s, were still well above today’s levels.  Dividends are almost twelve times greater and—when measured against the increase in consumer prices—are more than four and a half times what they were in 1975.  I’ll say it again: Over the past forty years, dividends on the S&P 500 index increased at more than four and a half times the rate of consumer prices. 

Conclusion:  If you’re forty years old or older, you have just lived through the greatest accretion of wealth by the greatest number of people in the history of the world.  There are two trends in place that are responsible for this spectacular economic progress.  First, there is the Global Capitalist Revolution, as free market principles have all but vanquished unalloyed socialism and pure communism.  Even China is adopting free market policies, and as its top down, crony command structure fades into history—and despite its current problems—it will become a true economic superpower.

The other catalytic trend is the exponential progress in information technology.  This could hardly be otherwise, given a free market in ideas and the vesting of ownership rights in inventions.  Biotechnology will soon be performing miracles beyond our ability to imagine or predict, and the work is well advanced.  Ditto, a return to space—in commercial, passenger-carrying vehicles.  With these things, and many others, consumers will benefit, our economy will grow, and investors will find new opportunities.  There will be temporary setbacks, but the trend of discovery is accelerating.

History is a window into the future, but the real lesson here is the same one you see at the close of our Editor’s Note in every edition:  The best investors, regardless of their age, are those who can ignore the noise.  They have learned that Patience, Discipline, and Confidence in the Future are virtues practiced by truly happy and successful people. mh 

Some New Thoughts on Old Money

I think most of you would agree that the foundation for America’s best possible future can only be found in the bedrock of an enduring political system based on the rule of law, economic and civil liberties, a strong work ethic, and a superb educational system.  Although these principles are embedded in our nation’s DNA, many people believe that they are all in some danger of being lost.  They fear for the future of our children and grandchildren.  But, aside from political activism – an avocation most of us have neither the time nor temperament to attempt—what are any of us going to do about it?

The 2014 Edition U.S. Trust Insights on Wealth and Worth Report (TIWW) says that sixty percent of wealthy Americans believe it’s important to leave a financial legacy for the next generation.  For the very reasons suggested directly above, I believe that leaving a financial legacy has become increasingly important for virtually all Americans, not just the valde pecuniosus.  However, leaving such a legacy entails the further responsibility of providing an appropriate legal and philosophical framework to guide the future beneficiaries of our life’s work.

In the first place, I don’t want my heirs, nor do you want yours, squandering their inheritances, or otherwise doing themselves more harm than good with money they’re not prepared to manage wisely.

Secondly, I want our heirs to be prepared for any future contingency with a solid education, strong moral values, and the financial wherewithal to make the most of both their genetic endowments and their own productive interests.

Thirdly, you and I are “off-balance-sheet” liabilities of the federal government. ( Collectively—Social Security, Medicare, etc. to the tune of nearly $100 trillion.) Forgive me if I seem self-righteous, but that’s a moral issue, and our generation is on the wrong side of it. The least we can do, I say, is leave to future generations assets at least equivalent to that $10o trillion debt that we’ve created for them. Our generation—the wealthiest in human history—ought to be able to leave behind something other than a “train wreck”. We can, and should, bequeath our wealth wisely—preserving capital for investment by future generations—in the same way, and for the same reasons, that many farm families improve and bequeath their land (and values) to their offspring.

I’ll have much more to say about this in my forthcoming book, Old Money for the Middle Class Family, but for now, food for thought:

What is Equal in the Context of Family Inheritance?

One of the most challenging aspects of planning an inheritance is that families and family life are increasingly complex.  American families come in many forms, shapes, and sizes, but they mostly tend to fall into just a few broad categories. According to the Key Findings Report in the 2014 TIWW, those categories are:

Single person: About one-fifth of wealthy participants in a recent survey had never married or had not remarried after being divorced, separated, or widowed. A small percentage of those are cohabitating.

Traditional marriage: About three-fourths of affluent Americans are in their first marriage and two-thirds of those couples have children.

Blended marriage: The Silent Generation (twenty-four percent) and Baby Boomers (seventeen percent) are more likely than younger generations to have blended families, meaning they have remarried after being widowed or divorced, and they may have step-children.

Multi-generational household: Generation X (eleven percent) and Millennials (thirty-two percent) are more likely to live in multi-generational households, meaning they either live with siblings, parents, or grandparents; or they have adult children, parents, or grandparents living with them.

So, in the context of modern family legacy planning, what seems like the simplest choice – dividing assets equally among all of the children – can be problematic.  There are often personal histories and circumstances that cloud the definition of equality.  And, when you combine subjective judgments about fairness with the complexities of modern American family structure, legacy issues can become emotional dynamite.

Minimizing Inheritance Disputes

Determining an equitable division of assets is rarely easy, not even for single parents or couples in traditional families. One child may suffer a disability, have an addiction problem, or manage the family business.  Another may be less successful than his siblings, or have made lifestyle choices that the parents are uncomfortable supporting. If your family circumstances necessitate an uneven distribution of assets, there are many techniques you might use to minimize conflicts that may erupt among the children or other heirs. These could include:

Acting discretely. If you’ve decided an unequal division of assets is necessary, and know that one or more children will not be happy with your decision, consider establishing a discreet trust for each child. The advantages of discreet trusts are that they can be funded unequally and each one can have completely different distribution triggers and other conditions or terms of control. In addition, each child will be apprised only of the provisions of her own trust.  Be sure that the assets that will fund each trust are appropriately titled.

Establishing a shared trust. If you distribute the majority, but not all, of your estate equally among heirs, the remainder (perhaps one-fifth or one-quarter of the assets) can fund a shared trust to be used when an heir has an emergency need. The trust should have an objective third-party trustee who will be responsible for distributing funds fairly and according to the terms of the trust.  We have seen family members acting as trustees abuse their powers in this type of trust.

Choosing your executor carefully. Some say it’s best to follow family hierarchy and make your oldest child your executor or trustee. Others say it’s best to choose a family member who is organized, hardworking, honest, and a good communicator. Still others will suggest you appoint a committee of executors, because of the checks and balances a group provides.  I think that this decision is unique to each family, but in my own case, one of our children is our trustee and executrix, but we have named each of the others (in birth order) as her successors, if she is unable or unwilling to serve.  All of our children seem to be comfortable with our decision; so far, anyway.  No matter what you decide, my advice is to let all of your children know what your decision is while you’re still living and able to explain it.  That may save a lot of grief for your trustee or executor when you’re no longer on the scene.

Explaining your thinking. The difference between family harmony and an on-going feud may ultimately be determined by how clearly you communicate with your family. The Wall Street Journal suggests, “Whenever possible, try to be open about your inheritance plan while you are still alive, so that every family member understands it, minimizing the chances for suspicions to arise later. If you don’t want to have this difficult conversation while you are alive, you can write a letter or make a video elaborating the reasons and thought process behind your plan, making it clear that these decisions are yours alone.”  I think that’s good advice, but that doesn’t mean that you need to disclose to your heirs how much you have today.  In fact, I would not and have not.

Also, Linda and I tried to personalize our trust documents, telling our children that we truly love them, one and all, and detailing our purposes and intentions using our own words.  Your legacy documents do not have to be legal boilerplate (Legalzoom is not a friend who knows and understands you), and I think your documents should reflect your values and your personality, not just your wealth.  Your kids love you, too, you know; and it won’t hurt them at all to be reminded of you through the stories you choose to share within your trust documents.

It’s often said that there are no right or wrong answers when it comes to inheritance.  That idea just makes me crazy!  Of course there are right or wrong answers! The issue is:  Are they answers that are right or wrong for you and your family.  You should make your decisions based on your first-hand knowledge of your family’s internal dynamics and on the individual needs and values of your heirs. Indeed, The American Association of Individual Investors Journal (AAII Journal) suggests taking “a multi-faceted approach that combines psychology, good lawyering, a lot of self-awareness, and a good dose of common sense.”

If you haven’t done so recently, I invite you to visit with us about your legacy plans, before you embark on a rewriting of your will, trusts, and other estate planning documents.  With twenty-three years of professional experience, having advised hundreds of families on these issues, and more importantly, perhaps – I sincerely believe that I can help you frame your questions concisely and effectively, so that you and your attorney can create documents that really work for what you want.  To be perfectly clear, though, I am not an attorney nor a CPA, so I am not offering legal or tax advice; I am offering the wisdom and compassion that can only come from a love of the game, and a sincere desire to help your family prosper for many generations to come.  mh


This information is not intended to be a substitute for specific individualized legal or tax advice.   We strongly suggest that before you make any final decisions regarding your estate plan, that you discuss your specific situation with qualified legal and tax advisors.

Source:  Much of this essay was prepared from material provided by, and with permission from, Peak Advisor Alliance, Omaha, Nebraska.

A Noteable September Birthday

Samuel Adams was born on September 27, 1722 in Boston, Massachusetts. He graduated from Harvard College in 1740.

A strong opponent of British taxation, Sam Adams, as he is affectionately known by most Americans today, helped organize resistance to the Stamp Act (1765), and he played a vital role in organizing the Boston Tea Party. Sam was a cousin to John Adams, America’s second President, with whom he urged a final break from Britain. Both signed the U.S. Declaration of Independence in 1776.

An iconic American hero, Samuel Adams is, nevertheless, a controversial figure in American history. Disagreement about his significance and reputation began before his death and continues into our time. His contemporaries, both friends and foes, regarded him as one of the foremost leaders of the American Revolution. Thomas Jefferson, for example, characterized Adams as “truly the man of the revolution.” Leaders in other colonies were often compared to him: Cornelius Harnett was called the “Samuel Adams of North Carolina”, Charles Thomson the “Samuel Adams of Philadelphia”, and Christopher Gadsden the “Sam Adams of the South”. When John Adams traveled to France during the American Revolution, he had to explain that he was not Samuel, “the famous Adams”.

Although supporters of the Revolution praised Adams, Loyalists viewed him as a sinister figure. Peter Oliver, the exiled chief justice of Massachusetts, characterized Adams as a devious Machiavellian with a “cloven foot”. Thomas Hutchinson denounced Adams as a dishonest character assassin, emphasizing Adams’s failures as a businessman and tax collector, in his History of Massachusetts Bay.

Whig historians challenged the negative Loyalist versions of Sam Adams. William Gordon and Mercy Otis Warren, two historians who knew Adams, wrote of him as a man selflessly dedicated to the American Revolution. George Bancroft portrayed Adams favorably in his monumental History of the United States from the Discovery of the American Continent (1852). The first complete biography of Samuel Adams appeared in 1865, and was a three-volume set written by William Wells, Adams’ great-grandson. The Wells biography is still valuable today for its vast wealth of information.

I say, let the historians have their battles, if it makes them feel better. The truth is that the American Revolution might not have happened without Samuel Adams, though it required wiser men than he to make it successful; most particularly the aforementioned Jefferson, Sam’s cousin John, and America’s indispensable man, George Washington.

Samuel Adams served as governor of Massachusetts from 1794 to 1797, his term overlapping the Presidential terms of George Washington and John Adams. He died on October 2, 1803, during Thomas Jefferson’s first term as President.

Samuel Adams’ simple and un-pretentious cenotaph may still be viewed from the sidewalk that runs past the Granary Burying Ground in downtown Boston. If you’re ever in Boston, I urge you to visit that site, and take the free, short, and fascinating guided tour. mh

A Revolution Within a Revolution

Elsewhere in this newsletter I’ve half-argued the case that we’re headed, not for a repeat of the inflation of the 1970’s, but for inflation on steroids. Here is my perspective on all the issues we face, including that one:
The Global Capitalist Revolution. We underestimate its power, perhaps because its force is generated by two relatively small minorities. They are the savers and the entrepreneurs, especially the entrepreneurs – the business people who know no limits to their own creative energy. This revolution has been growing for nearly three hundred years, its spreading across the globe, and its transformative capacity is boundless. It is not going to be stopped by the megalomaniacal ambitions of a KGB thug. Ditto, the divisive rhetoric emanating from the political posers in Washington, D.C., and the Fed’s Keynesian thimblerig. In fact, I think all these things are but the death rattle of arrogant and repressive political philosophies, inconsistent with human nature.
The Global Capitalist Revolution, which arose in mid-eighteenth century Great Britain, had by about 1980, enabled almost two billion people worldwide to attain a lifestyle that had become known as “middle class”. Since the fall of The Berlin Wall in November of 1989, another three billion people have emerged from the darkness, half a billion of whom could now be considered well-off. World-wide, nearly one hundred and fifty million people are ascending out of poverty each year; and there will soon be a five billion person middle class inhabiting the Earth. In a few short years, the value of their output will very likely dwarf the production of the past three centuries. Production is the one thing that can both fight inflation and pay down government debt.
From the beginning of the Global Capitalist Revolution, Great Britain needed one hundred and fifty years to double its per capita income. From its Civil War, America achieved that standard in thirty years. China and India have pulled off a similar feat on a much larger scale, albeit from a lower base.
Africa now has six of the ten fastest-growing economies in the world since 2010, and it’s projected to claim seven of the top ten spots by 2015. The financial services sector in Africa is expected to grow by forty percent annually to 2020. Apple is expanding its African stores, intending to sell more than a billion iPhones in the next five years. Maybe these are the reasons why rock star and social activist Paul David Hewson (stage name, Bono) says that capitalism is what Africa needs more of, not foreign aid. It was “a humbling thing” he says, “to learn the role of commerce.”
In Mongolia’s southern Gobi desert, British and Canadian firms are partnering to develop one of the world’s richest copper mines, with gold and coal mines already in production. There’s a sixty-mile highway and a modern railway running from Oyu Tolgoi into China, and a mile-long air strip that can accommodate 737 and C-130 aircraft. New schools are being built. Imagine!

Yes, we have our scars, physical and financial; and we have unhealed wounds, too. But, the vast preponderance of the historical evidence makes me a firm believer in the economics of freedom, and in the ultimate triumph of truth. So, the idea I most want you to engrave on your brain today is that human beings flourish when information flows freely. All top-down political solutions—including Keynesian top-down banking and such sacred cows as Social Security, Medicare, Medicaid, and Obamacare—depend upon the public discounting of truth. (The truth is that all of these programs discourage personal responsibility in varying degrees; and more to the point, they will—if not reformed—eventually bankrupt the nation.) But, history teaches us that human problems arise and are then solved. The flow of information can be slowed, but not halted. Even now, the flow of information is accelerating. My bet is that in the great sweep of The Global Capitalist Revolution, today’s problems, by which I mean all of them, will be whisked away by the exponentially expanding bandwidth of human knowledge. The Global Capitalist Revolution—really a special case of the Information Revolution, which began with the invention of the printing press—has only just begun to transform the world. mh

U.S. Tax Court Changes IRA Rollover Rules

Flourishing Tax Principle #1:  It doesn’t pay to be too clever in your dealings with the Internal Revenue Service.

Just ask Alvan and Elisa Bobrow.  Despite Alvan’s being a tax lawyer by profession, the U.S. Tax Court ruled that Alvan and Elisa violated the spirit of the 60-day rollover rules outlined in IRS Publication 590—Individual Retirement Arrangements.  That publication says that if you take money from your IRA, you have sixty days to put it back, without incurring either a tax or a penalty.  Further, Publication 590 says that you can do that once per year (365 day period) per IRA account.  That idea was backed up by two Private Letter Rulings (PLRs) from the IRS—one in 1987, and another in 1996.  

So, Alvan thought it would be okay to take $65,064 from one of his IRA accounts, as long as he replaced it within sixty days.  Before his sixty period expired, Alvan withdrew $65,064 from another IRA and deposited it into his personal checking account, and then wrote a check for the same amount for deposit into his first IRA.  Elisa then withdrew $65,064 from her IRA and deposited the money into their joint checking account.  Then Alvin wrote a check on that account for $65,064 and deposited it into his second IRA, again within the sixty rollover window.  This all seems a little silly to me, but it seems to comply with the IRS’ previous guidance, as provided in Publication 590 and the two PLRs mentioned above.

Nevertheless, Alvan and Elisa received a letter from the IRS, disallowing Alvan’s second sixty–day rollover.  Along with the letter was a bill for unpaid taxes of$51,298.  They were also penalized $10,260 for inaccurate reporting.  Alvan and Elisa disagreed and took the IRS into Tax Court.

According to IRA guru Ed Slott, Alvan bungled his own argument in court, failing to cite Publication 590 and the PLRs.  Whether that was the reason for the court’s decision may never be known, but the court ruled against the Bobrows.  It also rewrote the sixty-day rollover rule to allow only one sixty-day rollover per taxpayer in any 365 day period, regardless of the number of IRA accounts the taxpayer has.  To reiterate:  Publication 590 currently limits sixty-day rollovers to one per 365 day period per IRA account.  Big difference.  The new rule takes effect on January 1, 2015.

The bottom line is:  It’s generally not a good idea to withdraw money from your IRA, intending to do a sixty-day rollover.   If you have any other choice in the matter, consider that first.  When transferring money from one IRA account to another, always do it as a trustee-to-trustee transfer, and never take possession of the money yourself.  Like everything else I’ve ever seen from the IRS, this new rule comes with exceptions, lots of them.  But, don’t try to be your own tax advisor, looking for loopholes the way that Alvan did.  Always seek advice from a qualified tax professional before—not after—you withdraw money from your IRA or other qualified retirement plan.  After is almost always too late.  mh


Source: Ed Slott, Financial Planning Magazine Online, IRS Issues IRA Rollover Warning, April 11, 2014.

A Notable May Birthday

Friedrich August von Hayek was born in Austria on May 8, 1899.  After World War I, he earned doctorates in Law and Science at the University of Vienna.  Upon receiving his degrees he joined a private seminar led by the greatest of the Austrian economists, Ludwig von Mises.

The free market, Hayek said, was not designed by anyone, but evolved through the spontaneous ordering of self-interested human actions.  He showed, as have others, that so-called market failures are actually the failures of government central planners.  For example when the central bank holds interest rates at artificially low levels, people are led into mal-investment and reduced savings.  (A certain housing crash comes to mind, and before that a tech bubble.)

The reason socialist economists thought central planning could work, argued Hayek, was that they thought planners could take the given economic data and allocate resources accordingly. They’re smarter than their fellow citizens, after all.  But Hayek pointed out that the data are not “given.” The data do not exist, and cannot exist, in any one mind or small number of minds. Rather, each of the individuals who make up a market—millions of people, actually—has knowledge about particular resources, and opportunities for using these resources, that a central planner can never have. The virtue of the market is that it gives those individuals the freedom to use and share their own unique sets of information.  Without markets, information can’t flow.

In 1944, Hayek published The Road to Serfdom1 to warn the British people of Socialism as a growing political force within their country.  The warning was ignored, and it was finally left to the “Iron Lady” Margaret Thatcher to undo the damage thirty-five years later. 

In 1974, Hayek shared the Nobel Prize in economics with the Swedish economist Gunnar Myrdal (1899 – 1987) for their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social, and institutional phenomena. 

Hayek was still publishing at age eighty-nine. In his final book The Fatal Conceit2, he offered some profound insights explaining the intellectuals’ attraction to socialism, and he masterfully refuted the basis for their beliefs.  Of all Hayek’s work, the two named here are the required reading. 

Friedrich August von Hayek died in Freiburg, Germany on March 23, 1992.


1   The Road to Serfdom, University of Chicago Press, 1944.

2   The Fatal Conceit, University of Chicago Press, 1988.