"It was the best of times, it was the worst of times."

Charles Dickens, Tale of Two Cities (1859)

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair."  
--Charles Dickens, A Tale of Two Cities (1859)

That description covers 2009 (with "cash for clunkers" and much of the year falling under the "incredulity" category). In fact, there were many events of 2009 falling into Dickensian categories. Here, then, are financial planning highlights of the year gone by.

The Best/Worst of Times

 Although the stock market showed signs of life during 2009, many people remain concerned about bad news triggering another step backwards. The Dow Jones Industrial Average climbed back above the 10,000 level.

This is a psychological milestone, but closer scrutiny reveals that former components of the Dow that tanked in 2008 were replaced. In 2009, General Motors and Citigroup were bounced from the group of 30 stocks that make up the Dow, and they were replaced by Travelers and Cisco Systems. This is an ongoing process; in 2008, AIG was replaced by Kraft in the Dow 30.  

There is also a sobering prediction that large-scale stimulus programs based on borrowing will eventually trigger inflation in a few years' time. The reasoning is that if high interest rates became available in conventional bank accounts, more money would leave the stock market.

For 2009, however, interest rates remained low, and the universal question for the second straight year was, "Where can I safely invest money?" Nervous investors pushed the price of gold (a classic hedge) up above $1,100 per ounce.

For estate planning purposes, 2009 was the best of times to purchase real estate at low market values, cash in capital gains while tax rates remained low, refinance loans while interest rates were low, and shift assets to the next generation. Estates will continue to have optimal conditions for transfers in 2010 as well.

Corporate-owned life insurance and family limited partnerships techniques have been limited in recent years. With the assumption that the estate tax and a stepped-up basis for assets held at death will ultimately prevail and remain a fixture in the American transfer tax system, people with highly appreciated assets can often feel trapped, unable to sell or transfer such assets until death. But an owner transferring assets currently can take advantage of depressed market values, the current low capital gains rates, and high valuation discounts.

Future appreciation can then take place after the transfer, and such increased values will not be included in the previous owner's estate (assuming the transfers were not within three years of death). Such transfers can take advantage of advanced techniques as well as tried-and-true trust arrangements.

Age of Wisdom

Our wise leaders have tinkered with the estate tax repeatedly, year after year, and even repealed it. Yet somehow, in their wisdom, they just haven't found the time to rescind this repeal as everyone expects.

 Is the death tax a dead tax walkin'? Will Congress pull off a last-minute reprieve? Those questions have gone unresolved throughout the year. On December 3, by a vote of 225 to 200, the House of Representatives indicated a preference to continue the status quo of the 2009 estate tax, i.e., with a top rate of 45% and an exemption of $3.5 million.

  As the month of December winds it way down to a cliff-hanger, the Senate is preoccupied with health care, Afghanistan, global warming, and even the White House party crashers. It remains uncertain if the Senate can act in time to have a version get to the floor for a vote and be signed by the President before the stroke of midnight on December 31, 2009.

Age of Foolishness

 Someone decided that the English language "word clock" struck 1 million in 2009 and that the 1 millionth word was "Web 2.0," beating out "Jai Ho," "N00b," and "slumdog."   

If you are old enough to find all of that annoying, it may interest you to know that there is an actual list of the most annoying or overused terms in use for 2009 that was compiled by Accountemps from a survey of 150 senior executives. The list included: "leverage,"  "it is what it is," "viral," "game changer," "disconnect,"  "circle back," and "cutting edge."

Epoch of Belief

 If you have faith that good shall prevail and what is lost shall be found, then you may feel vindicated by several events of 2009.  

A New Yorker returned a 46-pound piece of a marble column that was taken from an Israeli Antiquities Authority dig 12 years ago.

In May, it was reported that an American couple from North Carolina mailed a fist-size chunk of terra-cotta back to Rome, Italy, with an apology, 25 years after they had taken it as a souvenir from a historic site near the Coliseum.

In New Bedford, Massachusetts, Stanley Dudek was reviewing the contents of his mother's estate when he found a book about government that was due to be returned to the local library on May 10, 1910. It was 99 years overdue. He returned the book, and the library waived the $361.35 penny-a-day fine.

A 10-year-old girl lay dying of cancer, too sick to go to a movie theater, but she wished she could see the movie Up that was about to come out. "I'm ready (to die)," she said, "but I'm going to wait for the movie." But she could not wait long. So Pixar sent a representative with a DVD of the movie prior to its release, as well as stuffed animals of characters, and provided the girl with a private screening. The little girl enjoyed the movie. Colby Curtin's dying wish came true. She died later that night.

Epoch of Incredulity

Irene Prusik died six years ago, but her son, Thomas Parkin, 49, showed up at the Department of Motor Vehicles in Brooklyn dressed in drag, trying to renew her driver's license. "I am my mother," said Parkin, who had been collecting his mother's Social Security benefits.

Tushar Gandhi, the great-grandson of Mahatma Gandhi, tried to block Antiquorum Auctioneers from selling a watch, a pair of sandals, a plate and bowl, and the iconic glasses of Ghandhi. Unfortunately, he only succeeded in driving up the bids for these items, due to the publicity his efforts gathered.

Also in that category, an ivory-and-gold retractable toothpick--once owned by Charles Dickens and engraved with his initials--was auctioned for $9,150 by heirs to the Barnes and Noble family.

Seasons of Light and Darkness

Uncertainty continues on gay marriage. New Hampshire became the sixth state to legalize gay marriage or civil unions, joining Massachusetts, Connecticut, Maine, Vermont, and Iowa. California had allowed gay marriage for a short time until a public vote banned it, but a court ruling has grandfathered those couples who were married while the law was in effect. Domestic partnerships are also recognized in several jurisdictions.

A gay couple from Massachusetts has sued the Federal government for the $15,000 of additional taxes incurred because they are denied the benefit of filing a joint tax return under the Defense of Marriage Act. Legislatures in the District of Columbia and New Jersey are both poised to vote on same-sex marriage.

In 2009, New York became the first state to recognize a same-sex spouse's right to inherit under state law. In Matter of the Estate of Ranftle (NYLJ, Feb. 3, 2009), the Surrogate's Court found that New Yorkers who were married legally in Canada had the right to provide for spouses by a will, and the deceased spouse's family members had no standing to challenge such a will.

A same-sex couple from California obtained a ruling from a Federal District Court that forced Louisiana to place both partners' names on the birth certificate of their adopted son.

Spring of Hope, Winter of Despair

The Federal Reserve has announced that it will keep lending rates for funds to banks between 0 and .25 percent to keep the recovery going.

But there is debt and unemployment with ongoing wars abroad. Bankruptcy filings included familiar names like Fatburger, General Motors, Chrysler, and Trump Entertainment. It is a record year for bankruptcy. Entire nations are on the brink. Dubai asked for a time-out on repaying its debts and needed a $10 billion bailout from Abu Dhabi. Austria, Greece, Mexico, Spain, and Ukraine are at risk of defaulting on loans. Are we doomed by climate change? Is this the end of America's dominance as a world power?

 --Prince, Party Like It's 1999.

Flashback: Should we be partying like it was 1999? Back then, folks had a bad feeling about the millennium and apocalypse with a side order of Y2K computer mayhem.

Let's "circle back" and revisit that time. Donald Trump was about to run for President with a platform that included a 14.25% tax hike on those making more than $10 million. Tiger Woods won his last four tournaments of 1999 and was on his way to superstardom. Before he became "America's Mayor," Rudy Giuliani was being hounded for a scandal involving his mistress.

Our fears and expectations were all wrong. Planning finances as though future economics and rules are certain remains a mistake. Stay flexible and adjust with each change. Peace be with you in 2010.

ESTATES IN THE NEWS

 Senator Ted Kennedy died leaving an estate estimated to be between $43 million and $163 million. As with the vast wealth of the rest of the Kennedy clan, much of the estate will benefit heirs via trusts that will preserve the family's privacy.

Michael Crichton, author of Jurassic Park and ER, was earning $100 million annually. He set up a living trust just before his death that is now to benefit his brother, sister-in-law, sister, brother-in-law, three nieces, 10 friends, numerous grand-nephews, and a foundation. His widow has filed a creditor's claim against the estate for $7 million based on her prenuptial agreement.

The children of Martin Luther King, Jr.,  were deadlocked in a legal feud of the estate of their father that looked like it would end in a very public jury trial. Dexter King, chairman of King, Inc., negotiated a film deal with DreamWorks that his two siblings opposed. A settlement resulted in a custodian to manage the estate.

Leona Helmsley's estate made news. New York's Surrogate's Court ruled that trustees of the Helmsley trust had discretion on the distribution of funds. Most of her $136 million is going toward medical research, and $1 million is being divided among 10 animal rights charities.

Aaron Spelling's 56,500-square-foot home on 4.6 acres in Holmby Hills near Los Angeles was placed on the market by his widow for $150 million. Mrs. Spelling is downsizing her lifestyle by trading in the 100-room mansion for a two-story condo that she purchased for $47 million.

"Estate of Ecko a $$ Wreck-O" read a New York Post headline, mocking the financial woes of billionaire designer Marc Ecko. Estates of other living figures also went down in flames, including those of Governor Rod Blagojevich, Bernard Madoff, and Tiger Woods.

Anthony Marshall, 85, faces prison time after being found guilty of exploiting his mother, philanthropist Brooke Astor. His attorney claimed that Astor was lucid when she changed her will. This is a sad ending to the fortune amassed by John Jacob Astor, who was America's first multi-millionaire and formed America's first trust.

Zsolt and Geza Peladi, two homeless brothers living in a cave outside of Budapest, were tracked down by lawyers and informed that they had a wealthy grandmother. The brothers will share $6.6 billion.

 Michael Jackson's estate dominated the news for most of 2009. The issues determined thus far included the following:

§          Joe Jackson (the father of the pop star) was not granted standing to challenge his son's will, but Jackson's mother, Katherine Jackson, was permitted to challenge the executors without losing her share of the estate. Mrs. Jackson is receiving $26,000 per month from the estate, plus another $60,000 per month to care for Jackson's children.

§          Mark Lester, the godfather of Michael Jackson's children, is claiming paternity for the children.

§          Debbie Rowe, Jackson's ex-wife and the mother of Jackson's children, sued a woman for defamation after the woman told the television program Extra that Rowe only wanted money from the estate and didn't want custody of the children.

§          Norwegian dancer Omer Bhatti is rumored to be Jackson's fourth child. Omer lived at Neverland Ranch for several years, and Jackson allegedly told people Omer was his biological son. If so, Omer may be Jackson's only biological son. Omer is willing to take a DNA test.

§          Executors of the estate indicate that it will be solvent, despite starting with at least $400 million of debt. Personal property and $5.5 million was recovered from a former financial adviser. Sony bid $50 million for Jackson's rehearsal film, This Is It, which went on to generate $70 million in theaters domestically.