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The Weekly Wealth Report

November 11, 2024

THE WEEK ON WALL STREET

Stocks surged higher last week, fueled by the Fed’s rate cut decision and post-election enthusiasm as investors looked to future policy impacts of a Republican-controlled Senate and executive branch. (The House of Representatives remains undecided.) The S&P’s 500 Index spiked 4.65 percent, while the Nasdaq Composite Index gained 5.74 percent. The Dow Jones Industrial Average rose 4.61 percent. The MSCI EAFE Index, which tracks developed overseas stock markets, was flat (-0.02 percent).

FACT OF THE WEEK

On this day, at the 11th hour on the 11th day of the 11th month of 1918, the Great War ends. At 5 a.m. that morning, Germany, bereft of manpower and supplies and faced with imminent invasion, signed an armistice agreement with the Allies in a railroad car outside Compiegne, France. The First World War left nine million soldiers dead and 21 million wounded, with Germany, Russia, Austria-Hungary, France, and Great Britain each losing nearly a million or more lives. In addition, at least five million civilians died from disease, starvation, or exposure.

As we observe November 11th, let us take a moment to honor and express our gratitude to the brave individuals who served our nation in the armed forces. Veterans Day is a time to reflect on their unwavering commitment and the incredible courage they have shown in defending our freedoms.

 

MARKET MINUTE

Stocks Extend Rally on Election News
It was a shaky start to the week for stocks as investors anxiously awaited election results and the Fed’s interest-rate decision. On Election Day, stocks rallied broadly before polling places closed. After the election was called early the next morning, stocks opened higher and climbed throughout the trading session. The yield on the 10-year Treasury fell to 4.307 percent. Stocks opened higher Thursday, and the rally picked up momentum after the Federal Reserve approved its second consecutive interest rate cut. Economic news that showed a 2.2 percent rise in third-quarter productivity helped support the move. Stocks finished the week with a number of records: the S&P 500 crossed the 6,000 mark, and the Dow breached 44,000 for the first time on Friday. While the S&P and Dow closed slightly below those record levels, each had their best week in a year.

Fed Cuts Rates
As expected, the Federal Reserve cut interest rates by a quarter percentage point at its November meeting. However, Fed Chair Jerome Powell signaled some uncertainty about the pace of future rate cuts, which slightly unsettled the markets. Citing a desire to “steer between the risk of moving too quickly and perhaps undermining our progress on inflation, or moving too slowly and allowing the labor market to weaken too much,” Powell said the Fed will continue to monitor the economy’s progress.

FINANCIAL STRATEGY OF THE WEEK

White Elephant Inheritance

Have you ever had to deal with a "white elephant"? Not the actual pachyderm, but what Merriam-Webster calls "a property requiring much care and expense yielding little profit" or, more simply, "something of little or no value." Of course, we're not talking about the sort of "white elephants" you might get in a humorous gift exchange over the holidays, like a tacky t-shirt that isn't even your size or an inexplicable kitchen gadget.

Not everyone has a rich uncle who will present them with a simple cash gift in his will. A "white elephant" is a gift that may cause more issues than it resolves, much as an elephant might eat an unwitting recipient out of house and home. It's an asset that comes to you via gift or inheritance and needs to be quickly sold, liquidated, or transferred to avoid further expenses of time or money. In such cases, it is crucial to understand how to disclaim an inheritance properly and avoid holding the burden. The average American household stands to inherit $46,200. Not all those bequeathments are straight cash, and some might prove inconvenient or troublesome.1

There are several reasons why someone might not want to accept an inheritance:

  • Income: If the inheritance generates income, such as a business or rental property, it may push you into a higher income tax bracket. This might be good in many cases, but there are situations where this might prove inconvenient, such as—
  • Litigation or Bankruptcy: If you face a lawsuit or anticipate bankruptcy, disclaiming the inheritance may be wise. However, it's important to note that if you are currently undergoing bankruptcy proceedings, you may be unable to deny the inheritance.2
  • Inability to Maintain: If the inheritance includes property or assets that require ongoing maintenance and you cannot fulfill those obligations, disclaiming may be the best choice. This could be real estate, a business, or perhaps even a literal white elephant.
  • Honoring the Decedent's Wishes: Circumstances may have changed since drafting the will, and accepting the inheritance may no longer align with the decedent's original intentions.

To officially disclaim an inheritance, you must meet the following requirements set forth by the Internal Revenue Service:

Provide written notice to the executor or administrator of the estate, clearly stating that you are disclaiming the assets and that the decision is irrevocable.
Submit the statement within nine months of the decedent's death (minors have until they reach the age of majority).
Ensure that you do not benefit from the disclaimed property, either directly or indirectly. Example: What if you were to live with the new recipient in a house you declaimed? The IRS might perceive this as you benefiting indirectly.

Notably, once you disclaim an inheritance, you have no say in who receives it. The estate will be treated as if you died before accepting it and will go to the contingent beneficiary named in the will. If there is no will, the distribution will resume according to the next person, in line with state law.

However, disclaiming an inheritance may not be the best choice for individuals receiving Medicaid benefits. If you reject an inheritance while on Medicaid, it could be considered a transfer of assets, potentially making you ineligible for Medicaid for a certain period. It is crucial to seek guidance from a professional with information specific to your situation if you receive Medicaid benefits.

Again, you may not have the choice or inclination to refuse this inheritance. In short, don't let the elephant gobble up your time and money! Another step, when possible, is to speak to your relative in advance if you anticipate inheriting something you can't handle or don't want. Conversations with your relatives might go a long way toward averting more work later and give them the satisfaction of knowing they are caring for you in the present.

Remember, this article is for informational purposes only and does not replace real-life advice, so consult a legal professional before deciding on an inheritance. The article provides high-level considerations, but a legal professional who is familiar with your situation may be able to provide more insights and guidance.