Expert advice on Net stocks, estate planning

Internet companies are the current darlings of Wall Street, but are they

a good investment? One expert advises that investors should use some common

sense before filling a portfolio with dot-com companies.

It is no secret that the Internet is a booming business. Here are some statistics.

In 1998, about 97 million people were using the World Wide Web. That number

is expected to increase to 320 million by 2002. In 1998, $1.5 billion was

spent on Web ads. In 2003 that number will exceed $10 billion. The value

of goods and services purchased online is expected to go from $32 billion

in 1998 to $400 billion in 2002.

Regardless of this tremendous growth, Internet companies are still in the

early stages of development and to forecast their prospects, investors must

look at least three to five years ahead.

Many experts think that Internet stocks are nothing more than speculative

bubbles. Louis Stanasolovich, president of Legend Financial Advisors Inc.,

a Pittsburgh-based investment advisory firm, thinks that Internet stocks

are bound to come crashing down because of a tremendous oversupply of capital

and Web sites. The problem with investing in Internet stocks, he says, is

that most investors are not trying to understand a business; they are trying

to guess the price that a common stock will sell for next week.

In the same vein, experts predict that 90 percent of the Internet companies

that have gone public will end up being valued at a fraction of their current


Estate Planning

Although domestic asset protection trusts do not offer the same type of

protection from litigation as offshore trusts, they can play an important

part in estate planning.

Domestic asset protection trusts can be set up so that the assets placed

in them will not be included in your estate and therefore will not be subject

to estate taxes. Here is how this works:

To determine what assets should be included in your estate, the Internal

Revenue Service looks at those assets that can be accessed by creditors.

In states that offer domestic protection trusts (currently Delaware and

Alaska), creditors cannot touch assets placed in an asset protection trust.

Because the assets are not available to creditors, Stanasolovich says they

may not be considered part of your estate and may not be subject to estate

taxes. Some individuals also place their assets in trusts to protect the

assets from seizures because of divorce litigation.

To create this type of trust, Stanasolovich says that assets transferred

into them must be a "completed gift," meaning that ownership of the assets

must be transferred to the trust. This, however, is not always attractive

to every individual establishing the trust. But domestic protection trusts

also allow the grantor to name himself as the "discretionary beneficiary"

of the trust while still making the assets a completed gift. This means

that the grantor can receive income generated by the assets in the trust.

Establishing a properly structured trust is not something you do yourself.

Consult an attorney if that is what you would like to do.

Zall, Bureaucratus columnist and a retired federal employee, is a freelance

writer based in Silver Spring, Md. He specializes in taxes, investing, business

and government workplace issues. He is a certified internal auditor and

a registered investment adviser.


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