Expert advice on Net stocks, estate planning
- By Milt x_Zall
- Jun 16, 2000
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
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.