Donor-Advised Funds: A public charity that pools donations with other donors' gifts and invests them tax-free; the fund makes grants to the recipients upon recommendation of the donor. Donor-advised funds provide a means of contributing to qualified charities of choice. What various mutual funds have begun to offer are these gift funds that let you donate to your account whenever you want -- even after your death. You choose a portfolio made up of mutual funds that matches your style of investing. There is no worry about maintaining receipts or checks. The programs send quarterly statements. There are minimum contributions of $10,000 - $25,000.

The donor-advised fund allows you to:

1. take immediate tax deductions for your contributions;
2. make grant requests on your own timetable;
3. grow your account over time with money management expertise;
4. lower your current taxes, and makes it easier to keep track of your charitable activities and tax-filing;
5. Deductions can be up to 50% of personal income for cash gifts and 30% of personal income for appreciated property at 100% fair market value.When you donate appreciated securities, you'll avoid paying capital gains taxes;
6. The contributions you make to your account will be removed from your estate, and, therefore, will not be subject to estate taxes;
7. Individuals may donate appreciated property without the risk of triggering the federal alternative minimum tax (AMT).

As with any strategy, there are pros and cons. Please contact us for further evaluation.

Gifting stock or other appreciated property

When tax season approaches, many of our clients look for ways to better plan for next year's tax bite. For many this involves considering a charitable gifting strategy. You can achieve tax benefits as well as aid those less fortunate, contribute to your alma mater, or show your support for a local organization.

Many clients use this time of the year to evaluate their finances, and decide what resources they have available for charitable giving. We recommend reviewing your estimated income and tax liability, as well as your assets. We encourage clients to consider non-cash gifts such as stocks or real estate. The tax code already provides an incentive to most taxpayers to give to charity, and this can be maximized with proper planning. Gifts of appreciated stock or property can be very advantageous to you from a tax perspective. Gifting appreciated property, such as common stock, mutual funds, or real estate, is a great strategy to fulfill charitable goals as well as to ease your tax burden. Most long-term capital gain property is deductible for the full fair market value of the property when the donation is made, subject to certain limitations. In addition, you do not pay any capital gains taxes on the sale of the property. Because charities are tax exempt, they do not pay any taxes on the sale either. By gifting appreciated securities to a charity, you can give a greater amount than if you sold the securities, paid capital gains taxes, and gifted the proceeds. This results in a larger donation to the charity of your choice, and a larger charitable deduction on your tax return.

Philanthropy should be and is the primary driving force in charitable giving. However there are many ways to not only benefit your favorite charity but to also provide the maximum benefit to you as a taxpayer.

I Bonds vs. Treasury Inflation-Protected Securities

The low rates that are currently being generated on most fixed income investments have caused many investors to start thinking about other bond alternatives. Although inflation has been relatively dormant in recent years, bonds whose returns are tied to inflation have been generating quite a bit of interest recently. Here's an overview of some of the key characteristics associated with I Bonds versus Treasury Inflation-Protected Securities (TIPS):

I Bonds:

TIPS:

ETF's

Many of you may have heard or read about Exchange Traded Funds or ETF's. ETF's are funds that represent a group of securities (an index) and trade like a stock on a major stock exchange. Examples included S&P 500 Index shares known as SPDR's, World Equity Benchmark Shares (WEBS). Barclay's Global Investors introduced several ETF's that track various indices as well, and Vanguard began offering VIPERS (Vanguard Index Participation Equity Receipts) to compete in this market. There are some key differences between these securities and mutual funds. Whereas mutual funds are only traded once per day at the closing price, ETF's can be traded continuously. Mutual funds automatically reinvest dividends, the ETF's reinvest the dividends quarterly. Perhaps one of the largest differences is the taxability of transactions. As you know, when you hold a mutual fund you pay taxes on gains at the end of each year, and your basis is adjusted accordingly. Because these ETF's trade like a stock, your basis is always your purchase price and you don't pay any taxes until you actually sell the investment. This may be a significant advantage for some investors, although we caution that eventually the tax bill does have to be paid. We are looking at these types of investments more closely and may have further discussion with you if we feel you may benefit from investing in some of these instruments.

Section 529 Plans (College Savings Plans)

Enhancements to qualified state tuition plans (defined under Section 529 of the Internal Revenue code) were provided by the 1997 Taxpayer Relief Act. A 529 Plan is an investment plan operated by a state that provides a way to save for college and has some significant tax benefits.

Basically, individuals make contributions to a state plan on behalf of the beneficiary. These funds are invested by the state (an investment management firm chosen by the state) and grow tax-deferred until the time of distribution. When the funds are withdrawn to pay for qualified higher education expenses, the distributions are not Federally taxed. This is a provision under the new tax law. State taxation varies; Illinois'plan is exempt from state tax.

The money can be used to pay for college bills at any accredited post-secondary school, anywhere in the country (not just in the state sponsoring the plan). In other words, an individual can take advantage of a state's plan, regardless of the state of residency; therefore, you don't have to actually live in a particular state in order to take advantage of that state's college savings plan. Note: A few states' plans may have residency restrictions but most do not. Note that under the new tax law, you can rollover your 529 plan another state's plan once every 12 months which gives investors some added flexibility.

The value of the plan is not included in the donor's estate, but the donor still retains control over the funds. There is no automatic transfer to the child at the age of majority. This varies significantly with the amount of control that a custodian has over an UGMA or UTMA account.

An individual can generally invest up to $50,000 ($100,000 per couple) in one year (per beneficiary) without incurring any federal gift tax. Note: This gift is assumed to be made over the following five-year period. The $50,000 maximum is per beneficiary.

Currently most of the 50 states offer 529 plans. Each state can design them differently and use a different investment company to manage the assets. The terms of each state's plan do vary, so it is important that you research the options available. Please contact us for more information. You can also visit the website www.savingforcollege.com for a comprehensive discussion of these plans.

Carol's Reading and Restatement

It has been a long time since we have experienced a lengthy bear market. That last major bear market was in 1973 and 1974 and the last cyclical bear market was in 1990. We had a major correction just recently in January of this year, which seems to be continuing as of this writing. Whereas these dips have alerted us of possible buying opportunities, the prolonged bull market has spawned a "can't lose" attitude on the part of most investors. This is giving us the opportunity to revisit the psychological perspective between risk tolerance and rate of return and the achievement of goals.

CCP, Inc, as advisors, is faced with coaching our clients to maintain discipline and avoid impulsive behavior. What are some of the issues that we can relate to in the here-and-now?

• Using the short term trends to become the starting point or anchor of our expectations
• Using headlines, the media and their interpretation of isolated sectors/industries/stocks as the basis of intuitive appeal and investor biases
• Applying simplistic extrapolations and trend investing ignores fundamentals and negates realistic long term assumptions due to short term overconfidence
• Using hindsight as a decision making tool creates an illusion of predictive powers rather than using it as a single form of analysis
• Consider your goals: consider the diversification of your current assets and income resources as solutions in optimizing the wealth needed to achieve your goals rather than chasing the inflated expectations of market results over the past few years

It is important to us, as a trusted investment advisor to clients and families, to have clearly defined, consistently applied investment strategies for their portfolios. It is through experience, research and listening to client needs that our diversified portfolios have been created and thus implemented.

Our services go beyond just the investment analysis... there is nothing more important to us than the overall achievement of client goals and financial security of each and every participant in our financial planning process.