Personal Financial Planning / Edition 5

Personal Financial Planning / Edition 5

by G. Victor Hallman, Jerry S. Rosenbloom

ISBN-10: 0070256802

ISBN-13: 9780070256804

Pub. Date: 02/01/1992

Publisher: McGraw-Hill School Education Group

With more than 135,000 copies sold in previous editions, Personal Financial Planning has become one of today's top answer books for people who want to know what to do with their money, and why.

This streamlined seventh edition provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on


With more than 135,000 copies sold in previous editions, Personal Financial Planning has become one of today's top answer books for people who want to know what to do with their money, and why.

This streamlined seventh edition provides in-depth coverage and analysis of the latest tax law changes. In addition, it features an entirely new chapter on planning and paying for education expenses, including the new 529 plans; ramifications of the GST estate tax repeal; new checklists and questions to tie up each chapter; and more.

G. Victor Hallman is a lecturer in estate and financial planning at the Wharton School.

Jerry S. Rosenbloom is a professor of insurance and risk management at the Wharton School.

Product Details

McGraw-Hill School Education Group
Publication date:
Edition description:
5th ed
Product dimensions:
6.28(w) x 9.27(h) x 1.77(d)

Table of Contents

Part 1.Coordinated Financial Planning1
1.Personal Financial Planning--The Process3
What Is Personal Financial Planning?3
Focus on Objectives4
Need for Personal Financial Planning5
Steps in the Planning Process6
Use of Financial Planning Statements7
2.Setting Financial Planning Objectives12
Importance of Setting Objectives12
Organizing Objectives12
Adjusting Objectives for Inflation and Possible Deflation (Recession or Depression)23
Adjusting Objectives to Changing Tax Laws24
Part 2.Using Insurance Effectively27
3.Personal Insurance Principles and Selecting Insurers29
Personal Risk Management29
The Insurance Principle30
Considerations in Choosing an Insurer30
Considerations in Choosing an Agent or Broker34
4.Life Insurance and Social Security36
Sources of Life Insurance Protection36
Social Security38
Types of Individual Life Insurance Contracts42
Definitions of Life Insurance for Income Tax Purposes55
The Life Insurance Contract57
Planning and Using Life Insurance62
Substandard Risks64
Nonmedical Life Insurance64
What Actions Can an Uninsurable Person Take?65
Group Life Insurance65
How Much Life Insurance Is Needed?67
5.Health Insurance70
Sources of Health Insurance Protection70
Disability Income (Loss-of-Time) Coverages71
Medical Expense Coverages79
Individual Health Insurance Policy Provisions90
Medical Savings Accounts92
Health Reimbursement Arrangements (HRAs)93
6.Long-Term Care Insurance and Medicaid Planning94
Nature of Exposure94
Basic Planning Approaches95
Long-Term Care Insurance and Other Arrangements95
Medicaid Planning for Long-Term (Custodial) Care101
7.Property and Liability Insurance109
Property Insurance109
Personal Liability110
Homeowners Insurance112
Automobile Insurance116
Other Property and Liability Policies to Consider120
Insurance Companies and Premiums122
Part 3.Investments and Investment Planning125
8.Basic Investment Principles127
The Basic Investment Objective127
Investment Directly or Through Financial Intermediaries127
Investment and Speculation129
Factors in the Choice of Investments130
Security of Principal and Income130
Rates of Return137
Marketability and Liquidity146
Tax Status148
Size of Investment Units (or Denominations)148
Use of Collateral for Loans148
Freedom from Care149
9.Common Stocks150
Characteristics of Common Stocks150
Some Measures of Value for Common Stocks150
Information About Common Stocks154
The Investment Process155
Diversifying a Common Stock Portfolio157
Periodic Review157
Decisions Concerning Selling Common Stocks157
Dollar-Cost Averaging158
The Mechanics of Buying and Selling Common Stocks158
Margin Accounts160
Selling Short160
Securities Investor Protection Corporation161
Investment Categories of Common Stocks161
Some Theories of Common Stock Investment164
Common Stocks and Market Cycles166
The Case for Long-Term Investments in Common Stocks166
Some Caveats170
10.Other Equity Investments174
Real Estate174
Oil and Gas (Natural Resource) Ventures182
Other Tax Shelters182
Impact of Passive Activity Loss Rules183
Put and Call Options184
New Issues or Initial Public Offerings (IPOs)186
Commodity Futures Trading186
Art, Antiques, Coins, Stamps, Gold, and Other Precious Metals188
11.Fixed-Income Investments189
Types of Fixed-Income Investments189
Ways of Taking Returns from Bonds189
Corporate Bonds191
Municipal Bonds (Munis)192
U.S. Government Obligations196
Market Discount Bonds199
Zero-Coupon Bonds (Zeros)200
Preferred Stocks201
Guaranteed Principal Fixed-Income Investments202
Liquid Assets204
Conversion Privileges in Fixed-Income Securities204
Bond Ratings and Investment Quality204
Strategies for Investing in Fixed-Income Securities207
12.Mutual Funds and Other Investment Companies209
Kinds of Investment Companies209
Why Invest in Mutual Funds?209
Disadvantages of Mutual Funds210
Types of Funds--Some Planning Considerations210
Regulation of Investment Companies213
How to Invest in Mutual Funds213
Distributions from and Exchanges of Mutual Funds214
Mutual Funds and Their Investment Objectives215
Getting Information About Mutual Funds222
Mutual Fund Performance222
Mutual Fund Expenses225
Factors Involved in Selecting Mutual Funds226
Planning Considerations for Mutual Funds227
Tax Aspects of Mutual Funds227
Exchange-Traded Funds230
Hedge Funds230
13.Asset Allocation Strategies and Models232
Fundamentals of Asset Allocation232
Steps in the Asset Allocation Process233
Personal Factors and Asset Allocation233
Investment Objectives235
Investment Policies236
Possible Asset Classes to Be Considered237
Investment Vehicles to Be Considered237
Return-Risk Considerations239
Allocations Within Asset Classes243
How Investments (Asset Classes) Should Be Held243
Illustrations of Asset Allocation Strategies245
Part 4.Income Tax Planning255
14.Income Tax Fundamentals257
The Federal Income Tax on Individuals257
The Federal Income Tax on Corporations273
Pass-Through Business Entities277
Federal Income Taxation of Trusts and Estates278
State and Local Income Taxes280
15.Basic Income Tax Saving Techniques for Individuals281
Eliminating or Reducing Taxes281
Shifting the Tax Burden to Others287
Allowing Wealth to Accumulate Without Current Taxation and Postponing Taxation288
Taking Returns as Capital Gains290
Taxation and the Capital Gains Lock-in Problem290
Tax-Planning Caveats298
16.Charitable Giving300
Basic Tax Principles300
Planning Techniques302
Part 5.Planning for Retirement and Capital Accumulation Plans317
17.Employer-Provided Qualified Retirement Plans and Social Security Benefits319
Economic Problems of Retirement Years319
Steps in Planning for Retirement Income319
Sources of Retirement Income320
Characteristics of Employer-Provided Retirement Plans322
Pension Plans333
Profit-Sharing Plans336
Savings (Thrift) Plans338
Stock Bonus Plans and Employee Stock Ownership Plans (ESOPs)344
Hybrid Qualified Retirement Plans345
Retirement Plans for the Self-Employed (HR-10 or Keogh Plans)346
18.Other Employer-Provided Retirement Plans and Other Employee Benefits351
Other Employer-Provided Retirement Plans351
Other Employee Benefits358
19.Individual Retirement Accounts and Annuities (IRAs)361
Basic Concepts361
Types of IRAs362
Other Aspects of IRAs371
Planning Issues for IRAs372
20.Planning for Taking Distributions from Qualified Retirement Plans and IRAs377
General Considerations377
Taxation of Benefits from Qualified Plans and IRAs379
Planning for Distributions from Qualified Retirement Plans and IRAs397
21.Individual Investment Annuity Contracts406
Fundamental Purposes of Annuities406
Types of Individual Annuities406
Parties to the Annuity Contract409
Phases of Annuities409
Investment Returns on Annuities410
Expense Charges on Annuities412
Withdrawals and Loans413
Exchanges of Annuities414
Annuity Distribution (Payout) Options414
Annuity Death Benefits414
Split-Funded Annuities415
Taxation of Nonqualified Annuities416
Other Individual Annuity Arrangements418
Using Life Insurance Values to Provide Retirement Income418
22.Employee Stock Compensation Plans420
General Considerations420
Types of Plans420
Statutory Plans421
Nonstatutory Plans424
Provisions of Stock Option Plans428
Valuation of Stock Options431
Some Caveats Concerning Stock Options and Other Plans434
Planning Issues Regarding Stock Options and Other Stock Plans434
Part 6.Estate Planning437
23.Estate Planning Principles439
Objectives of Estate Planning439
Methods of Property Disposition440
Property and Property Interests441
What Is Meant by the "Estate"?448
Settling the Estate452
Trusts in Estate Planning454
24.The Transfer Tax System462
Impact of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA)462
Applicable Credit Amount (Unified Credit) and Applicable Exclusion Amount463
Federal Gift Tax464
Federal Estate Tax472
Federal Generation-Skipping Transfer (GST) Tax480
25.Lifetime Giving and Sales Within the Family486
Making Lifetime (Inter Vivos) Gifts to Noncharitable Donees486
Sales Within the Family503
Loans to Family Members506
26.Marital Deduction Planning, Postmortem Planning, and Estate Liquidity507
Marital Deduction Planning507
Postmortem Estate Planning522
Estate Liquidity524
27.Life Insurance in Estate Planning526
Taxation of Life Insurance526
How to Arrange Life Insurance533
Gifts of Life Insurance540
28.Revocable Living Trusts, Other Will Substitutes, and Property Management Arrangements544
Revocable Living Trusts as a Will Substitute544
Joint Property with Right of Survivorship548
Property Management Arrangements to Deal with Physical or Mental Incapacity549
29.Financing Education Expenses552
Importance as a Financial Objective552
Nature and Growth of Education Costs552
Estimating Education Costs553
Financial Aid Considerations554
Tax "Breaks" for Education Costs555
Strategies in Planning for Education Costs557
30.Planning for Business Interests572
Potential Issues572
Characteristics of Closely Held Businesses573
Types of Business Entities573
Check-the-Box Regulations581
Income Tax Basis in Business Interests582
Factors in Choice of Entity583
Disposition of Business Interests588
Retention of Business Interests598

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