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Morfitt & Turnbull

Issue 31   

NEW BEGINNINGS - Hi, I’m Craig the new Editor in chief and here’s my first Newsletter.
As you are receiving this newsletter on Halloween I thought it would be worthwhile looking at some scary financial issues that have happened close to Halloween.
The Panic of 1907 – Also known as the bankers panic or the Knickerbocker Crisis! Which took place in the USA over a 3 week period starting in mid October when the NYSE fell almost 50% from its peak!
Panic occurred and there were numerous "runs" on banks and trust companies. This was triggered by the failed attempt to corner the market on Stock at the United Copper Company, this then led to the downfall of the Knickerbocker Trust Company, which was New York’s third largest trust company at that time, hence the Knickerbocker Crisis.

The following year senator Nelson W. Aldrich, the father in law of John D. Rockefeller Jnr. established and chaired a commission to investigate the crisis and propose solutions. This led to the creation of the Federal Reserve System as we know it today.
  Panic in the streets
Wall St. Crash of 1929 – This was the most devastating stock market crash in United States history and signalled the beginning of the 10 year great depression that affected all western industrialised countries.

On October 28th "Black Monday" the Dow suffered a record loss of an incredible 13%, "Black Tuesday" followed the next day with a further loss of 12%.

After this experience stock markets around the world instituted measures to suspend trading in the event of rapid declines to prevent panic sales. However, the one day crash of 19th October 1987, also named "Black Monday", when the Dow fell 22.6% was worse in percentage terms than any single day of the 1929 crash, so these measures didn’t exactly work! Although the 2 day decline in 1929 still remains the worst overall fall in history.

"Black Monday II" – 19th October 1987 when markets around the world crashed. This began in Hong Kong and spread west like wildfire to Europe and the United States; the Dow experienced its biggest ever one day fall.

By the end of October 1987 markets in the UK had fallen by 26.45%, New Zealand was hit especially hard falling by around 60%!! Interestingly though the FTSE actually finished higher over the whole of 1987 by 0.1%, that’s what you call a rollercoaster ride!!

After these events regulators developed new rules known as "trading curbs" allowing exchanges to temporarily suspend trading in instances of exceptionally large price declines in some indices.

So what’s the moral of the story? My message would be that markets recovered and returned to normal after all of these unprecedented events, so don’t be scared of investing as our "Gold List" investment process will hopefully provide plenty of treats and not the nasty tricks!

Happy Halloween, Craig

Adam's Technical...  Inheritance Tax
The Inheritance Tax (IHT) threshold has been £325,000 per individual since April 2009 and is to remain at this amount until at least April 2020. IHT is payable at 40% on any amount over the threshold plus any threshold inherited from a spouse/civil partner.

With the main residence nil rate band set to be introduced in April 2017 (see December ’15 newsletter), I thought it timely to highlight some of the well-worn routes that can be followed to reduce IHT payable by an estate.

These are as follows:
Inheritance Tax
  Firstly, ensure you have an up to date Will in place.
  Make gifts to family and friends. You can give money to anyone you choose and once you have lived for seven years from the date of the gift the amount is outside of the estate.
  Everyone can gift up to £3,000 each tax year and it is immediately removed from their estate for IHT. In addition gifts of up to £250 can be made to anyone each tax year, other than the person you have gifted the £3,000 to.
  Gifts can also be made on marriage. This can be up to £5,000 from a parent, £2,500 from a grandparent or great grandparent and £1,000 from anyone else.
  Any monies left to charity are not included in the IHT calculation. Also, if you leave at least 10% of your net estate (after deducting the threshold) to charity, the rate of IHT payable reduces from 40% to 36%.
  Regular gifts can be made out of income. These leave the estate immediately. The proviso is that the standard of living of the person gifting the money is not affected.
  An insurance policy can be set-up under trust that guarantees to pay out a lump sum on death whenever this occurs. This type of policy can be used to meet all or part of the IHT due.
  Invest a lump sum retaining the right to access the amount invested with any growth in the investment being outside of the estate. The lump sum invested remains in the estate.
  Invest a lump sum to receive a fixed income for life and depending on health part may be removed from the estate immediately, but all will be after seven years regardless. In this scenario the capital cannot be accessed.
  Invest monies in shares that qualify for business property relief. Once held for two years they are removed from the estate. Please note that the monies must still be held in qualifying shares at the date of death.
Ensure a record is kept of any IHT planning undertaken and gifts made, which will be helpful to the person who deals with the administration of your estate. Contact your usual Morfitt & Turnbull adviser if you have any queries or require more information.

Gareth Says... 

"Brexit Et Al...."
Surprisingly, to me at least, we BREXITED. In this scenario many doom merchants had predicted large falls in the market, me included! I saw a prediction as much as 40% down.
On June 24th we opened 9% down and then started to rise and have done so ever since! I struggle to explain why markets are so high, the weak pound will help some, but hinder more. Therefore we are in interesting times. Valuations have generally looked very healthy. Long may it last!

Staff Matters
Craig joined M & T on September 5th as a Director. He brings with him a wealth of experience, being in the industry since 1994, starting off at Prudential’s flagship academy, then moving into the IFA arena, where he has practised for the last 17 years, and as a partner/director for the last 10 years, specialising in retirement planning and advice for clients aged 50+.

Also, Annie successfully completed the Manchester Half Marathon this month in an amazing time of 2 hours and 2 minutes, despite running "just for fun"! Here’s the medal to prove it, well done Annie!
  Annie - Marathon


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