What to know about charitable trusts
Q I inherited a portfolio of stocks. In addition, I have some holdings that I purchased. The current value varies according to market conditions from $315,000 to $425,000. I'm reluctant to pay capital gains on my holdings or to reinvest in mutual funds. I'm 60, single, with no children. I would like to retire earlier than 65.
My stock broker has said he could set up a charitable trust for me, paying a minimum 5 percent. What are questions that I should consider about setting up such a trust?
H.B., Pittsburgh
A According to a spokesman at Fidelity Investments, you should make sure you know what fees are involved, the groups to whom your charitable contributions would be directed, the amount of income you would be guaranteed, the stocks and bonds in which trust monies will be invested, and whether you gain a tax benefit.
Also, as we have mentioned in these columns before, several mutual-fund companies - including Fidelity and Vanguard - offer popular charitable trusts.
In addition, many religious groups have their own programs.
Q A stock that we have held for several years recently split, going from the $100 range to about $50. How significant is a stock split?
M.W., New York
A Companies usually split a stock to make it easier for investors to buy shares.
A company that has split its stock is worth exactly the same as before the split, says author Jane Bryant Quinn, in "Making The Most of Your Money." But companies with high share prices don't usually split unless they expect to see continued growth and higher dividends, she writes.
Look out for a company with a low share price (say $30) that suddenly splits. In that case, make sure the firm is financially sound.
Q My broker speaks of a "bottom-up" and a "top-down" approach to investing. What is he referring to?
Name withheld, Scotch Plains, N.J.
A Top-down investing starts with a theme, such as, "energy stocks should do well during the remainder of the year 2000." You would then look for appropriate energy firms.
Bottom-up investing means you look at the financial-fundamentals of a company first, such as its sales, earnings, and debt regardless of what industry it is in.
Q I'm disputing expense charges made by my broker. Who should I contact to help me get back my money?
Name withheld, Astoria, N.Y.
A Contact your local bar association for a referral of securities lawyers, or call the American Arbitration Association in New York at 212-484-4000.
- Guy Halverson
(c) Copyright 2000. The Christian Science Publishing Society
