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If gifting is on your horizon between now and the end of the year, the IRA charitable rollover can help manage the tax impact resulting from Required Minimum Distributions. The American Taxpayer Relief Act of 2012 (ATRA) extended the IRA charitable rollover through December 31, 2013. The provision permits IRA owners who are age 70ó or older to make a tax-free distribution to a qualified charity of up to $100,000 per taxpayer, per taxable year. A distribution made directly to a qualified charity any time prior to December 31, 2013 can be treated as a qualified charitable distribution for the 2013 tax year and will be excluded from the taxpayer’s adjusted gross income.

The provision mainly benefits donors who itemize deductions and whose charitable contributions are reduced by the percentage of income limitation. Usually when individuals receive distributions (such as Required Minimum Distributions) from their IRAs and make corresponding charitable contributions, they must count the distribution as income and then take the charitable deduction for any amounts given to charity. For higher income taxpayers, the charitable contribution deduction they receive may not totally offset the taxes they must pay for receiving the IRA distribution. This is where the IRA charitable rollover provides greater tax relief.

Most contributions to public charities are qualified. Because donors exclude this contribution from their gross income, they cannot take a charitable contribution deduction for the contribution; to do so would result in a double benefit for donors and is prohibited.

To make an IRA charitable rollover, contact your Trust Administrator at Indiana Trust. As always, if you have more detailed questions on the tax implications of any strategy, consult with your tax adviser for additional information.

Additionally, as a reminder, the annual gift tax exclusion for 2013 is $14,000 per individual.

In early November, Dr. Jack Gordon, Vice President and Trust Officer of Indiana Trust & Investment Management Company, presented a benefit lecture hosted by Elkhart’s Lerner Theater, proudly sponsored in part by Indiana Trust. The following is excerpted from an article announcing the event by Sharon Hernandez of The Elkhart Truth.

Many remember the tragic events of Nov. 22, 1963, like they happened yesterday. Others have learned about their importance in the shaping of this country in history classes.

On Thursday, Nov. 7 — nearing the 50-year anniversary — the Elkhart community will have the chance to learn more about the assassination of President John F. Kennedy. Jack Gordon, who has specialized his research on the president’s assassination, will give a lecture about the incident, what happened in Dallas the day of the assassination and why the truth still matters after 50 years. Gordon, who now lives in northern Indiana, was born and raised in Albany, N.Y. He graduated from Hamilton College with a degree in history, and completed his masters and doctorate degrees at Indiana University.

It was during his years at IU that he began to research U.S. political assassinations. He was a consultant to NBC and British Central TV during production of the miniseries “Kennedy.” In 1986 he was appointed by Los Angeles Mayor Thomas Bradley to a 12-member committee in charge of finding a repository for the Los Angeles Police Department records on the assassination of Senator Robert Kennedy. Those records became public two years later. Gordon has lectured on the two Kennedy assassinations over the last 35 years.

During his lectures, Gordon reviews the history of political assassinations in the U.S., examines medical evidence from autopsies and summarizes theories of what took place in each incident.

To view the full article, visit elkharttruth.com.

Source: Hernandez, Sharon. (2013, November 4). Elkhart’s Lerner Theater to host lecture on Kennedy assassination. The Elkhart Truth, p. 1. Retrieved November 4, 2013, from http://www.elkharttruth.com.

Indiana Trust takes into consideration the potential for volatile interest rates when constructing fixed income portfolios. Generally, target portfolio duration is in the intermediate term range and is slightly shorter in average maturity than the broad U.S. investment grade bond market. Our recent strategic allocations to high yield bonds (both taxable and tax-exempt) in many fixed income portfolios as a complement to core investment grade bond allocations is one way to help manage interest rate risk and provide overall diversification. Also, we have adjusted bond portfolios to have a greater weight on investment grade corporate bonds compared to the market benchmark, and we continue to establish positions in investment grade international bonds. These bonds further diversify sources of bond return.

As we rebalance portfolios, given recent fixed income performance, we will be harvesting equity gains and adding to fixed income positions to bring allocations in both stocks and bonds back to target weights. Similarly, as international stocks have been outperformed in recent years by U.S. stocks, we have been rebalancing allocations to international stocks back towards their target weights in client portfolios. The rebalancing discipline across asset classes allows portfolios to capture relative value through time – put another way, it provides a “buy low, sell high” portfolio management discipline.

After a strong start to 2013, volatility returned to stock and bond markets in May and June. Some of the volatility was undoubtedly generated by comments from Fed Chairman Ben Bernanke related to the potential tapering of the Fed’s monetary stimulus program. Markets tend to pore over every word from the Fed, as changes to U.S. monetary policy can impact global capital markets. At times, the Fed’s efforts at transparency on its decision making process can lead to misinterpretation and overreaction by investors. Seemingly “old news” from the Fed is sometimes treated like a “surprise” by markets and can generate market volatility over short time frames. The markets’ reactions to the Fed in late May and in June, along with sour economic news from emerging markets, drove most major asset classes into the red for the second quarter. The exception was the U.S. equity market, which ended the quarter in positive territory.

U.S. large cap stocks ended the second quarter up 13.8% for the six month period while small cap stocks were up 15.9%. These returns represent the best first half start for U.S. equities since 1998. Continued slow-but-steady U.S. economic progress helped buttress U.S. stocks in the second quarter, particularly relative to international markets. Reported corporate earnings have been average so far for the second quarter, with sales a bit lackluster.

While investors want to see sales growth play a more prominent role in boosting earnings, they appear to be settling for cost containment and share buy-backs as catalysts for recent advancement. Still, valuation metrics on U.S. equities continue to indicate stocks are in a fairly-valued range. Building on the first half of the year, July was a tremendous month in U.S. equity markets as large cap stocks were up 6%. International developed markets were likewise up 5.3%.

The first half of 2013 was very similar to the first half of 2012 when international and emerging market stocks trailed U.S. markets by a wide margin. (The second half of 2012 saw a dramatic reversal of leadership, with international leading the U.S.) Continued muted economic growth in Europe has been a wet blanket over markets there, although some markets such as Germany and Ireland have held up well. Foreign currency weakness translated into lower U.S. dollar returns as well. Currency depreciation was particularly acute in emerging markets. The Indian rupee, for example, reached all-time lows versus the U.S. dollar in the second quarter. Also weighing heavily on emerging market returns were revised-lower (but still robust) economic growth figures in China, as well as falling commodity prices.

Bond markets performed poorly across the board in the second quarter. This was in large part due to an interpretation of Ben Bernanke’s comments to mean that the Fed may wind down its monetary stimulus a bit sooner than expected (also known as the “taper” in the media). The 10 year U.S. Treasury Note, an indicator of broad market interest rates, increased from 1.7% in early April to 2.6% in late June as investors reacted to this news. As bond prices move inversely with interest rates, bond market prices – particularly investment grade intermediate and longer term bonds – were pushed lower. The U.S. Aggregate Bond Index ended down (-2.3%) for the quarter. Other sectors of the bond market, such as high yield bonds (-1.4%), held up marginally better, underlining the benefit of a multisector approach to fixed income portfolios.

Since late last year, the Fed has been actively buying intermediate term bonds in the open market in an effort to increase the supply of money – a program known as Quantitative Easing, or “QE.” The Fed buys bonds from U.S. banks, which are given money in return. This money, referred to as “bank reserves,” may then be lent by banks to their clients.

Many investors ascribe QE’s main goal to be lower interest rates available to consumers and companies, which, in theory, should boost borrowing and spending. Lower interest rates are a benefit but it is not the whole story – if that were the sole aim of QE, it would be known as “Interest Rate Easing” rather than “Quantitative Easing.” The main problem QE is attempting to address is the lackluster money supply growth (or, the quantity of money) in the economy, which is surprising considering that the Fed has created $2.7 trillion via QE programs since 2009. The reason for the low growth in money supply is that banks – who received bank reserves from the Fed in return for their bonds – are not lending those larger reserves to the broader economy. The borrowing and lending process is impaired. This helps explain tepid U.S. economic growth and is a reflection of many nuanced problems in the demand for loans (i.e., households deleveraging) and the supply (i.e., banks not lending because of stricter regulations). Ultimately, the creation of all of those dollars has not led to inflation.

Through this lens, the rise of interest rates in June based on comments made by the Fed related to its potential tapering of QE is a bit of a head-scratcher. The Fed did not say it was raising interest rates. The Fed has no intention of raising interest rates in the near future – some estimate not until 2015 or beyond, thanks to the Fed’s dual mandate of stable inflation and full employment.

As bond investors normally look to be compensated for expected inflation, an end to QE – an end to the program whose goal is to create money supply – may cause inflation expectations to fall. That may actually lead to interest rates falling, which is a positive development for bond prices and is in fact what happened when the Fed ended previous QE programs.

Interest rate volatility does have an impact on the valuation of many assets, with the primary impact on bonds but with similar impact on other income generating assets such as preferred stocks, dividend paying stocks, and REITs. However, interest rates remain very low, and as mentioned above, the Fed has no current plan to increase interest rates. It may be that the market overreacted to the latest comments from the Fed, which affected bonds and these other income-producing assets. It is far from inevitable that interest rates move substantially higher from here in the near term – even if the Fed were to taper its bond purchases in 2013.