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KENNETH FORD

President & LPL Wealth Advisor 201 798 7992 ken.ford@lpl.com

December 10, 2007

When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people. ~ Chinese Proverb

The Markets

The market tends to go up in December and so far that trend has continued. Last week, the Dow gained +1.9%, S&P 500 +1.6%, Nasdaq +1.7%, and the Russell 2000 +2.3%.

With just 15 trading days left of 2007, for the year the Dow is currently up +9.3%, Nasdaq, +12.0%, S&P 500 +6.1%, and the Russell 2000 -0.3%. Considering all of the problems in housing, credit markets, energy prices, consumer spending, and overall health of the economy, the market is holding up pretty well in comparison.

The combination of oversold conditions, expectations for another rate cut, some better than expected news from retailers, and overall hope that the economy is holding up far better than expected enabled the market to tack on more gains this week. In addition, the overwhelming perception that you can't beat the market down in December played a significant role.

Once again, interest rates and inflation will be the main themes of the trading week ahead, during which traders will focus on the Fed’s upcoming interest rate decision on Tuesday. From what we saw last week, the market seems to want the best of both worlds - a stronger than expected economy and a friendly Fed willing to slash rates aggressively to foster in a new bull market. Will investors get what they wish for this Christmas? At least as far as the Fed is concerned, we'll find out next week.

Top Headlines:

• Activision (ATVI) announced that it will merge with Vivendi Games, creating a gaming giant to contend with current leader Electronic Arts (ERTS). (12/3)
• The ISM Manufacturing Index inched lower for a 5 consecutive month in November. The index now stands just above the 50% mark, which indicates expansion, at 50.8%. The ISM Services Index also slowed, coming in at 54.1% for the month. (12/3)
• Job growth substantially outperformed consensus estimates in November, as the ADP employment report showed an 189,000 rise in payrolls compared to a consensus of 60,000. (12/5)
• Friday's job report proved to be slightly stronger than expected as the economy added 94,000 nonfarm payroll jobs in November. This gain allowed unemployment to remain steady at a healthy 4.7%. (12/7)

Help Preserve Assets and Provide for Loved Ones With a Trust

As the year draws to a close, many people take time to reflect on their financial circumstances and to plan ahead, making provisions for their future needs and those of their loved ones. As part of your year-end planning exercise, take a moment to consider what would happen to your assets and surviving family if you were no longer able to care for them. Then consider the potential benefits of setting up a trust. Trusts are an effective means of helping protect important assets, providing for beneficiaries and managing taxes. And, contrary to popular belief, trusts are not just for the wealthy.

A qualified attorney can help you set up a trust fairly easily that can be used for any number of practical purposes, such as:

• Controlling assets and providing security for beneficiaries.
• Providing for beneficiaries who are minors or who require expert assistance managing money.
• Avoiding estate or income taxes.
• Providing expert management of estates.
• Avoiding probate expenses.
• Maintaining privacy.
• Protecting real estate holdings or a business.

Trust Definitions - A Quick Primer

A trust is a legal arrangement in which you, the owner of the estate and the trust's grantor, transfer the legal title of that estate to somebody else - the trustee - for the purposes of benefiting one or more third parties - the beneficiaries. The trustee, who may be a person or corporation, is given title to the property in accordance with the terms of the trust agreement.

There are two general categories of trusts: revocable and irrevocable. Revocable trusts can be changed or "revoked." Irrevocable trusts cannot be changed once they are set up. Most revocable trusts become irrevocable at the death or disability of the grantor. The assets you place into an irrevocable trust are permanently removed from your estate. Income and capital gains taxes on assets in the trust are paid by the trust. Upon your death, the assets in the trust are not considered part of your estate and are therefore not subject to estate taxes.

A Trust for Every Purpose

There are many different types of trusts, each serving specific needs and involving different tax and legal considerations. While a thorough discussion of the many different types of trusts is beyond the scope of this article, following is a brief review of a few widely used trusts.

Living Trust. A living trust allows you to be both the trustee and the beneficiary of a trust while you're alive. You maintain control of the assets and receive all income and benefits. Upon your death, a designated successor trustee manages and/or distributes the remaining assets according to the terms set in the trust, avoiding the probate process. Living trusts are also an ideal way to provide for management of your financial affairs in the event of incapacity. You, not the courts or an improperly motivated family member, choose who will manage your finances.

Credit Shelter Trust. Married couples enjoy many protections with regard to estate planning. For instance, under the unlimited marital deduction, husbands and wives do not have to pay federal estate tax on assets transferred to each other. This benefit works well until the death of the surviving spouse, at which point nonspousal beneficiaries (typically children) may face a significant federal estate tax bill on any amount in excess of the current estate tax exclusion ($2 million through 2008).

To avoid this problem, couples should include a credit shelter trust in their estate planning documents. With a credit shelter trust, you divide your estate into two parts. One part is left to your spouse, and the other is placed in a trust. Any amounts left to your spouse are tax free due to the unlimited marital deduction, while those in the trust - up to $2 million - are sheltered by the estate tax exemption.

When your spouse dies, the trust assets will pass to your children or whomever else you've named as beneficiaries. The trust assets won't be taxed as part of your spouse's estate. The assets that passed to your spouse outright will go to whomever your spouse has chosen. These assets will be included in your spouse's estate for tax purposes, but your spouse's own exemption will offset some or all of the tax due. Using this planning technique, a couple could currently pass up to $4 million to their children or other beneficiaries estate tax free.

Irrevocable Life Insurance Trust (ILIT). This type of trust is often used as an estate tax funding mechanism. Under this arrangement, you make gifts to an irrevocable trust, which in turn uses those gifts to purchase a life insurance policy on you. Upon your death, the policy's death benefit proceeds are payable to the trust, which in turn provides tax-free cash to help beneficiaries meet estate tax obligations.

Qualified Personal Residence Trust (QPRT). A QPRT allows you to remove your residence from your estate at a discount. Under this arrangement, you get to use the home for a predetermined number of years, after which time ownership is transferred to the trust or beneficiaries. Any gift tax you might incur from giving away the property is discounted because you still have rights to the house during the term of years spelled out in the trust. The potential drawback is that if you die before the term of the trust ends, the home is considered part of your estate.

Charitable Trusts. To help benefit your favorite charity while serving your own trust purposes, you might consider a charitable lead trust (CLT) or charitable remainder trust (CRT). CRTs and CLTs are often described as mirror images of each other: CRTs provide an income stream payable to the donor, a family member or other heir for a designated period of time, after which the remaining principal goes to charity. CLTs, conversely, pay the charity a stream of income for a period of years, after which the remainder is paid out to designated beneficiaries, typically family members.

Perhaps one of the biggest benefits of trusts is that they allow beneficiaries to enjoy property ownership while minimizing the tax exposure to those involved. Keep in mind that trusts are legal documents - an estate planning attorney can help explain the complexities of specific trust arrangements.

This article is not intended to provide specific investment or tax and legal advice for any individual. Consult your financial advisor, your tax advisor and a qualified attorney or me if you have any questions.

Best Regards,

* The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general.
* The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks.
* The Nasdaq Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System.
* Yahoo! Finance is the source for any reference to the performance of an index between two specific periods.
* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
* Consult your financial professional before making any investment decision.
* Past performance does not guarantee future results.