Newsletter

March 27, 2006

To our valued clients and friends:

1. “Serious stuff”
2. A quick look back - March of 2000
3. The numbers and the beach
4. Your gift and a service survey

“SERIOUS STUFF”—

During this quarter we lost two special friends, who were also clients. While one’s death was expected because of a long diagnosed illness, the other’s death was unexpected and abrupt. Both friends left way too early for a world where most of us can expect to live well into our 90’s. This quarter’s letter takes a moment to review one of the most basic, yet important, elements of financial planning - leaving your financial affairs in order.

I am still puzzled by the fact that 70% of Americans do not have a will. A simple document that directs what to do with your “stuff”. A document that directs who should take care of your kids, how you would like your life’s work handled, how you would like your possessions distributed, and most importantly expresses your wishes to the ones you love. Yet here we go, as a group, apparently not giving much thought to these issues.

Back to our two dear friends — While both of our clients had wills both of their wills were flawed in different ways. One of the wills was poorly drafted. The second was so complicated that I had to call an attorney, who speaks plain English, to have the will interpreted. (Fortunately the second will, although overly complicated and glib, was a functioning document, unlike the first which attempted to give the same property to multiple recipients).

With seventy-percent of the population without wills and a large portion of those with wills having wills that are either dysfunctional, or in need of interpretation, it appears that we are handing our families a lot of needless hardship, not to mention making a lot of lawyers a bunch of money to interpret our wishes.

If I have yet to get your attention on this manner, here are a few basics that should move all of us in the right direction:

1. You MUST have a will!
   1. If you do not have a will, state law will decide how your assets will be divided — PERIOD!
   2. If you have minor children, the probate judge will decide who they will live with and who will manage any assets that you may have left for their benefit.
   3. If your spouse survives you, he or she will have to report to the probate judge how any money was spent for the children’s benefit from their share of the estate.
   4. Your children will receive ALL assets that you have left for their benefit at age 18 - AN ABSOLUTE DISASTER!
   5. If your will is not structured correctly your estate may pay hundreds of thousands of dollars in needless estate taxes. Yes, hundreds of thousands of dollars in needless estate taxes because you did not take the time to write down your wishes and consider current estate tax law.
   
   
2. If you have a will—
1. Can you read it without an interpretation from a lawyer?
2. Does the will express your current wishes?
3. Does it address the need for a trust to be established for minor children, so that they will not receive funds at age 18?


3. Your will and assets— I am forever surprised that some of our clients have beautifully constructed wills that are absolutely worthless. The prepared will establishes trusts, addresses the needs of children, and considers the tax ramifications — good work by the attorney, but it is worthless.

The manner in which you hold your assets supersedes the wishes of your will. If your home is owned by both you and your spouse as “joint tenants with rights of survivorship”, the house and all other real estate titled in this manner, is conveyed immediately to your spouse regardless of your will’s declaration. The declaration of a beneficiary for IRA accounts, pension benefits, and insurance also bypasses the wishes of your will as well. There is no telling how many millions of dollars in estate taxes have been needlessly paid because someone did not create a spreadsheet to determine if your asset division reflected the wishes expressed in your will.

Solutions —

1. If you do not have a will we are available to meet with you to discuss your wishes for your estate. We can then suggest solutions and put them into memo form so that you might meet with an attorney of your choice to create your will.  (Note: We do not prepare wills. Our memo is only used to streamline the process between you and your attorney).
2. If you have a will, take it out of it’s hiding place, (Remember do not keep your will in a bank safe deposit box as it will be sealed immediately upon your death) and re-read the document to ensure that you are satisfied with it’s direction. Make sure that your assets are held in a manner that will allow for the described direction to be implemented. If you are in doubt, allow us to “spread” the assets for you to see if your will design is functional. There may be a need to consider re-titling some of your assets to ensure that your strategy may be implemented.
3. As a last, yet not preferable resort, if you are unable to move on solutions A or B, sit down and write out your wishes with pen and paper. Please sign this document and have your signature witnessed by two individuals. Although this is not the best way of expressing your wishes it at least gives your loved ones a place to start and will save time and legal fees.

ONE LAST UGLY THOUGHT:

If you die intestate, or without a will, each potential recipient of a portion of your assets must be represented by legal counsel, or must have legal counsel appointed for their benefit by the probate judge. Now, please picture the probate judge in his office with multiple attorneys, all billing at an hourly rate or expecting to receive a percentage of whatever they collect from your estate for their client, all chatting and enjoying themselves knowing that their fee will come from either your heirs or your estate. If this picture doesn’t motivate you to take action I am afraid nothing will.

II. A QUICK LOOK BACK — I am writing this letter while on our children’s Spring Break. Many of you may recall another letter that I wrote to you on a Spring Break, so long, long ago. I drafted the letter on the plane during a return trip from San Diego where we had just visited my brother and his wife. It was March of 2000 and I was concerned because late that spring the NASDAQ had fallen by 200 points. Oh, if I only knew then what we all know now. It has been six years since that letter and while the Dow and NASDAQ have been on the rise over the last twenty-four months, neither has returned to the level they were when I sent you that letter in March of 2000.

The Dow closed the week at 11,279 only 4% below it’s all time high of 11,722 achieved in January of 2000. The NASDAQ closed at 2,312, still 2,768 below it’s 5,080 peak in March of 2000. The NASDAQ will have to rise another 119% to get back to it’s 2000 level.

FOOD FOR THOUGHT:

If you had invested in only the market indexes at the beginning of the millennium, six years later you have yet to make a dime. Diversity continues to be the key — as it always will!

III. The numbers and the beach —

	12/31/05	3/25/06	Quarter %Change	YTD % Change
Dow	10,717	11,279	5.2	5.2
NASDAQ	2,205	2,312	4.8	4.8
S&P	1,248	1,302	4.3	4.3
Russell Value	685	727	6.1	6.1
Russell Growth	513	529	3.1	3.1
Treasury	91.9	89	(3.1)	(3.1)
REIT Index	64.1	72.7	13.4	13.4

Observations: We have come through a sound quarter, without a drop in interest rates, which I mentioned was my major concern at year-end. Corporate earnings continue to fuel the market even though the Fed continued to increase interest rates. I continue to be concerned that the market has become quite pricey. [ie...the fair market price earnings ratio] The prime interest rates divided by one equals 12.9 as a fair value price earnings ratio. This week the price earnings ratio of the S&P was 18.22 or about 40% above “fair value.” To support the market at this level we need to see a continuation of improved earnings, a stop to interest rate increases, and perhaps a decline in real estate prices. This could lead to a retreat from real estate investmentments made over the last several years and a return to the more traditional stock and investment market.

The beach: In the March 6th issue of Business Week, Maria Bartiromo collected the opinions of three of the “housing industry’s heavy weights”. The individuals, Angelo Mozilo of Mortgage Lender Countrywide Financial, Bruce Karatz of K. B. Home and real estate professor Bob Shiller of Yale University. The bottom line: A projected decline in housing prices of between 5% and 10% a year for the next two years. More interestingly, for those areas that have been fueled by speculation, California and south Florida, “as much as a forty percent decline is plausible.” While the Gulf Coast was not mentioned by name the area fell into the category of areas “where there have been speculative excess.” An interesting observation. We will have to wait and see.

In closing, our letter has two attachments today. The first is from Jackie Moon in our office who highlights the gift that we have made in your honor this quarter to individuals who are less fortunate than ourselves.

Our second attachment is a quality of service survey which we ask that you take a moment to complete. It is extremely important to us that we provide you with the highest level of service and we ask that you provide us with feedback by completing this survey. We also ask that you pay special attention to the “bonus question” in which we ask you to provide us with a just a bit of insight “to your soul.”

I thank you in advance for completing the survey and placing it in the provided envelope.

Warmest Regards,

M. Brooks Clark

MBC/alm

Please remember that each quarter we will be donating animals to Heifer International to benefit underdeveloped countries. This quarter’s donation choice was made by Jackie Moon.

From Jackie Moon:

I chose to provide two pigs to a careworn community because Heifer animals are like “living savings accounts” for struggling families, and the pig may well be the most interest-bearing.

When you donate a pig, you give a family a valuable source of protein, income for sale of offspring and natural fertilizer to nourish crops and soil.

Pigs need little land and can thrive on crop and garden by-product scraps. An average soul can provide a family with up to 16 piglets a year. Pigs usually double their three-pound birth weight in their first week and can grow to more than 200 pounds in six months.

We appreciate your support and look forward to seeing you in the coming year.

*Please remember that Clark Financial Advisors’ office is now located at 4128 Crosshaven Drive in Cahaba Heights. Please visit our website for pictures of our new office, as well as photos and an introduction to our staff. Our phone numbers are the same, but our mailing address is now P.O. Box 43828, Birmingham, AL 35243. For directions to our office visit our website or give us a call.

PLEASE NOTE: All checks to be added to your accounts should be made payable to: Fidelity

*Clark Financial Advisors is registered with the Securities and Exchange Commission (SEC) as a registered investment advisor and annually files an ADV with the SEC, as required. The ADV II form provides background on the firm and its principals. If you would like to receive a copy of this form please contact Amanda McCollum via email at Mario@clarkfinancialadvisors.com to receive a copy. You may also return this page of the letter with a note signifying your request for a copy of the ADV II filing for Clark Financial Advisors.