Tesla shares down 21% on Sept. 8
Q. Can you explain why shares of Tesla sank 21% on Sept. 8? I read that it was because the company wasn’t added to the S&P 500 index, but it’s not like anything really happened to the business.
– G.B., Shaker Heights, Ohio A. You’re right – whether the company is or isn’t an S&P 500 index component doesn’t change its business or its prospects. When a company gets added to the index, though, the many index funds that track that index will need to grab shares of the company – and some investors might be buying shares ahead of the add, expecting that index-fund buying to propel the shares up some more. The expectation of inclusion had been baked into Tesla’s shares. When that didn’t happen, many shares were sold, sending the price down.
Over the long run, a stock’s price tends to move along with its changing intrinsic value, but over the short term, it’s often subject to the impulses of investors.
Q. What are the prevailing capital gains tax rates?
– F.W., Portland, Oregon
A. It depends on how much you earn. Long-term gains, from assets held for more than a year, are taxed at 15% for many people. Those with lower earnings pay 0%, though, and those with higher incomes pay 20%. Short-term gains (from assets held for a year or less) are taxed at your ordinary income tax rate. Note that if you have capital losses, you can use them to offset your gains and reduce your tax bill.
The ABCS of probate
It’s impossible to avoid death, but we may avoid complex probate issues by having a valid, properly executed will. Here’s a closer look at probate, the legal process of settling and transferring the estate of someone who has died.
During the probate process, the deceased person’s will, if there is one, is validated, and one or more executors (personal representatives) are appointed to oversee the process and settle the estate. All assets are identified and any debts owed are paid, when possible. Any taxes owed are paid, too. What’s left is then distributed according to directions in the will. If there’s no valid will, assets will be distributed to the next of kin according to state guidelines.
If this all sounds complicated and seems like a lot of work – yes, it sometimes is. It can be lengthy and costly, too. But in many cases, the probate process is quick and inexpensive. Much depends on which state or states are involved and how valuable the estate is. In planning for your own heirs, you may be able to keep costs down by holding some assets in a revocable living trust, but that’s not always necessary.
Note that not every asset has to go through probate: Life insurance proceeds typically don’t, and assets in retirement plans generally go directly to named beneficiaries.
There’s much more to the probate process than this, of course, and you’d do well to learn more about it and about estate planning in general – perhaps via “J.K. Lasser’s New Rules for Estate, Retirement, and Tax Planning” by Stewart H. Welch III and J. Winston Busby (Wiley, $25), or “Get Your Ducks in a Row: The Baby Boomers Guide to Estate Planning” by Harry S. Margolis (Ducks in a Row Publishing, $19).
It’s a good idea to consult a financial adviser to help you plan; you can find a fee-only one near you via NAPFa.org. Estate-planning attorneys can also help.
Last week’s trivia answer
I trace my roots back to a one-bedroom apartment in San Francisco, where four guys began developing cloud-based customer-relationship management software in 1999. By 2001, I had more than 3,000 customers. For fiscal 2002, I had $22.4 million in revenue; by fiscal 2020, that topped $17 billion. I’ve been named one of the most admired companies and one of the best companies to work for. I’ve given more than $300 million in charitable grants, too. I employ more than 49,000 people, and 90% of Fortune 500 companies are my customers. My market value recently topped $242 billion. Who am I? (Answer: Salesforce)