The Essentials List:
Summer Update

July 2018

As weather warms, the pace of your life may slow a bit, allowing more time to think about your big picture. Here are some crucial questions for you to consider, along with our insights and some answers. The summer is a good time to reflect on what’s most important to you and to speak with your J.P. Morgan advisor about all of your wealth planning goals.

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It’s urgent you review your estate plan. Have you?

If you live in one of the 17 states or D.C. that impose taxes independent of  U.S. estate taxes—you must speak with your estate planning lawyer. This is true even if the new, higher federal exclusion amount of $11.18 million means your estate is likely to be untouched by U.S. estate taxes. It still may get hit by state inheritance or estate taxes.

Also because of the new law, your will or revocable trust may now produce radically different outcomes than the ones you intend. 

You should speak with your estate-planning lawyer as soon as possible to check, for example, whether your will or trust, in directing how your assets are to pass, uses “formula clauses.” These are phrases such as “the maximum U.S. estate tax exclusion amount.” Given that the exclusion amount has more than doubled, such instructions could produce unanticipated consequences. 

How big a difference can a formula clause make?

Let’s take a hypothetical example, and say your estate is worth $10 million and you intend to provide for both your children and your spouse. It would be common for your will or trust to direct that the “maximum U.S. estate tax exclusion amount” pass to a trust for the benefit of your spouse and children, with the balance of your estate going outright to your spouse. Because of this language:

  • In 2017, your assets would have been split as you intended: $5.49 million would have gone into trust for your spouse and children and $4.51 million would have gone outright to your spouse
  • But in 2018, your intentions would be thwarted: All of your $10 million would go into the trust for the benefit of both your spouse and the children—and nothing would go outright to your spouse

Click here to download a copy of Your Estate Plan Review Checklist. See below to find out whether you live in one of those states that have independent death taxes.

A little planning now will help take care of your family later.

Death taxes across America

Seventeen states (and the District of Columbia) have an estate or inheritance tax independent of the U.S. estate tax, and one of these states, Maryland, has both. The amounts these states allow to pass to heirs free of transfer taxes vary greatly.

*Figures apply only to 2018
Source: J.P. Morgan Private Bank, March 16, 2018.

What do you want your wealth to accomplish long term?

One of the best ways to shape your wealth strategy is to identify your primary intent. While it can be tempting to analyze moment-to-moment market movements, and let those drive your decisions, we know that this behavior generally diminishes returns.

Rather than reactively focusing on elements that are out of our control—markets, economies, policymakers, and the like—we can instead proactively focus on elements that we can control.

Many of our clients have one of four intents:

  • 1.Spend: to support their lifestyle
  • 2.Divide: to leave a set amount to beneficiaries
  • 3.Preserve: to have wealth last multiple generations
  • 4.Grow: to enable their wealth to grow in perpetuity

Once you’ve articulated yours, share it with family and professional advisors. That way your strategy can be aligned with what you truly want.

What’s your primary intent?

Knowing your goals will help you chart the right wealth strategy for you

Learn more. Download The Power of Intent, and contact your J.P. Morgan Advisor to help you identify your goals-based approach to wealth.


How do you teach children about wealth?

Children as young as three are able to learn about money matters. It is best to start early, and never too late to teach. The important thing is to begin. And then—keep the dialogue going.

Of course, you’ll need to identify what children should learn. Your child should be able to:

  • 1.Save well
  • 2.Spend wisely
  • 3.Invest as a wealth owner
  • 4.Protect against risks
  • 5.Borrow effectively
  • 6.Share thoughtfully
  • 7.Earn throughout life
  • 8.Make informed decisions
  • 9.Act based on your family’s values

Help your children master key concepts over the years using methods identified by J.P. Morgan in partnership with Susan Doty, an expert in economic education and financial literacy.

For example, here’s how you might teach your children to save. You can start anytime and keep building with age-appropriate activities. 

Activities over time help teach SAVING and much more


*This is for educational and informational purposes only, and is intended to provide some suggestions on ways you may teach your children to understand the basics around savings and funding for expenses. This is not intended, nor should it be relied upon, to address every aspect of the subject discussed herein.


It’s late in the economic cycle. Is your balance sheet ready?

All good things must come to an end. Trees don’t grow to the sky. What goes up must come down. Nothing lasts forever. You get the point.

With the economic expansion in its ninth year, aphorisms predicting its demise are in ample supply. For investors, the cacophony of recession talk can be alarming.

Will there be a recession? Yes. But while a recession is inevitable, that doesn’t make it imminent. We say that because:

  • Despite the current cycle’s age (and unlike the tech bubble in 1999 or the housing bubble in 2007), the slow nature of this expansion has helped prevent ominous imbalances or excesses from forming.
  • Inflation is inching higher—yet remains in check, allowing the Federal Reserve to raise interest rates at a snail’s pace.
  • Long-term rates have risen to levels more consistent with modest economic growth; they are not high enough to choke off credit to the economy or to encourage a massive switch from stocks to bonds.
  • The global economy is looking better; despite some fits and starts, Emerging Markets, Europe and Japan are all on more solid footing now than in recent years.

Rates have risen...but so has growth

Source: Federal Reserve, Bureau of Economic Analysis (BEA), Haver Analytics, J.P. Morgan Private Bank. Policy rate and GDP data is as of March 31, 2018.

Ultimately, recessions tend to occur when the cost to borrow exceeds the return that consumers and businesses hope to earn with their borrowed money (see chart, above). Though we are indeed late in the cycle, low inflation and strong foreign demand for U.S. bonds should keep a lid on long-term yields, enabling the cycle to march on.

So what should investors do?

Step 1: Build a plan. Step 2: Stick to the plan.

Mike Tyson famously quipped, “Everybody has a plan until they get punched in the face.” But what if the plan is specifically designed to absorb punches?

Too often, investors are distracted from their plan by bouts of volatility or fears of the next downturn. Academic research suggests it can be a mistake to react emotionally to markets. We believe in a different approach where investors work closely with their advisor to identify the purpose and intent of their money. Then they design and construct a plan and portfolio that aligns with these goals. For example, an investor with a significant short-term liquidity need probably requires a different plan and portfolio than one focused on long-term growth. Like a ship at sea, a sound plan is designed to weather storms. It’s all about having the right boat for the journey.

Dimmers: Set the right mood

Your portfolio is not an “on-off” switch. Instead, think of it as a series of dimmers that can be adjusted to match your goals. Not bad, right? 

Perhaps the most important dimmer is the asset allocation decision related to stocks vs. bonds. Late in the economic cycle, a shift from stocks to bonds can add stability and income. One layer of the onion deeper, a tilt away from more aggressive stocks to defensive ones (less volatile, higher dividends) might make sense.

On the fixed income side, floating-rate bonds—which pay higher yields as rates move up—can help protect investors as the Fed continues to raise rates. This is especially important in short-term fixed income, which is most affected by Fed rate hikes. At the longer-end of the curve, the opposite might be true, as much of the rise in rates (from 1.5% in 2016 to ~3% today) is likely in the rearview mirror.

The liability side of an investor’s balance sheet is also in scope. With short- and medium-term interest rates still on the rise, it might be worth considering fixing or terming-out any floating-rate debt they may have exposure to.

Overall, there is plenty to consider as this cycle ages. With the right plan and an active approach to calibrating exposure, investors can stay the course without worrying about the timing of an all-or-nothing decision to “get out.”


Should we be worried about increasing debt levels in the U.S.?

You’ve probably heard that the U.S. federal debt is becoming a real problem, especially now that borrowing costs are on the rise. But what does it mean for you?

How big is the problem?

As the comedian Larry David might say, “Pretty, pretty, pretty big.” Over time, continuous budget deficits have led to a rise in federal debt levels. After peaking at roughly 10% of GDP in 2009 (financial crisis), the deficit fell to a cycle low of 2.5% of GDP during the recovery.

But recent fiscal stimulus has deficits back on the rise, with shortfalls expected to hit 7% of GDP in 2028. And those deficits add up; after all, the debt is simply an accumulation of each year’s deficit over time.

Today, debt outstanding is equal to 77% of GDP; it’s expected to reach 105% by 2028.

Fiscal deficit to double over next 10 years

Federal budget surplus(+)/deficit(-), % of GDP, 1990 – 2028, 2018 CBO Baseline

Sources: BEA, Treasury Department, J.P. Morgan Asset Management, Guide to the Markets—U.S. Data is as of March 31, 2018. Please note that CBO baseline assumptions do not include the impacts of the Tax Cuts and Jobs Act of 2017. Budget deficit is based on CBO June 2017 baseline, incorporating projected impacts of tax reform, increased spending caps and greater natural disaster outlays, per the CBO. Note: Years shown are fiscal years (Oct. 1 through Sep. 30). Past performance is not a reliable indicator of current and future results.

Why we’re not doomed?

Assets. The U.S. government has far more assets than debt, with an approximate asset-to-debt ratio of 10:1 (imagine having $10 million of cash and assets in the bank against outstanding debt of $1 million).

In other words, the federal government could—if needed—force liquidation of these assets to pay its entire stock of debt nearly 10 times over before defaulting (and this is before tapping into the private sector). But that’s hypothetical, and asset fire sales are usually a last resort. Unfortunately, that’s where you come in.

What does it mean for you?

While the debt load does not pose an existential threat for the country or the U.S. dollar, its consequences are most likely to manifest in three key ways:

  • Slower economic growth
  • Higher interest rates over time
  • Higher taxes—especially for the wealthy

While none of these are favorable, all are manageable within the context of a thoughtful financial plan and the array of strategies available to a well-equipped advisor.

For members of the working-age population today, it’s important to be planning now to use the next 20 years to prepare for looming changes, including potential shortfalls in benefits received, delayed eligibility for Social Security and increased taxes to fund the currently promised level of benefits.

Saving more, spending less, and working with a qualified advisor to assess your financial roadmap and assist you in building a diverse portfolio of investments can help you meet your goals.


You need immediate liquidity for something big. Now what?

You want to pursue a time-sensitive investment.
An ideal property hits the market.
The perfect painting is up for auction.

To seize great opportunities like these, timing is essential.

Give yourself the freedom of financial flexibility. Being able to act quickly is imperative when you need to bridge a gap in your liquidity or meet an unexpected financial obligation. And you should try to avoid selling assets and potentially disrupting your portfolio’s asset allocation.

To help make sure you are ready with liquidity when you need it, establish a line of credit that uses the securities in your portfolio as collateral. There are no setup fees, and only the funds you use incur interest charges—which are often lower than other financing options. 

Speak with your J.P. Morgan Advisor to understand your options. As with all investment decisions, it is important to understand the potential rewards of borrowing as well as the risks before you act.

This short video explains the key advantages of a securities-based line of credit.*

*JPMorgan Chase Bank, N.A. Member FDIC. Not a commitment to lend. Any extension of credit is subject to credit approval by the lender in accordance with the terms contained in definitive loan documents. Loans collateralized by securities involve certain risks and may not be suitable for all investors. Assets used as collateral for a securities-based line of credit are subject to liquidation to meet collateral/maintenance calls.


What if you gave your graduate the opportunity to change the world?

Now is a good time to engage the next generation in your family’s philanthropy. Consider gifting a donor-advised fund for graduation from college or graduate school to help your loved ones establish their own charitable giving strategies. Or name them as advisors or successors on your DAF—so that, together, your family can explore how to make a difference.

All donor-advised funds provide you with an immediate tax deduction at the highest level permissible under U.S. law. This important deduction is one of the few that the new tax law left untouched.

But a donor-advised fund also allows you and your graduate to take as long as you need to find the causes and nonprofits you want to support.

If your graduate wants to give internationally, you’ll want to consider choosing the donor advised fund offered by J.P. Morgan in partnership with National Philanthropic Trust, a public charity.

Where would your graduate choose to make a difference? And what issues would they address?

Here are some highlights of grants made to 22 countries around the world through the Charitable Giving Fund in 2017:

Source: National Philanthropic Trust. Data as of 2017.

Working with J.P. Morgan and National Philanthropic Trust not only allows international grants but also makes international giving easier by:

  • Vetting potential recipients
  • Managing all paperwork
  • Conducting follow-up reviews

Expand your options. Enhance your giving. Empower your philanthropy at home or abroad.

Click here to find out more about the Charitable Giving Fund.  

The J.P. Morgan Charitable Giving Fund is offered under an agreement between J.P. Morgan and National Philanthropic Trust, a public charity incorporated in Pennsylvania. JPMorgan Chase & Co. and its subsidiaries do not render accounting, legal or tax advice. Estate planning requires legal assistance. You should consult with your independent advisors concerning such matters.

The tax deduction that donors may claim is subject to certain income limitations, and the ability to claim itemized deductions may be affected by certain other limitations. Please consult with your tax advisor concerning your individual situation.


Do you think twice before transferring funds or paying invoices?

Fraudsters target individuals, particularly those who regularly perform wire payments in a number of ways. Two popular methods are Email Compromise and Invoice Fraud.

  • Email Compromise: Fraudsters go to great lengths with social engineering schemes. They’ll research you, mimic you or your trusted associates using language specific to you, and request that funds to be sent to accounts under their control.
  • Invoice Fraud: Fraudsters target vendors to exploit genuine relationships that have been built with customers. The fraudsters hack into the vendor systems, then send you emails requesting a change to the banking details for the vendor. Often, individuals or businesses update their banking details without checking directly with the vendor. This directs payments for future authentic invoices to accounts under the fraudsters’ control.

To help protect yourself

Money movement and online banking

  • Always validate payment instructions by calling the originator on a known number when instructions are received via email, even if the email is from a senior member of the company or a trusted vendor.
  • Check your online banking accounts periodically for unauthorized activity, and set up online alerts to notify you of account changes and transactions.
  • Never share banking credentials and passwords, and never log into your online banking from a public computer or Wi-Fi.
  • Adopt multi-factor authentication for all online banking accounts and always log off your online banking account when not in use.
  • Do not preprint or include personal information on checks, and keep your checks in a safe place.

Computer, email and telephone

  • Ensure operating systems and data protection software on your computer and mobile devices, including anti-malware and antivirus software, are up-to-date
  • Do not allow anyone to access your computer remotely
  • Be wary of the following red flags in emails:
    • Spoofed email address
    • Poor grammar or spelling
    • Urgency around payment transmission
    • Late changes of payment instructions
    • Suspicious attachments or links
    • Blurred company logo on an invoice

Do not assume a phone call is genuine because the person on the other end has your information; J.P. Morgan will never call to instruct you to move funds to a new account.

Do not call or text an unknown phone number; call a known number (i.e., back of the credit card or your banking representative) to help prevent a possible fraud incident.

J.P. Morgan will never:

  • Ask you to log in to the same computer with more than one user’s credentials
  • Ask you to repeatedly submit login credentials
  • Contact you about online problems, such as logging in, if you haven’t contacted us first
  • Request sensitive confidential information by email

If you believe you have been targeted by a fraud scheme, or your login credentials have been compromised, please contact your J.P. Morgan team.

Remember, if you receive a request to provide personal or financial information, take a step back from the situation to evaluate it. Even if the requestor claims to be your bank or other trusted organization, don’t rush to action.

Watch this video to learn more about protecting yourself against cybercriminals.

Explore our 2018 J.P. Morgan Reading list


For Informational/Educational Purposes Only. The information provided may inform you of certain investment products and services offered by J.P. Morgan’s private banking business, part of JPMorgan Chase & Co. The views and strategies described in the material may not be suitable for all investors and are subject to investment risks. The information presented constitutes our judgment based on current market conditions (as of June 2018) and is subject to change without notice.

Risks & Considerations.

Depending on the laws of the home state of the client or designated beneficiary, favorable state tax treatment or other benefits offered by such home state for investing in 529 Plans may be available only if invested in the home state’s 529 Plan. Any state-based benefit offered with respect to a particular 529 Plan should be one of many appropriately weighted factors to be considered in making an investment decision, and clients should consult with their financial, tax or other advisors to learn more about how state-based benefits (including any limitations) would apply to their specific circumstances.

Floating Rate Investments are subject to several risks that should be understood before investing. Some key risks are: 

Reference Rate Risk: Total return may be less than anticipated if future interest rate or reference rate expectations are not met.

Credit Risk: As with any fixed income investment, there is a risk that the issuer will be unable to meet its payment obligations. Changes in the creditworthiness of the issuer can decrease or increase the current market value and may result in a partial or total loss of your investment.

Call Risk: If a callable floating security is called by the issuer prior to maturity, the investor may be unable to reinvest funds in another floating security with comparable terms. If not called, the investor should be prepared to hold it until maturity.

Estate planning requires legal assistance. You should consult with your independent advisors concerning such matters. Investment ideas presented herein may not be suitable for all investors. This information is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Asset allocation and diversification do not guarantee investment returns and do not eliminate the risk of loss. Speak with your J.P. Morgan representative concerning your personal investment needs.

The information provided is intended to help clients protect themselves from cyber fraud. It does not provide a comprehensive listing of all types of cyber fraud activities and it does not identify all types of cybersecurity best practices. You, your company or organization is responsible for determining how to best protect itself against cyber fraud activities and for selecting the cybersecurity best practices that are most appropriate to your needs.

Legal Entity / Brand and Regulatory Information. Bank deposit accounts and related services, such as checking, savings and bank lending, may be subject to approval are offered by JPMorgan Chase Bank, N.A. Member FDIC. Not a commitment to lend.  All extensions of credit are subject to credit approval. Lines of credit are extended at the discretion of J.P. Morgan, and J.P. Morgan has no commitment to extend a line of credit or make loans available under the line of credit. Any extension of credit is subject to credit approval by the lender in accordance with the terms contained in definitive loan documents. Loans collateralized by securities involve certain risks and may not be suitable for all investors. Assets used as collateral for a securities based line of credit are subject to liquidation to meet collateral/maintenance calls. Collateral/maintenance calls may include the sale of the asset serving as collateral if the collateral value declines below the amount required to secure the line of credit. In exercising its remedies, J.P. Morgan will not be required to marshal assets or act in accordance with any fiduciary duty it otherwise might have.

JPMorgan Chase Bank, N.A. and its affiliates (collectively “JPMCB”) offer investment products, which may include bank-managed accounts and custody, as part of its trust and fiduciary services. Other investment products and services, such as brokerage and advisory accounts, are offered through J.P. Morgan Securities LLC (JPMS), a member of FINRA and SIPC. Annuities are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. JPMCB, JPMS and CIA are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.


The J.P. Morgan Charitable Giving Fund is offered under an agreement between J.P. Morgan and National Philanthropic Trust, a public charity incorporated in Pennsylvania. JPMorgan Chase & Co. and its subsidiaries do not render accounting, legal or tax advice. Estate planning requires legal assistance. You should consult with your independent advisors concerning such matters.control of JPMorgan Chase & Co. Products not available in all states.

The tax deduction that donors may claim is subject to certain income limitations, and the ability to claim itemized deductions may be affected by certain other limitations. Please consult with your tax advisor concerning your individual situation.

Non-reliance. We believe the information contained in this material to be reliable and have sought to take reasonable care in its preparation; however, we do not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. The views, opinions, estimates and strategies expressed in it constitute our judgment based on current market conditions and are subject to change without notice. We assume no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of J.P. Morgan, view expressed for other purposes or in other contexts. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward looking statements should not be considered as guarantees or predictions of future events. Investors may get back less than they invested, and past performance is not a reliable indicator of future results.

References in this report to “J.P. Morgan” are to JPMorgan Chase & Co., its subsidiaries and affiliates worldwide. “J.P. Morgan Private Bank” is the marketing name for the private banking business conducted by J.P. Morgan.

This material is confidential and intended for your personal use. It should not be circulated to or used by any other person, or duplicated for non-personal use, without our permission.

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