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How to Keep Your Estate Plan from Jeopardizing a Disabled Heir’s Benefits

Estate planning is not a requirement. No one can force you to make your will, create a power of attorney or to own your property in a way to avoid probate. As a result, people too often let common estate planning excuses stand in their way.

For those who fail to plan, states have default laws for managing the transfer of their property and assets at death or for controlling their property if they lose this ability because they’re critically injured or at an advanced age.

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However, these laws should be viewed as a backup plan, not an ideal arrangement — especially if you have a family member with a disability. By relying solely on the default laws in the probate or guardianship code of your state without considering your heirs’ current or potential eligibility for certain benefits, you might unintentionally disqualify your disabled child or grandchild from receiving public benefits, or these benefits may be substantially reduced. Thoughtful planning on your part can create additional benefits for your heirs by preserving resources made available through private or public sources.

A person with a physical or cognitive disability may qualify for taxpayer-sponsored public benefits or privately funded benefits to support his or her living expenses, since he or she may be unable to work or to gain full employment due to a disability. These public benefits, called Supplemental Security Income (SSI) are “means tested,” meaning that to apply (or re-apply) for them, a person must utilize, or “spend down,” most of their savings or funds that are available without restriction.

Grandpa’s problematic old estate plan

I was recently introduced to a widower who has five grandchildren. His grandson suffered a severe head injury and compound fractures to his leg in an automobile accident when he was 16. He will have difficulty with fine motor skills for the remainder of this life and can’t stand for extended periods. He is now 22 and qualifies for SSI to supplement his earned income. His grandparents had a typical estate plan created before the accident. It provided that at the death of the first spouse, the balance of that person’s estate would pass to the surviving spouse. Upon the surviving spouse’s death, the balance of the remaining joint estate would be divided, leaving shares directly to their surviving children and grandchildren.

This plan would have caused an unintended consequence for this grandfather’s disabled grandson. Since his grandson would receive this inheritance directly, the Department of Human Services in his state would have considered his inheritance an available resource, disqualifying him from continuing to receive full governmental benefits, including Medicaid health insurance, until these funds were fully used. His problems would have been compounded if his father wasn’t living at his grandfather’s death, because he would have also been entitled to the share set aside for his father.

Thankfully, the grandfather updated his estate plan (described in detail below). Had he not, it still would have been possible for his grandson to continue receiving public benefits, but this would have required the state to be reimbursed for the benefits paid during his lifetime before any remaining funds could be distributed to other family members. The grandfather was resolute in his decision to change his estate plan when he became aware of the likelihood that the state would be paid a portion, if not all, of his legacy.

How supplemental needs trusts work

After collaborating with an estate planning attorney experienced in the complicated arena of public benefits planning, we explained to the grandfather that funds can be held in a trust that won’t reduce his grandson’s present benefits or disqualify him or other heirs from future benefits. These trusts are known as supplemental needs trusts or special needs trusts (SNT). 

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An SNT can be either a first-party trust created by a parent, grandparent, guardian or a court using the beneficiary’s own funds or a third-party trust funded with assets belonging to the trust’s creator. Because the beneficiary’s assets are used, a first-party SNT requires that the state benefits provider be reimbursed for lifetime benefits paid by it on behalf of the beneficiary. A first-party SNT could have been created by the court had the grandfather not changed his original plan, but state reimbursement would have been required.

The grandfather’s new plan created a third-party SNT for the primary benefit of his grandson that will supplement, but not supplant, his public benefits. Upon his grandson’s death, the remaining balance of the trust will be distributed to his grandson’s descendants or his other grandchildren.

Since the trust is funded with the grandfather’s money, and not his grandson’s, there is no need to reimburse any state for public benefits received. The grandfather also made similar provisions for any of his other children or grandchildren who are not presently receiving public benefits but may qualify in the future.
 

Alternatives to special needs trusts

Special needs trusts are one of several solutions that can be used to plan for descendants who currently receive disability benefits or may in the future. Choosing an experienced trustee to oversee a special needs trust for his grandson’s benefit was a good solution for this client, based upon the overall size of his estate and the nature of his assets. Under different circumstances, he may have considered other alternatives, such as an ABLE account, a pooled trust or purchasing exempt resources (such as a car or house) for his grandson.

ABLE accounts

ABLE accounts were created with the passage of the Stephen Beck Jr. Achieving a Better Life Experience Act of 2014. An ABLE account is a savings accounts for individuals with disabilities. They are like 529 education savings accounts with similar tax advantages. There is a limited amount that can be held in an ABLE account, but the balance will not be considered an available resource. The maximum amount that can be contributed to an ABLE account annually is set by the federal government and is adjusted for inflation each year. In 2022 this amount was increased to $16,000. The balance held in ABLE accounts can increase from year to year as long as it doesn’t exceed the maximum amount permitted in the state where the disabled person resides. This limit currently ranges from $235,000 to $550,000, with many states allowing more than $500,000 to be held in an ABLE account.

Pooled trusts

A pooled trust can be a first-party or third-party special needs trust. This type of trust is managed by a nonprofit organization and is often a cost-effective solution, because the funds of many beneficiaries are combined into one master trust for administrative and investment purposes. Sub-accounts are then created for each beneficiary, with the disabled person’s account receiving a proportionate share of the entire fund’s earnings.

Distributions may be made by the nonprofit trustee from the beneficiary’s share and used for his needs. One important thing to note: Pooled trust providers typically can’t hold a house for a disabled beneficiary, unlike a trust created for a single beneficiary.

Purchasing exempt resources

When determining a disabled person’s resources in calculating his or her benefits, the value of personal property and household goods, one automobile and a home occupied by the person will not be counted. Purchasing exempt resources, such as an automobile or residence, can be an effective strategy for some people, particularly when combined with a pooled trust or ABLE account.

It is a good idea for everyone to review their estate plan from time to time, particularly because beneficiaries’ personal circumstances can change or there might be developments in state laws that could be advantageous to them or their beneficiaries. The time you take to carefully plan with a qualified estate and benefits planning attorney can improve your beneficiaries’ quality of life and provide additional public resources for a disabled child, grandchild or other family member.

  • SEE MORE TOD Accounts Versus Revocable Trusts – Which Is Better?

Stock Market Today: Fastest Inflation in 40 Years Flattens Stocks’ Rally

The much-awaited consumer price index (CPI) reading for January more than lived up to its billing, jumping by the fastest annual rate in four decades. Wall Street ultimately sold off on the news, but only after a few hours of waffling.

The Labor Department said Thursday that consumer prices rose by a whopping 7.5% annually in January, easily exceeding economists’ estimates of 7.2% – the sharpest such increase since February 1982.

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The headline number was driven by steeply higher prices for food and energy, but even “core” CPI, which backs out groceries and gasoline, was up 6.0% annually.

That in turn heightened expectations of a more aggressive approach from the Federal Reserve to tamp down inflation.

“The odds of a 50-basis point hike jumped to around 50/50 and the yield on the 10-year Treasury is now trading around 2%,” says Brian Price, head of investment management for independent broker-dealer Commonwealth Financial Network. “Investors may want to buckle up. It could be a rough ride for risk assets until inflationary data starts to abate, and I expect that it will, as we move through the year.”

However, Bill Adams, chief economist for Comerica Bank, notes that while price gains continued to overshoot the Fed’s target last month, fundamental drivers of inflation are beginning to improve.

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“Remember, a big part of the surge in prices was from shortages, and the economy is making big strides to reduce shortages,” he says. “Businesses made a huge inventory build in the fourth quarter of last year, and surveys (ISM, NFIB) show that businesses continued to grow inventories, worked through order backlogs, and see less supplier delivery delays in January. 

“Over time this will show up in inflation, but it wasn’t enough to help in January.”

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A little more encouraging was the latest unemployment-benefits data, which showed 223,000 filings for the week ended Feb. 5, below 230,000 expected.

Stocks finished lower but hardly got there in a straight line; they opened well in the red, then flirted with gains an hour later before their legs gave out for the rest of the day. The Nasdaq Composite (-2.1% to 14,185) led the way lower, helped by sizable declines in its largest components, Apple (AAPL, -2.4%) and Microsoft (MSFT, -2.8%). The S&P 500 was off 1.8% to 4,504, and the Dow declined 1.5% to 35,241.

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 sank 1.6% to 2,051.
  • U.S. crude futures rose nearly 0.3% to end at $89.88 per barrel.
  • Gold futures posted a marginal gain to finish at $1,837.40 an ounce.
  • Bitcoin was off 1.4% to $44,119.77. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Affirm Holdings (AFRM) plunged sharply in mid-afternoon trading after the company accidentally posted a now-deleted tweet that included details of its fiscal second-quarter results, which were not due out until after tonight’s close. The buy now, pay later firm brought in revenue of $361 million for the three-month period – up 77% year-over-year and above the $328.8 consensus estimate – but reported a wider-than-expected per-share loss of 57 cents and gave lower-than-expected revenue guidance for the current quarter. After being down as much as 33% earlier, AFRM ended the day down a still-sizable 21.4%.
  • Walt Disney (DIS) was the best Dow stock today with its 3.4% gain. This honor came as a result of the entertainment firm’s solid fiscal first-quarter earnings report, which showed a higher-than-expected adjusted profit of $1.06 per share and revenue of $21.8 billion – also more than analysts were expecting. In addition, theme park revenue more than doubled year-over-year, while Disney+ net adds came in above estimates. “Fiscal first-quarter results were solid, highlighted by better financials (revenues 5%-10% ahead; operating income beat by 50%+ due to better parks) and stronger Disney+ sub growth,” writes UBS Global Research analyst John Hodulik (Buy). “We expect further upside as int’ parks get back up to speed and recent initiatives improve the long-term cost structure/sustain higher per cap spend.”

A Bad Day All Around, But…

It was hard to find much that “worked” today: Every equity sector was lower, bonds turned tail, and popular gold and oil funds even managed to close in the red.

  • SEE MORE Factoring Inflation Into Your Retirement Plan

So it’s natural, given 2022’s market moves, to be worried about inflation’s effect on your investments – and you’d hardly be alone.

Charles Schwab today released its latest Trader Sentiment Survey, based on answers collected from Charles Schwab and TD Ameritrade traders in early to mid-January. And it showed that while overall, market optimism is prevailing, consumer prices are on nearly everyone’s mind.

“Bulls outnumber bears among active traders, with 46% reporting a bullish outlook for the U.S. stock market for the first three months of the year compared with 39% who are bearish,” Charles Schwab says. “But nearly nine out of 10 (88%) traders are concerned about inflation, and many are taking action to hedge against it.”

If there’s any good news, it’s that no matter how you prefer to invest, you have plenty of hedges against the two predominant worries of the day – inflation and resultant rising Fed rates – at your disposal.

These five mutual funds, for instance, are designed to protect against the market impact of climbing consumer prices. And these seven ETFs feature equities and bonds that can mitigate the effects of (or even benefit from) steadily rising interest rates.

We have stock investors covered, too. These five stocks represent five different sectors that traditionally have managed to weather inflation better than their peers, combining to form a protective mini-portfolio of sorts.

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Stock Market Today: Energy Rises, Comms Fall on Mixed Monday

The stock market followed up on its best weekly performance of 2022 with an up-and-down Monday session.

A slow day on the data front allowed investors to further process last week’s better-than-expected January jobs report; that benefited cyclical sectors including energy stocks (+1.3%), which led the way despite a 1.1% decline in U.S. crude oil futures, to $91.27 per barrel. However, communication stocks including Meta Platforms (FB, -5.1%) and Google parent Alphabet (GOOGL, -2.9%) weighed on the major indexes.

  • SEE MORE The 22 Best Stocks to Buy for 2022

The Dow Jones Industrial Average finished marginally higher to 35,091, while the S&P 500 (-0.4% to 4,483) and Nasdaq Composite (-0.6% to 14,015) slipped, but by modest amounts.

There’ll be plenty more to watch later this week, however. Walt Disney (DIS) and Coca-Cola (KO) are among the noteworthy companies reporting earnings this week, and Thursday’s consumer price index report will provide another important update on America’s inflation situation.

UBS estimates more big numbers for CPI – 0.4% for the month, and a 7.2% 12-month rate – and believes CPI increases will remain elevated for the next few months. However, “in Q2, with rents starting to slow, and motor vehicle production and inventories gradually rising and weighing on vehicle prices, monthly core price increases should begin to slow more rapidly,” UBS analysts say.

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Melissa Brown, global head of applied research at financial intelligence firm Qontigo, notes that another measure of inflation has actually remained quite low.

“The inflation issue highlights the stark contrast between Main Street and Wall Street. High reported inflation has dominated the news, and clearly consumers are hurting from higher prices. And this is what the Fed is looking to address,” she says. “But breakeven inflation – a measure of future inflation expectations – remains relatively low, and has even fallen slightly since the beginning of the year. 

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“Investors setting the breakeven rates do not seem overly concerned and likely expect that realized inflation will fall – maybe because the effects are temporary, or maybe because the Fed acting will drive inflation back down.”

YCharts

Other news in the stock market today:

  • The small-cap Russell 2000 finished decently in the green, gaining 0.5% to 2,012.
  • Gold futures gained 0.8% to settle at $1,821.80 an ounce.
  • Bitcoin continued to recover from last week’s slump, rebounding 8.9% to $44,165.96. (Bitcoin trades 24 hours a day; prices reported here are as of 4 p.m.) 
  • Peloton (PTON) jumped 20.9% after a late-Friday report in The Wall Street Journal suggested the at-home fitness equipment maker has caught the eye of several high-profile suitors. The article cited people familiar with the matter, who listed e-commerce Amazon.com (AMZN) as one potential bidder, but said no deals have been made. “Assuming Peloton’s founders and largest shareholders are open to a takeout (a key assumption), we would view Amazon and Apple (AAPL) as the more likely suitors for the company. For Amazon in particular, we see several potential benefits from a Peloton acquisition,” says Truist Securities analyst Youssef Squali (Hold). Specifically, Squali points to the e-commerce giant’s growing health and wellness segment, “clear and material synergies” with Amazon Prime and the fact that Peloton would likely win market share as a part of Amazon as reasons a potential AMZN-PTON marriage could work.
  • Spirit Airlines (SAVE, +17.2%) and Frontier Group Holdings (ULCC, +3.5%) made headlines on M&A Monday after the two airlines said they agreed to combine in a cash-and-stock deal (including net debt and operating lease liabilities) worth roughly $6.6 billion. As part of the deal, SAVE shareholders will receive 1.9126 ULCC shares plus $2.13 in cash for each share owned. If the merger is approved, it will create the largest ua low-cost airline in the U.S. The news helped boost other airline stocks today, including JetBlue Airways (JBLU, +3.6%), Southwest Airlines (LUV, +2.2%) and Alaska Air Group (ALK, +3.5%).

These Stocks Look “Agitated”

From time to time, we highlight groups of stocks that various types of experts have signed off on.

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Our “Pros’ Picks,” for instance, detail which stocks are most popular among the Wall Street analyst crowd. We regularly keep you updated on what’s floating around in Warren Buffett’s Berkshire Hathaway portfolio, and we also keep tabs on stocks attracting a lot of hedge fund attention.

For the most part, all of these experts are fairly hands off – analysts research from the sidelines, and most big-money investors are typically happy to simply invest their money and leave it at that.

But a select few like to get more involved – these “activist investors” will build up stakes and agitate for changes they believe will unlock at least short-term (and sometimes long-term) value for shareholders, going so far at times as to replace board members or attempt to oust a CEO.

While they’re not always successful, their mere presence can excite current and prospective shareholders alike, and sometimes, the policies they push through can result in meaningful returns. Today, we’re highlighting seven stocks that have attracted activist investors, and explaining the changes that might be in store.

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The 20 Biggest Wealth Destroyers of the Past 30 Years

When folks think of the worst stocks of the past 30 years, Lehman Brothers, Enron or Arthur Andersen are but three among legions of notorious names that might immediately come to mind.

Yet somehow, those corporate catastrophes don’t come near cracking the top 20 stocks that destroyed the most shareholder wealth in recent history. 

That’s partly due to the depressing fact that there’s simply too much competition.

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The respective popping of the tech and real estate bubbles in the U.S. and Japan; an appalling catalog of corporate malfeasance, malpractice and fraud; and the Great Financial Crisis make for a crowded field when it comes to the wholesale destruction of shareholder wealth since 1990.

But before we get to these all-time drags on shareholder performance, let’s start by defining our terms for wealth creation and destruction.

What Is “Wealth Destruction”?

Hendrik Bessembinder, a finance professor at Arizona State University’s W.P Carey School of Business, takes a different tack when it comes to studying the best and worst performing equities. 

The idea isn’t to figure out stocks’ straight-up returns, be they positive or negative, over some defined time period. Rather, as Dr. Bessembinder writes in his research:

“We measure for each stock the dollar amount by which the wealth of shareholders in aggregate was enhanced by their decision to take on the risk of stock investing rather than investing in low risk U.S. Treasury bills.”

Put another way, Bessembinder measures long-term shareholder outcomes both in terms of compound returns and relative improvement to shareholders’ wealth.

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To oversimplify a bit: Imagine an investor back in 1990. Rather than buy shares in, say, Apple (AAPL), what if he or she instead sunk their capital into risk-free one-month U.S. Treasury bills? 

Think of Apple’s “return” in this case as essentially the change in market capitalization adjusted for things such as dividends, share repurchases or new equity issuance, when compared against the compound return of risk-free one-month U.S. Treasury bills over the same time period.

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The T-bills are a kind of stand-in for opportunity cost. And the difference over time between the two investment choices, when positive, is wealth creation. It’s the enhancement.

In Apple’s case, the enhancement happens to be tops among the 30 best stocks of the past 30 years. Apple created $2.67 trillion in shareholder wealth, or 23.5% annualized, from 1990 to 2020, according to Bessembinder’s research.

But what happens when the enhancement is negative? That’s when you get wealth destruction. 

“Wealth destruction is not simply a decline in market cap, though in many instances this will be the largest contributor,” Bessembinder says. “My calculations all take the one-month Treasury bill rate as the opportunity cost.”

A firm that generated a zero return would be destroying wealth, at least in those months where T-bill rates are positive, Bessembinder adds. His calculations also implicitly account for any share repurchases or new equity issuances.

“If a firm’s market capitalization falls, but the reason is a share repurchase, then no wealth is destroyed,” Bessembinder says.

The 20 Biggest Wealth Destroyers of the Past 30 Years

Have a look at the top 20 stocks of the past 30 years in terms of how much shareholder wealth they destroyed:

“Long-term shareholder returns: Evidence from 64,000 global stocks” by Hendrik Bessembinder, W.P. Carey School of Business, Arizona State University, et al.

Note that 12 of the wealth destroyers in the table above are Japanese firms – and 10 of those names are banks. Japan’s banking crisis, which ran from 1991 to 2005 following a collapse in stock, real estate and other asset prices, is to blame.

The U.S. has the dubious distinction of making four contributions to the list. Wachovia, which fell apart amid the GFC, is today part of Wells Fargo (WFC). WorldCom, among the most infamous accounting scandals of its day, emerged from bankruptcy in 2003 under the name MCI. Parts of that business survive today within Verizon’s (VZ) Verizon Business division. 

However, the greatest wealth destroyer of the past three decades by far is PetroChina (PTR). The Chinese oil-and-gas company is the listed arm of state-owned China National Petroleum Corporation. From June 2000 through December 2020, its Shanghai- and Hong Kong-listed shares destroyed more than a half-trillion U.S. dollars in shareholder wealth, Bessembinder found.

The Takeaway for Investors

Perhaps the most salient aspect of Bessembinder’s research is that the vast majority of stocks are duds. Indeed, all of the $76 trillion in net global stock market wealth created over the past 30 years was generated solely by the top-performing 2.4% of stocks.

Investors were highly unlikely to buy and hold a concentrated portfolio of the market’s vanishingly small handful of outsized wealth creators. At the same time, the market’s biggest wealth destroyers were out there helping to crush investors’ long-term plans and goals.

If the lists of greatest wealth creators and wealth destroyers tell us anything, it’s the supreme importance of having a diversified portfolio.

  • SEE MORE The 22 Best ETFs to Buy for a Prosperous 2022

Walt Disney (DIS) Remains a “Show-Me Story” Ahead of Earnings

It’s another busy week for the earnings calendar, with entertainment and media giant Walt Disney (DIS, $140.39) among several Dow Jones stocks set to report. DIS is scheduled to unveil its fiscal first-quarter earnings report after Wednesday’s close.

Analysts appear to be all over the place on the subject, with estimates ranging from 40 cents per share on the low end to $1.13 per share on the high end. The consensus estimate, meanwhile, is 61 cents per share (+90.6% YoY). Revenue is expected to arrive at $18.74 billion, a 15.3% increase from its year-ago results.

  • SEE MORE The 22 Best Stocks to Buy for 2022

“DIS remains well positioned for the recovery driven by a continued increase in capacity at theme parks and an improving content slate in the second half of fiscal 2022,” writes BofA Securities analyst Jessica Reif Ehrlich (Buy). 

She points to Disney+ as “a key tenet of the bull thesis,” and expects the company to report 7 million net adds in its fiscal first quarter (-67% YoY). Still, total streaming subscribers are forecast to land at 125.1 million, up 31.8% from the year prior. 

The analyst also anticipates Disney theme park attendance will show “signs of improvement” over the three-month period. 

But following a disappointing fiscal fourth quarter where the firm missed both top- and bottom-line estimates, DIS remains a “‘show-me story’ as investors await signs of Disney+ net adds to re-accelerate and theme parks to show operating leverage as attendance improves,” Reif Ehrlich says.

Coca-Cola Stock Outperforms Before Q4 Earnings

Coca-Cola (KO, $61.21) stock has put in a strong outperformance against the Dow Jones Industrial Average and S&P 500 so far in 2022. KO shares are up about 4% for the year-to-date, compared to negative returns of 4% and 6%, respectively, for the indexes.

Can a solid earnings report help keep the wind at KO’s back?

The drinkmaker is scheduled to report fourth-quarter earnings ahead of the Feb. 10 open. Analysts, on average, are targeting revenues of $8.96 billion (+4.1% YoY) and earnings of 41 cents per share (-12.8% YoY) – the latter of which is due in part to Q4 2021 having six fewer days than the previous year.

In fact, analyst optimism toward KO seems to be growing for the long term. “With the pandemic’s worst likely passed, we think Coke is now poised for a period of mid-single, maybe even double-digit topline growth and high-single digit bottom line growth,” says Credit Suisse analyst Kaumil Gajrawala, who has an Outperform (Buy) rating on the stock, and calls it a top pick.

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“We expect Coke to be a stronger company as the pandemic fades,” Argus Research analyst Chris Graja says. “We expect the combination of more focused marketing and a more profitable brand portfolio to boost earnings and the share price as the away-from-home business rebounds.” Graja has a Buy rating on Coca-Cola, and adds that high-quality stocks such as this one play an important role in portfolio construction.

That sentiment is certainly shared by the Oracle of Omaha. Not only has the stock been a member of the Berkshire Hathaway portfolio for more than three decades, but the holding company is Coca-Cola’s largest shareholder with a 9.3% stake.

Analysts Eye Earnings Call Guidance on Pummeled Peloton

To say Peloton Interactive (PTON, $23.97) has had a rough few months would be an understatement. Shares of the at-home exercise equipment maker, which shot to prominence during the start of the pandemic as gyms shut down, have shed roughly three-quarters of their value since late October amid a slew of fundamental follies. 

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These include an early November fiscal first-quarter miss and late-January press reports that the company is temporarily suspending production of its fitness equipment amid a big drop in demand – the latter of which was later denied by Peloton CEO John Foley.

Will PTON’s fiscal second-quarter earnings report – due out after the Feb. 8 close – add to the stock’s woes or help it reverse course?

Following those reports of production cuts, PTON issued preliminary numbers for its fiscal Q2 in late January, saying it expects revenue to arrive at $1.14 billion versus previous guidance of $1.1 billion to $1.2 billion. The company also anticipates it ended the quarter with 2.77 million subscribers, lower than its prior guidance of 2.8 million to 2.85 million. 

Peloton’s fiscal Q2 revenue outlook – which is in line with analysts’ consensus estimate – represents a 7.5% year-over-year (YoY) decline. Wall Street pros, on average, also expect PTON to swing to a per-share loss of $1.19 for the three-month period, compared to its 18 cents per-share profit from the year-ago period.

But due to the company’s preliminary release of its fiscal Q2 results, Truist Securities analyst Youssef Squali will be looking toward the company’s earnings call for further guidance. 

“We’re maintaining a Hold rating and recommending that investors remain on the sidelines until we get better visibility into the company’s evolving strategy in light of lower than anticipated demand,” he says. “We view the long-term secular trends around home fitness as favorable still, and PTON’s brand, global scale and internal sourcing are strong attributes for success.”

Squali adds that, in the short term, management should be focused on a strategy of growth and “around rightsizing the operations to address near-term headwind realities.” 

Oppenheimer analyst Jason Helfstein, meanwhile, recently slashed his price target on PTON to $40 from $85 following the fiscal second-quarter pre-announcement. “However, we are maintaining our Outperform as we believe PTON will sustain its leadership position in connected fitness over the long term,” he writes in a note.

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The 7 Best Cloud Stocks to Buy for 2022

The cloud computing market is growing at a massive pace – with the ongoing pandemic only spurring demand for cloud solutions and services. This, in turn, has investors turning to cloud stocks as a potential source for profits.

Cloud computing as an industry is only 15 years old, and can be traced back to when Eric Schmidt, then-CEO of Google, introduced the term at an industry conference.

Of course, a lot has changed since 2006. 

Today, cloud computing is a $445.3 billion industry, according to market data firm ReportLinker. And it’s expected to grow to $947.3 billion by 2026. That works out to a compound annual growth rate (CAGR) of 16.3%. And when it comes to an industry of that size, it’s no surprise many investors are looking to get exposure to it via cloud stocks.

Additionally, many of these cloud computing companies are innovating – bypassing a global semiconductor shortage by making their own chips, according to The Wall Street Journal. This means, of course, that cloud stocks might have even more to offer investors as the years go on.

With plenty to look forward to in this high-growth industry, here are seven of the best cloud stocks to buy for 2022. Included on this list are some of the biggest users and providers of cloud services, as well as some relative newcomers. And all of the names featured here are well-liked by the analyst community.

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Share prices and other market data as of Feb. 3. Analysts’ estimates, recommendations and price targets as of Dec. 20, 2021, courtesy of Koyfin.

Prince’s Estate Is a Royal Mess: 5 Ways You Can Do Better

When pop superstar Prince died of a fentanyl overdose in 2016, he left behind significant assets, many relatives … and no will. It was a recipe for disaster. In addition to tangible assets – money in the bank, real property – Prince left music rights and the value inherent in his name and likeness. Comerica, the estate’s administrator valued it all at $82.3 million; the IRS said it was worth twice that amount – a whopping $163.2 million – and asserted a tax claim for $39 million.

It took six years and tens of millions of dollars in legal fees, but the heirs and the IRS finally came to terms in January, agreeing on a final valuation of $156.4 million. In the interim, there were changes. Prince’s half-brother passed away in 2019, leaving a will that opened the door for new, unrelated parties to assert claims against the estate. Now the process of distributing the vast estate finally begins.

  • SEE MORE What Assets Should Be Included in Your Trust?

We may not possess a fraction of Prince’s estate, but we can all treat our heirs like royalty. Simple steps now can prevent a nightmare like the one his family experienced. These are five key lessons from the Prince estate debacle.

1. Make a will

It sounds obvious, but an up-to-date will was clearly not on Prince’s priority list. Your will tells the court how you want to distribute your property, and it ensures that minor children will be placed in the care of someone you trust. Without a will, the court will make those decisions on your behalf.

To be valid and binding, a will must be signed by someone of sound mind; unrelated witnesses may also be required in your state.

Although a DIY will may sound enticing, don’t do it. A mistake can send an otherwise simple will to litigation, where any money saved is quickly eaten up by legal costs. Have a legal professional create your last will and testament.

2. Know what you have

Start your inventory with big-ticket items, such as real estate and savings accounts – trusts and life insurance policies will bypass probate if beneficiaries have been named – and work your way down. Your grandmother’s recipe book and your father’s tie clip may not have monetary value, but they mean something to somebody. Put them on a spreadsheet so they don’t fall through the cracks when you’re no longer here. It may also be helpful to add a column to the spreadsheet showing to whom you intend to pass the asset, so you can refer to it as you draft your will.

3. Know what it’s worth

The IRS and Comerica settled last spring on the real estate portion of Prince’s estate, but it took another year and a half to arrive at a valuation for intangible assets, such as rights to Prince’s music. The IRS ultimately dropped a $6.4 million “accuracy-related penalty” it had levied on Prince’s estate, and the Minnesota Department of Revenue also dropped an accuracy penalty. However, the fight over value resulted in a huge tax bill that will likely force Prince’s heirs to sell their interests in his catalog, rather than reaping its long-term benefits.

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Protect your heirs by enlisting the services of a reputable expert to value jewelry, artwork and other items of unique value, and be sure to keep all documentation in a safe place. Although valuations change over time, having a general idea of an asset’s value when making estate plans can spare your heirs severe tax consequences down the road.

Include a valuation column on your asset spreadsheet in which you insert the best information you have for each item and the basis for that valuation. If you’ve received a professional appraisal, indicate the source and the location of any supporting documentation; if it’s a best guess, state as much. Save your beneficiaries a fight over valuation by assigning a value or a process for determining values if one beneficiary wants to buy out others or receives a specific property.

4. Anticipate family dynamics

Even the best of families can morph into dysfunction when a loved one dies. How sad to think that your death could create a permanent divide between your relatives. Make things simple by creating a clear plan that leaves nothing to chance. Just because you’ve told a close relative that you want them to have your silverware, don’t assume that everyone knows this or will be happy about it.

In Prince’s case, the court was left to divide his extensive estate – including his Paisley Park studios-turned-museum, real estate and music rights – equally among six blood relatives. Had Prince simply spelled out his wishes prior to death, his heirs may not have been happy but they would have received their inheritance intact and in a reasonable time. Instead, they had to watch and wait as the estate doled out tens of millions of dollars to lawyers and consultants and valuable assets to pay those fees.

A letter that clearly explains to your heirs the reasons for your decisions can head off hurt feelings, acrimony and possible legal challenges. When the only decisions your relatives have to make are what to wear to the service and what kind of food to order afterwards, you’ve given them a precious gift.

5. Name an executor

Designate a trusted individual to carry out your will’s instructions and manage the affairs and wishes of your estate. Don’t make it a surprise. The more prepared and informed your executor is, the smoother the process will be. Your designee should understand what he or she will be required to do. If you sense any hesitation or concern, talk through those concerns. If it still doesn’t feel right to one or both of you, identify another person to serve in this important capacity, someone who will truly have your heirs’ best interests at heart.

The largest beneficiary of Prince’s estate was the IRS, followed by the administrators and attorneys. A close family member or friend may be willing to waive compensation and should work to keep fees down so that the bulk of your estate passes to your loved ones.

Prince probably thought — like most of us do — that he had plenty of time to get his affairs in order, or he may have concluded that whatever happened after he was gone was none of his concern. Creating an estate plan is an extremely personal decision, but it has huge consequences. It is perhaps the strongest expression of love that the law recognizes.

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