Yet Another Scam (Part 2)
Last week I was telling you how Joe got scammed. He paid money to increase his odds of winning a Publisher’s Clearinghouse prize. It was all a lie and he lost more than $22,000 which he wired to an overseas account. His children were as upset about it as Joe was. Could anything have been done to prevent it? Let’s take a closer look. Could Joe’s children have stepped in to stop Joe? Not really because Joe still handles his own finances. His son, Joe, Jr. had tried to get Dad to allow him to help but Joe had steadfastly refused. While his children speak or see Dad several times a week he mentioned nothing about the calls he received. In fact when his daughter, Mary was present when he took one of the calls and asked him what the call was about, Joe replied that it was a solicitation. What about the bank? Does it have any responsibility? Joe went to his local branch to wire funds to an overseas account as he was instructed to. While it isn’t clear exactly what the bank employee who helped him asked Joe or what Joe said in response (he gave
Yet Another Scam
6 months ago I wrote about some common scams that target seniors. Here's another one that doesn't just prey on seniors but really on anyone who is struggling financially. Joe received numerous phone calls from Publisher's Clearinghouse. That's the company that many of us remember because Ed McMahon was their pitchman. It's the company that runs a "sweepstakes" in which participants can win $1,000,000. They ran commercials for years in which winners were presented with an oversized check at their front door. The caller told Joe that if he paid a fee he could "move up the list" and soon be a winner. Of course, this wasn't true. It certainly sounds like a crime to rig a contest by telling contestants if they pay money it increases their chance of winning. Nevertheless, Joe was desperate. His wife had just entered a nursing home and he was stressing out about how to pay for it. It all sounded too good to be true. He knew that but he wanted to believe it. Joe was told that if he paid $7500 he'd increase his odds of winning $1,000,000 as well as some of the lesser prizes. He went to his bank
A Simple Estate Matter? Not so Fast (Part 2)
Last week I was telling you about Mark’s call regarding the administration of his sister, Melanie’s estate. He had gone to the Surrogate to get appointed as administrator of the estate but had listed only 4 of 5 siblings as heirs, thinking his brother, Frank should not be listed because he “can’t” receive a share. What he really meant was that he can’t receive that share without losing his government benefits, including Medicaid. However, I explained to Mark that legally Frank was entitled to a share because Melanie didn’t leave a will. Intestacy laws establish that because she wasn’t married, didn’t have children and both her parents had already died, the next in line to receive her estate are her siblings. Mark was correct that Frank’s receipt of his share would jeopardize his benefits and could result in his losing his housing in a group home he has been living in all his adult life. I told Mark what we need to do is establish a special needs trust #SpecialNeedsTrust for Frank’s benefit. His share of the estate could be placed in that trust as long as he is disabled and under age 65 (he is). The trust can only
A Simple Estate Matter? Not so Fast
Mark called because he needed assistance with an inheritance tax return. The attorney he had hired to assist him in selling his sister, Melanie's home was unsure how to complete it. A little bit of background is helpful. Melanie died without a will. She had never married and had no children. Accordingly, under New Jersey's intestacy laws, which determine how assets are distributed when one dies without a will, Melanie's estate next passes to her parents. However Mark told me they both died years ago. Next in line are Melanie's siblings. Mark told me he had already gone to the Surrogate to be appointed administrator. He said his 3 siblings signed renunciations as administrator in favor of him. He now just needed help filing the inheritance tax return so he could then distribute the estate to himself and his 3 siblings. I explained that the tax is calculated based on the relationship of the heirs to the person who died. But what he had said early in our conversation raised some questions which caused me to inquire further. He had said at one point that Mary had 5 siblings but later referred to his 3 siblings (plus himself would
The Problem with Annuities and How to Solve It (Part 3) #ProblemwithAnnuities
Last week I outlined for you the advantages of the Pension Protection Act (PPA), #PensionProtectionAct which became effective in 2010. The government has provided some pretty significant tax advantages as an incentive for Americans to self-fund their long term care. As a result, insurance companies have created varied products to take advantage of the law. Let’s look at some examples. Bob is 70 and has an existing IRA annuity. He looked at traditional long term care insurance and didn’t like the “use it or lose it” aspect and the uncertainty of increasing premiums in the future. If he or his wife needs long term care he intends to start drawing the money out of the annuity. By repositioning the annuity to one with a long term care rider, if either he or his wife needs long term care they’ll use the cash in the annuity but they’ll also have additional coverage under the LTC rider. Bob designates his wife as an “eligible person” for coverage. If he dies first, his wife can continue the policy for the rest of her life and get the same coverage. If he survives his wife any cash remaining in the annuity is passed
The Problem with Annuities and How to Solve It (Part 2) #Annuities
Last week I was outlining the problem with annuities. What I am specifically referring to is the tax deferred status of annuities. While the growth inside these investments is not taxed until monies are withdrawn, they are taxed as ordinary income and if left to heirs there is no step up in basis to avoid the tax like there is in the case of stocks and real estate. Often these annuities will pay out on an accelerated basis at death, causing a large tax hit. Americans own billions of dollars of deferred annuities. Less than 2% of annuity owners ever annuitize them - turn on the guaranteed income stream that is one of the primary advantages of these investments. Instead they leave these assets untouched to their heirs – with the very large tax bill that goes along with it. There is, however, a way to avoid the taxes on these assets and at the same time pay for your long term care should you need it and protect your other assets from having to be spent towards that care. That’s because Congress passed a law in 2006 that allows for the withdrawal of tax deferred growth from annuities,