Reuters Money
Divorce stress meets recession mess, and women struggle
When Carol Meerschaert of Paoli, Pennsylvania divorced 10 years ago, she experienced first-hand how starting over as a single mom also means managing the money without any help.
Her kids were 7, 10 and 14, and even though she had income as a dietician, “it certainly was very challenging,” Meerschaert recalls. She moved into a smaller home, paid her own mortgage and, in time, funded college tuition for her eldest daughter.
“She had to drop out of school for a year — a school she loved,” Meerschaert says. “I went back to school, too, to get an MBA so I could make more money.” She never lost her house, or her nerve. But other woman aren’t so lucky.
Experts say alarming numbers of women emerge from divorce lacking even the most basic money management skills, to the point where many begin single life as financially illiterate. Meanwhile, the serpentine economy of 2011 has only placed added strain on unhappy couples and divorced women.
A new study by the University of Virginia’s National Marriage Project found that divorce rates have followed the fall and rise of the nation’s troubled economy during the last four years. Between 2008 and 2009, divorce rates dropped significantly as families experienced unemployment and mortgage stress. In 2008, the divorce rate fell 24 percent, and in 2009, 57 percent. The rate is on the rise, however, as the nation slowly recovers from the recession.
“The current economic climate has certainly added more complications to the divorce process,” says Linda Lea Viken, president of the American Academy of Matrimonial Lawyers.
Viken cites a new survey where 85 percent of the organization’s members reported a jump in divorce settlement difficulties since 2008 due to housing debt. That, in turn has impacted child custody cases due to relocation issues, 53 percent of members reported.
How to claim unclaimed money without getting scammed
Nearly $33 billion in 117 million accounts. That is how much money is currently held by state treasurers and other agencies and awaiting someone to claim it, according to the National Association of Unclaimed Property Administrators (NAUPA).
Could some of it be yours?
Seth Rabinowitz, a management consultant and economist in Los Angeles, thought so. At least his mother did. She saw an advertisement about unclaimed assets in a magazine and asked her son to help her claim it.
Generally, assets held in financial accounts that the owner has not accessed, or have had no activity in over a year, are considered unclaimed assets. This includes savings or checking accounts, stocks, uncashed dividends or payroll checks, insurance payments or refunds, annuities, unredeemed gift certificates, trust distributions and contents of safe deposit boxes. One of the most common overlooked item is the security deposits required by utilities, says Ed Smith, Director of Tax and Accounting at Morrison, Brown, Argiz & Farra LLC in the private client wealth services group.
Rabinowitz’s mother grew up in Pennsylvania and her parents retired in New Jersey. So Rabinowitz did a Google search for New Jersey unclaimed assets. Together they searched the first and last name of his grandparents — plus several spelling variations of their names. Up popped more than two-dozen entries with addresses associated with them. Rabinowitz through each entry and asked whether or not his grandparents lived at each address.
“Turns out my grandfather worked at Boeing and there was some stock leftover,” says Rabinowitz. Unfortunately, he says, there are obstacles to actually claiming the money. You are required to photocopy a number of documents—some of which you may or may not have. “If someone died 20 years ago, do you have the will, death certificate, something that shows the Social Security Number… something from the probate court that is an affidavit that says you are the heir?” His mother couldn’t find this information, but she submitted some paperwork anyway. “We knew it wouldn’t be tons of money,” says Rabinowitz. But he also didn’t want the money sitting in the state treasury.
After about a month, Rabinowitz found out the amount was about $600. “We still haven’t gotten the money yet because of all the obstacles,” he says.
Thank you MaryFindsMoney for your extremely helpful comments. Clearly, you’ve got quite an expertise in finding unclaimed money. Our readers will certainly benefit from your tips.
Funeral planning: How to avoid paying beyond the grave
No one likes to think about the time when they will shuffle off this mortal coil. That’s why getting our parents or even our selves to do estate planning can be such a monstrous task. If you think that’s a hard sell, imagine thinking about paying for your own funeral — before you die.
When a salesperson came knocking on his door, John Hammond didn’t think it was a hard sell at all. The O’Connor Mortuary rep came to his house in Laguna Hills, California home and outlined all the costs for funeral prepayment for Hammond and his wife.
After talking about it, the Hammonds realized it made a lot of sense. “We thought that by paying in advance for our funeral, it wouldn’t put a burden on our children,” he says. It also wouldn’t put a burden on the remaining partner to either pay for it or plan for it. Even better, the costs would be fixed so there would be no need to worry about escalating fees.
What’s more, says Hammond, the sales rep got them to think about questions they hadn’t even begun to ponder. “If we were in another country or another state, we carry a document with us that tells people what we want, who has authority over us [if we died],” says Hammond. “We think that’s worth paying for.” The cost for this peace of mind set him back between $7,000 and $8,000. O’Connor Mortuary even gave him payment options: He could spread it across six months or pay it over five or six years.
Most people, Hammond included, don’t typically think about planning in advance to cover the cost of their own funeral. “If you look at life from birth, every segment of our life is planned,” says Neil O’Connor, owner of O’Connor Mortuary. “This is one area where it’s so taboo in our society and it’s also one thing that is guaranteed that will happen, so why not plan for it?”
But the demographic of those who are thinking about it have changed over the last 18 months. Before it was people 65 and over – now it’s 45 and older. “The Baby Boomers that I work with, they have already had experience with their own parents, and they are much more concerned that their kids are not in the same position,” says Jonathan Blumenthal, a senior vice president at Peak Capital Investment Services in Dallas. “The generation before really didn’t do much about it.”
When you prepay, a mortuary can either choose to put money into a trust at a bank, or work with insurance companies that offer funeral/cremation insurance. When the death occurs, the funeral home contacts the bank or the insurance company and the money is released to the mortuary. The prepayment plan is transferable to other states, says O’Connor, who estimates about 20 percent of the 1,000 families he serves annually prepay.
Planning your funeral can be one of the most important things you do. Some people plan their funerals to take the stress away from loved ones others don’t trust their loved ones to give them a good funeral. Funeral plans can be very detailed and can be conducted to exactly how you want your own funeral to be. They are also an investment. Funeral London
Does growing up mean outgrowing the family financial adviser?
As a boy, Bernie Reed watched his father ride into the hills of their Nebraska farm on a yellow-orange Case tractor to farm corn, alfalfa and winter wheat. Bernie’s ancestors homestead has occupied that land since the 1800s, and his dad — a weathered, leathery man with a linebacker’s build — tackled it some 16 hours a day, resting only on church-going Sundays.
The Reed family farm prospered, nearly tripling in size to 1500 acres, and so did the Reed estate: Today it is conservatively worth $3 million. And the financial advising team that his parents, Doran and Maxine Reed, started with almost 40 years ago in Holdrege, Nebraska is the same one his mom uses today, along with Bernie and four of his five siblings. (A sister lives in Grand Junction, Colorado; Doran Reed passed away almost nine years ago).
“Mom and Dad didn’t specifically tell us what to do; it seemed logical to continue on,” said Bernie Reed, 60, a ministry development consultant. “There’s a lot of trust and peace of mind in knowing that this has been a proven path for our family.”
“Most people here know me or my family, and my credibility is my last name,” said Dave Hunt, the Principal Financial Group representative who handles estate planning and finances for the majority of the Reeds. “With people in big cities, that might not make sense. But this is a town of 5,000. It means a lot here.”
In advising more than one generation of the same family, Hunt is something of a rarity. A new survey of 600-plus financial professionals by Principal reveals that in most cases, less than 25 percent of client relationships involve multiple family generations. And only 2 percent indicate that three-quarters or more of their clients are part of a multi-generational relationship.
“It’s a symptom of how many times parents [have failed]to sit down and advise the children,” said Timothy Minard, a senior vice president at Principal. “People of all generations haven’t taken the time to nail down their financial lives.”
Yet this apparent communications gap has a flip side that any parent of teenagers can appreciate: Even if you’re ready and willing to talk money, that doesn’t mean your kids want to listen.
How to avoid an inheritance battle
We’ve all read about huge family fortunes squandered in legal battles between siblings after the patriarch or matriarch dies. While most of us wouldn’t make national headlines regarding our estate planning matters, the pain and destruction of inheritance feuds can be minimized if not totally avoided.
Interestingly, most of these fights aren’t about money. “What causes inheritance feuds are a few other things — lack of communication mostly by the parents — and [other emotional] stuff,” says Theresa Malmstrom, vice president and senior wealth planner at PNC Wealth Management.
That other emotional stuff includes longstanding sibling rivalry. Indeed, “if parents can somehow eliminate jealousy among and between siblings, disputes could disappear,” says Michael Dribin, an estate planning attorney at Harper Meyer Perez Hagen O’Connor Albert & Dribin LLP. “These disputes are often the result of deep-seated issues that go back many years and only reach their climax when mom and dad are no longer around.”
While establishing a sense of family harmony that is stronger than a need for financial gain, many families fall short of it. Still, there are steps to take that can at least facilitate a more harmonious transfer of assets between family members. Note the foundation of this entire process is ongoing communication — both verbal and written.
Create a plan Sit down with a trusted professional adviser who can help you plan your estate. Identify and document all your assets and then get down in the weeds and talk about all the family dynamics. Are there issues and circumstances that would lead you to leave more of your assets to one child? Does one child out-earn another or have special needs? Ask yourself the hard questions. Aside from a seasoned estate planning attorney and financial adviser, you may want to consider a family psychologist if necessary.
Engage in family discussions A lot of inheritance feuds can be avoided if parents communicate their desires with the beneficiaries while the parents are still alive. Tell them what you are doing and then “explain to them what you are trying to accomplish in your will and estate planning, says Allison Shipley, a principal at PWC. Unfortunately, the “why” of asset distribution is often not communicated and that is where problems often arise.
Notarize a Letter of Instruction In addition to the will, consider writing a Letter of Instruction to the family that outlines, in your own words and without the legalese, how you want your estate divided. Think of it as an operating manual. “You have all-in-one book who will run the company, the trusts, what goes to charity, to the grandchildren, what happens at the first death, second death, etc.,” says Rebecca Pavese, the manager of Palisades Hudson Financial Group’s national tax practice. This letter will be read along with the will after your death.
The smartest thing to do would be to spend it all on yourself and what you want while your are alive. (I suggest actively doing that in front of your heirs should give you some idea of whether your heirs are interested in you or your money, and that should give you the answer your need as to what to do now.) Also, anyone living in the paradigm shift speed of the present times, who still thinks like the English landed-gentry, should seek different personal advice than a financial adviser.
Tax, market conditions ideal for gifting a home
When Alice (who asked that her real name not be used) and her husband bought their vacation home 1983, they knew it was special: a 4,500 square foot beachfront house in the Crystal River, Florida area, with views of the sunrise, the sunset and the Gulf of Mexico.
After 55 years of marriage, Alice’s husband passed away in 1999 — the same year the couple put the home in a Qualified Personal Residence Trust, or QPRT. That way, she could pass it down to her sons and not incur huge hits on estate and gift taxes.
“We told our advisers that we wanted to pass this property down to our children, and for them to their children,” says Alice, who is now 91 — and still stays at the home with her family. “They suggested this as a way to get it out of our estate at a reduced value.”
Now, estate planners and wealth managers aren’t particularly known for displaying irrational exuberance. But that doesn’t mean they don’t get pumped when they see a chance for clients to have their proverbial cake — a sweet vacation home in Florida, for example — and eat it, too.
They get that kind of rush now with the QPRT, which allows a person or couple to gift up to two homes (in most cases, to children), yet still live there. And while QPRTs have been around for some time, experts say they’re making a comeback, largely because the clock is ticking on multimillion dollar IRS exemptions that make this strategy a major tax boon.
In December, Congress extended Bush-era tax cuts, keeping estate and lifetime gift tax exemptions at $5 million. But on Jan. 1, 2013, the extension expires and those limits (along with one for the generation-skipping transfer tax) return to $1 million, unless Congress intervenes. What’s more, homes once worth $5 million and up may be worth less today, thanks to the post-2008 real estate slump.
“This is one vehicle to look at right now,” says Madaline Creehan, a principal and wealth adviser at BAM Advisor Services in St. Louis. “It’s a rare opportunity. Absolutely, this could be the perfect time.”
Will(ing) or not: 3 reasons to revisit your estate planning
My husband, Neil, and I recently planned a trip for the two of us to celebrate his 50th birthday in Anguilla. Because we were leaving our two sons at home, he mentioned that it would probably be a good idea to look over our wills. It made sense given the last time we looked them over was 12 ½ years ago when our youngest son was born.
It is a good thing we did. Both of us had a vague recollection of whom we had chosen as our executor, trustee and guardians. When we took a look at the document, it was totally out of date. I wasn’t comfortable with either couple we had chosen as my children’s guardians: one we barely spoke to anymore and the other couple wasn’t one my children knew well. But, perhaps most importantly, our executor and trustee was my brother-in-law who was in the process of becoming an ex-brother-in-law as a result of a divorce from my sister.
I know attorneys tell us all the time that when we have a life event we need to change our legal documents. Of course, that makes sense. But most of us think of the life events only when they happen to us — our own divorce, the death of our own spouse, etc. When life events happen to others, like my sister’s divorce, we are less inclined to think about how it affects our estate planning. “A lot of people put their estate planning on a shelf, they don’t look at it for years and the people they have named in there — executors, trustees, beneficiaries, have died or move away,” says Beti Bergman, principal and founder of Peninsula Law, a probate firm in Torrence, Calif.
That certainly described my situation. Unfortunately, “there is no [prescribed] time period to ever revisit a will so you have to do it on your own [time schedule], “ says Bergman. To that end, Bergman recommends a review every three years, at a minimum. There are some experts who recommend annual check-ups. “We roll a whole bunch of things into the yearly review, and it allows us to have contact with the client,” says David Okrent, a CPA attorney and ex-IRS agent. And while you’re at it, make sure you add living wills and powers of attorney to the mix.
Aside from the ongoing musical chairs of the people stated in the will and whether you still want them to represent your interests, there are a number of other things that can drive the opportunity to look at your will — even in between the predetermined three-year check up.
Moves to another state This most certainly affects your will. “Many people think a will travels from state to state,” says Heidi Schmidt, a certified financial planner at USAA in San Antonio. “There is a federal estate law, however, states are the ones…(that) determine the distribution, especially if you have property,” she says.
Increases (or decreases) in assets Anytime you’re re-thinking where you want your money to go, you can review who gets what from a distribution standpoint. Significant changes in your assets — either up or down – should be a catalyst for you to take a look at your will and make sure the distribution plan you’ve written into it still fits your intentions.
Great article. This story is more common than not – most people fail to update their wills and estate planning documents for years or even decades. Other reasons to revisit your will in addition to changing laws, moving states, and change in assets include: birth of children or grandchildren, marriage, divorce, death and illnesses.
This is one of the reasons we created AfterSteps – an online end-of-life planning services. In addition to guiding users through creating a complete end-of-life plan, we also make sure that their plan remains up-to-date with reminders, alerts & notifications as changes occur in their own lives and the legal environment. We encourage everyone to visit http://www.aftersteps.com to learn more and create your plan today.
“Help! Our executor cost us $129,000″
“Can you do a story on a relative’s choice of executor and how it may impact beneficiaries when the relative dies? My relative chose an outsider, a surprise to me and another relative, and he cost us $104,000. The additional hitch: He was a retired financial adviser and THEN he took $25,000 for executing a relatively simple estate. I lose sleep over this, want to warn other boomers and very much want to tell my story. I’m still beyond angry. Best, Stephanie Stephen, fellow journalist.”
I received this email in my inbox not too long ago and felt compelled to dig a little deeper. I wanted to help Stephanie, and others like her, to better understand and hopefully avoid some of the estate planning minefields like the one she experienced.
In Stephanie Stephen’s case, she met the executor of the will after her relative passed away. It was around the beginning of the recession and she recalled asking the executor why he hadn’t taken the assets out of the market. “I made it very clear [to him] to cash the rest of the estate out,” says Stephens. “It seemed to be the duty of the executor to take the assets out and it turned out there was a loss of $104,000 [in the portfolio] from the recession,” she says.
To make matters worse, “there was no discussion, no apology and under state law the executor was entitled to five percent of the estate,” says Stephens.
No doubt, we all have some sort of financial horror stories. It could be, in part, because we are not required to learn about financial issues in school. Instead, we learn about personal finance on the fly, by the seat of our pants, or like Stephanie, in a crisis situation.
So in the case of choosing an executor, who should get the job, what are the fees and what should you expect? There are a few things to consider when answering these questions.
Consider the estate. A spouse or children can easily serve as an executor of a simple estate with an easy-to-understand portfolio. In this case, “discuss with your spouse and children what the assets are and what your thoughts are [about your estate] when you pass,” says Michael Friedman, head of trusts & estates at Kurzman Eisenberg Corbin & Lever. In Stephen’s situation, it seems as though a family member may well have been able to handle the estate.
I empathize with those who are angry a relative didn’t trust them enough to appoint them as executors, opting for a very expensive executor. Either the deceased relative didn’t appreciate they money they could have saved with their financially and informed beneficiaries (in this case, Stepahnie et al), or they thought the beneficiaries would have fought over the estate and tied it up for years. If that were true, for example, that was a well spent $100,000+ fee to avoid a conflict that could have dire tax consequences and destroy the surviving family. Only these beneficiaries know for sure.
No matter, however, another commenter is correct that executors violate ethics by timing the market. Suppose the market went crazy in 2008 as many thought it would? Look at how real estate was hyperinflating. I was even lulled into a sense a crash, if any, was years away. Harry Dent’s “Roaring 2000′s” and other books reinforced such obscene speculation.
In that case, of course, I suspect Stephanie would have been livid the executor cashed in too early, perhaps leading to a $1 million loss or greater in a hyperinflationary scenario. Perhaps the deceased recognized it’s impossible to time the market, and wanted an executor who would be impartial to simply selling and disbursing assets? (Otherwise, if Stephanie said “don’t sell” and the market crashed, it would be her, not the executor, in the dog house with other beneficiaries.)
Each person should plan the disbursal of their estate on a case by case basis, with regard to best outcome not only cost considerations. If one knows relatives will fight over your dividing the estate amongst them, or you believe they will get into trouble with the IRS, or if they have spending “problems,” why be penny-wise but pound foolish in finding the best executor?
What happens to Fido when you die?
Nearly four years ago, hotel heiress Leona Helmsley gave an afterlife kiss-off to some of her relatives and household help by leaving them out of her will and including a $12 million bequest to her beloved Maltese, Trouble. A judge later considered the amount excessive and reduced it, leaving the trust fund pooch to scrape by on a mere $2 million.
Although the Helmsley dog drama is the most high profile instance of pet legacies gone wild, there are reports of others. When Gail Posner died last year, the daughter of takeover magnate Victor Posner left her Chihuahua $3 million. Gene Roddenberry’s dogs collected some $4 million when the Star Trek creator’s wife passed away in 2009.
Like famous socialites, most ordinary pet owners want to provide for their pets should they become incapacitated or die. But according to the website petguardian.com, an estimated 500,000 pets are euthanized every year at shelters and at veterinarians as a result of pet owners predeceasing their pets.
“Many people outlive their pets, and they assume that relatives or friends will step in if something happens to them,” says Scottsdale, Arizona estate planning attorney and pet owner Joel Klinge. “Unfortunately, that’s not always the case.”
To provide for his golden retrievers Dobby and Stella if anything happens to him, the 49-year-old divorced attorney has arranged with a friend and his wife to take them in. The couple would also receive a set amount of money to help offset expenses associated with his dogs’ future care.
Over the years, Klinge has made a variety of arrangements in wills and trusts for clients. Several would like to have their pet’s ashes mingled with their own powdered remains and spread over a specified location. Another client, who had a 16-year-old dog in very poor health, left instructions for his pet’s euthanasia.
Whatever final note you have in mind for Fido or Fluffy, a number of planning tools are available to help ensure they will be cared for if something happens to you.
Philanthropy: How to make even small gifts matter
Giving money away has such an emotional component to it that it’s hard, sometimes, to think about in strategic terms. But the truth is that if you pay as much attention to your giving strategy as to your investing one, you can have more impact and fund more of the organizations you care about without getting sidetracked by requests.
Tom Tierney, chairman of the Bridgespan Group, which advises both philanthropists and nonprofits, and co-author of the forthcoming book Give Smart: Philanthropy That Gets Result, has been thinking about how to make your philanthropy count for a long time. Before co-founding Bridgespan in 1999, Tierney, who has an MBA from Harvard, had been chief executive of Bain & Co. But as he reached his mid-40s, he made a career shift that few on Wall Street understood at the time. “Midway through the ’90s, I started asking, ‘Are there other ways to live my life?’ ” he recalls. “I had a couple of senior partners come into my office and shut the door, and say, ‘are you okay?’ They were expecting me to say I had gotten bad news from the doctor.”
Since then Bridgespan has accumulated heavy-hitter clients like the Bill & Melinda Gates Foundation, the William and Flora Hewlett Foundation and the Rockefeller Foundation. These foundations account for a lot more money than the rest of us, but whatever the dollar amount you’re giving — and whatever you choose to give to — you can benefit by thinking smarter about that decision. “Whether you’re giving $1 million or $1,000, ask yourself, ‘What do you want to achieve with it?’ ” Tierney says. “For most folks $1,000 is a bigger deal than $1 million is for Bill Gates.”
Here’s a few questions to ask yourself to make sure you’re getting the most out of that giving, whatever the number.
What are your values and beliefs? Yeah, it’s basic, and it’s also a hard question. And that’s why it comes first. Most of us start giving willy-nilly to people who ask, or to solicitations that come in the mail. But without unlimited time and resources (and we all face such constraints!), there’s no way to give to everything. “Most of us respond when we’re asked,” Tierney says. “If you give to everyone who asks, you’ll make a lot of $15 or $20 contributions. Maybe it would be better to spend the bulk of your giving on one thing. In business, focus matters. In philanthropy, even more.”
That’s true for the ultra-wealthy, and that’s true for regular givers. “The principles that apply to the wealthy apply also to the less-wealthy because they still have limited resources and limited time,” Tierney says. “The moral of the story is: Don’t wait too long to ask life’s most important questions.”
What’s your strategy? Or to put it another way, how do you define success? “Charitable acts are a means not an end,” says Tierney, whose personal philanthropy includes the Nature Conservancy (where he’s on the board of directors). So once you’ve figured out what you care about — conservation, say — what groups will you choose to give to, how much, and in what time period. While it’s tough to decide how much to give away (and that number depends greatly on your personal financial circumstances), a higher number isn’t always the answer. Today’s story about Madonna’s failed efforts to finance a school in Malawi are only the latest example that large sums of money are not enough. The bigger question is what impact your giving has in changing the world.
I think divorce is very hard on the children, and if a recession keeps families together then at least there’s one thing that isn’t awful about this economic mess. I got here through a law firm blog – and I couldn’t agree more that some people think nothing of getting married and divorced 3 or more times. What happened to a lifelong commitment? http://patrickcrawfordlaw.wordpress.com/ 2011/10/18/divorce-and-the-great-recessi on/