Shah & Associates P.C.
Estate Planning & Elder Law Blog

Using a financial power of attorney is one way to ensure that there’s someone else to step in and manage your assets if you become unable to do so, but be aware of not just the state’s rules about creating a power of attorney but your own financial institution’s policies around this.

Financial institutions can use contracts to limit your beneficiary naming and other strategies. The terms of your contract with your financial institution should be reviewed. This can be a beneficiary agreement, in your bank account signature card, or online. It is the document you would have signed when you opened it up. Your bank has the ability to determine how you style your financial accounts and how you name beneficiaries. This means that if you are not aware of a restriction because you didn’t read through the fine print when you opened the account, someone else could end up getting the assets inside those bank accounts. Since you won’t be around to deal with this situation, you want to have the clarity on what can be expected and the common pitfalls associated with it. An example of this can happen when you discuss things with your estate planning attorney and want to make sure that all of your children in equal shares receive your assets. If you fail to name contingent beneficiaries on your bank account form, for example, because this isn’t provided as an option, this can cause conflicts when it comes time to transfer those assets. Make sure that you gather any and all documents, such as account agreements with your banks and use these to schedule a consultation with your estate planning lawyer.

Lately, we’ve seen a meaningful uptick in market volatility fueled by economic instability here and abroad. From Chinese real estate woes threatening to disrupt their economy, to political wrangling in Washington that will continue to ripple through our own, there’s no escaping that the headlines have near-term market impacts around the world. But if the ups and downs have you worrying, don’t forget—you’ve trained for this!

Click here to download

 

 

Common Caregiver Pitfalls

It takes a special type of heart and selflessness to be a caregiver for a loved one but sometimes the best intentions can backfire. Most often it’s going to be the adult child or spouse that will act as the caregiver. But there may be other interested parties in the circumstances, such as siblings or stepchildren, with different motivations-nefarious or not.

One of the pitfalls I see with caregivers is the commingling of assets. It’s common for the caregiver to pay for groceries, or pay out-of-pocket for certain expenses for a loved one with the expectation that it will all balance out in the end. However, when it’s time to reconcile, everyone may not be on the same page and the caregiver may be out of this money.

We often see caregivers give up jobs or careers to care for a loved one. This may be an active decision made by the caregiver because of the belief that the loved one will take care of them. However, when there’s not clear communication to this regard, the caregiver can find themselves in a financially difficult situation if the family member being cared for as had a change of heart, or if other beneficiaries of the potential estate dispute the value of the services, or any renumeration at all.

Sometimes taking on the responsibility as a caregiver may bestow upon the caregiver a heightened standard. Are the investments be managed properly? Is the cash flow being tracked? Are the proper safeguards in place in the event of a fraud/theft? If the caregiver hasn’t put these things in place, will the caregiver face liability? Often the answer is no, but despite not facing potential legal liability there may still be a negative impact on relationships with other family members.

My parents moved to the US in 1973, I was born in 1975. For some reason, whether it was by omission or intentional – I didn’t learn English.

Imagine showing up for your first day of school, in the country in which you were born – having (a) avidly watched Sesame Street daily & (b) being fascinated with being an American cowboy , only to be placed in an ESL (English as a Second Language) class.

To be totally honest, I don’t remember what I felt at the time. I really don’t have distinct memories so I don’t think I was traumatized or set back in life anyway. What did happen was something beautiful. And last week, about 40 years later, I was reminded of it:

I was asked to help educate a group of Senior citizens via Zoom on Financial, Tax and Estate planning updates. All. In. Gujarati.

During the meeting, I got to look into the beautiful faces of 150 Indian-American couples who came to this country and raised the kids of my generation.

It was an honor to have spent the time to help those who have helped so many of my peers. The video is available here (https://youtu.be/xHJH7qcBKtI) in case you, or someone you know would like to see/hear it.

And as for the impact of not learning English until I started school? I guess it wasn’t too bad. Pinky and I did the same thing to our kids after all.

I can’t wait to see how they choose to give back when their time comes. Thank you Mom (Anjana) for this amazing gift!

By: Neel Shah 

Creating an estate plan requires a holistic view of what you intend to accomplish and will require your consideration and thought. It is usually best done with the help of an experienced estate planning lawyer when you start the process.

One of the first things you will do is to create an overview or a list of all of your assets. You might find that an asset inside your estate are your shares of stock and there are a couple of different ways that you can handle this as part of your estate planning strategy. Your lawyer will sit down with you to discuss which of these makes the most sense. One option is to create a trust to hold the shares of stocks. Extra caution must be taken before transferring any title to a trust if the company in question is an S corporation.

The S selection could accidentally be destroyed in this process with invalid planning which could have significant tax consequences for the company. It is vital to get guidance from a knowledgeable attorney before creating any estate plan that has S corporation stock inside of it. There are benefits, however, to using a trust for the purposes of stock estate planning. The biggest is that ownership will transfer efficiently and smoothly after you pass away without requiring the oversight of the probate court. This is why you’ll want to discuss all of the options with your estate planning strategy with the help of an experienced attorney. You will be able to cover all of your bases and have a better perspective on what to expect.

Creating your own will is a common interest for many people who have had this on their to-do list for some time and are concerned about how to best protect their interests and cross this off their checklist.

Creating a DIY will is an alternative to hiring an experienced lawyer but it also comes with its own risks. A lawyer can provide instrumental insight in the process of creating your estate plan, including a will. Furthermore, your lawyer will be familiar with state and federal requirements as well as common reasons for which wills are challenged. A will challenge can slow down the administration of your estate when one or more beneficiaries believes that the will is invalid.

Your lawyer will help you match the document created with your planning intentions to create a plan that’s aligned with your future. This helps you know that if something happens to you, your loved ones are taken care of because of this advanced planning. A lawyer can also introduce you to estate planning strategies you might not have known about, too.

Having the support of a lawyer to create this document in the first place can decrease the chances of a successful will challenge and ensure that you have considered all of the most important aspects of your estate plan. A lawyer can also review your will with you on a regular basis to ensure that it’s in line with your individual goals as well as state and local requirements. You can make things much easier for your loved ones by having a will drafted by a knowledgeable attorney.

 

Tenancy in common is a formal arrangement in which two or more individuals have ownership rights in a property or a piece of land. Each person who owns a portion of tenancy in common could own a different percentage of the total property or an equal percentage. This property type can also be residential. Tenants in common are eligible to bequeath their share of the property to anyone when they pass away.

Tenancy in common is also a distinct concept from joint tenancy. This is especially when it comes to the degree of ownership that each tenant maintains and survivorship rights. You can create a tenancy in common appointment at any point in time and members of the agreement are eligible to borrow against or independently sell their portion of ownership. Tenancy in common and joint tenancy have a few important differences. In a joint tenancy, tenants will get equal shares of a property with the same deed at the same point in time. In tenancy in common, a change in members doesn’t break an agreement. However, with joint tenancy the agreement is broken if any of the members decide to sell their interests.

Additionally, certain states name joint tenancy as default property ownership for married couples, whereas others would use the tenancy in common ownership model. This is why it is so important to set aside time to speak with an experienced lawyer about your unique situation and how you wish to leave property behind.       

Social Security benefits are an important form of fixed but recurring income for most retirees. There are many important details that you should consider in terms of incorporating these as part of your retirement plan and in conjunction with your estate planning strategy. Individuals in the United States can currently start receiving Social Security benefits at 62 years old.

However, the longer you can delay your retirement benefits will significantly increase your benefits. Waiting until the full retirement age of 70 will put you in the best position financially if you can survive until that point without those benefits. Each person’s situation is different so you need to be sure to consider the specifics of your situation and to discuss this with your financial professional. Selecting the benefits to work will help you make the right decisions and some of the most important factors to consider include your life expectancy, whether or not you have health insurance through an employer sponsored plan and any employment status. 

For example, if you plan to continue working you might want to delay benefits since you’ll have another source of income. However, it’s also important to note that many people end up retiring earlier than they expected so you’ll want to have a backup plan of what to do in the event that you need to make an exit from the workforce sooner rather than later. For more questions about how to create a comprehensive estate plan that addresses all of your needs, schedule a time to speak with an experienced lawyer.       

 

The danger of self-directed IRA scams heightened during the pandemic, as many investors were at home and online but isolated from in-person interaction, NASAA says.

The number of investigations and enforcement actions by state securities regulators remained largely steady during the COVID-19 pandemic, though the total amounts of restitution and penalties/fines each decreased by about half between 2019 and 2020, according to the North American Securities Administrators Association’s annual enforcement report released this week.

But the number of state enforcement actions focused on self-directed individual retirement accounts (IRAs) more than doubled, from 24 in 2019 to 53 in 2020. Joseph Borg, the director of the Alabama Securities Commission and the co-chair for NASAA’s enforcement section, said the danger of self-directed IRA scams heightened during the pandemic, as many investors were at home and online but isolated from in-person interaction.

Related: New NASAA President to Prioritize Expungements, Digital Assets

“That became the new trust vehicle for con artists to convince folks that ‘you’re not sending the money to me. You have control over it,’” Borg said.

With self-directed IRAs, investors can use tax-deferred retirement funds from traditional IRAs to purchase “alternative” investments that are not typically accessible; some self-directed IRAs allow people to invest in certain digital assets and cryptocurrencies, according to NASAA. But these options are usually directed at investors with particular interests or expertise in unconventional options, not the typical investor. Additionally, custodians for these IRAs do not tend to work like a typical IRA’s custodian, according to the NASAA report.

Related: NASAA: Nearly 60% of State Advisors Lack Procedures Protecting Senior Investors

“Specifically, (self-directed IRA) custodians generally do not have the fiduciary duties associated with investment advisers,” the report read. “This lack of services, and protections, is fertile soil for scammers.”

Once a victim rolls over their 401(k) and IRA savings into the self-directed accounts, the schemer can access them, depriving the investor of their retirement savings, according to NASAA. Borg said self-directed IRAs were enticing tools for scammers because while investors were familiar with IRAs, they wouldn’t necessarily understand the difference between a traditional IRA and a self-directed equivalent.

NASAA conducts an annual survey of all U.S. members (the survey for 2019 found state regulators collected $700 million in total investor relief that year). Last year, states initiated 5,501 investigations and reported 2,202 enforcement actions in total, including 206 criminal actions, according to the report.

According to Joe Rotunda, the enforcement director for the Texas State Securities Board and vice chair for NASAA’s enforcement section, there were an additional 2,572 investigations that carried over from previous years, with 8,073 investigations in total. State regulators initiated 497 against registered parties, including 153 investment advisors, 115 IARs, 110 broker/dealer firms and 119 b/d agents. States also brought 619 total enforcement actions against unregistered parties in 2020, including 20 unregistered financial planners.

In total, $306 million was ordered returned to investors via restitution in 2020, compared with $634 million in the prior year, while there was $42 million in fines or penalties, a drop from $80 million in 2019, according to the report. In mulling the contrast between enforcement action rates and the drop in monetary restitution and penalties, Borg argued that investigations were less likely to be impacted by remote working, as investigations could still be opened and documents received and analyzed when working from home last year.

But Borg believed there would be a lag in criminal proceedings, though he speculated that was more likely to show up in next year’s data. He noted that restitution was often part of the criminal system, and often came near the conclusion of investigations.

“I do think we saw a slowdown on the criminal side,” he said. “But remember, there’s a time lag between opening up an investigation and moving forward on the cases.”

Earlier this week, NASAA announced a new campaign, partnering with the Financial Industry Regulatory Authority and the Securities and Exchange Commission’s Office of Investor Education and Advocacy to urge investors to supply financial firms with a trusted contact. That person could be contacted by the firm in certain circumstances, including if there is suspicious activity in an account or if the investor cannot be contacted.

“All investors can benefit from adding a trusted contact to their account—having one or more trusted contacts provides another layer of security on the account and puts the financial firm in a better position to help keep the account safe,” FINRA President Robert Cook said about the initiative.

By: Patrick Donachie

Sources: https://www.wealthmanagement.com/regulation-compliance/enforcement-against-self-directed-ira-scams-doubled-2020