Ailing parents

    Senior Investment Fraud

    There have been an increasing number of financial advisors who call themselves “Senior Specialists.” Often these titles don’t require any specific study or experience. Seniors are a very attractive audience for these “specialists.” They often have a large portion of their investment assets in cash and CDs. As rates have continued to come down, seniors are looking for attractive alternatives with higher yields. Many financial advisors have used “free meal” seminars to attract seniors and sell them a number of CD alternative products. The Securities and Exchange Commission did a study in 2007 noting the deceptive practices used in these seminars.

    If you or your parents attend one of these investment seminars, be very careful. Do not sign an application at the seminar. Be critical of the promises made at the meeting regarding guaranteed returns and safety of principal. Often if statements sound too good to be true, they often are. If your parents have attended one of these seminars or have signed an application and given the specialist a check, do some research on the product they purchased. There is usually a grace period allowed to return your parents’ funds if they change their mind.

    The SEC provides important information for senior investors including explanations of different products, asset allocation, and risk. You can also get information on affinity fraud, “senior specialists” and investment advisers and what to look for to identify and steer clear of potential frauds on their Senior Investors page.

    FINRA provides important information for senior investors. Its website has such items as Broker Check that gives you the ability to look up the history of your investment professional to see if they have prior complaints or problems. Their website also includes including Investor Alerts that provide timely information on steering clear of investment scams and problems instead of just dealing with their aftermath. Subjects of recent alerts include Look Before You Leave: Don’t Be Misled By Early Retirement Investment Pitches That Promise Too Much; Annuities and Senior Citizens: Senior Citizens Should Be Aware of Deceptive Sales Practices When Purchasing Annuities,” and Seniors Beware: What You Should Know About Life Settlements.

    The North American Securities Administrators Association (NASAA) also has helpful information available for seniors on its website, ServeOurSeniors.org, developed this to provide resources for senior investors, family caregivers, the securities industry, and policy makers. Resources include: a quick checklist of questions to ask before you invest, 10 tips to protect your nest egg and guidance on where to turn for help.

    Regulators have warned that seniors may be confused by designations that imply some expertise in helping seniors. Information regarding professional designations is available through NASAA’s Investor Alerts. There is also SEC information on professional designations and FINR’s Professional Designation Database.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    95 Year Old Investor Beats Elder Fraud!

    We are finally seeing action taken to protect elderly investors from sharks in the financial services business who prey on them.

    A Financial Industry Regulatory Authority panel awarded an elderly investor, David Wolfson, $1.6 million in a case involving StockCross Financial Services Inc. of Beverly Hills, CA. Mr. Wolfson accused StockCross, along with two of its brokers, of misconduct and self-dealing. He claimed the brokers recommended and solicited unsuitable and overly risky investments that were actively traded on margin.

    The claim also alleged that StockCross and the two brokers, Thomas B. Cooper and Peter L. Boorn, put Mr. Wolfson’s home at risk. According to the complaint, they “encouraged and invited Mr. Wolfson to leverage the equity in his home with a reverse-mortgage transaction to utilize as investment capital.”

    According to the complaint, Mr. Wolfson was a client of Mr. Cooper for almost 20 years, when Mr. Cooper dropped the account in 2008.

    A footnote to the lawsuit alleged that Mr. Cooper “quit because he had bilked nearly all of Mr. Wolfson’s assets—including the equity in his home, all his cash reserves, all his emergency/medical cash reserves and even the insurance money Mr. Wolfson received to replace his automobile—and there was nothing left to churn.”

    The arbitrators awarded Mr. Wolfson $320,000 in compensatory damages and $960,000 in damages for elder abuse. They also awarded the 95-year-old $234,000 in legal fees, expert witness fees of $62,000, various costs of $21,000 and $10,000 as sanctions for failing to follow discovery orders.

    Sweet justice! Unfortunately too rare in the financial services industry.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    Should you have a pre-paid funeral plan for your parents (or yourself)?

    Advantages and Disadvantages of Prepaid Plans

    One way to plan in advance for the end of one’s life is to sign a formal contract called a “preneed funeral plan.” With this plan, money to pay for a funeral and/or burial is held in a trust, in an escrow account or paid through an insurance policy on the life of the person desiring the plan. Parts of or all of the funeral service and burial are designed in advance and pre-funded in advance and the family has little to do but show up.

    This type of planning has become very popular in recent years. A survey conducted by the AARP in 1999 found that two out of five people over age 50 had been approached to pre-purchase funerals and burial goods and services. An AARP survey in 1998 indicates that 32% of all Americans over age 50, roughly 21 million people, have prepaid some or all of their funeral and or burial expenses (but not necessarily through a formal preneed plan). Breaking that down; about 25% of the over age 50 population have prepaid for their burials (cemetery plot, mausoleum or niche), 18% have prepaid for headstones, urns, caskets, grave liners or vaults, opening and closing of graves and so on and 13% have prepaid for goods or services from a funeral home or funeral director. The same survey indicates that over $25 billion is being held in preneed trust funds. Roughly another $25 billion is waiting to be paid out in life insurance benefits. Prepaid or preneed funerals and burials are big business.

    Funerals and burials funded privately by the family, or paid from an individual life insurance policy and arranged informally through a funeral home or funeral director are generally not subject to state regulation. Any formal arrangement through a second party or involving a contract is subject to regulation in all states. Each state has adopted different rules as to who can sell these plans, what the plans can provide, what contract provisions must be, how the plan is to be funded and what recourse purchasers might have in the event of fraud or default. All states call these regulated plans “preneed” funeral and burial arrangements.

    Here are some advantages as to why one would want to buy a preneed plan for funeral and burial services and goods.

    • It provides peace of mind knowing these arrangements have been made in advance.
    • It avoids the burden on family members to make decisions when they are most vulnerable to manipulation.
    • It allows one to virtually control from the grave by determining in advance the funeral products, funeral services, burial products and burial services that one would prefer having for final arrangements.
    • It helps the family to avoid taking loans, arranging finance plans, raiding savings or selling assets to pay for a funeral and burial.
    • It guarantees (for many contracts) that if products and services currently purchased are not available in the future, equivalent substitutes will be provided at no additional cost.
    • It locks in guaranteed prices (available with some contracts) forever.
    • It allows for inflation in future costs (for those contracts that do not guarantee prices) by investing money in an interest-bearing account or buying life insurance that increases in value over time.
    • Depending on the contract, it may allow for transfer to another funeral home or for a partial or full refund.

    Unfortunately, there are also problems with prepaid, pre-planned final arrangements.

    • With some trust fund and insurance funding options, there may be no refund if someone wants to cancel the plan in the future.
    • If a purchaser moves to another state there may be no transfer options or there may be different rules governing the funding option.
    • In some contracts, interest earnings on investments resulting in excess money not needed for the plan may be retained by the funeral home or funeral director.
    • On installment plans, interest may be charged but not credited to the account.
    • In certain insurance-funded contracts, the ownership or death benefit may be irrevocably assigned to the contract holder (funeral home), preventing the purchaser from enjoying ownership rights in the policy.
    • In certain insurance funded contracts, a growth in the death benefit over time that exceeds the cost of the preneed plan services and goods may be pocketed by the contract holder (funeral home) instead of being refunded.
    • If the contract provider goes out of business or fails to secure 100% of the funds for future payment, there may be no recourse to get all of the money back that was put in.
    • If certain services or goods that were purchased initially are not available in the future, but more expensive versions might be, the family may be forced to pay extra for those items.
    • In certain insurance funded plans, if the insured dies too soon, there may have been a waiting period in which few or no benefits are paid at death, thus forcing the family to pay out of pocket for the funeral.
    • Certain unscrupulous providers may have failed to provide an itemized list of services and goods or failed to identify properly, specific services and goods, thus allowing the provider in the future to substitute less expensive items or to leave out services and goods that were originally anticipated in the agreement.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    Give Your Children What They Deserve! Performance Based Inheritance

    Most of our parents don’t really think about how they want their inheritance distributed to their children. Often without much thought, they choose to divide everything up evenly between them, regardless of their children’s situations. In many case,s this can result in anger and hurt feelings for many years after they are gone.

    Let’s take a situation that I have seen very often. A daughter takes on the responsibility of watching over her parents, visiting them daily, cooking for them, driving them to their doctors and in some cases, bringing them into her home or living with them. When they pass, on she gets the same inheritance that her two brothers got despite her exceptional contribution to their well-being and her brothers’ lack of involvement.

    Why does this happen so often? Because most parents don’t want to face the issues head-on with their children while they are alive.They don’t want anyone to be upset. They don’t want to face a possible conflict within the family. As a result, they just split everything up and let the children work it out after they are gone. The conflict and hurt feelings often arise months and years in the future.

    How can your family avoid this situation if your parents don’t want to take the initiative to discuss these issues? It’s time for a family meeting, and it’s often the Alpha child’s job to make sure that meeting happens. Who is the Alpha Child? That ‘s the child who takes the most interest in his/her parents, has their trust and who they will listen to. That meeting often is facilitated by a family adviser or in some cases a professional mediator. When the meeting is over, everyone understands the parents’ position and what they can expect. There are no surprises when the will is read.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    Does your Mom need Palliative Care?

    A very interesting article appeared on the front page of The New York Times in 2010. It was  about Dr. Desiree Pardi,  a leading practitioner of palliative care, one of the fastest growing fields in medicine. Palliative care is the counseling of terminally ill patients regarding their end of life choices. Unfortunately Dr. Pardi contracted terminal cancer and had to choose whether or not to receive palliative care herself. Ironically she chose not to, but rather decided to fight her illness aggressively until the end.

    Palliative care has become the standard practice of most hospitals in the country. It’s popularity is a backlash against the harsh, sterile treatment of patients at the end of life that had been practiced in so many hospitals. It stresses the relief of pain, and recognizing that after a certain point, aggressive treatment may prevent patients from enjoying what time they have left.

    Dr. Pardi chose to believe that her doctors underestimated her and that she could fight and win the battle against cancer. But she died a very painful death after extensive chemotherapy and other experimental treatments. She died before many of her colleagues could say goodbye and they grappled with her death. Some said she took the right course fighting her illness to the very end. Others said that she was in a state of denial and refused to accept her impending death.

    At what point would you recommend to your own parent that she receive palliative care? It is a very difficult decision and should be discussed prior to the time when a decision has to be made. Have you discussed your parent’s advanced directives with them, their health care proxy, their living will and their power of attorney?

    An excellent alternative to the traditional health care proxy and living will is the Five Wishes program. Each individual goes through a form which asks detailed questions regarding how they want the Five Wishes to be carried out. It is available through http://www.agingwithdignity.org

    Wish 1: The person I want to make health care decisions for me when I can’t make them for myself.

    Wish 2: My wish for the kind of medical treatment I want or don’t want.

    Wish 3: My wish for how comfortable I want to be.

    Wish 4: My wish for how I want people to treat me.

    Wish 5: My wish for what I want my loved ones to know.

    The form guides your parent through the decisions that have to be made in each of these areas. When s/he is done I suggest that you give him/her the opportunity to go through the form with you and discuss each area. You will be very glad that you did.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.