KEEPING OUR SENIORS SAFE

In this past March's Newsletter, I provided the following live link, " Keeping Our Seniors Safe – Watch Your Wallet" , to a booklet residing on our website. Financial exploitation of our senior population is a serious and growing problem. With this booklet, we are trying to raise awareness both for our clients and their families of what signs to look for that a loved one may be a victim of financial abuse and need protection.

Coincidentally, what follows is one of this month's Informational Articles concerning the "Senior Safe Act", that I want to share in its entirety, here -
Financial exploitation of our senior citizens is a growing problem. To some extent, seniors are targeted because that’s where the money is. However, the decline of cognitive ability in the older population also may be a factor when scamsters consider whom to go after.

Financial professionals—bankers, brokers, insurance agents—are on the front lines of finance, and so they may be in a position to spot and stop such exploitation. However, there is also a concern about the invasion of privacy, especially if someone interferes with a transaction that turns out to be legitimate. Might the service provider be sued for damages?

To unravel this knot a bit, Congress added the Seniors Safe Act, which had previous been considered in the House and the Senate, to the new banking regulation law. President Trump signed the legislation on May 24.

The new law is modeled on a law already enacted in Maine. Institutions are encouraged to provide training for their employees on "how to identify and report the suspected exploitation of a citizen internally, and, as appropriate, to government officials or law enforcement authorities, including common signs that indicate the financial exploitation of senior citizens." After the training has been completed, the institution and the individuals will be held immune from any lawsuit over privacy invasions that come up as a result of the vigilance.

It is good to know that bankers and other financial professionals may now be active allies in the fight against senior exploitation. But they can only be a second line of defense. A healthy skepticism, and resistance to high pressure sales tactics, still come first.

© 2018 M.A. Co. All rights reserved.
One of our core competencies at Garden State Trust Company is serving as Trustee for a Revocable Living Trust. A Living Trust is a great way to protect a client and their assets as they grow older and may become more vulnerable to financial abuse. Many of our trust clients want us to pay their bills, ensuring timely payment and providing us a window into any unusual charges and possible red flags. I can’t count the number of times we have saved a grateful client from financial exploitation by predatory phone scams or unauthorized billing. To learn more about revocable trusts visit our website at: http://www.gstrustco.com/revocable---irrevocable-trusts.html

Our focus is always where it should be. On you. On your family. On your future.

Happy Father’s Day to all Dad’s!

Sincerely,
Ira J. Brower, Founder
WEALTH AND LONGEVITY
You don't have to be rich to live a long life, but it helps. Crain's Wealth recently summarized several surveys on the subject. Some of the takeaways:
 
  • According to an AMA study, the richest 1% of women live more than 10 years longer than the poorest 1% of women. For the men, the difference is 15 years.
  • In a survey of global investors by UBS, 49% of American respondents hope to live to age 100. However, only 30% expect to reach this goal. Investors in other countries were far more optimistic. Some 76% of Germans expect to achieve age 100, as do 68% of the Swiss, 67% of the Mexicans, and 66% of the Italians.
  • Health is more important than wealth to 90% of affluent respondents. Those with wealth in the $1 million to $2 million range would sacrifice a third of their fortune for an additional 10 healthy years of life. Those with $50 million or more would give half their fortunes for that same benefit.
  • For 69% of the respondents, their biggest worry about aging is health care costs.    
  • Although lifespans are increasing around the world, average life expectancy in the U.S. has fallen in the last two years. This may be due to the increased deaths among younger persons attributed to the opioid abuse crisis.

Longer lifespans require larger retirement capital to maintain financial independence. The sooner one begins saving and investing for retirement, the better the chances of success for the financial plan.

(June 2018)
© 2018 M.A. Co. All rights reserved.
A BATTLE BREWS BETWEEN THE IRS AND SOME STATES
Several high-tax states, including California, New York, New Jersey, and Connecticut, are trying to establish a legislative work-around to the new $10,000 cap on the deduction for state and local taxes (SALT). The cap will only affect the highest-income taxpayers, who have long been the target for state tax increases. Nevertheless, these states apparently fear that the loss of the deduction will increase the competitive disadvantage that results from their tax policies. The work-arounds may involve the creation of quasi-charitable funds controlled by the government and the allowance of a state tax credit for donations to such funds. The theory seems to be that the SALT cap won’t apply to such "donations." Other schemes involve converting to a payroll tax that would be fully deductible by employers.
   
The IRS is not likely to agree with any such gimmicks, and it signaled disapproval in a Notice released in May. New Regulations on the subject are coming. Federal law controls the proper characterization of payments and expenses for federal income tax purposes, regardless of what the states may hope. The IRS will use substance over form, which suggests that if a purported charitable gift relieves a taxpayer of a legal obligation to pay a tax, it is not a charitable gift at all.

The affected states appear poised to take the matter to court. Governor Andrew Cuomo of New York said: "New York was the first to take action to protect our residents from this hostile assault and ensure New York families weren’t being used as a piggy bank to pay for tax cuts for big corporations. Now, the administration appears poised to attack again through new tax regulations, showing its true hostility to New Yorkers and middle-class taxpayers."

On the other hand, the IRS warning may prove so chilling that tax advisors will not recommend any of the work-arounds to their clients.

(June 2018)
© 2018 M.A. Co. All rights reserved.
SEVEN MYTHS ABOUT TRUSTS
When one is in the business of selling cars, just to pick an easy example, one may take it for granted that everyone knows what to do with a car, why they need one, and the advantages that a car offers over alternative means of transportation. These are just the sort of assumptions that we cannot make as we offer our investment and wealth management services to affluent individuals and families, especially our trust services. Trusts are, for many people, simply quite mysterious. We'd like to change that—the more that people know about trusts, how they work and what their benefits are, the happier we are. Here are seven common misconceptions that people have about trusts. There is a kernel of truth behind many of these myths, but it’s important to understand the larger reality.

1. Trusts are just for the very rich.

When one hears a news item with a trust angle, it’s often the case that a wealthy family is involved. The Kennedy trusts and the Rockefeller trusts are common knowledge. But trusts are not just for tycoons anymore. Although most very rich families do employ trusts in their wealth management, these families constitute a minority of trust customers. Most of our clients are not multimillionaires, and most don’t think of themselves as "rich." They do have some significant investment assets that need careful management—proceeds from the sale of a business, perhaps, or a lump sum retirement distribution, or an inheritance. Or an investment portfolio painstakingly accumulated through a successful career.

2. Trusts are expensive.

True, there is an expense in establishing a trust; it does cost more than starting an ordinary investment account. The trust documents must be drafted by a lawyer, who will charge a fee for supervision of the creation process. But a trust costs more because it does more. Once the trust is up and running, the annual fees for our trust services are competitive with those of investment advisors and with mutual funds. To learn the specifics, please ask for a copy of our fee schedule.

3. Trusts are for saving taxes.

Some trusts do save taxes. A marital trust, for example, will defer federal estate taxes until the death of a surviving spouse. Charitable trusts generate income and transfer tax savings.

But tax savings is not what these trusts are for , that’s just an extra benefit. A marital trust provides lifetime financial protection to a surviving spouse. A charitable trust implements philanthropic objectives. The most common sort of trust, the revocable living trust , does not have tax advantages at all. Instead, it provides for professional investment supervision, financial management upon incapacity, and the potential for probate avoidance.

4. Assets get "tied up" in a trust.

Another term for "tied up" might be "asset protection." Stated that way, the restrictions imposed by a trust might be seen as a benefit, not a detriment. For example, an inheritance trust might be designed to limit access by the beneficiaries’ creditors, preserving trust assets for longer-term financial protection.

If you create a revocable living trust for yourself, on the other hand, nothing will be "tied up." You will be free to amend the trust, change trustees or cancel the arrangement altogether. In fact, one purpose of having a living trust is to have more control, to have the choice of delegating investment duties as needed.

5. Trusts must be funded with publicly traded stocks, bonds or other investment securities.

Although investment portfolios are likely the lion's share of trust assets overall, trusts may own any sort of property, including real estate and shares of closely held companies. Shortly after Steve Jobs' death in 2011, for example, it was revealed that he and his wife had transferred all of their California real estate interests to trusts in the year that Steve had his liver transplant. Those trusts may be the foundation of his estate planning. Or they may not be, and we may never know. That’s because, unlike the terms of a will, the terms of a trust do not normally become a matter of public record.

6. Trusts are invested conservatively, with low return potential.

At one time, trustees tended to be very risk averse with trust assets, which did lead in many cases to very conservative investment policies. In recent years, however, the laws governing the investment of trust assets (the "prudent investor" rules) have been reformed in most states. In most cases "prudence" is determined today on a total portfolio return basis, not on the riskiness of each individual asset held in the trust.

7. Anybody can be my trustee.

There are few legal limits as to who can be a trustee, but the better question is who should be your trustee. Your trustee needs to have financial strength as well as professional investment capabilities. Experience is important—look for someone, or a financial organization such as us, who has handled all types of trusts in every kind of market for diverse sorts of families. You’ll also want a trustee who can be fair and impartial in administering the trust, one whose judgment all the beneficiaries will be able to accept.

© 2018 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2018, are not reflected in this article.
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2017. All rights reserved.