Halloween is here. Snow is on the Ground. Now for some really scary stuff: Is your financial planner a “Financial Scammer?”

In my time as an Estate Planning Attorney, I have seen the good, the bad and the downright ugly in the financial planning industry. All financial planners are not created equally. To complicate matters there is little governmental regulation in this area. Financial Planners are not regulated as such, they are instead regulated by what types of services they provide. For example, a financial planner who provides advice on securities is regulated as a stock broker or an investment adviser, whereas a financial planner who provides life insurance is regulated as an insurance agent. Often the term financial planner may be misleading, and customers are left in the dark as to what qualifications their financial adviser actually has.

It is important that everyone take charge of their own personal finances. No one should care more about your finances than you! A large part of taking charge of your personal finances is hiring the right professionals to help you make your investment decisions. The big question is: How do you know if you are hiring the right person?

You should be prepared to ask a lot of questions when shopping for a planner. A good place to start is to ask your planner-What experience do you have? Ask him/her planner to describe how long they have been in practice and what types of companies they have been associated with. Don’t be afraid to ask about their work experiences and how that experience relates to their planning approach.

Another good question is- What are your qualifications? Ask if they have ever been licensed? Once you get this information don’t be afraid to do a little poking around on the internet. A good website to do a little checking on your financial adviser is www.finra.org. This website allows you to know what licenses your adviser has earned, whether or not they have had disputes with clients and whether or not they have ever been disciplined. A little background information can go a long way in helping to discover if your financial planner is who he or she claims to be.

Beyond your planners experience and qualifications you should also ask about what types of services they offer, and what their approach to financial planning is. You want to make sure that their approach is not too aggressive or too cautious for your personal situation. Another important question to ask is how their services are paid for. Some advisers are paid a salary by the company they work for, others are paid by commissions from the products they sell, and some charge an hourly rate. Your planner should be able to clearly articulate how he or she is paid and should also be willing to put this in writing.

The above are just a few ideas on how to find a good financial planner. The best advice is to set goals, ask questions, get a plan together, and keep your eye on the ball… and on your financial planner

Next week I will publish my private list of local financial planners to avoid-  just kidding!  But if any not so good financial planners are reading this (and you know who you are)-  shape up or ship out.

Reader Mail!

It’s time to answer another reader question:

Dear Attorney Guertin:

            My mother is law is 86 years old.  In December she moved in with us after her husband passed away.  She has dementia, although we did not know this when she moved in.  Sometime down the road she may need nursing home care.  If she gives away $13,000 to each of her children and grandchildren, will this be taken away from them if she runs out of money in 2-3 years? 

M

North Branford

            M- It is true that the IRS allows any person to gift up to $13,000 to any single person.  This means that any person can give up to $13,000 to any number of individuals without having to file a gift tax return or paying any gift taxes on the transfer.  However, when the question is framed in the context of nursing homes and Medicare it might not be a good idea to gift money out of your estate to “real people.”  Although it is permissible to give funds away under the Internal Revenue Code, the State of Connecticut may be looking for those funds should your mother-in-law need nursing home care provided by Medicaid.

In order for an asset not to be considered when a person is applying for Medicaid, it needs to be out of the applicant’s estate for five years.  Imagine a situation where assets are gifted out in year 1 and in year 3 those assets are needed for nursing home care.  If the person does not have the money to pay for their care they will need to apply for Medicaid.  When you apply for Medicaid, the State will ask for all sorts of information about your assets, including questions about transfers you have made- and believe me, they will investigate.  Funds that were gifted out will count as an available asset if they were gifted within the five year window.  What happens if those assets that were gifted out have been spent, or were lost in a lawsuit or a divorce?  If the assets are not available (to pay for your care) a penalty period will be assessed against the Medicaid applicant.  Imagine that nursing home care in Connecticut costs 15,000 per month.  If the applicant gifted out $45,000 the year before they applied for Medicaid they would be assessed a three month penalty- meaning they would need to pay for their own care for three months.

Gifting to a “real person” is not the best idea and is quite risky.  A better idea would be to gift those funds to an entity such as an Asset Protection Trust.  An Asset Protection Trust is irrevocable by nature.  The grantor (the person who funds the trust) will have no control over the Trust.  Typically, a trusted family member serves as Trustee and manages the assets in the Trust.  The Trust has beneficiaries which will take under the trust after you die.

Asset Protection Trusts are better recipients of the gifted assets because they don’t get sued or get into car accidents or divorced.  If funds are needed to pay for your care they are available through the Trustee.  If you want to play it completely safe an Asset Protection trust is the way to go.

If you would like to learn more about what an Irrevocable Asset Protection Trust can do for you and your family, Guertin and Guertin, LLC will be hosting a no cost, informational workshop on protecting assets on November 2, 2011 at 6pm. If you would like to attend,  please call our office at 203-234-7400.

I’ll See You in My Dreams

I’ve been having this reoccurring dream:  I am in my office and my phone rings.  I answer.  On the other end is my dog, Ernie and he talks.  It is funny, in my dream, I do not seem to be phased (at all) by the fact my dog is on the phone.  The conversation goes something like this:

Ernie/Dog:  “Marc, I’m going in for surgery in the morning…I’m just a little worried.  What will happen if I  die?”

Marc/Lawyer:  “Ernie, have you ever seen the movie All Dogs Go to Heaven?”

Ernie/Dog:  “I don’t watch TV.  What’s going to happen to my stuff if I die?”

Marc/Lawyer:  “Let me check your file.  I’ll give you a call back.”

Most of the time, I wake up at that point.  When I am awake and on the job, I get similar calls from my clients.  Being a sympathetic person, I bite my tongue and resist the urge to mention the bad results of planning during the 11^th hour

Time can be your best friend, or your worst enemy, and when you are planning or trying to understand the ramifications of your plan on the way to the hospital, time is not on your side.  There is a line in a Bob Dylan song “Time is an ocean, but baby it’s at the shore.” When you are having surgery in the morning, time is “at the shore.”

Trying to pull a plan together in a day or a week before some sort of major surgery is risky.  It is certainly not a big picture approach and there are many reasons why it is inadvisable.    Two major reasons are Contemplation and Cost.

This approach usually lacks the contemplation (on the part of both the client and the attorney) that is necessary to create a plan that is comprehensive and correct.  To get the most benefit out of your estate plan, lots of thought should be put into its’ design, which is difficult to do in an extremely short time frame.

This approach also costs more (note:  other lawyers hate when I talk about how jobs are priced, I mean they want to charge you lots of money- but they are generally horrible at communicating the reasons why).  On pricing, an old, salty lawyer once said to me “You can have it Fast, Correct and Cheap- Pick two out of three.”  If you want it, Fast and Correct- it is not going to be cheap.  If the attorney has to interrupt his schedule to create, draft and properly execute a plan under the gun, before you go under the knife, it is going to cost more, much more.  If the attorney then has to leave, his office to see you at the hospital, it’s going to cost you much, much, much, much more.

You can get a much better plan for less money if you do not wait until the last minute.  If you’ve got surgery planned, make sure your plan is in place long before you go under the knife.