Thursday, July 23, 2009

Navigating an Estate

Please pardon the significant gap between posts.

Last month, after years of more good cheer and grace than anyone could have asked for given her circumstances, my mom passed away. She has been significantly diminished for several years and my brother and I have long missed the mother we grew up knowing. What has surprised me is how much I miss spending snippets of time with even the shadow of her that I've grown used to seeing on a regular basis in recent years. Biology is a powerful force, and losing a parent under any circumstances is a major life event.

As we sort through our emotions, my brother and I are also getting a first-hand lesson in funerals and estate administration from the state of Maryland and the custodians of my mother's last few accounts. Here are a few tidbits and tips we can share for anyone who finds himself in our shoes:

  • Find out, far in advance, what your parents' wishes are so that you can honor them to the extent it is possible. Our mother executed a complete set of documents -- a will, medical power of attorney, durable power of attorney, and living will-- several years ago when she was first admitted to the nursing home. This allowed us to instruct the staff to move into hospice mode, according to her wishes, when she was obviously terminal. She had also purchased a plot in the cemetary where her parents are buried. It was not the resting place we might have selected for her, but it was her choice and we were happy to be able to grant her one last wish.

  • Make sure you have access to any safe deposit boxes, know where tax returns are stored and have the addresses and social security numbers of all beneficiaries.

  • The staff at the funeral home can be extremely helpful when you are really in need. They are experts in planning funeral logistics and can tend to many details that you may not have considered or be prepared to handle in the midst of your grief. In addition to all of the funeral details, the funeral home also took care of applying for death certificates and sending a death notice to our local newspaper.

  • Request plenty of originals of the death certificate. The funeral home we used recommended a minimum of twelve. If you know your parent's financial life was fairly complex -- he or she owns multiple homes, has accounts with multiple custodians , banks or fund companies, or has multiple life insurance policies -- twelve may not even be enough. Many of these account holders may accept a copy rather than an original, but it's better to be safe and order extra.

  • The personal representative, or executor named in the will is responsible for estate administration. This involves gathering all relevant documents, filing paperwork with the state to register the estate and obtain a tax id number, and eventually distributing the assets. How long this takes and how much it will cost depend upon many factors including what state the deceased lived in, the complexity of his or her financial life, and whether there are trusts in place. If you are serving as a personal representative for an estate be prepared to be very patient and to wade through a tremendous amount of bureacracy. You can also engage an estate attorney to handle much of this process.

  • Life insurance, IRAs, pensions and trusts contain named beneficiaries and pass directly to them when the proper paperwork has been completed and filed. Expect to provide each company involved with a copy of the death certificate along with whatever paperwork and additional documents they require.

  • Contact Social Security to notify them of the death. Payments received after the month of death will be reversed and must be returned if they were not paid electronically. If there is a surviving spouse who was also receiving Social Security, he or she will receive the higher amount of the two individual payments in the future.

  • Small estates qualify for a simplified probate process in most states. Larger estates, $1 million and over may require appraisals of real property and personal property and a Federal estate tax return that is due nine months after the date of death.

  • Joint accounts must be retitled in the name of the survivor. Notify the bank or brokerage firm and expect to provide them with a death certificate.

  • Retain cancelled checks and bank statements for five years prior to death for your records. Estates can be audited by the IRS.

Sunday, May 10, 2009

Ruminations on Risk

Last year we analyzed the portfolio of a prospective client who had very significant wealth -- more than all of our other clients combined. The client told us, and we agreed, that he had more money than he could possibly spend in his remaining lifetime. One of our recommendations in light of this fact was to invest his portfolio in low risk, fixed income securities. Why incur risk when you don't need to?

The client did not think much of our analysis or our recommended course of action. Why would he bypass the opportunity to earn big returns by investing in private equity placements, hedge funds and and other high stakes options when he could clearly afford to participate? From his perspective, he was able to withstand the risk. Taking the safe route just meant leaving money on the table.

Needless to say, the client did not choose us to be his advisors, and whenever his name comes up, the two of us just shake our heads and wonder how he could have ignored our good advice. Why take risks when you don't need to in order to reach your goals?

Clearly, we had a failure to communicate.

I've recently observed a similar disconnect in my personal life. With my youngest child leaving for college in the fall, I've realized it's important that my husband and I start doing more together than coordinating schedules and making sure someone has shopped. This weekend, I invited him to join me on a walk along a trail that runs near our house. Taking a long walk on the trail is one of my favorite things to do on nice days, but he declined -- he had work to do, needed to prepare for a trip the next day and was playing hockey that evening. Unless it was going to be a quick walk, he wasn't really interested.

I mulled this over on my long walk and concluded that my husband is just not a walker. This should not be news to me -- we've been together for more than 30 years and he has been in constant motion for most of that time. He wants to do it all, and pretty often pulls it off. He works long hours with frequent travel, plays ice hockey in an adult league, religiously follows several sports teams, regularly volunteers as a hockey coach and in a reading program for school children in D.C. He's truly an amazing guy -- but you don't get all of that done by walking.

I, on the other hand, am a walker -- literally and figuratively. I abhor stress and have structured my life to limit it. Of course when my children were young this was largely out of my hands (which surely contributed to my strong stress aversion), but these days I have managed to arrange my work schedule, my commute, even my meals in a way that keeps my stress level very low. I have built cushions into my schedule, so I won't miss deadlines or sweat out conflicts. Whenever possible I avoid activities that I find frustrating or just don't enjoy.

You might think that with such a cushy life I'd be happier than I have ever been. But, instead I am learning that sometimes stress is what makes me feel alive and truly engaged with the world. Rather than bliss, I'm feeling bored and somewhat useless. The activities I enjoy most these days are those that are stressful in the sense that they take me out of my comfortable routine and force me to adapt to new situations -- traveling is a great example.

I love traveling to new places, soaking up the culture and the history, and finding the local treasures--even though I hate flying and packing and dealing with airports. The adventure of discovering a new city is a payoff that far outweighs the inconveniences of traveling, and for some reason I even see the occasional misstep in the course of traveling (getting lost, missing trains, unfortunate food selections) as a part of the whole grand experience.

Looking back on my life, I also must admit that the heightened emotions of some very difficult times are memorable and cherished. The demands of three small children were overwhelming and exhausting at times, but there was an undeniable degree of excitement in surrendering all control of your life to the whims and needs of your offspring. That imposed randomness is missing in my life now.

Don't get me wrong -- I'm quite happy to be free to choose when I will be spontaneous, and don't wish to return to those past days of chaos. But I now see that eliminating too much stress from one's life can leave you feeling small and unfulfilled.

So I've come to understand why Mr. Not-a-client wanted to make some risky bets, even though it was unnecessary from a planning standpoint. Even more than me, he is more-or-less accountable only to himself -- no job, no young children making demands on his time, nothing that absolutely has to get done when he wakes up most days. Making his money grow is one of the only challenges remaining in his life. He wants the excitement of having a horse in the race more than the absolute assurance that his money will always be there for him and his family. And, though I understand a little better where he's coming from, I'd still give him the same basic advice -- don't take unneccesary risks with you family's money. Still, maybe I'd suggest keeping a small percentage of his money in a pool he could use for some riskier plays, just to satisfy his need for an adrenoline rush.

And in my own life, I'm going to make more of an effort to regularly step outside my comfort zone, and raise my stress level a bit. Perhaps I'll work a little harder to break a sweat and keep up with my husband-- if he can slow down occassionally to let me catch my breath.

Maybe we'll invite Mr. Not-a-Client to go bungee jumping -- just for kicks!

Annette Simon

Copyright 2009 The Money Dames

Thursday, April 16, 2009

Like Mother, Like Daughter -- Not Always

It's my mom's birthday today, but there's not much to celebrate. She is 74, has been completely disabled and living in a nursing home for more than seven years.

I've come to the conclusion that most of us never see our parents clearly or in three dimensions. The memories and perceptions of our inner child distort our views of mom and dad (and siblings for that matter) beyond childhood, and probably throughout our lives. In my case, I was a complete daddy's girl when I was young -- a tomboy, good student and brimming with ambition. Although neither of my parents went to college, I saw my dad as smart and self-educated. He was a successful business-owner and a prominent member of the community.

On the other hand, I had no respect for my mom -- a stay-at-home mother of three. She had planned to be a nurse, but dropped out of nursing school at 19 to get married and move to Minnesota. My brothers and I never fully appreciated that or any of the other hundreds of sacrifices she made to help us grow up to be whatever we wanted to be. We did devote a lot of time, though, to ridiculing her yoyoing weight, her hair, which changed color frequently, her non-existent cooking skills and her endless volunteer activities. And we gleefully participated in mom's addiction to shopping, a habit that afforded us every toy, outfit or gadget we ever wished for on countless indulgent afternoons at the local shopping mall, our favorite childhood and teenage haunt. I swore I would never be like my mom -- she was the last person I would have considered a role model either for motherhood or for life.

By the time I became a mother, my mom had concluded she could never live up to my expectations. True to my childhood vow, I had traveled a completely different path than hers -- college, grad school and a career in business. Mom was completely intimidated by me and our relationship was beyond dysfunctional. I didn't want her around when my first child was born; she didn't want to come and help me following the birth of my second or third-- when I really wanted and needed her to be there.

The funny thing is, I turned out to be a mom who is in some ways just like the one I considered such a failure. I have almost always worked, but for the past15 years my work has allowed me to be at home and available for my kids pretty much any time they have needed me. I stopped cooking several years ago when we moved across the street from Trader Joe's and within walking distance of more than 100 restaurants. I've devoted countless volunteer hours to my professional association ( a less altruistic pursuit than mom's work with the local hospital auxiliary and chapters of Jewish women's groups). And my children focus on my foibles more than my accomplishments; they never miss an opportunity to poke fun me. Like my siblings and me, they're not exceptionally mean, just self-involved and unappreciative -- i.e. over-privileged teenagers and twenty-somethings.

As my kids got older my relationship with my mom eased a bit. By the time my dad died 15 years ago (they had long since divorced) we were on pretty good terms. When she became physically disabled nine years ago my younger brother and I stepped in and eventually moved her from the west coast to a nursing home here in Maryland where we could visit frequently and try to keep her somewhat involved in our lives until she declined mentally a few years ago.

I'm surely still viewing mom through the filter of my childhood experiences, but I think I've gained at least some perspective. I now recognize that she was loving and generous to a fault with her kids; bored with the drudgery of housework and childrearing, and eventually fed-up with the ingratitude of her spoiled kids. The grandchildren were her reward for enduring the three of us. She was financially illiterate, but thanks to alimony, life insurance and inheritance she felt pretty wealthy and continued to love shopping until she was unable to get around. While she was mentally alert, Mom endured years of complete helplessness with more gratitude and grace than most able-bodied people demonstrate on a daily basis.

Mom's life now is extremely limited. She has not left her bed or her room in years, and if she recognizes me when I visit it's only as a friendly face, not specifically as her difficult daughter. My brother and I talk about her in the past tense since the mother we knew has been gone for some time. I'm back to swearing that I never want to be like my mom -- but this time I want to be sure I avoid her fate.


Copyright 2009 Money Dames

Monday, March 23, 2009

Families and Money -- A Prescription for Tension

Money and family -- is there any combination that is more emotionally charged and fraught with the potential for lingering resentment? I can't think of one! Why is this true? And is there any way to defuse the strong feelings money issues arouse in family members?

A family shares things -- a home, their time, values and experiences --and the members support each other through their individual trials and triumphs. Each person contributes his or her talents and efforts and has a vested interest in the success of the family and all of the members of it. Rough patches and misunderstandings arise, but thanks to their undying bond everyone keeps their egos in check and does whatever it takes to make it work. It's all about unconditional acceptance.

Sound like your family? Not mine either. Or any real family I have known up close. It's an ideal we might strive for, but reality is much more complicated and messy. In most families some members make personal sacrifices and may occasionally--or even constantly--remind the others of what they have done. Many families have an overachiever and an underachiever; an ant and a grasshopper. Because real families are made up of imperfect people, these differences in ability and temperament are handled (and often mishandled) differently by each family. And every person perceives the words and actions of the others through his or her own unique filter. All of this makes families, even loving, well-meaning ones, emotional powder kegs.

Add to this volatile organism money, which triggers intense feelings of greed, fear, shame and power. Talking about money is taboo in many famililes; regardless, everyone in the family knows who has it and who doesn't. Inequality almost always leads to resentment, though it may be suppressed for many years in the name of keeping the peace. But over time, children grow to adulthood, parents age, possibly become disabled and eventually die, and issues boil to the surface.

What, if anything, can parents do to manage such an inherently explosive issue?

  • Decide what you consider a fair way to dole out resources. Do you want to give an equal amount to each child, or do you want to provide extra support to a child who has struggled or chosen a path that has not led him or her to financial security? Your personal or family philosophy will inform this decision. When you meet with your financial planner and estate attorney, tell them your wishes so that they can help you incorporate them in plans and documents. Talk to your adult children about your choice as well -- they may not agree, but at least they will not make inaccurate assumptions or be surprised by what happens later on in life.
  • Some families create a shared loan fund and leave it to their adult children to govern its use. A pool of money is set aside in an account that is available to all family members. Siblings may borrow from the fund, rather than hitting up mom and dad, as needed for education, down payments, etc. All participants must agree to repay responsibly so that the money is there when someone else needs it. This works well for families with an equal and strong sense of fairness and obligation.
  • One child often bears more of the responsibility of caring for aging or ailing parents -- due to proximity or a strong caregiving personality or both. Consider providing reasonable compensation for these services. Too many times, the caregiving child grows resentful, and the sacrifices he or she has willingly chosen to make are thrown in the faces of other siblings on a regular basis. We've seen cases as well, where the caregiving child has started finding ways to compensate him or herself on the sly, triggering anger and resentment in the other siblings. It's better to recognize up front that the services provided have value and pay accordingly.
  • Choosing your most capable child as your trustee and/or personal representative seems logical, but it creates tremendous tensions between siblings. Suddenly, one sibling has authority over the others. This magnifies any brewing resentments. A better solution might be to name a more neutral party to these roles -- another close family member or friend perhaps.
  • Educating your children early and often about money issues may be the best way to inoculate your family against future money wars. While openly discussing money may seem unnatural and even rude in our culture, assuming your children will just pick it up and figure things out makes no more sense with regard to money than it does with sex or drugs.

Every family is unique and extraordinary, and dysfunctional in its own special way. It's worth giving some thought and care to how money issues are handled -- no need to make things any more difficult than they already are.

Annette Simon

Copyright 2009 Money Dames

Wednesday, March 18, 2009

Who's Afraid of 50?

I turned 50 earlier this month. That's not unusual and certainly not newsworthy; thanks to the internet I'm in touch with many friends from my past who are exactly my age and everyone seems to take turning 50 pretty much in stride. But passing this big milestone has led to some reflection (and angst) on my part. I've been spending a lot (maybe too much) time thinking about my age, and what it means to me -- both emotionally and financially.

In many ways I feel relatively ageless. On the inside, I am more-or-less who I was at 18 -- fun-loving, impatient, analytical, casual, rule-bound... in many ways a bundle of contradictions. I have different people in my life, much more responsibility and experience to draw on, better impulse control but my thoughts and feelings on a day-to-day basis are very much the same. When I was in college, my faculty advisor once told me that she was stung by a student who said she (the student) couldn't identify with where the professor was coming from. My 50+ year old advisor told me, "I can completely identify with this girl -- I'm just like her." Although I couldn't imagine it to be true at the time, I get it now.

But if I look at myself today through the eyes of 18-year-old Annette (or my 17-year-old daughter) I see a very different picture. I see a middle-aged mom who is reasonably fit for her age, knows nothing about current music, loves movies, television and books, seems to be pretty successful professionally, secure financially and is lucky to have a very nice husband who puts up with her many quirks.

Not exactly what I imagined thirtysome years ago. Back then, I thought I could do anything if I decided I wanted to -- an assurance (or delusion?) I now see in my own sons. An ardent feminist, I dreamed of climbing to the top of the corporate ladder or building my own business empire. Things came easily to me at that age and it was wasn't hard to envision myself on top. I couldn't wait to escape my small town life and take my place in the big outside world.

But my younger self never anticipated that I would be unhappy in corporate life and would flounder about professionally for many years trying to find the right path. It turned out I had neither the drive nor the discipline nor the stomach to thrive in the cutthroat world of big business. After graduate school, a series of jobs in consulting provided me with a great education but the long hours and excessive travel made me miserable. It took a break from the workforce and a few dramatic family crises to bring me to financial planning.

I didn't have it all wrong wrong at 18. It turns out I was a city girl trapped in a small town and to this day I love urban life. When we moved to a house just a block from downtown several years ago I had finally realized my dream of city living and have loved every minute of it. Being in the city makes me feel more alive, younger I guess. And, I have been part of building a modestly successful business and have served in several leadership roles in my professional association for the past 13 years. I'm not the CEO of GM (thank goodness!) but it's been challenging and rewarding and fits my personality perfectly.

Financially, I've had a rare luxury. My husband and I were starving students after college, barely making it with our part-time jobs and begging for loans from our parents when we fell short. Until the birth of our oldest child, I earned more than my husband -- yes, the entire first two years of our marriage I was the "primary" breadwinner. Since then, the next 23 years, he has earned more, and even now much more than half our total household income. His financial success has allowed me to figure myself out while we put away money for college and retirement. We won't be retiring at 55 as we once dreamed, but we're in pretty good shape and on track to cut back and take things slower sometime after 60.

It sounds like we're living the dream, and in many ways we are. But I'm a planner, and I know that in life, autopilot doesn't work. In my 50 years I've seen unplanned pregnancies, parents die young or end up prematurely disabled. I've seen couples who seem completely happy together call it quits and model husbands announce their wish for a divorce by having their wives served with papers. I've seen accomplished professionals laid off and unemployed for extended periods. And don't get me started about can't-miss investments that have gone completely afoul. Everyone needs a Plan, and a Plan B and a Plan C.

Life is a series of unexpected events. I think that's something I know at 50 but had no clue about at 18. Back then, I thought I knew what lay ahead; now I never know what's coming next -- but that's what keeps it interesting. I haven't concluded that being 50 is better than being 18, but I wouldn't go back for anything. I'm more interested in seeing what happens next.

Annette Simon

Copyright 2009 Money Dames

Friday, March 13, 2009

Are We There Yet?

After just three up days in the market, some people are starting to check their account balances to see how much of their losses have been recovered. If only it were so easy!

Here's a depressing lesson in portfolio math that we'll all need to keep in mind as we (hopefully) dig out of the hole the market has fallen into since last summer. When the market drops by any percentage it always needs to rise by a greater percentage to get back to where it started. Take this simple example:

Say the market index you are using is at 100 and drops suddenly by 50%. Now the index is 50. If it rises 50%, the index will not be 100 again, it will be 75. It has to rise 100% to get back to your starting point of 100.

How does this translate to what's going on in the markets? Using the S&P 500 as a measure, the market lost over 56% of its value from the high in October 2007 to the low (to date) on March 9. To make it back to that 2007 starting point the market needs to gain 130%. The 10%+ gains we saw this week are a start, but we have far to go.

Annette Simon

Copyright 2009 Money Dames

Sunday, March 8, 2009

I am SO not into this World View

OK, so last night I went to a chick flick. I knew it had received bad reviews, therefore should have expected all I got and don't have the right to vent. But I'm doing so anyway.

The movie: He's Just Not That Into You (HJNTIY) playing in the local suburban theater. The audience: all the pre-teen kids in the neighborhood (or so it felt) and us - Annette, me, and a friend. There was a smattering of other grown-ups but we were in the minority.

The back-drop: From the kids - kicks, giggles and ushers escorting selected parties out for behavior. From the adults - Sshhes and hisses - completely ignored, of course.

The basic premise: women are pathetic and desperate, and men are inconsiderate commitment phobes. This theme was foreshadowed by a preview of a movie that appeared to be a cross between Fatal Attraction and The Hand that Rocked the Cradle. The preview showed a crazed woman vindictively chasing a happily married guy. The twist? She is very blonde and he is African-American. This being the movies, they are naturally both very attractive, as is everyone else in the cast.

Everyone in HJNTIY also is very attractive but that doesn't stop Jennifer Anniston, Ben Affleck and sundry from drowning in angst. We have 5 women in various categories : single, living with someone, married, slut and flake.

The single woman wants a man (any man), the shacked-up one wants a wedding ring, the wife wants perfect bathroom tile and a baby - apparently in that order, the slut wants someone else's husband, and the flake will settle for a 'real' rather than a virtual date.

Their behavior? Endless analysis, whining, spying, and stalking. The women are so uniformly annoying that by the end of the movie, I was completely on the men's side.

The ending? The single woman (very improbably) gets a guy, the wife dumps her husband, not for cheating but for smoking (a worse sin perhaps in our PC world?). Jennifer Anniston gets her ring, the slut gets a singing gig, and the flake (the most sympathetic character in my opinion) gets a relationship.

What do the men get? Not clear.

What does this have to do with women and money - the theme of this blog? Nowhere, by any of these women, is there any discussion of self-reliance, independence, savings and planning, or an exploration of finding fulfillment via a challenging and interesting career. Its all about the guy - finding, pursuing and getting him.

It stings to see the way popular culture stereotypes women. Maybe this movie bothers me because I am now single and recognize some of this behavior in myself and my friends? Could be. No criticism hurts as much as one with a grain of truth in it. All I can say is this single is going back to PBS for a while ...

Veena Kutler