Does Your Dog Bite?

One of my all-time favorite movie scenes is from The Pink Panther Strikes Again where Inspector Jacques Clouseau (played by legendary actor Peter Sellers) inquires of the innkeeper, “Does your dog bite?”

While reaching to pet the animal, Clouseau is viciously attacked causing him to yell in shock, “I thought you said that your dog does not bite!?”

“THAT is not my dog.” The innkeeper calmly replies.

Despite seeing it hundreds of times, I still laugh at that scene. As most of you know, the plot of the Pink Panther movie series revolves around the heist of a famous large pink-hued diamond and Clouseau’s ensuing shenanigans pursuing the thieves.

But it’s not so funny when mother or father loses precious jewelry or other valuables while in assisted living or nursing home care.

Anecdotally, the loss of keepsakes and valuables appears to happen quite frequently when a loved one is in the care of another, whether in their own residence or in an assisted living facility. Unfortunately, when valuables disappear, they are almost never recovered, and it’s very hard to prove who may be responsible. Further, most assisted living facilities are not contractually liable for valuable items lost or stolen while one is in their care.

I’m not, by the way, accusing all health care workers of committing theft. I’m sure many such caretakers have been accused of taking items that were long ago lost, but faulty memories lead to false accusations. With that said, enough valuables have disappeared from the homes of those being cared for or from the rooms in assisted living facilities that residents should consider taking precautionary steps to avoid the heartache of losing an item near and dear to their hearts.

So let’s review what steps you may want to consider before moving yourself or another loved one into a residence where others are readily present.

First, if one owns valuables that one doesn’t often wear, consider storing them in a bank safety deposit box. The annual charges are well worth the investment to ensure that your valuables aren’t prone to those who may have sticky fingers. When you have a safe deposit box, it is usually a good idea to have a trusted relative as a signor on the box, and for you to advise the bank location and box number that you have rented as well as where your key is stored.

Second, if you have already considered giving some or all of your valuables away to loved ones now (as opposed to bequeathing them in a will), you may get the added benefit of watching your loved ones enjoy the gifts. Here you should consider getting appraisals and filing gift tax returns if you or your spouse is likely to have to file a federal estate tax return.

Third, if you don’t already have riders covering the valuables on your homeowner’s or renter’s policy, speak to your insurance agent. Your agent will tell you what steps should be taken to guard against loss. Most of the time, however, it is not the financial loss that hurts when losing jewelry and other keepsakes; it is the emotional loss as well. To that end, if you decide to give jewelry that is already covered by an insurance rider, make sure that you remove the rider from the policy after the gift is completed.

I have known some who use modern surveillance equipment to record video of those who work in the home.  While I don’t believe that this is the best option, it could catch a thief red-handed, so to speak, and lead to the recovery of the item if discovered soon enough after the heist.

I believe that the takeaway from all of this is that those who are vulnerable should work to minimize the opportunity of those who might be interested in taking valuables by not having them around to begin with.

After all, most of us don’t have a trusted manservant like Clouseau’s Cato Fong – who would never steal anything. Instead, Cato would rather karate chop the inspector upon his arrival from home after a hard day’s work.

So don’t end up like Chief Inspector Dreyfus who eventually ended up in the funny farm (pun intended!).  When you or a loved one is in need of assisted living or nursing home care, don’t forget to secure the valuables.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Four Freedoms & Running Out of Future

You get a fascinating perspective serving as estate planning counsel for 29 years, as I have. You get to see people make major transformations, and then eventually transition into a place that they’re not quite sure how to act – namely their retirement years. I represent retired physicians, attorneys, CPAs, business owners, and executives of publicly traded institutions, among others. When these individuals first retire, they are excited to exit the busy world that wore them down over the years.

Some choose to slow down, golf, play bridge, travel and enjoy themselves. I don’t begrudge them at all. They’ve certainly earned it.

But there’s something else that I’ve noticed. When a hard-charging, ambitious, determined individual suddenly has nothing to do, things seem to change. After enjoying a “sabbatical” of several months they don’t seem to know what to do with themselves.

That’s when it gets interesting. Some will become consultants, an occupation that allows them to pick and choose the work they get involved in, while others dive into philanthropy and charitable causes. Some vigorously pursue hobbies left neglected over the years, while many spend more time with their grandchildren than they were ever capable of spending with their children.

Some, however, seem to run out of future. When this happens, a noticeable change occurs. Health often declines, as does mental acuity. They don’t seem to enjoy life as much anymore. They haven’t found a new purpose that engages them. I believe that if you take a look at four freedoms that everyone wants to achieve, no matter the age, it becomes easier to never run out of future.

These are the freedoms of time, money, relationship and purpose.

The first is freedom of time. There are two aspects to each freedom. Freedom from and freedom to. Retirees are free from the day to day grind that consumed their lives for many decades. Now they are free to engage in those activities that they enjoy doing. Those retirees fortunate enough to maintain good health don’t spend a great deal of time in doctors’ offices, instead they are able to choose to take the time in those activities that they find motivating.

The next freedom is that of money. Most of the retirees that I encounter have done a good job of saving, and therefore have the freedom from obligations such as mortgages or those found when raising a family. I have three daughters, one who just graduated from her Master’s degree, another who is going to enter professional/graduate school in the coming year, and a third beginning her college career this fall. I’m looking forward one day to being free from college tuition expenses! Most of those a couple of decades older than I are free of those types of expenses. The retirees I work with also have a freedom to spend their money on those things that provide fulfillment and energize them. Some choose to go back to school simply for education’s sake. Others like to travel, become philanthropic or enjoy helping their children and grandchildren with life’s expenses.

Once you gain freedoms of time and money, that opens the possibility of freedom of relationship. Again, we can be from those relationships that we find toxic or exhausting and can enter relationships that we find satisfying, loving and supportive. Finally, there is the freedom of purpose. This is the highest freedom that can only be obtained once we’ve achieved the other three freedoms. Here we find our meaning. Our why. It can mean many different things to many different people.

When we consider our freedoms in this fashion, it’s impossible to run out of future no matter our age. If you find yourself stuck in a routine that you can’t seem to break out of, I suggest that you consider these four freedoms, and what you want to be free from and free to do. That might just be the thought process that begins an entirely new and exciting chapter in your life.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

The Vultures

Those ugly turkey vultures are quite ubiquitous throughout Southwest Florida. You see packs of them on the side of the roads picking at road kill. I suppose that they serve a useful purpose, disposing of the carcasses of various dead creatures big and small.

But family vultures are quite different.  They’re not present in all families, obviously. Vultures can be found in just a few I would say. But when they’re present, someone has to stand guard.

While both Dad and Mom are alive and well, they circle patiently overhead, not making a sound. But then Dad dies, and when Mom’s vulnerable, you see them become more aggressive.

“My car won’t start anymore and I can’t afford a new one.”

“The kids’ private schools are so expensive, and I just don’t know how we’re going to pay the tuition bills.”

“I haven’t been on vacation in years and I’m burning out at the office.”

“Now that I’m middle aged no one will hire me.”

And so on.  The vultures prey on Mom’s maternal instincts to take care of her children, even though those children are now adults and are quite capable of taking care of themselves. They knew that they couldn’t ask for money while Dad was alive, because he would say “No” and might even disinherit them for even asking.

But now that Dad’s gone, they look at Mom’s retirement account as a lump sum that can and should be shared by all. The vultures don’t realize that the corpus of the retirement account is necessary to generate annual income for Mom. Since yields are so low these days it takes a lot of money to generate even modest income.

I’ve seen the vultures swarm several times throughout my career.  Mom’s financial advisor warns her that she really can’t afford to make such large gifts to her children without compromising her standard of living. Yet she does so anyway.

And I don’t mean to be sexist. Sometimes the surviving Dad is the one being preyed upon. More often than not it’s Mom, only because women tend to have longer life expectancies than do men, and as I said before, the instinct to assist even capable adults seems stronger with the parent who actually carried and gave birth to that person, even though it was several decades ago.

And sometimes the vultures sweep in while both parents are alive. Not too long ago I represented a long time married couple who were bled completely dry by one of their adult children. Even though Son had a job and apparently did reasonably well (or overspent) as he took vacations to Europe with his family. But Son also demanded that his parents pay for the plane tickets to bring his family of four down to visit, and expected Mom and Dad to pick up the tabs when they went out to eat, and for the family’s activities. This was on top of the annual assistance he said he needed to make ends meet.

Despite the pleadings of their professionals, including the CPA and the couple’s financial advisor, Mom and Dad couldn’t stop themselves from making large gifts to Son. When Daughter found out about it, she became terribly upset and frustrated, but there was little that she could do by that time. The damage had been done.

So what’s the answer? How do you protect yourself from a circling vulture?

That’s a complicated answer, since every family’s situation is unique. But there are some common threads. When your advisors are telling you that you really can’t afford to make gifts that your adult children request, the first line of defense is to say “No.”

But this is hard to do for many.

If you find yourself unable to say “No” when you know that you should, that’s the time to name a co-trustee in your revocable living trust who does have the ability to help you say “No” and will monitor your financial situation. That co-trustee might be a trusted son or daughter who won’t try to take advantage and will act as a gatekeeper to their vulture-like sibling. It could also be a trust company that can serve the same role in a less emotional and more impartial way.

When I mention professional management, oftentimes my client will bemoan the fees that they would have to pay.  I remind them that they are likely already paying management fees of one sort or another, but even if they aren’t, paying 1% for someone to stand guard is better than losing large amounts to vultures whose appetite never seems to diminish.

If you suspect that you have vultures circling, please do yourself a favor and ask your team of advisors what steps you should take before you jeopardize your own financial stability.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.

An Apprenticeship in Reality

The Canadian psychologist Jordan Peterson has become one of the most prominent intellectuals of our time. His recent book, Twelve Rules for Life, is a massive best-seller. He courageously challenges the fashionable fallacies of the contemporary west. Particularly striking in his book is Rule 5: don’t let your children do anything that makes you dislike them.

That point is more subtle than it sounds. According to Peterson, a significant number of parents today fail to socialize their children. They indulge them. They don’t teach them rules. He states that there are many complex reasons for this. Some of it has to do with lack of attention; parents are busy and don’t have the time for the demanding task of teaching their children discipline. Some of it has to do with Jean Jacques Rousseau’s influential, yet misleading, idea that children are naturally good and only become bad through society’s rules. The best way, that idea states, is to let children choose for themselves.

Peterson believes that modern parents are paralyzed by the fear that they will no longer be liked or even loved by their children if they chastise them for any reason. They are afraid to damage their relationship with their children by saying “No” for fear that the children won’t love them anymore. The result is that they leave their children dangerously unprepared for a world that will not indulge their wishes, desire for attention. A world that can be tough, demanding and sometimes even cruel.

Without rules, social skills, self restraints or a capacity to defer gratification, children grow up without an apprenticeship in reality.

So how does this correspond to estate planning? I commonly hear my clients voice a concern that leaving their children a significant inheritance will only serve to create ne’er-do-wells. There’s a fear that inheritance will eviscerate any drive or ambition that a child might have. Life will be too easy.

Since most of my clients are self-made, they remember a time when they didn’t have much. They struggled. They saved. They denied themselves things that others considered necessities until they were on sound financial footing.

But when they had kids, they didn’t want their children to suffer in the same way that they did. So the children were provided the very things that my clients couldn’t afford or denied themselves at similar ages. As the children grew, many clients described a feeling – a sort of regret – that perhaps they indulged too much. While shielding them from the very scars that defined the parent, the child wasn’t forged into the same tough alloy. The children were happier, yes, but softer as well, and sometimes had less perseverance in difficult situations.

Now fast forward to the time when a client sits in my office discussing their estate plan. While they love their children and believe them to be good, solid citizens, my clients aren’t sure how the transfer of wealth will affect the family. Will it be good or bad? They consider leaving amounts to the grandchildren, but often conclude that might end up cascading the same issues to the next generation.

One answer commonly discussed is to make the trust only available for limited yet specific needs. Education. Health. Supplementing retirement. To do this requires not an outright distribution at the client’s death but a continuing testamentary trust. Not only that, but it also wouldn’t make sense for the trustee of the trust to be the beneficiary/child. In that case, the trustee/beneficiary could simply disregard the terms of the trust and distribute for whatever reason he or she desired. When imposing use restrictions on the inheritance it would make sense to name an independent corporate trustee, from which many clients shy away.

Further, the tax law dissuades us from accumulating income inside of a trust, as compressed federal income tax tables result in much higher bounties paid to Uncle Sam. Here professional money management is often necessary to balance growth and income to save taxes.

The issues and concerns surrounding these issues are unique to each family. I sympathize with having to make these tough decisions, as I grew up in a family that struggled financially. I tossed pizzas, waited tables, mopped floors and bagged groceries in high school through college and law school. My children didn’t have to earn the stripes I acquired in my youth. Yet, our kids did everything my wife and I asked of them, excelling in school and in college.

So what’s the answer? It will be the best one possible assuming that you’ve taken the time to engage in these thought processes. It’s also going to matter what types of assets you bring into the estate plan. Inherited IRAs, which distribute annual taxable income in the form of required minimum distributions beginning in the year following your passing, will have different planning challenges than other assets will, for example.

It all starts with the process of considering what you believe to be in the best interests of your loved ones. As Jordan Peterson would counsel, do what’s right for your family, even if it means that they might not love you for it.

© 2018 Craig R. Hersch. Originally published in the Sanibel Island Sun.