Bell tolls for long-term-care insurance

Perhaps the product was doomed from the start. As critics pointed out, people who needed long-term-care insurance couldn’t afford it; people rich enough to afford it didn’t need it.

And those were the good old days. Most holders of LTC policies have seen their premiums soar; in an era of low interest rates, insurance companies have a hard time meeting their investment targets for their pools of funds. Sales of new policies have plummeted.  In 2002 the number of individual policies sold peaked at 750,000. Last year’s sales: 110,000.  There are 45 million Americans age 65 and older, and only 8 million of them have long-term-care policies.

Some people reportedly are worried that if they have the insurance, it will make it too easy for their children to force them into a nursing home. As if soaring premiums and severe shrinkage in the number of companies offering policies aren’t trouble enough, marketing of long-term-care insurance also has clashed with an opposing concept: Medicaid planning. Why buy a policy to protect yourself against the risk of exhausting your wealth and ending up in a Medicaid-funded nursing home? Medicaid planners offer techniques for diverting or divesting assets in order to achieve that very result.  But the government really can’t afford to cover nursing home care for everyone.

LTC insurance and Medicaid planning share the goal of protecting the children’s inheritance. Shouldn’t the kids be glad to pay their parents’ LTC premiums?  The idea hasn’t gained traction. If the potential costs of long-term care can’t be insured against, they must be met through added savings and investment. The job of investing for financial independence only begins with building a source of regular retirement income.


(September 2016)

© 2016 M.A. Co. All rights reserved.

When is a transfer a gift?

Cohen got along famously with his son-in-law Raymond, who went to work in his father-in-law’s scrap metal company. Raymond became one of Cohen’s most valuable assistants. In 2006 Cohen sold the company. He and Raymond each received three-year employment contracts.  However, they were not very happy working for the successor, and began to seek other business opportunities. The pair traveled to Germany together to observe scrap metal operations in that country.

Cohen wanted Raymond to become familiar with the world of investing.  To that end, he created a brokerage account in Raymond’s name at Merrill Lynch, depositing $250,000 in the account.  Apparently, there were no formalities observed in this transaction, such as a written loan agreement.  Cohen later testified that he thought the account would be “seed money” for a future venture.

Unfortunately, Cohen’s stepdaughter and Raymond divorced two years later.  Next, Raymond withdrew $50,000 from the Merrill Lynch account.  Cohen demanded that Raymond repay the entire $250,000, and he filed a lawsuit to get it.  The trial court ruled that there is a “weak” presumption that a transfer of assets to an in-law is really a gift.  The presumption means that Cohen has to prove that a gift was not intended.

The New Hampshire Supreme Court came to Cohen’s rescue.  The Court held that the presumption of a gift applies only to transfers to a spouse or children, not to transfers to in-laws. When the case returns to a lower court, Raymond will have the burden of proof to show that a gift really was intended at the time that the Merrill Lynch account was set up for him.

(September 2016)

© 2016 M.A. Co.  All rights reserved.

Fear of identity theft

A recent survey of high-net-worth investors, reported on, probed for respondents’ greatest fears.  Major illness came in third, at 56%.  Terrorism concerned 65%.  The top worry, for 72% of respondents, was identity theft.

The concern is not misplaced.  Reportedly, in 2015 alone there were 13.1 million victims of identity theft, at a cost of $15 billion.  Curbing identity theft was a big motivator for the addition of chip technology to credit and debit cards.  But there are many more ways for identity thieves to skin that cat.

E-mail.  In the early years of e-mail and the Internet revolution, having a naïve password was understandable.  You might think that by this time, most people would have gotten the message to avoid passwords that are easy to guess.  If so, you would be wrong.  According to, the top five 2015 passwords from a leaked trove were, in descending order: 123456, password, 12345678, Qwerty, and 12345. To make guessing a password harder, experts recommend avoiding complete words, user names, real names or company names.  When you change a password, make it completely different, rather than just a tweak.  Finally, although it may be tedious to have different passwords for every Web site, it is very dangerous to rely on a single password for everything.

Snail mail.  A wealth of personal financial information passes through your mailbox.  In many cases you can eliminate this danger by requesting online only versions of bank statements, credit card accounts and retirement accounts. Short of that, you never should leave mail in your mailbox overnight or on weekends.  The U.S. Postal Service will hold your mail if you will be away for three to 30 days.  Preapproved credit offers that are being tossed should be disposed of in a secure manner.

Public Wi-Fi.  Using free Internet service from a public hot spot may be tempting, but it can be dangerous.  Hackers may set up fake public Wi-Fi hot spots, from which they may gain access to your data. Experts recommend sticking to known secure Wi-Fi when possible.  Avoid all sites related to your personal finances when using public Wi-Fi.  When in doubt, check on the authenticity of a hot spot before using it.  Eternal vigilance is the price of a protected identity.  For some, a revocable living trust may add a layer of identity protection.  Using a revocable trust with a distinct tax identification number might make it more difficult for a criminal to pilfer the accounts.


(September 2016)

© 2016 M.A. Co.  All rights reserved.


Companion animal planning

Dear Garden State Trust Company: 

Can I provide something for my pets in my will?  —THOUGHTFUL ANIMAL LOVER

Dear Thoughtful:

More and more states are changing their laws to permit pet owners to provide lifetime financial support for their companion animals.  About 40 states provide for simple “statutory pet trusts” as a method for implementing such wishes.

Alternatively, you may want to explore having more specific instructions identifying the caregiver for your pets, the standard of living to be provided, the schedule of vet visits and the plan for financial distributions.

These are matters that you should explore with the attorney who handles your estate planning.  Don’t feel embarrassed to bring up the subject of planning for your pets.  As the Leona Helmsley case from some years ago shows, estate planning for pets is going mainstream.

Do you have a question concerning wealth management or trusts? Send your inquiry to