You don’t have to be poor to be snookered by con artists. One of the guys in my Thursday morning business group, affectionately known as George the Elder, is a financial manager. He has a client, an old gal who’s been with him for 20 years and has plenty of money in IRAs. He had things set up so that she was getting about $6,000 a month from now unto the end of time, with the fund unlikely to run out before she croaks over.
Somehow, this woman got involved with a scam artist who persuaded her that the world economy is about to crash in flames and that to save herself she must convert all her investments into gold!
Our guy tried his weenie-wurst to persuade her otherwise, but she simply would NOT listen to him — the crook had her convinced that George was ripping her off! — and so she has unloaded all her IRAs, sold all her equities, and drained her savings, paying hundreds of thousands of dollars in taxes, and is madly buying freaking gold coins!
George is beside himself, but there’s nothing he can do about it. He thinks she’s alzheimering out or otherwise has taken leave of her sanity…but she lives alone and there’s apparently no one to challenge her competence.
The obvious message here is don’t believe anyone who advises you to do anything drastic with your money. Anyone who tells you the world is coming to an end or the stock market is headed for an irrecoverable crash is either a nut case or a scam artist, especially if the person is trying to get you to change your way of doing business.
But there’s a subtler message. We are about to see millions of people enter old age. Following in their tracks will be millions of scam artists trying to take advantage of them. If you have any assets at all — even if it’s just a paid-off house, to say nothing of hundreds of thousands of dollars in savings — you and your spouse or partner should set up your estate to protect the survivor and your children from predators and their own stupidity.
Even if you’re not among the 1 percent, you can set up a trust to protect just about any kind of asset, be it cash and investments, real estate, or your beloved mattress filled with Krugerrands. These entities exist in a variety of forms, among them the irrevocable living trust, the revocable trust, the Kiss trust, and the like. Some work as tax shelters, because in effect you no longer own the assets — the trust owns them. Thus if you have a child who’s trying to get college aid, sheltering your family’s money in a trust can erase wealth that would be held against him or her in the application process, and you can draw funds from the trust without paying large taxes on them. The Kiss trust lends itself to this strategy, especially for middle-income families that are not wealthy, and it has the advantage that more than one person can contribute to it.
A trust should be set up by a lawyer. As with any decision involving your life savings, it pays to get professional advice — and to ensure that the adviser actually is trustworthy. Don’t do business with “experts” who want to sign you up in your living room. Hire a good lawyer and check the person’s credentials. Bear in mind that AARP does not endorse any living trust products, and so if someone tries to play the AARP card with you, walk away. Also don’t walk but run away from anyone who tries to high-pressure you or speed you through some sales pitch.
In setting up a trust, be sure that you as the grantor have the say over how the funds will be invested; that you retain the right to decide how assets will be distributed among beneficiaries; that you retain the right to remove a trustee if you’re not satisfied with his or her services; and add a provision ensuring that after your death beneficiaries must appoint a qualified trustee from a legitimate bank trust department. Also bear in mind that it’s possible to set up a trust so that assets outside of it are transferred into the trust after you pass away.
If you have a complicated estate or a lot of money, setting up a trust will cost something in lawyers’ fees, although a Kiss Trust can be organized very inexpensively. But you get what you pay for. Consider: if George had his client’s investments set up so she was receiving 4 percent of principal, she had $1.8 million. All of which she is busily converting to gold coins… The savings on taxes alone would be more than the cost of having hired a lawyer to protect those assets with a trust. It’s worth checking out the pro’s and cons and exploring whether one of these instruments might help protect you or your heirs from questionable schemes and bad ideas.