February 2017 - Susman
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Truth about Elder Financial Abuse

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928000/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]There are unscrupulous people in every industry. Insurance and financial planning is no exception. Join Karl Susman on this week’s Susman Insurance Agency podcast as they discuss the truth about Elder Financial Abuse. Transcript to follow.

JIM: Welcome everybody, and today we have a fantastic program for you. When people go into retirement there are many risks that they face. The American College I know listed a lot of different risks that people face like inflation and healthcare and all those things, but one of the things you don’t see too often is elder abuse. Joining us today is Carolyn Rosenblatt, who has over 45 years of experience in her combined professions of nursing and legal practice, and she spent a lot of time recently, as a matter of fact she’s written a couple books on the subject and that is elder abuse and how to protect people and protect ourselves as we age, and we’re looking forward to you sharing with us. Welcome Carolyn.


CAROLYN: Thank you so much Jim.


JIM: First of all, I’m always curious, what got you involved going from nursing to the legal profession and now helping with elder issues and retirement planning, how did you make that journey, what got you on that path?


CAROLYN: I’ve been asked that question so many times because it’s not usual for a nurse to become a lawyer. But really, nursing at the time, this is back in the 60s when I graduated, the end of the 60s, early 70s, when I graduated from nursing school, nurses were not well paid. We were doing a tremendous amount of work, and I was doing about the same as a checker at the grocery store, so I realized it was just unfair. I love nursing, Jim. I love taking care of patients. I was out in the community visiting people at home, thousands of home visits to many, many elders and their families and a lot of other people too, gives you a perspective, but with a bachelor of science in nursing, a public health nurse certificate, and being able to excel in my field, I was not being paid properly, we didn’t have benefits, it was terrible, so I started looking around and thinking what else can I do. I was always comfortable with words and speaking and writing and I thought well these are some of the tools of the trade of the law, so I put myself through law school while working as a nurse, and when I got out I worked a couple years for other firms and then started my own practice in my home town, and it turned out to be a great way to raise kids, to have my own business and work near my husband, Dr. Michel (SP?) Davis, who is a psychologist and is a now a geriatric psychologist. When the kids were done with all that and went through college and I looked at what I would do next, because litigation which I did for 27 years is being on the battle field, I didn’t want to stay there the rest of my life. I looked at what else I loved to do, and I created an encore career consulting with people who have aging parents or who are professionals with aging clients. That’s what I’ve been doing for about the last 10 years, I really enjoy it, and I am on a mission to see what we can do to thwart elder abuse.


JIM: You know and that’s a tough one. One of the things that as a financial myself, you’ve got this privacy issue, and then you see a situation where you think someone is being abused, and it is really a tight rope that you walk on as a professional as to whether or not you can even blow the whistle. Do you see that?


CAROLYN: I see that as a common refrain among financial professionals, and I say look folks, it doesn’t need to be this way. Financial advising historically started with families, and if you are engaged with the families of your clients, however flawed those families may be, you’ve got to have someone that your client, who is aging, can rely on to help with decision making in the event that the older person begins to lose the ability to safely make decisions. The first problem is a lack of connection from the get-go when you have a new client, to engaging their family members and getting the client’s permission to share that financial information with them. That privacy consideration can be dealt with immediately. It can be dealt with in many ways, but it is not and should not be a barrier to keeping the elder safe.


JIM: I’m in Wisconsin. I had a planning attorney that I work with design a document with the estate planning documents, where when everybody is of their sound mind they sign off a permission slip for me that if I feel that they’re in danger or something is happening that I have the right to go consult with some of their other family members, because I’ve had situations where clients just get very upset and say no you’re not to talk to anybody about this. It really puts you in a dilemma because of the privacy rules and everything else. Do you have something similar to that that you’ve seen out in California?


CAROLYN: Absolutely. We see it all over the country, because I speak across the country and I deal with financial advisors and clients all over the place. I’m speaking to a guy today from Brazil whose mother is in Ohio, so this is a universal problem, okay. I think that it takes a legally sufficient document for that privacy, let’s call it a privacy waiver. Because the rules are in place but you can get around those rules by getting permission. That’s the basic concept and it’s quite simple. However, a lot of people are not clear, a lot of people who are the client and a lot of people who are the advisor are not clear about how to make that document happen, what does it mean that it’s legally sufficient? If you have a lawyer drafting it for you Jim, great, but a lot of other people in your kind of profession don’t do that, and then they think that they’re just going to get some letter after the fact, hastily drafted by themselves, that’s easily questioned. It’s not uniform; it doesn’t have the right language. If you don’t know the law you might not know what to put in it, but it’s a very, very important step in keeping clients safe, because a lot of people don’t understand when they are losing their capacity to make safe financial decisions.


JIM: There’s probably nobody better than a trusted financial professional that’s dealing with a lot of your planning, when they see something out of whack, you know all of a sudden extra money being drawn out or other issues that might affect it, making big changes that there was nothing discussed. Usually we can see the warning signs, and that’s a good person to have, but it’s always good to have a team. You want to have the attorneys, the accountants. You might want to have your financial planner, maybe any number of those folks, or if you have a trusted person at the bank, some different people that you give the right to that if the warning bell goes off they could do something. We’ve talked about this financial abuse of elders, which I unfortunately see way too often. How big of a problem is it?


CAROLYN: Enormous. The government studies this a long time ago, the National Center on Elder Abuse, and they came up with a statistic that it was $2.9 billion a year stolen from elders; however, much more recently a private company, which has some very good things in it, including a credit card that you can limit for anyone who is at risk, they did a study, a much more comprehensive study, with researchers from Stanford University on their team, they came up with a figure of $36.4 billion a year stolen from elders in this country. That’s every year, so indeed the problem is enormous. Some people call it the crime of the century. Everyone needs to be aware of it, and financial planners, as you say, are in a unique position because you know the client. You see what’s happening to their money. Very few other people have that kind of knowledge of the client, and it’s a very important relationship, and I think a unique opportunity for the financial professional to sound the alarm as you say, but no everybody knows how to look for those warning signs in the same way. We do have a tool for advisors or for anybody to use, and it’s a diminished capacity checklist. It’s on my website at aginginvestor.com, it’s free, and I recommend that families, as well as advisors use that so that you have a uniform way of describing the problem and that you can then justify making that call to the third party, because you have evidence that it was necessary.


JIM: So who have you found to be the most common financial abusers of elders?


CAROLYN: There’s no question, and all of the research data is the same, that by far the most common abusers are family members. Typically the adult children of the elder, adult children know the elder, know their vulnerabilities, have a relationship of trust, and it’s easy for them to exercise what we call undue influence over the elder and take things from them. Some of them feel entitled, some of them are resentful because they don’t have a good relationship with the parent and it’s payback, sometimes they’re just greedy, Jim. I mean there are a lot of reasons. No one has really identified to all of them, but I say it all boils down to greed and opportunity, because older people are trusting and vulnerable, they need the help, they’re victimized readily, and they’re too embarrassed to report it.


JIM: Well let’s take a short break and when we come back, let’s talk about some of the solutions that families can implement. Please stay tuned.




JIM: Welcome back as we continue to visit with Carolyn Rosenblatt; nurse, attorney, and now advisor around the country to help families avoid elder abuse, especially when it comes to financial elder abuse, which is a much bigger problem, I think, than what most people realize. One thing I found a while back, I had a client, she just had Medicare supplement insurance with me. You know I tried to talk to her about investing money with me and she was really content with where she was at. She was pretty much stubborn, she didn’t want to consider anything I talked about having, family members to look at it, because I really felt I could improve her situation. I was just shocked to find out that she was taken for about $15,000 with some scam saying that there was some kind of fraud at the bank with social security checks and we want you to withdraw some cash to see and then bring it out and all that, and somehow she fell for this scam. It went around the town that I was in and quite a few people got taken for this. Now she actually admitted that this happened, but I think a lot of them are too embarrassed to admit that it’s happening. Do you find that a lot?


CAROLYN: Yes, very much so. When it’s a family member the aging parent feels guilty. This is the son I raised, this is the daughter I raised, how could they do this. I remember, Jim, looking a 93-year-old woman in the eye, saying to her after I learned what had happened. She had already been ripped off by somebody else before, but now her son, who was her designated agent on the power of attorney, a son that she loved and trusted very much, he had taken money out of her account, and it was over $10,000, and that was just the beginning. He had designs on getting her house too. I looked her in the eye and I said look, your son has stolen money from your account. You told me he did that without your permission. I said that is a crime, it could be reported. She looked me in the eye and said I don’t want my son prosecuted. Okay, so we have a willing victim, and that is often the case with elders. They say that only one out of eleven, or four out of fifty, I mean you can look at different statistics, are actually reported to authorities and even fewer of those are prosecuted. People are getting away with this crime because of the population they’re stealing from and that’s why they keep doing it, it’s so easy.


JIM: I come from a German heritage, and the community that we’re from, for years it was everything was held close to the vest. Parents did not talk to their kids, everything was private, you didn’t find out what they had until the reading of the will, and we’re a very conservative community so we have people living in rags with millions of dollars sometimes and it’s very common. We get very involved in the estate planning process with the client’s attorney, we work with their CPA, we go through all this as kind of a team, and we implemented a process a while back of family meetings, so there’s open communication, the whole family gets to hear what’s going on, because I look at those as the soldiers, the eyes and ears on the ground so to speak. I think that’s one way that you can help prevent maybe somewhat of theft by having some communication with all the family members so everybody knows what’s going on. What are some of the other things? You talk about a checklist and having their financial professional maybe step in if they see some kind of warning sign. What are some of the other steps that you see that families can use to protect themselves?


CAROLYN: Well first let me comment on your concept of family meetings, which is excellent. Not everyone does that. A lot of people don’t do that; don’t know how to do it. At aginginvestor.com we have a video course on how to do a successful family meeting, so I encourage any advisors or families who have advisors listening to get on with that, and it’s a great thing you’re doing and I appreciate hearing it. To the question of what other people can do, I think a lot of people in our society have a kind of denial going on about the aging process. It’s unfortunate, but we have a very negative bias about aging in all part of our media. Everything is about turn back the clock, defeat aging, defy aging, on and on and on as if aging itself were so terrible. It’s not. It’s a natural part of life, it can be very enriched and enriching for the families of people who are older, but because of this sort of negative mindset, we are in denial ourselves, the adult children and family members of elders, about the fact that they may be declining, so we treat them at 85 as if they were 65 or 55 and they’re not. Even if they do not suffer from cognitive impairment, if their brains are not suffering from the beginnings of dementia, they still need more close watching by us. I have a 94 year old mother-in-law. Fortunately for my husband, a psychologist, and me, she’s very open, but she has been taken advantage of before by her own financial advisor. We stopped that, got rid of the advisor, got the money back, but we pay attention. My husband looks at her statements every month online, and even if your parent does not have computer skills or isn’t comfortable going online, the adult child can gain access to the account and watch it every week to see what’s going on. That’s something I strongly encourage families to do because it is just another way to keeping your parents safe. They don’t have to give you access to the money, but giving you access to the information is usually something that they’re willing to accept, because first of all they don’t understand how that works if they use a computer, but if they do they may be comfortable letting you kind of watch over them. If you have a less than ideal relationship with your aging parent, I think the approach to allowing access is really best pitched by saying look, I know you don’t want to be a burden to me mom, dad, grandma, and it would be a burden to me if you were harmed and I had to try to fix that after the fact. If you let me see what’s there at least I can try to protect you and that’s not making a burden for me. That pitch sometimes is much more successful than saying hey what if you get dementia, gee, you know, people don’t want to hear that.


JIM: Yeah, amen to that. I know it’s always a difficult situation, but I find if people care enough, you got to be persistent maybe a little bit, but I found with clients, and when I engage with them, I said look I’m going to let you know right now there’s going to be a family meeting. It may not be right away but at some point in time when we feel the timing’s right we’ll discuss just how much detail we get into, whatever you feel comfortable with and we’re going to do this. We’ve been doing that for a number of years now and it’s really paid big dividends. The best part about it is I do have those eyes and ears on the ground, and I’ll have some of the kids come hey I think this is happening or that’s happening, and we can get together with the parents and kind of talk through things and figure it out, and a lot of times thwart what could have been a serious offense against them of someone taking advantage of their situation.


CAROLYN: Yes, that’s very, very good. I think it’s important that there be, as you say, a team approach because sometimes the abuser is the favored child, the beloved daughter or son, the nephew, the cousin, somebody who has access, and the other family members are suspicious of that person but they need to be empowered with information so that they can stop the elder from getting ripped off. I mean there’ve been daughters who have taken money and bought a house for cash and the elder is going to need more healthcare and more homecare, and there is no more money because it’s been tied up by this unscrupulous child who’s greedily taking it and making themselves rich. No, I mean other family members need to know what’s there so that they can protect this person from any no so upstanding family member who might try to help themselves to the wealth.


JIM: Recently I read or was at a seminar, I can’t remember where I heard it, but they talked about the age on average where people start diminishing capacity for dealing with financial issues, and it’s like in the early to mid-60s, you know, and I know a lot of people that seem sharp as a whip even at 80 or 90, but if we know that this could be happening or would be happening, when would be the time to do this, probably as you’re getting into the 60s and the kids are now getting to the age where they at least have a good head on their shoulders.


CAROLYN: Yeah, and I say pick a date, pick a birthdate, pick an occasion. If you want to bring this subject up and say when will we have this family meeting, when we will have this discussion, when will we share the information about the assets that exist within the parents portfolios, say it’s at 60 on their birthday, or it’s the date that they retire, or it’s the date that they celebrate a certain anniversary, or the birth of a grandchild, some occasion it will serve as a handy excuse to do it, but it should be done consistently with all clients. Families ought to expect to do that by a certain time. It’s not that everybody is losing their marbles starting at 60. I’m in my late 60s myself, but what I will say is that we know that the risk of Alzheimer’s disease, which will destroy a person’s ability to make sound financial decisions, that risk begins to double about every five years starting at age 65. By the time we reach the age of 85 and many, many people are living past 85 these days, the risk of Alzheimer’s disease is one in three. Those are pretty high odds that something is wrong, and financial judgement, Jim, is eroded first. Of all the things that we have as capabilities of the intellect, financial ability goes first with this brain disease. We can just be more watchful, be more compassionate, be kinder, and be vigilant to try to protect the loved one from every nefarious person who’s out there trying to rip them off.


JIM: I had a grandmother pass away with Alzheimer’s, I had a grandfather on the other side pass away with Alzheimer’s, and here just a couple days ago we learned at the recording of this, we learned of Gene Wilder, who was from my home time, died of Alzheimer’s, President Regan died of Alzheimer’s, I mean if people think it’s not going to happen to them they need to wake up. The possibilities are there and you need to protect yourself. This has been great, Carolyn. Share with the audience before we wrap up the books that you’ve written as resources and how can people get them.


CAROLYN: Sure, thank you. For families I have a book called The Family Guide to Aging Parents, it’s published by Familius Press, it is available on my website. I have two sites, agingparents.com and aginginvestor.com, it’s also on Amazon, and the title is The Family Guide to Aging Parents. That covers the topic of how to approach the subject with your aging loved ones, what you need to talk about. It covers a lot of things including the care needs of elders and how much they cost and what we can do to protect everyone from abuse, so that’s a pretty comprehensive thing that is easy for people to get. It’s $29.95. Then we have for professionals, especially financially advisor, Succeed with Senior Clients, and it’s a financial advisors guide to best practices, and it talks about some of these same subjects from the professional’s point of view. What do we say to our clients? What do we need to do when we see abuse? How do we get around this privacy problem? What kind of document do I need if I’m trying to break past this problem of privacy? Then we deal with the other problem which is really everybody can get impaired, including financial professionals, so how do we address this among our own colleagues. That is also available at aginginvestor.com. That’s aginginvestor.com my website, and it’s available on Amazon as well.


JIM: Well Carolyn, this has been fantastic, and it’s a subject that none of us want to talk about. It’s the big elephant in the room, but it needs to be talked about, and when you see the staggering statistics of how many people are affected by this, and I think they’re probably even short on that. I’ve seen it so many times. I heard a story of a gentleman that was suffering from dementia when his wife died, the kids brought him home and closed all the bank accounts, you know they had ten different accounts, just closed them all, didn’t really look at the records, and then when he passed away they were going through cleaning his stuff and found out that he had $500,000 death benefit on his life insurance that lapsed because they terminated all the bank accounts, there was no forwarding address, and it was just timing that they weren’t made aware of that. That’s just another example. I had another client who two years before needing nursing insisted he was going to cancel his nursing home policy because he was healthy and he wasn’t going to live in a nursing home, and here he had paid premiums for 15 years and decided to quit and wouldn’t let me talk to his kids. I mean who knows if his mind was right or not, I don’t know, but man if I would have had a permission slip signed early I could have talked to his kids. His kids were all in a position they would have paid for it for him, and then to see how they dealt with it afterwards it just pulls on the heartstrings. It’s important for everybody listening out here, planning goes beyond just investing in an account and setting up your estate plan, you need to make sure that you’ve got a Plan B in place to help protect yourself when you’re not able to protect yourself. Thanks again, Carolyn.


CAROLYN: You are welcome. I’ll leave you with several watch words Jim. First of all for your audience, be watchful, be vigilant, our elders need protection. Next one, communicate more. The third saying, include the financial professional; it’s an invaluable help to all of you.


JIM: Thanks Carolyn, appreciate that, we’ll have to have you back again soon.


CAROLYN: Alright, take good care, bye bye now.

Gift that gives back

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928003/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]What is better than giving? Receiving you say? How about a gift that gives you back! Join Karl Susman and guests this week as they discuss ways to give and get back! Transcript below.

JIM: Welcome to today’s program. Today I’m flying solo and talking about a subject that’s near and dear to my heart which is charitable giving. With this being the holiday season, many of us are in a giving mood whether it’s Christmas or Hanukah or Festivus or whatever holidays that we’re celebrating over this season, it’s generally regarded as a time of giving and whether we’re giving to our family members or those that we care about or to our favorite charities, it’s important to understand the benefits of planning with your giving to get the most impact that not only can benefit your favorite charity but can come back to benefit you which might in turn mean you can do more for your favorite charities so today I’m going to cover some of the planning options that are available to you and it’s something that we as advisors a lot of times fail to bring up. With some of the changes that have happened in the tax code you really want to be aware of these opportunities for you because it can save you a lot of money in taxes. I remember reading a book a while back and it’s called Tax Planning From The Heart. To sum up that book in just a couple sentences, it basically says you have you and your family, you have charities, and you have Uncle Sam. Pick two of the three because with charitable planning we can control where our money is going whereas when we pay taxes we really don’t have a lot of say as to how that money is being spent so before I talk about the tax benefits, I think it’s important that people understand the taxes so then you can better understand how to plan and how to benefit from your charitable giving. Our tax system is set up into brackets and I know when I ask people what their bracket is most people look at me like a deer in headlights. Talk to your accountant, to your tax advisor, your insurance professional, your financial advisor, talk to whoever you’re working with to help you understand what bracket you’re in so the way the brackets work is the first few dollars that you earn you have deductions and exemptions that offset any tax on the first few dollars of taxes that you earn so that’s a 0% bracket. Then your taxable income starts and the first few dollars of your taxable income will be taxed at 10%. Then it goes to 15%, then it goes to 25%, and it keeps bracketing up all the way to 39.6 and that’s just the federal tax. You have the same thing on the state level and there might be things like the Affordable Healthcare Act taxes. There are other taxes, capital gain taxes, all of these different things go on to your final tax return and they determine what your bracket is for your ordinary income so the things like interest income, your wages, your distributions from IRAs, they all go into your ordinary income that are affected by all of these brackets. One thing that’s really important to understand is where your brackets are. Now we’ve had a couple of changes in the tax code over the last few years. One affects itemized deductions so what goes into itemized deductions is money that you’ve paid for your property tax, state income tax, your medical expense, and your charitable contributions, and one of the big changes that happened here is it used to be your medical expenses, your non-reimbursed medical expenses, anything that exceeded 7.5% of your income could qualify toward going to those itemized deductions while a few years ago they changed the rule and made it 10% so less of your medical expenses can go toward itemized deductions and if you’re over 65 this will be the last year that you can use the 7.5% because starting next year in 2017 the itemized portion of your medical expense goes to 10% like it is for the rest of us right now so why is that important. I talk to a lot of clients, they take in all of these receipts, and they think they’re itemizing on their taxes but they don’t have enough of these deductions and they end up getting the standard deduction so it’s real easy to look at your tax return and you can see whether or not you’re getting the standard deduction. Now every year that changes and it depends on your age, whether you’re disabled or whatever, what you get for standard deduction so it’s different for everybody but you just want to look at your tax return and see if you’re qualifying for that because if you end up just defaulting the standard deduction it means you’re not getting any additional deductions for your charitable contributions so it’s really important to understand that when doing charitable planning.

Let’s talk about some of the options that are available to you. First of all, for those of you that are over 70-1/2 and are subject to required minimum distributions from your retirement accounts, when you reach 70-1/2 for traditional retirement accounts the government says you have to start taking money out. It doesn’t matter whether you need the money or not, you have to start taking distributions and that percentage that you have to take is determined based on your year-end account value and applying the percentage based on your age and basically it starts out at 3.6% and every year it’s a little bit of a higher percentage so let’s say for the sake of discussion you have a couple hundred thousand dollars in an IRA and when you get to 70-1/2 your required distribution is going to be around $7000. Now let’s say you don’t need that money and let’s say for the sake of discussion you’re giving $5000 to your favorite charity or charities every year. Well, what happened at year-end last year, 2015, they passed a law and it had been a temporary law that they kept kicking down the road and passing a temporary law, temporary law, and, unfortunately, they didn’t pass that until very end of the year so it was very difficult to do planning. Well, at the very end of the last year they made this law permanent so it gives us some real opportunities to do some meaningful giving so what happens with the charitable contributions is if I’m already giving $5000 let’s say to my church and I have a 7000 required minimum distribution, I can contact my IRA holder and have them make the check directly to my charity and they have to be registered as a registered charity, a 501(c)(3) or some other qualified charity, they have to pay the check directly to the charity so instead of you donating money let’s say every week when you go to church, you would probably want to make it easy on yourself and just do it once and have it done. Now by doing that the money that comes out does not get included in your taxable income and if you’re just getting the standard deduction that’s like reducing your taxable income by $5000 and you save the taxes on that so that’s something you definitely, for anybody over 70-1/2 that is giving money to any charity, you want to work with your professionals to make sure that you’re taking advantage of that so in a $5000 let’s say donation to charity, if you’re in a 15% bracket that means you would save $750 in taxes and then if you’re in a state that has an income tax you would add that savings to that as well so that is an important tool that I see a lot of people aren’t made aware of that, that you should be looking to take advantage of for those of you that are turning over 70-1/2. Now we’re going to take a short break and when we come back we’re going to talk about some other planning techniques that you don’t need to be 70-1/2 to take advantage of. Please stay tuned.



JIM: Welcome back as we’re exploring some real benefits to doing charitable planning. I know many clients that give to charities on a regular basis because it’s the right thing to do. They want to make a difference and they want to help out those causes that are near and dear to their heart and they don’t really think about the tax impacts so something that you want to do though is if you look at this and you say, geez if I could save $2000 on taxes, well that’s either $2000 in your pocket that you control or maybe you could do another $2000 of giving and it doesn’t cost you any additional money, you’re just reallocating money that you would’ve been sending to Uncle Sam and now controlling where that money is spent by giving it to your favorite charity. Let’s talk about a couple of different things you can look at. One thing is there are donor-advised funds in which you can make contributions to a fund. It’s kind of like setting up a family foundation and you get a charitable deduction today and you can advance payments so let’s say again, for example, you’re giving money to your favorite charity every year and you’re not getting a deduction. Well, if you’re sitting on some cash you might be able to make the gift for let’s say the next 15 years, lump-sum it one of these donor-advised funds, and then give the money out over years and still have control of that money. There are different mutual fund companies that have these type of things available and you want to talk to your financial advisor as to what opportunities might be there but that’s something you can do. The disadvantage of this is they don’t offer a lot of flexibility and ultimately all of the money has to go to charity so one of the solutions that we look at that could possibly fill this void and give you a little bit more control is the charitable lead trust and what a charitable lead trust is, it’s something where you put money in a trust for the purpose of charitable giving and then money every year gets doled out to a charity over a specified period of years. Now I know you can do a lot of different options with this and depending on what options you pick will determine what the deduction is but what we’ve done is we look at a charitable lead trust with a lot of my clients and we’ve looked at a 20-year charitable lead trust. It just seems like that’s an efficient way to do it and what happens is each year, whatever we put in that charitable lead trust, then we have to have 5% of what we put in be donated to charity each year so what I do is let’s say, for example, I have a client giving away $3000 to the church every year, I look at their tax return, they’re not getting any deductions, and then we look and see they have maybe $60,000, $70,000, $80,000 somewhere that they’re not using for other purposes and I say, well let’s take $60,000 and put it in a charitable lead trust. Well, if I have someone that’s let’s say in their late 50s/early 60s, they’re not able to itemize anymore, they’re empty-nesters, they lost the child deductions, and the interest on their mortgage is lower now, so we get to the point where they’re not really able to get much of a deduction. If we put that money in a charitable lead trust what determines the deduction is the current interest rates and the period of time that the money is being paid out. Right now with very low interest rates what ends up happening we actually get fairly high deductions so in a case like that if we put $60,000 in we might get a deduction around $55,000 as a charitable deduction. Now we’re able to itemize. Now in today’s program I don’t have a lot of time to go through all of the numbers plus it’d be pretty confusing but if you’re in a position where you’re giving money regularly to charity and you’re going to continue doing it in the future and if you have a little bit of cash laying around there’s an opportunity to maybe accelerate those gifts and drive a deduction where you’re not getting any now and all we’re really doing is taking economic benefit of an asset and committing toward giving to charity every year. Now one of the big advantages of that charitable lead trust is we can set it up at the end of those 20 years to go to the kids, we can set it to come back to us so if we feel we want to relook at it, maybe do it again, we could drive another deduction or maybe we need money back to supplement our retirement income, whatever the case may be, but it’s something that you want to sit down with your accountant, your financial advisor to figure out if that’s something that could work for you but we’re seeing a lot of clients taken advantage of because most of them didn’t even realize they weren’t able to get those deductions that they had gotten for so many years but now they had lost them and didn’t realize it so that’s something you may want to look at. Another type of charitable planning that’s real popular is the charitable remainder trust. This is pretty complicated and I could take a couple of hours explaining it but it’s exactly the opposite of a charitable lead trust so what happens is we give money to the trust, the trust pays us income, and whatever is left goes to charity. In a nutshell where these are really popular is if we have people that, let’s say they have rental properties that they’ve depreciated, they’re in a business, they have equipment that’s depreciated or maybe they have real estate that’s appreciated or a stock portfolio that’s appreciated, and they want to reposition that. Well, when you do that a lot of times you trigger some pretty high capital gains and if it’s a once-in-a-lifetime-type event where you might have several hundred thousand or several million dollars that are all subject to taxes, I know here in my state if I look at the federal income tax, the state tax, ObamaCare tax, in some instances some of those dollars might be taxed at over 50%. Well, one of the big advantages of a charitable remainder trust is it is tax exempt. We can donate items into it, sell them, and reposition them, no tax. Now when we get the income from it we’re going to have to pay income tax as the money comes to us but we’re avoiding the big hit all at once because that income obviously is probably going to be coming in and we’re going to be in a much lower bracket by spreading out that income over our lifetime. When all is said and done money is going to charity, whatever is left in there, so if we have charitable intentions that fits very nicely. If we don’t have charitable intentions or don’t have that strong of charitable intentions there’s going to be a problem with the family because that money goes to charity and according to the IRS rules charity does not begin at home. One thing that we find is if we’re getting income from an asset that has not been taxed, okay so let’s just say we are avoiding a 20% capital gain rate. Now some rates might be higher, some might be lower, and we don’t really have time to go into it in today’s program but let’s just say our average tax is 20%. Well, if we had a $500,000 asset, paid a 20% tax, that means we have 400,000 let to invest. Well, if we have 500,000 paying us income because we avoided the tax, that income is going to be much greater than 400,000 of income and what we do with some families if they’re important on taking care of the family we look at replacing what we gave to charity by using life insurance and it’s just a numbers game. I’m not here to sell life insurance necessarily but it’s a tool in the toolbox so let’s say the family decides, well if we were going to sell it anyway that means we took 400,000 out from what our family would get, we’d buy 400,000 of life insurance. I’ve had some clients where the numbers worked to replace the whole 500,000. I’ve had other clients where they’re in an estate tax situation where they look at it and because the charitable trust is tax exempt the family does not have to pay any federal estate tax on that money and let’s just say we’re at a 40% rate, I know it’s a little bit more than 40%, but for simple math that’s $160,000. If I take $160,000 off what was remaining of the 400,000, what would the family have actually gotten. Now we’re looking at 240,000 so I’ve had some families just replace what ultimately would go to those kids so there are ways to solve the problem. One of the other benefits of a charitable remainder trust is what do we get when we give money to charity. We get a tax deduction. Now being that this is the opposite of a charitable lead trust, we talked about some pretty rich deductions in the charitable lead trust and what drives a charitable remainder trust is the age of the clients and the interest rates and with the low interest rates it actually drives the charitable trust deductions down and right now if we have somebody in retirement we’re seeing deductions in the 10% to 15%, maybe a little bit higher percentage range but if you’re dealing with a $500,000 asset and let’s say you get a 10% deduction, hey you just avoided the capital gain, you’re getting more income in retirement. The deduction a lot of times is icing on the cake. Lots of opportunities in charitable planning. Talk to your advisors about charitable planning and see if it fits for you, especially if you are charitably inclined anyway, you want to take a look at what you’re doing, are you getting deductions for it. If not might there be a way of taking advantage of one of these tools and driving a deduction. The other thing that I want to emphasize, too, even if you’re not charitably inclined, if you’re looking at a significant capital gain event, you might want to look at the charitable remainder trust. You might be able to accomplish what you want to accomplish anyway and by structuring that create some tremendous tax advantages for yourself and your family but don’t go this alone, you need a team to help guide you through this, go to your insurance professional, your financial advisor; they’re typically a good lead because they probably have the best understanding of your total circumstances and they’re going to want to team up with a CPA that understand this as well as an attorney and do the math, see if it makes sense, but during this holiday season evaluate the gifting that you’re doing and seeing if there’s a way to take advantage of it. Thanks for joining us this week and tune in again next week as we explore another phase of the Real Wealth process and remember if anything you heard in today’s show you’d like to get more information about contact your Real Wealth advisor. Also if you feel that any of this information would be helpful to a friend or family member, just click the forward to a friend button.

JADE: The opinions voiced are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by any registered representative. A registered representative is not a tax advisor and does not provide tax advice. Before taking any specific action, be sure to consult with your tax professional.

How to retire strong and live long

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928005/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]Do you want to retire strong and live long? Do you want to be able to rhyme that well, too? Join Karl Susman this week on the Susman Insurance Agency podcast to discuss some good way to plan to retire. Transcript to follow.

JIM: I have been looking forward again to today’s show, especially with National Senior Citizen Day, we decided we would have Kelly Ferrin (SP?). She’s been a regular guest on our program. What’s unique about Kelly, her profession is probably something you’ve never heard of before, which is gerontologist, and she has made it her focus to study longevity and the effects of people living longer and longer and the type of planning that you need to do because of it. I want to start out the program, Kelly, I know you got a golf scholarship, and you were studying gerontology in the classroom and how that was different than golf practice. Can you share that a little bit.


KELLY FERRIN: Well you know Jim, it’s a delight to always talk with you. I so enjoy your passion and your message that you are just so interested in sharing in. For me I think that that’s why we have this connection. We’re very passionate about the work that we do, and oftentimes I do work predominantly in the financial industry and I ask my audience all the time, how many of you have ever met a gerontologist before. Most of them just kind of look at me dumbfounded, a couple of hands will go up. I say, okay how many of you even know what a gerontologist is. Again, dumbfoundedness, and I said well if I show you a bottle of Geritol would that help you go in the right direction. Gerontology is a study of aging, and I say you know we are in the same line of work. Financial advisors do it from a different perspective than I do, but we have the privilege and the pleasure to help people make the right choices in their lives. Probably like many of them wondering how in the world they got to their point in their lives or their careers to be listening to a gerontologist, I too had no idea I would be a gerontologist when I grew up. Like you said I was fortunate to go to the University of Southern California on a golf scholarship and came out a gerontologist. Most people can see the connection between golf and gerontology. Certainly the fact that I competed with kids my own age, the majority of time I spent on the golf course, however, was with older adults. At a very early age subconsciously I started looking at aging in a very different way. I saw healthy, active, working, traveling, volunteering. The interesting thing was when I got into the academic side of aging, now this is the top school in the nation for the field of gerontological study, it’s a university with hundreds, if not thousands of graduates in other disciplines, there were five people in my graduating class. That’s why most people have probably never met a gerontologist before, there are not very many of us around, but when we take a look at the coming demographics in this country, obviously we can see there’s going to be a tremendous need for this. There has been really kind of a fun way of transferring this knowledge and working in the financial industry as well, but that’s pretty much how that whole thing got started, and I think that this industry is at a crossroads, the financial industry in my opinion, professionally. The new model is going to be more about longevity planning. I think that’s something that’s an exciting time because we’re starting to take a look at longevity and retirement and financial in a very different way. My industry had to change as well. I think it’s an evolutionary time. When I started in the field of aging, up until the last maybe 30 years ago, all the studies on aging were done in nursing home. All of them. Now that may be a very convenient plan to study one side of aging but it’s not the only way of looking at aging. As a society I think one of the challenges is that a lot of people have been conditioned to believe that age is time of decline. People may age because they expect to age. Which brings up some interesting challenges in the financial industry, because if you’re talking about people sacrificing for a phase of life that they don’t understand, let alone have a negative image of, it’s not going to work. We really do have to kind of engage people into a new style of financial retirement longevity planning because of bringing them current on what’s going on in the longevity sphere.


JIM: I know the big thing is people are living longer, medical technology is keeping us alive longer, and as someone who counsels people on retirement planning, they talk about what date do they want to retire, and you still have these people saying love to retire by 60 or sooner if I can, and I find myself more and more often telling people even though I’m not telling them what they want to hear, I’m telling them you really should plan on working until you are 60 or more ideally 65 and then have a transition to where maybe you slow down a little bit, but you still should be trying to earn some income instead of being completely dependent on what you’ve been able to save and social security for what might amount to longer than they did accumulating. They might be working for 30 to 35 year and then be 40 years in retirement. Is that what you’re saying?


KELLY FERRIN: Well yeah, absolutely. I think that when we talk about retirement planning versus longevity planning, the concept of retirement has changed. The word, no, but the concept yes. As a result of that we’re kind of looking at retirement in phases where people are living longer, so logically it’s likely they’re going to be working longer, but there are so many important elements that work brings to life with longevity, like engagement, looking at the life stages that we’re in. We’re in a place where we’ve never seen not only people living longer but living the way that they’re living. For example, the life stages, you know there’s no sequential order to the life stages of marriage, child, divorce, grandparent, widowhood, retirement, whatever, nor is there any rule you’re not going to revisit some of these ideas more than once. We have some very interesting trends new occurring now as a result of longevity. For example, we have this concept of the family bank, where the majority of the Americans have become the family bank, where they’re supporting adult children, nieces, nephews, siblings, aunts, uncles, I mean it’s all over the place. We have another phenomena called grey divorce, which is something we’ve never seen before, where we’ve seen a 50% increase in divorce rate after the age of 50 in the last 20 years. The good news is they’re getting remarried. The bad news is they’re getting remarried, which means they’ve added another layer of financial responsibility. What about the affect divorce has on a woman’s household income, or grandparents who certainly hope that they can contribute to the grandchildren’s college fund, little did they know they probably are the college fun. There is just all these very interesting things that are happening dynamically which is really changing the look of retirement like you started off by saying, people are going to have to change their thinking about how they look at their life and how they look at their life in retirement and how they’re preparing financially, that’ s just the way it’s going to be.


JIM: Now I’ve heard you first coin the word Financial Sherpa as opposed to being just another financial advisor or professional. Talk to our audience about what you mean by that.


KELLY FERRIN: Well I love that, and it kind of falls under the umbrella of financial gerontology. I’ve been working in the financial industry space for the last 12 years. I am a retirement specialist, longevity expert, and one of the things that we’re starting to see is this connection now between financial and retirement and financial gerontology. There really is such a concept. It’s a blending of our two industries to help better understand the financial ramifications of this longevity. I think when we talk about a financial advisor versus a financial sherpa, one of the slides that I show when I open up my talk is this 80-year-old at the top of Mount Everest with his sherpa. I said not only is this extraordinary, it wasn’t the first time but the third consecutive time this guy scaled Mount Everest. Did it at 70, 75, and again at 80. If that’s not extraordinary enough, he started his 80th year off with his fourth heart surgery, so as you said earlier, clearly the medical technology is enabling people to live very long lives. How they live these lives, how they finance these lives, how they plan these lives obviously is very different. What I share with people is that, and if it wasn’t for the gentleman on the left, the sherpa, would he have ever gotten up or down. The sherpa plays an extraordinary roll, navigating people through unchartered territory, very treacherous terrain. What I share with people now is that consumers today feel very much like they too are scaling Mount Everest as they prepare financially for this retirement and this new longevity. I ask financial advisors just to take off that hat and to look at their roll now as more of a financial sherpa, because people very much need this help in navigating their way through and preparing for it.


JIM: Now let’s bring up another challenge, and that is okay not only are people living longer, but now we see things like the social security which most people are depending on, they’re telling us there’s not enough money and changes are going to have to happen. We have low interest rates, we have a lot of people out of work, a lot of people don’t have pensions anymore because companies have done away with those and now people are dependent on themselves to save for retirement and we don’t see them saving the way they should. What do you say about that?


KELLY FERRIN: Well here again, I think the financial advisors play one of the most important roles in this country, and I think that this industry has done a phenomenal job of really enlightening people about what’s going on. There’s not one company out there that’s not got some gimmick whether it’s the number, whether it’s the line, whatever it is, but there definitely has created an awareness of the fact that people have got to start planning better for financial, for longevity and for retirement. For one of the things that I try and share with people is that when we’re talking about financial planning, we really need to understand that we live in a financially illiterate country. I just read in the USA Today, Jim, one of those statistics that they have where they said 80% of older adults feel challenged in financial preparation in retirement and for retirement, this was an American College study. Even as later in life. I think when we start understanding that, particularly in this industry, this is not the consumer and the public’s comfort zone, this is not their world. This is the financial industries world and we conversate with them in a way addressing financial issues, which I think we need to really shift that back and understand it needs to be life planning and longevity planning and how then we position products and discussions with that in mind. Because clearly this is a realty, there was a study that was done not too long ago where it said 80% expect to see their dentist on an annual basis, yet less than half, 46 will see their financial advisor, that’s if they even have one; 65% of the American public view money and finances as complex, and as a result 65% procrastinate over financial matters. Two-thirds of Americans between the age of 35 and 70 have not prepared a retirement plan. You and I know people don’t plan to fail, they fail to plan. They really don’t even know where to start. When we start looking at probably the most important part is to have effective communication and listening skills, that’s what consumers are really looking for and helping navigate them through this longevity journey. Does that answer the question?


JIM: Absolutely. We’re going to take a short break. When we come back let’s focus on what role the client should have in working with their financial professional. Please stay tuned.




JIM: Welcome back as we continue to visit with Kelly Ferrin, who is a gerontologist, who is a student of the longevity issue that’s going to affect many of us Americans as we dive into retirement, especially us Baby Boomers at the rate of 10,000 a day, are we prepared. Kelly, before the break we were talking about the sherpa that you used, and I look at it while the sherpa was doing a lot of lifting, that 80-year-old gentleman still had to take the steps up the hill and then back down the hill, so there’s work involved, it’s a team effort. The people that are listening to this program they have a professional that has distributed this program to them as a way of helping to educate them, and I know I encourage all my clients to have regular meetings, regular checkups, and we don’t have the time to chase them down. It takes the effort of them responding to the phone call or a letter or an email that says it’s time to come in and actually schedule that appointment. What would you suggest that as a client what should they be proactively going to their financial professional, when should they be calling them, should they be responding to all these invitations for whether it’s seminars or come in for an Annual Review or whatever the case may be, what do you say to clients?


KELLY FERRIN: Well for me, I try and position the financial advisor team as their most important confidant. The relationship that clients have with their financial advisors is probably some of the most important and maybe even comes in a completely different perspective than that with their family. I think if they can just get over the fact that they’re probably not prepared and be straightforward and upfront with their advisors about where they really are financially, then we can start laying down the right path. I don’t think most people are willing to admit the fact that when we look at the current retirement boomer studies and their income sources, 50% are planning on social security as their primary source of income, 25% will come from traditional pension plans, 23% will come from a 401(k), 19% may be personal investments, and then 17% from an IRA. We really need to educate people and make them feel comfortable. I really do, Jim, I’ve said this from the very beginning, I don’t think it should be discussed with clients from a financial planning focus as much as it should be coming from a life planning focus. Helping people understand that longevity, where they are in the life stages where they’re headed, what maybe is coming up that we need to be looking at in preparation financially for this life journey that we’re on, that’s really where it comes down to, so it’s never just the clients need to be coming in this way or the advisors need to be talking about, it’s a partnership and that’s why we talk about the sherpa. Because each of them brings a different element to the table. When we look at today’s studies of retiree priorities of their financial advisor, the advisors are usually quite surprised when I share this information with them, that 82% of consumers say peace of mind is the goal, six times more important than accumulating wealth. Yet when they’re sitting down and having client discussions, they’re probably focusing more on the accumulation of wealth, the aggressive investing and those types of things. That’s not necessarily what the clients are looking for today. Protecting assets is actually five times more important than aggressive investing to a consumer, an 80% are looking for education and advice on saving for retirement because they’re looking for this partnership, but again how the conversations are being held I think is where we need to remember always that the financial world is not their world. It is our world and it’s our job to help them look at their life and figure out how to put the financial pieces with it. When they’re asked what the ideal financial advisor is, they talk about effective communication and listening skills far more important than returns.


JIM: I know a lot of advisors that are out there are very sharp people, they understand and they’re well-skilled in their profession. Sometimes, like you said, I heard a story a while back about the tappers and the listeners. They did a study where they had this group of tappers and they gave them a bunch of songs to tap out like Mary Had A Little Lamb, well-recognized songs, and they asked these tappers, this audience that you’re going to be tapping to how many songs do you think the audience can correctly identify, and they said probably half and would end up being is 2%, because they knew what they were tapping out but the listeners didn’t hear it, they’re trying to figure it out because they’re in their realm, and one thing as a client that I emphasize that you should take from this message is you got to be willing to speak up. I always tell people the only dumb question is one that doesn’t get asked. You’re dealing with a professional right now, but if you have to take a role, if you don’t feel that you’re getting what you need to be getting from that conversation, you maybe need to just say timeout and let them know what’s important to you, what your priorities are, because they’re skilled to help you reach that, but if you don’t speak up they’re just assuming that this is the direction you want to go.


KELLY FERRIN: But I’m not sure, Jim, that most people are comfortable doing that. Consumers don’t want to feel like they’re some schmuck and they don’t really understand the terminology or the language or the presentation that’s being made, so they just kind of nod their heads and go along. I frankly think that’s one of the reasons why we have a financial illiterate country. We certainly have great professionals as you’ve talked about who are very well-versed and educated in how to help people, but that industry also needs to take another additional step, and this industry listen has been playing with this idea of life planning for a long time. I do think that it is getting more incorporated and they understand the fact that talking with consumers needs to be different than talking with one of their financial advisor associates. You have to speak a completely different language to them. The ones who are effective at doing that are the ones that have the growth in their business and the continued referrals and the multi-generational planning abilities.


JIM: That’s absolutely, and I agree wholeheartedly, and that’s why I tell clients because at the end of the day if you’re not making sure you feel comfortable in the direction that you’re going, who is going to fix that for you? You have to take charge when it comes to these issues and making sure you’re on the right path. The other thing is that you mentioned that I just have to reiterate, sometimes it’s clients take an us and them mentality, you know I don’t know if I want to tell my advisor about this or that, I better keep this secret, and the thing is it’s just like going to your doctor. If you keep it a secret that you’ve got this lump that’s been growing for the last three months, because he might want to do surgery and he’s got kids going to college I might be paying for that, well you might have a life-threatening disease that might not be life-threatening if it’s caught soon enough. Well you talk about life planning versus retirement planning and making sure people have a quality of life that they want and expect, well if you’re not fully honest with your financial doctor you may not get the best results.


KELLY FERRIN: I agree, 100%, and that’s a great scenario to share, because it is dead on with where we have so many challenges. We are getting there, but you know it’s funny, you know I talk about the fact that as a gerontologist and a specialist in retirement, I can’t talk about successful aging, successful retirement without talking about financial planning. Nor do I think this industry can be as effective in the work that they do without really incorporating this longevity planning, life planning scenario in their conversations with products and the investments that they are recommending. They do have to step away and look at it from a different lens and that’s where we end up getting to have some pretty significant results, and like I said this industry has done a great job. There’s a lot more work to do but they definitely stepped, definitely stepped up.


JIM: Well Kelly, it’s always awesome to have you onboard. You are a wealth of information, and one thing I just got to bring up the one story that really sticks in my head is the gentleman that you had, the retired, I think it was a GM exec that retired a couple years shy of being vested in his pension because of a heart condition, thought he was going to die, he lived, and I think if I remember right he was a gold medal winner in the senior Olympics, over 90 in the hurdles or something like that, and that story will always stick with me, so the thing is we have to be prepared for our future, so if there are any parting thoughts what would you say that it would be?


KELLY FERRIN: Yeah, no I think that we do, and the reality here, Jim, is that the majority of Americans guesstimate how long they’re going to live and how much it’s going to cost them to do so. The probable with that is that they generally underestimate how long they’re going to live, so when you’re basing your finances on a low ball number that’s going to be a problem. We seem to be in a place now where we are keeping people alive sometimes longer than they want to be, and we’ve got to start recognizing that this longevity planning is here. I think at the same time too we are experiencing perhaps one of the most extraordinary revolutionary events ever where we’re seeing this mass longevity. People are living not only longer but they’re living healthier lives. This idea of retirement has changed dramatically. It is no longer and nor has it been for years in the front porch and tiddlywinks, this is just a whole new life phase and stage and it can be what we make it to be. I can introduce you to 80-year-olds who act and look like their 50, and 50-year-olds who act and look like they’re 80. When people often ask me, when they hear I’m a gerontologist and I specialize in longevity, what would be the number one thing. The number one thing I tell people all the time is attitude. Feeling good about yourself, feeling good about your life. When we can get people to think differently about their life and their longevity, then they’re much more likely to incorporate the lifestyle behaviors that will enable that to happen. If they think it’s an automatic to decline, they’ve got no control over it, they give it up, they go to the barker-lounger and they blame all their problems on age. We are in a very new place and it’s an exciting time to be living long. But there are some tremendous challenges that go with it and the preparation financially, physically, mentally, socially that’s all going to be a part of this. We need to look into longevity planning and life planning as part of the umbrella of financial planning, and I think that’s why this financial gerontology is such an exciting time for this industry.


JIM: I’m going to quote the boy scouts to finish it, “Be Prepared.”


KELLY FERRIN: Be Prepared, that’s good, that’s right, or as Spock says, “Live long and prosper.”


JIM: Absolutely. Well it’s always a pleasure, Kelly; I really appreciate it and look forward to having you on again soon sometime.


KELLY FERRIN: Right back at you Jim. We’ll look forward to that, Jim. Thank you so much and thank you so much for the work that you do, it’s fabulous.


JIM: Have a good one.


KELLY FERRIN: Alright, take care, bye.


JIM: Bye.

How to protect your family when life happens

[podcast src=”https://html5-player.libsyn.com/embed/episode/id/4928008/height/360/width/450/theme/standard/autonext/no/thumbnail/yes/autoplay/no/preload/no/no_addthis/no/direction/forward/” height=”360″ width=”450″]S*it happens. Let’s face it, that is part of life. If you’re old enough to be reading this, and listening to our Susman Insurance Agency weekly podcast, then you know it. This week, join Karl Susman and friends as they talk about how to best protect your family when the worst happens. Transcript follows.

JIM: Today we have with us the CEO of LifeHappens.org, it’s a nonprofit organization whose mission is really to educate people on the importance of insurance, and Marv, we’ve become good friends and we’ve shared the stage a few times on speaking engagements, and I really appreciate all the work that you’ve done for the industry. You’ve been a life long insurance agent, insurance professional, and now you’re giving back to the industry. I know you served as president of the Top of the Table in MBRT and you’ve been very involved in a lot of different things, but I think the most important thing you’ve been involved in with the industry is this LifeHappens.org, and Marv Feldman, I just want to thank you for being with us and I appreciate all you do for the industry.


MARVIN FELDMAN: Jim, thank you very much. It’s my measure and my honor to be able to share and give back, and hopefully we’ll come up with some good ideas for the people who are listening.


JIM: The scary thing for me when I see some of the stats is the number of people out there, I know Limber has done a bunch of studies about Americans that are uninsured or under insured when it comes to life insurance, and it always affects us. There’s always those people that you see that you think they’re the epitome of good health and somebody happens to them health-wise and they unfortunately pass away or a car accident or something tragic like 9/11, none of us know when that day comes but only some of us know how our family is going to be taken care of, and a lot of us are out there leaving things to chance.

Can you just first of all just share what LifeHappens.org is and how some of our listeners might be able to tap into some of the resources that they have?


MARVIN FELDMAN: Absolutely. The web site as Jim mentioned earlier is LifeHappens.org. We were formed approximately 22 years ago for the express purpose of educating the consumer about what the products in our industry do, not just what they are, about motivating consumers to make informed educated guesses in their overall financial planning while utilizing the agents, and to reinforce the value proposition and the trust level between the consumers and the industry, because that’s something that the media continues to attack because we’re a big target, and they think we have relatively thick skin, but the reality is we have thin skin and it hurts our feelings just like everybody else. Our job is to reinforce that trust and confidence with the consumers.


JIM: The insurance industry, it’s amazing when I hear how much in claims are being paid out, and it’s amazing. It’s a really important part of people’s overall planning, and I know this is September so we’re focused on life insurance this month. It’s live insurance awareness month. You’ve been doing something every September by having a national spokesperson, so talk about a little bit.


MARVIN FELDMAN: One of the things that we try to do is to bring somebody to the front who is a nationally recognized individual who is also willing to share their personal story as it pertains to some type of loss, typically involving either life insurance or whether there was no life insurance. This year we’ve done something a little bit different, and that is that we’ve looked for somebody who is in a risky profession and has the chance of incurring some type of accident, injury, or death as a result of what they do, because in reality everybody is involved in some type of risk, even if you’re just getting in your car, driving down the road to go to the grocery store. You’re at risk of somebody running into or having an accident.

This year we reached out and chose Danica Patrick who is a professional race car driver, both Indianapolis type cars and NASCAR, currently running in the NASCAR circuit, and it’s interesting that when we reached out to her we were only thinking in terms of her sharing why she might want life insurance because of her profession, but then we found out that one of her grandparents had died, they owned a farm, and when the grandfather died the grandmother had to sell a good portion of the farm to pay for taxes and expenses. We didn’t know that she had that story, so actually we have a two-fer. We have a story of loss and we have a story of protecting against the future risk that you might be incurring. She’s a tremendous, tremendous spokesperson and is being exceptionally well received by the industry and the consumers.


JIM: Marv, another thing that you do is you have the Life Lessons scholarships, where you award scholarships to kids who suffered a loss, and I’ve got to say I’ve been the judge for that a couple of times over the years, and I think if everybody had the chance to read those stories, first of all you don’t get through them without shedding some tears, but it is amazing, some of those tragedies that these families would have been maybe just a little bit better off had there been some planning in place, but those are all kids who lost parents with little or no life insurance. Share that with us a little bit, how that works.


MARVIN FELDMAN: We open it up February and allow people to submit their requests for scholarships and grants. During a 30-day period we have several thousand kids who will submit applications either written or video application which they can also submit. We then have to boil that down to a very few because last year or this year we only gave out about 34 scholarships total, but we’ve given over $1 million worth of funding in the last few years so it does add up to significant numbers, but it’s surprising when you read these scholarships about how many children were in a situation where there was a loss because of shooting, of drugs, of alcohol, of accidents, of illness, where the people were totally unprepared. They had no planning in place. They had little or no life insurance in place, and the trials and the tribulations that the families have gone through to try to maintain a family life, and for these kids to say, well how do I better myself going forward, so we’re looking for the stories where the children have really struggled to do well and are doing all the things that they need to do to better themselves and allow us to help them along the way, and it’s really significant.


JIM: Yes, you’re dealing with kids that are approaching college, so you’re talking about young adults and the parents of these young adults are fairly young by today’s standards, and you would think there would be one or two out there but you literally get hundreds if not thousands of applications, so it’s a reality of life today that life might end at the wrong time for the wrong reasons, but it’s still important to do planning.


MARVIN FELDMAN: It’s very important to do planning. One of the things that we’ve learned through our barometer study which we do in conjunction with Limber the research group for the industry, this are approximately a hundred million people in the United States who have no life insurance of any type. One of the problems today is that you look at the millennials who are deferring the life changing decisions, so they’re deferring getting married, they’re deferring buying a house, they’re deferring having children until they’re five or 10 years older than what it was during our time when we were doing those things.

I was married at 21, today the kids don’t get married in their 30s. I had children in my 20s. They don’t have children now until they’re in their 30s, so those life changing decisions are being delayed and because they’re being delayed they’re not learning early on what needs to be done, and for some of these millennials they’re far enough along in their life that now they’ve developed a few medical impairments and sometimes they can’t get insurance or can’t get it at a reasonable rate, so by delaying they cause other problems that they’re not thinking about, but it’s the old saying of it’s not going to happen to me so I don’t need to deal with it today, and what we do at Life Happens is to try to make sure that they understand what are the possibilities that something could happen. They really need to take care of it today, and it’s not near as expensive to do what they need to do as they think it is.


JIM: Let’s take a quick break. When we come back let’s just talk about that a little bit, about what it really costs, because I think that’s one of the biggest myths. People think this insurance is really, really expensive but it is something that you can do by maybe giving up maybe a cup of coffee a couple times a week might be the difference between protecting your family and not, so please stay tuned.



JIM: Welcome back as we continue to visit with Marv Feldman who is the CEO of LifeHappens.org, a nonprofit organization that helps educate Americans on the importance of preparing and planning for their families, and also puts the money where the mouth is by offering scholarships for kids who have come from families who didn’t do proper planning with their Life Lessons scholarships.

Marv, before the break we were talking about how many people are ill prepared. You talked about the barometer, the insurance barometer where people are putting off starting families, buying homes, and things like that, and unfortunately they’re also putting off the important planning process and as people get older, having access to life insurance due to ailments, illnesses, maybe some bad hobbies that they might get into like race car driving like Danica Patrick which might make it unaffordable or unattainable to do the proper planning.

Before the break, one of the things we were talking about is the price of insurance, and I know this is probably one of the biggest myths out there. People think it’s ungodly expensive and they can’t afford it without actually checking in to what the price might be for them. Comment on what the cost of insurance is today.


MARVIN FELDMAN: One of the things that we’ve done in our research is to ask people of various ages what they think it would cost for them to buy just a quarter of a million dollars of term insurance at their age assuming they’re healthy. We get estimates of anywhere from two times to seven times what the actual cost is, so for a 30-year-old who is healthy, $250,000 policy is only approximately $200 per year, and a 40-year-old it’s only about $300 per year, and that’s for a 20-year level term policy.

Now, term is not necessarily always the right answer but it’s the least expensive solution, and people have to understand that for less than a dollar a day they can protect their family, and people waste more than a dollar a day in all of things that they do. A cup of coffee, even if you use a Keurig machine a cup of coffee costs 50 cents to a buck a day, and if you go to Starbucks you’re talking about $2, $3, $4 a day, so when you put it into perspective the cost of buying life insurance is very, very inexpensive and what you do is create money where none existed before at a time when your family is going to need it the most, and that provides you a great sense of confidence and security, and provides dignity for your family.


JIM: Now, I know LifeHappens.org, your main mission is education and you’ve been trying different ways to reach the public to help them become aware that this is important for them and it’s not as bad as you might think it is. Talk about some of the new alternative distribution systems that are being developed to help the consumer.


MARVIN FELDMAN: There are a number of companies out there that are developing programs to make it much easier for the consumer to buy, and even the old multi-line companies and the old mutual companies, they’re all looking at things that can make it easier for the insurance to buy, so the research can now be done on line. They can look to see what they want. They can choose whether or not they would like to work with an advisor or an agent, whether they want to talk with somebody, whether they want to meet with somebody, and in many cases the actual application process can be done on line electronically, so there’s no need to sit there and fill out a bunch of paperwork.

It’s much easier than it used to be to buy. It’s not near as onerous as it once was. The system still does require some medical information but for many people it’s just a questionnaire. There’s really not much more that needs to be completed, so people are afraid to do anything because they think it’s very difficult and very hard to arrange it and to buy and very expensive, but those are myths that are no longer accurate, and it just takes a little bit of effort on their part to take care of it. If they are looking for a company that they can go to, go to LifeHappens.org, look at the list of our supporting companies. We have 150 or 160 companies that are listed on the site.

Jim, one of the things that people don’t understand is sometimes you can go on to a site and you’ll get quoted a preferred best rate and they think that’s what they’re going to get, but they forget that they’ve got a little bit of blood pressure, they’ve got a little bit of diabetes, they’ve got a little bit of too much weight. They have all these little things that will impact their underwriting and that’s where an agent can really help guide them through the proper company.


JIM: I always tell people the internet has all the information in the world you need, but it lacks the wisdom, and what I find when it comes to insurance, I know you guys have great tools and if people want to get access to your tools, what’s that web site again?


MARVIN FELDMAN: LifeHappens.org.


JIM: As a consumer they can navigate through all those tools, and there are a lot of helpful things there, articles that have been written. There are real life stories. There are different things that they can access that can help them make an informed decision or at least get on the right track and formulate what questions they should be asking their insurance professional. It’s a great resource. People should be looking into it, and the last thing I would say it you touched on this, how important it is to work with an insurance professional, but I also look at that as when you make the decision to buy the insurance, they can help guide you to have the right coverage but even more importantly if there’s a claim they can help your family guide through it because let’s face it, if you lose a loved one you might not be thinking clearly, you don’t know which way to turn. There’s a lot of stress involved. An agent can really help you at that time.

Then in between, making sure you don’t make the mistake of letting that insurance lapse just before you need it, I think an agent plays a very important role in making sure that insurance does what it’s intended to do, and that is provide security for that family when it’s needed the most.

Any other points that you’d like to make, Marv?


MARVIN FELDMAN: No. Your point about the agent is good. When you’re going through a lot of stress and strain in what’s happening in your life, you don’t want to be calling 800-agent to find somebody to help you. You want to be able to go to somebody you trust that you know can walk them through the process.


JIM: My understanding too is I have not seen any policies that are priced less just because you avoid the agent. The policies are fixed, it’s just a matter of whether or not you want the agent or not. Is that true?


MARVIN FELDMAN: That is true. A lot of people think that if they’re buying over the internet and they’re buying direct that they’re saving a lot of money. There are no fees, there are no commissions involved. Those are all regulated by the state. It doesn’t matter whether you’re buying through the internet or you’re buying through an agent. The cost for the policy, the premiums are exactly the same, so if you want to look at it that way, when you work with the professional agents and advisors you’re getting their advice and their wisdom for free.


JIM: Marv, always a pleasure to have you. Again, I really appreciate what you do for the industry, especially helping to educate the consumer, and hopefully we’ve reached a couple of people where it’s going to end up making a big difference that they make the decision to take care of their families and it’s there when they need it, so thank you, Marv.


MARVIN FELDMAN: Jim, thank you very much.