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October 2019 - In This Issue:
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TARGET: ELDER FINANCIAL ABUSE
EVAPORATING ESTATE REMAINS FULLY TAXABLE
LEARNING TO LIVE WITH RISK
ARTICLES OF INTEREST
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Recently I received one of those 800 phone calls that I let go to voicemail. I saved the transcript because I knew I wanted to share it in my October Newsletter. Here is just a part of the message:
"....a complaint was filed on your Social Security number for criminal activities so when you get this message
kindly
call as soon as possible on our number that is 828-***-**** I repeat 828-***-**** before we begin with legal proceedings and
have a nice day
when you get this message..."
Don't you just love how they made sure to tell me to have a nice day? All kidding aside, these types of scam messages resulting in financial exploitation are becoming more and more prevalent and are targeting our older population. They are targeted because that's where these scamsters believe the money is. The decline of cognitive ability is also a factor when they consider whom to go after. Unfortunately, many will respond resulting in a monetary loss to those that can least afford to lose their hard-earned dollars.
In May 2018, the Senior Safe Act was enacted. Since financial professionals--bankers, brokers, insurance agents--are on the front lines of finance, and they may be in a position to spot and stop such exploitation. The Seniors Safe Act was modeled on a law previously enacted in Maine. Institutions are encouraged to provide training for their employees on "how to identify and report the suspected exploitation of a citizen internally, and, as appropriate, to government officials or law enforcement authorities, including common signs that indicate the financial exploitation of senior citizens." After the training has been completed, the institution and the individuals will be held immune from any lawsuit over privacy invasions that come up as a result of the vigilance.
It is comforting to know that bankers and other financial professionals may now be active allies in the fight against this type of exploitation. Of course, assuming their customer shares these calls with them. On our website you will find a booklet,
"Keeping Our Seniors Safe - Watch Your Wallet" that discusses these issues and who to contact in New Jersey. You might want to share this booklet with your older relatives and friends.
Sincerely,
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TARGET: ELDER FINANCIAL ABUSE
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The U.S. Attorney's Office and the FBI announced a major sweep of elder fraud cases last March. The cases involved more than 260 defendants from around the world, with total alleged losses of over $750 million. The action follows a similar fraud sweep last year. This year's action involved twice as many fraud victims, 28% more criminal defendants, and 28% more in losses than last year.
As welcome as this development is, it may only be the tip of the iceberg. Many seniors are reluctant to report when they have been victimized, for fear that family members may conclude that their competence has been impaired.
Don't do these things
Some commonsense tips on how to avoid becoming a victim:
- Don't share personal information with anyone you don't know.
- Don't pay a fee for a prize or lottery winning.
- Don't click on pop-up ads or messages.
- Delete phishing emails and ignore harassing phone calls.
- Don't send gift cards, checks, money orders; or wire money; or give your bank account information to a stranger.
- Don't fall for a high-pressure sales pitch or a supposedly lucrative business deal.
- If a scammer approaches you, take the time to talk to a friend or family member.
- Keep in mind that if you send money once, you'll be a target for life.
- Remember, it's not rude to say, "NO."
- A good rule of thumb is, if it's too good to be true, it's likely a scam.
A cornucopia of scams
Fraudsters are very resourceful in trying to separate seniors from their money. Examples of actual financial frauds:
- Lottery phone scams. Callers convince seniors that a large fee or taxes must be paid before they can receive lottery winnings.
- Grandparent scams. Seniors are told that their grandchildren are in trouble and need money to make rent, repair a car, or even pay bail.
- Broken computers. Caller claims that a problem has been detected on the victim's computer, but that repair is possible over the internet upon payment of a fee.
- Romance scams. Victims are lulled into believing that their online paramour needs funds for a U.S. visit or some other purpose.
- IRS imposter scams. Fraudsters pose as IRS agents and claim that victims owe back taxes--in some cases demanding to be paid in gift cards!
- Sham business opportunities. Victims are persuaded to invest in business opportunities or investments that turn out to be bogus or Ponzi schemes.
When a fraudster makes contact
(October 2019)
© 2019 M.A. Co. All rights reserved.
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EVAPORATING ESTATE REMAINS FULLY TAXABLE
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Francis Roper's estate consisted largely of $17.6 million worth of Colonial Bancgroup stock. She died in 2007. Unfortunately, the value of the stock sank like a stone, and it was worth only $8.5 million on the alternate valuation date, six months later. That was the value used on the estate tax return filed in 2008. But in 2009 the federal government undertook a fraud investigation that, upon its resolution in 2010, rendered the bank stock completely worthless. The estate asked for a refund in 2013 of the estate taxes that had been paid on the now valueless stock.
No refund is allowed, the District Court ruled. In the first place, the refund request is so late that the Court no longer has jurisdiction over it. The taxpayer-executrix claimed that the tardiness was due to her disability, and she had the medical documentation to back up the assertion. Unfortunately, while that excuse may be available to individuals, it is not permitted for estates. But even if the Court looked at the case on the merits, no refund would be allowed. The market for the bank stock had not yet collapsed on the alternate valuation date, even if the stock would have been worthless based upon nonpublic information. It is valued on the date of death and alternate valuation dates that must control the determination of tax obligations.
The amount exempt from federal estate tax was far lower in 2007 than it is today--an $8.5 million estate would owe no federal estate tax at all. Still, today's higher exemptions are set to expire in 2026. Some estate planning experts have suggested that the expiration could come sooner if control of the levers of power in Washington, D.C., changes hands before then.
(October 2019)
© 2019 M.A. Co. All rights reserved.
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LEARNING TO LIVE WITH RISK
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People who are averse to risk often consider cash investments such as money market funds and CDs to be worry-free, "safe" investments. Today, especially, volatile markets and the fear of a lengthy recession are likely to make these choices, for some, the correct path to take. But ever-present inflation--even low inflation--eats into the buying power of your money. Only if your investment surpasses inflation are you gaining ground.
The truth is, all investing involves risk. But risk shouldn't keep anyone from investing. Successful investors learn how to manage their risk by finding a comfortable balance between the risks that they are willing to take and the rewards commensurate with those risks.
Stock risks
Historically, stocks have offered investors the highest long-term total returns. Of course, as we have seen recently, the results can be very different when measured in the short term.
What kinds of risk do investors in equities face?
- Company and industry risk. If the company issuing the stock fares badly, or is held in low regard for some reason, the price is likely to fall. And a falloff in business in an industry can affect the price of a company's shares, even if the company itself is not faring that badly.
- Market risk. Certain factors may cause the market as a whole to move. They may be economic--for example, expected or reported rises or falls in economic growth--or national or international events. Of course, factors that can depress a stock's price may have a flip side--good news can send the market, as well as the investor's equity holdings, upward.
- Liquidity risk. There is always the danger with any investment of not being able to get out of the investment conveniently, at a reasonable price. When forced to sell a holding suddenly, an investor could suffer a significant loss. (This risk is not limited to stocks alone.)
Bond risks
Bonds generally are perceived as a lower-risk investment than stocks. When bonds are held to maturity, bondholders should receive back their principal, in addition to the income earned on the bond.
Default and credit risk. Here's why we said "generally": It's possible that a company or other bond issuer will fail to make scheduled payments on its debt or not pay the bondholder back all or part of his or her principal. The risk of default is, perhaps, more on some people's minds now as municipalities struggle with large budget deficits.
Interest-rate risk. Bond prices are sensitive to changing market conditions. When interest rates rise, bond values fall. Therefore, when new bonds pay more income than bonds that an investor owns, the risk arises that if the investor has to sell the bonds, he or she may have to do so for less than what was paid.
Managing risk
The first step in risk management is to determine how much risk you can live with--and stick with. Many factors will contribute to your decisions about how much risk to take: Your age, your knowledge about investments, your attitude toward risk are just a few of them.
If you know your comfort level, you can take the necessary actions to manage the risks that you are willing to accept. For instance, developing an asset allocation strategy and diversifying your investment capital among a mix of stocks, bonds and cash reserves are important steps in the process.
To find the right level of risk is every investor's challenge, but one that needn't be faced alone. Calling upon the knowledge and experience of our professionals to assist you will help you meet that challenge.
© 2018 M.A. Co. All rights reserved.
Any developments occurring after January 1, 2018, are not reflected in this article.
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Cherry Hill, NJ
Lebanon, NJ
Linwood, NJ
Toms River, NJ
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856-281-1300
908-287-7188
888-323-5535
732-255-5000
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Because of the rapidly changing nature of tax, legal or accounting rules and our reliance on outside sources, Garden State Trust Company makes no warranty or guarantee of the accuracy or reliability of information contained herein nor do we take responsibility for any decision made or action taken by you in reliance upon information provided here or at other sites to which we link. ©2017. All rights reserved.
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