IN THIS ISSUE

IRS PRIORITIES

AN UNEXPECTED RELATIVE

NATIONAL DEBT, AROUND THE WORLD

ARTICLES OF INTEREST

In our December 2022 newsletter I wrote about scams targeting our older population. The False Authority Figure scam, IRS phone call scam, and the Robo-call scam to name a few. You can read that newsletter here.

Since December I have been reading about more and more scams that to me seem even worse than what I wrote about because they pull at the heartstrings of the targeted. Take for instance, a story I recently read online about a 75-year-old woman from Georgia who sold her home to pay almost $100,000 to a man she met on Facebook. The story, originally appearing on the website Insider.com on April 30, 2023, went on to explain that this woman was the victim of a romance scam. The woman started talking to the man via Facebook and when the "relationship" started to get serious, he began asking for money in the form of cash. She never actually met the man in person, yet she sold her home to raise the money he supposedly needed only to find out that she was the victim of a scam. 

Another story that made headlines earlier that same month involved an 87-year-old Holocaust survivor who was scammed out of nearly $2.8 million over several years by a woman he met on an online dating site. The alleged scam artist was ultimately found and arrested, but unfortunately not before she spent the money on luxury items like designer jewelry, clothing, handbags, and lavish trips. According to an NBC News article, the victim lost his life savings as well as his NYC apartment because of the scam.

Romance scams like these are becoming more common. Insider.com reported that Americans have lost $1.3 billion to romance scammers in the last year alone. Scammers often prey on people who have no family and/or are lonely. As we've discussed in some of our past newsletter articles, single people, especially the elderly without any family or close friends looking out for them, are prime targets for this scam because they are more likely to be lonely and looking for someone to form a connection with so are less likely to question a potential romantic partner's motives.  

A few weeks ago, I was watching an episode of 60 Minutes and it really confirmed why I needed to write once again about scams targeting our older population. The episode, which aired on May 21, 2023, included a story about how seniors are the demographic losing the most money to scams, especially cyber scams. The story highlighted a type of scam that is gaining in popularity known as the "grandparent scam." In this scam, the scammer pretends to be a grandchild in dire need of funds who frantically begs their grandparent to send them money or they will face horrific consequences, like being sent to jail, while also pleading with the grandparent to please not let their parents know they are in trouble. Watch "What it sounds like to be targeted by the grandparent scam."

What can we do about this? One thing we can do is to continue to educate our older loved ones, whether they are family or friends, about these insidious scams. Impress upon them that they need to alert their family, friends, or financial advisor if they are unsure of a recent call or request. For families that live far away from their loved one, they can suggest a living trust utilizing a local professional corporate trustee to serve as a safeguard. Most of our elderly trust clients know to call us when they receive a request they are not sure of.

Trust is hard to build, and easy to break. At Garden State Trust Company, we take these issues very seriously. Please visit https://gstrustco.com/assets/Garden-State-WYW.pdf to view our booklet Keeping Our Seniors Safe-Watch Your Wallet. If you would like a hard copy, please call 732-255-5000.

ASK GARDEN STATE TRUST COMPANY

Dear Garden State Trust Company,

Why should I create and fund a revocable trust during my lifetime when I am able to pay all my bills on my own and have designated a friend as a POA? 

Thank you.

Hello and thank you for your question.

Funding a revocable trust during your lifetime can offer these several advantages:

1.   Avoidance of Probate

2.   Incapacity Planning

3.   Flexibility and Control

4.   Privacy

5.   Asset management and Continuity

It is important to consult with an estate planning attorney to fully understand how a revocable trust can specifically benefit your circumstances. They can help assess your goals, review your assets, and provide personalized advice based on your unique circumstances. Read more about Trusts here.

Before you consult with an estate planning attorney, I would be pleased to help you to walk through this process by contacting me below.

Kurt Talke

Senior Vice President & Trust Officer

Regional Manager Lebanon Market

1390 Route 22 West, Suite 101

Lebanon, NJ 08833

(908) 287-7188

ktalke@gstrustco.com

HAVE A QUESTION ON TRUSTS, WILLS, OR INVESTMENT MANAGEMENT?

For general informational purposes only. This information does not constitute legal advice.

In our Informational Article, National Debt, Around The World see where the United States of America stands in terms of national debt compared to the rest of the world. Read in An Unexpected Relative about how an intestacy reveals relatives the decedent never met during his life who may be beneficiaries of his estate.

Summer is just around the corner, enjoy!

Sincerely,

Speaking to the Senate Finance Committee earlier this year, IRS Commissioner Daniel Werfel sought to allay fears that increased IRS funding would result in a dramatic increase in audits of small businesses and middle-class taxpayers. The audit rates from 2018 will be used as the benchmark, he said, and that was a historic low point for audits of taxpayers with less than $400,000 of income. In 2011 the audit rate for this group was one in 116. After the controversy about IRS audits of conservative political groups the agency's budget was flat for several years. The audit rate for the under-$400,000 group fell to one in 222 in 2017, and one in 301 in 2018. 

The audit priority for the IRS instead will be 390,000 high-income individuals, corporations and complex partnerships. Tax returns for some in this group can run to 100,000 pages, and the IRS has only 2,600 enforcement personnel to deal with them. The Service needs more accountants, lawyers, and data analysts to adequately assess these complicated tax returns. According to the IRS plan, an additional $4.3 billion will be spent on enforcement in 2027. Before that, the IRS is upgrading taxpayers services and its aged computer systems. Some $1 billion per year for three years will be spent on new computers beginning in fiscal 2024.

The IRS received much criticism for poor taxpayer service in the 2022 filing season. Only 15% of taxpayers trying to telephone the IRS reached an agent, and then after an average wait time of 27 minutes. The 2023 tax season went much better, Commissioner Werfel reported. The average wait time was cut to 4 minutes, and 87% of taxpayers were able to get an answer from an agent.

About half of the 504,097 audits in 2018 of returns with less than $500,000 of income were of returns with less than $25,000 of income. This was because of the high rate of errors and fraud in claiming the earned income tax credit, according to the IRS.

Commissioner Werfel concluded: "I just wanted people to realize that small businesses around the country -- mom-and-pop shops, clothing stores, auto repair shops -- they have nothing to fear in terms of a wave of new audits coming. It's just not coming."

(June 2023)

© 2023 M.A. Co. All rights reserved.

In 2018, Loch David Crane, a California resident, died without having made a will. His reasons for not taking care of this important financial chore are unknown, but perhaps it was because he had no surviving spouse, children, siblings, or grandparents. Under California law, that meant his heirs were the descendants of his grandparents. The only such descendant from the paternal grandparents was Shannon Wehsener, a cousin.

Shannon was named the administrator of the Crane estate. On January 8, 2020, she filed her report and petition for distribution of the estate with the probate court. On February 21, 2020, Judy Scherber filed an objection, claiming that she also was an heir.

Mr. Crane's mother had an adopted brother, Charles Bloodgood. Judy's mother had abandoned her as an infant. When she was two years old, Judy's father asked Charles and his wife to babysit her--then never returned to pick her up. Charles and his wife raised Judy as their own daughter, but they never formally adopted her. When the family moved to Indiana, Charles said he was Judy's father when she was enrolled in school. In his will, Charles called Judy his daughter.

In his entire life Mr. Crane never met either Judy or Charles, as neither of them had been to California. Judy only learned about her potential inheritance when she was contacted by a company that locates missing heirs for a share of their inheritances.

The legal question is whether Judy is a descendant of Crane's grandparents. Had the adoption formalities been attended to, the answer would be yes in all jurisdictions. But under Indiana law, where Judy lives, the answer is no.

California has a more expansive, less formal rule, under which Charles is presumed to be Judy's "natural parent" unless clear and convincing evidence to the contrary is presented. No such evidence was offered, and Judy's attorneys persuaded the California courts that the California rule should apply. Judy gets half of the estate.

The Court's decision does not reveal how large the Crane estate was -- but it was at least large enough to support four years of legal proceedings.

(June 2023)

© 2023 M.A. Co. All rights reserved.

The U.S. national debt stood at $31.4 trillion before the Congress acted with legislation to avoid a default on the debt. That number is so huge that it is hard to comprehend. An easier way to think about it is to compare the debt to the economy that must support it. The International Monetary Fund has provided the data on the debts of nations over time, which is quite interesting (see https://www.imf.org/external/datamapper/CG_DEBT_GDP@GDD/USA).

In 1950 the U.S. national debt amounted to 78.2% of the nation's Gross Domestic Product (GDP). The very high costs of World War II were still being paid down. The debt declined over time, reaching 27.51% of GDP in 1974, the modern low point. It rose slowly, reaching 57.39% of GDP in 1993, at the beginning of the Clinton administration. Through a combination of spending control and increased tax revenue, the debt fell to 41.38% of GDP by the end of the Clinton years. 

Interestingly, the war on terror after 9/11 was not accompanied by a major increase in the national debt, in terms of the GDP, despite increased military spending. In 2007, it was still only 45.17% of GDP. The onset of the Great Recession in 2008 marked a dramatic change, as the debt grew steadily faster than the economy as a whole through 2019, when it reached 93.11% of GDP. Then we had the pandemic, and massive government spending offset the economic effects that ensued. In 2020, we reached the modern high of 119.37% of GDP, before dipping to 115.28% in 2021 (latest data available).

When interest rates are low, the cost of paying the interest on the national debt is also low. However, as interest rates have risen to put a damper on inflation, the cost of debt service has risen as well, now coming to roughly the same as the amount spent on the defense department. As rates go higher, the problem that Congress will have to wrestle with is whether other discretionary spending will be crowded out.

The U.S.A. is far from having the highest national debt as a percentage of GDP in the world, but we are in the top tier. For example, Japan's national debt comes to 221.32% of its GDP! In contrast, Germany's debt is 46.27% of its GDP, Sweden's is 39.31%, and Norway just 15.75%. The table below reports the national debts of several other countries.

Country by country, national debt as a percentage of GDP

Source: IMF Datamapper (2021 data)

(June 2023)

© 2023 M.A. Co. All rights reserved.

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